Exhibit 10.1
SECOND AMENDED AND RESTATED
FORBEARANCE AGREEMENT
THIS SECOND AMENDED AND RESTATED
FORBEARANCE AGREEMENT (this “ Agreement ”),
dated as of September 30, 2008, is entered into by and among
the financial institutions identified on the signature
pages hereto (collectively, the “ Lenders
”), U.S. Bank National Association, as administrative agent
for the Lenders (in such capacity, the “ Agent
”), Westaff (USA), Inc., a California corporation (the
“ Borrower ”), and Westaff, Inc., a
Delaware corporation and the sole shareholder of the Borrower, as
parent guarantor (the “ Parent Guarantor ”),
with reference to the following facts:
RECITALS
A.
The Borrower, the Parent Guarantor,
the Agent and the Lenders are parties to a Financing Agreement,
dated as of February 14, 2008, as amended (collectively, the
“ Financing Agreement” ), pursuant to which the
Agent and the Lenders provide certain credit facilities to the
Borrower.
B.
Certain Events of Default have
occurred and are continuing under Section 11.1(b)(1)
of the Financing Agreement. Such Events of Default were
caused by the Borrower’s failure to comply with
Section 10.28 of the Financing Agreement, due to the
Borrower’s failure to achieve a Fixed Charge Coverage Ratio
of at least 1.25 to 1.00 for the Applicable Period ended
April 19, 2008 (the “ First Event of Default
”) and for the Applicable Period ended July 12, 2008
(the “ Second Event of Default ” and
collectively with the First Event of Default, the “
Existing Events of Default ”).
C.
At the request of the Borrower and
the Parent Guarantor, the Agent and the Lenders entered into a
Forbearance Agreement with the Borrower and the Parent Guarantor
dated as of July 31, 2008 (the “ First Forbearance
Agreement ”), pursuant to which the Agent and the Lenders
agreed to forbear from exercising their available default rights
and remedies under the Financing Agreement, the other Loan
Documents, applicable law and equity (collectively, “
Default Rights and Remedies ”) in response to the
occurrence and continuance of the First Event of Default through
August 26, 2008.
D.
At the request of the Borrower and
the Parent Guarantor, the Agent and the Lenders also entered into
an Amended and Restated Forbearance Agreement with the Borrower and
the Parent Guarantor dated as of August 26, 2008 (the “
Second Forbearance Agreement ”), pursuant to which the
Agent and the Lenders agreed to forbear from exercising their
Default Rights and Remedies in response to the occurrence and
continuance of both of the Existing Events of Default through
September 30, 2008.
E.
The Borrower and the Parent
Guarantor have requested that the Agent and the Lenders agree to
continue to forbear from exercising their Default Rights and
Remedies in response to the occurrence and continuance of both of
the Existing Events of Default through November 21,
2008.
E.
The Agent and the Lenders are
willing to continue to forbear from exercising their Default Rights
and Remedies in response to the occurrence and continuance of both
of the Existing Events of Default through November 21, 2008 on
the terms and
conditions set forth in this Agreement, which
shall amend, restate, replace and supersede (but which shall not
cause a novation of) the Second Forbearance Agreement.
NOW, THEREFORE, the parties hereby
agree as follows:
1.
Defined Terms
. Any and all
initially-capitalized terms used in this Agreement (including,
without limitation, in the recitals to this Agreement) without
definition shall have the respective meanings assigned thereto in
the Financing Agreement.
2.
Limited Forbearance
Agreement . So long
as no additional Events of Default occur during such period, the
Agent and the Lenders hereby agree to forbear from exercising any
of their Default Rights and Remedies in response to the occurrence
and continuance of the Existing Events of Default throughout the
period commencing on the date of this Agreement and ending on
November 21, 2008 (the “ Forbearance Period
”).
3.
No Waiver . The agreement of the Agent and the
Lenders under Section 2 of this Agreement conditionally to
forbear from exercising their Default Rights and Remedies
throughout the Forbearance Period shall not constitute a waiver of
either of the Existing Events of Default, and the Agent and the
Lenders hereby expressly reserve all their Default Rights and
Remedies in connection with the Existing Events of
Default.
4.
Addition of Minimum EBITDA
Covenant .
Exhibit F to the Financing Agreement is hereby amended
and supplemented by deleting current Section 3 and
adding new Sections 3 and 4 as follows.
“ Section 3
. Minimum EBITDA . Borrower shall achieve EBITDA
(exclusive of royalty income) for the respective cumulative periods
commencing on the first day of the four-week fiscal period 10 of
Borrower’s Fiscal Year 2008 and ending on the last day of the
applicable 4-week fiscal period of Borrower indicated below of not
less than the corresponding amounts set out below:
|
Cumulative Period Commencing
on the First Day of Fiscal Period 10
of Fiscal Year 2008 and ending
on the Last Day of
|
|
Minimum EBITDA (Exclusive of
Royalty Income)
|
|
|
|
|
|
|
|
fiscal period 10 of Fiscal Year 2008
|
|
$
|
(350,000
|
)
|
|
|
|
|
|
|
fiscal period 11 of Fiscal Year 2008
|
|
$
|
(740,000
|
)
|
|
|
|
|
|
|
fiscal period 12 of Fiscal Year 2008
|
|
$
|
(710,000
|
)
|
|
|
|
|
|
|
fiscal period 13 of Fiscal Year 2008
|
|
$
|
(930,000
|
)
|
|
|
|
|
|
|
fiscal period 1 of Fiscal Year 2009
|
|
$
|
(1,280,000
|
).
|
|
|
|
|
|
|
|
2
Section 4
. Calculation of Financial
Covenants .
Agent, in addition to using the
information contained in the financial statements submitted to
Agent pursuant to Sections 8.5 and 8.7 of the
Financing Agreement, may calculate Borrower’s EBITDA and the
other specified amounts under this Exhibit F (and under
any other Financial Covenants contained in the Financing Agreement)
on the basis of information then available to Agent, which
calculation(s) will be binding on Borrower; however ,
Agent shall give notice to Borrower of Agent’s computations
made pursuant to this Exhibit F and an opportunity to
provide Agent with any additional or contrary information.
Borrower must provide any additional (or contrary) information
within 15 Business Days after Agent gives notice to Borrower of
Agent’s computations.”
5.
Reserve for Payroll and Payroll
Taxes . The Agent
shall continue to maintain a reserve against Revolving Credit
Availability to cover the Borrower’s payroll and payroll tax
obligations. The required amount of such reserve shall be
based upon the assumptions that the Borrower’s weekly payroll
obligations total $4,400,000 and that the Borrower’s weekly
federal and state payroll tax obligations total $135,000. The
Agent shall adjust the required amount of the reserve if the
Borrower’s actual weekly payroll obligations total materially
more (or less) than $4,400,000 or if the Borrower’s actual
weekly unemployment taxes total materially more (or less) than
$135,000. The Agent shall add $135,000 to such reserve each
week. Upon the Agent’s receipt of evidence
