Exhibit 10.1
THIRD AMENDED AND RESTATED
FORBEARANCE AGREEMENT
THIS THIRD AMENDED AND RESTATED
FORBEARANCE AGREEMENT (this “ Agreement ”),
dated as of February 13, 2009, 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 through each Applicable Period ending on or
before April 7, 2009 (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 Existing Events 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 the Existing Events of Default through
September 30, 2008.
E.
At the request of the Borrower and
the Parent Guarantor, the Agent and the Lenders also entered into a
Second Amended and Restated Forbearance Agreement with the Borrower
and the Parent Guarantor dated as of September 30, 2008, as
amended (collectively, the “ Second A&R 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 the Existing
Events of Default through December 19, 2008.
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F.
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 the
Existing Events of Default through April 7, 2009.
G.
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 the
Existing Events of Default through April 7, 2009 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 A&R 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 Forbearance Events of Default (as hereinafter defined) occur
hereunder 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 April 7, 2009 (the
“ Forbearance Period ”). Upon the
occurrence of a Forbearance Event of Default, at the option of the
Agent, the Forbearance Period shall immediately
terminate.
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
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.
Amendment of Travelers Letter of
Credit . On the
effective date of this Agreement, US Bank shall amend the
Irrevocable Standby Letter of Credit in the face amount of
$27,000,000 issued by U.S. Bank to The Travelers Indemnity Company,
with an expiration date of February 28, 2009, to extend its
expiration date to April 7, 2009.
5.
Amendment of Ohio Bureau of
Worker’s Compensation Letter of Credit
. On the effective date of
this Agreement, US Bank shall amend the Irrevocable Standby Letter
of Credit in the face amount of $253,000 issued by U.S. Bank to the
Ohio Bureau of Worker’s Compensation, with an expiration date
of February 28, 2009, to extend its expiration date to
April 7, 2009.
6.
Agreements Regarding Credit
Facility .
A. Reduction of Credit
Facility . The Revolving Credit Commitments are hereby
reduced to Twenty-Eight Million Dollars ($28,000,000). The
respective Revolving Credit Commitments of the Lenders are set
forth on Schedule 1 to this Agreement.
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B. No Additional Loans
. In light of the reduction of the Revolving Credit
Commitments pursuant to Section 6A and the amount of the
outstanding Letters of Credit, the Borrower shall have no further
right to request, and the Agent and the Lenders shall have no
further obligation to make, any additional Revolving Loans under
the Financing Agreement, other than forced loans due to draws upon
the outstanding Letters of Credit.
C. Use of Excess Cash
. The Borrower may use its operating cash on deposit in the
Special Account for the Borrower’s working capital needs,
provided that the use of such cash does not cause a
Borrowing Base Deficiency. Each day, the Agent shall
recalculate the Borrowing Base and determine whether any Borrowing
Base Deficiency has occurred by (i) increasing the Borrowing
Base by the amount of all new Eligible Receivables reported by the
Borrower to the Agent on the preceding day, (ii) reducing the
Borrowing Base by the amount of all collections on Eligible
Receivables received in the Special Account on that day, and
(iii) increasing the Borrowing Base by the amount of all
Available Cash added to the Special Account on that day.
D. Weekly Adjustments to
Reserve for Payroll and Payroll Taxes . The Agent shall
adjust weekly t
