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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K
CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report: February 13, 2009

(Date of earliest event reported)

WESTAFF, INC.
(Exact Name of Registrant as Specified in its Charter)

Delaware
(State or Other Jurisdiction
of Incorporation)

000-24990 94-1266151
(Commission (I.R.S. Employer
File Number) Identification No.)

298 North Wiget Lane, Walnut Creek, CA 94598

(Address of Principal Executive Offices, including Zip Code)

(925) 930-5300
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of
the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4 (c))
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Item 1.01 Entry into a Material Definitive Agreement.

On February 17, 2009, Westaff (USA), Inc. (the “Borrower”), which is a wholly-owned subsidiary of Westaff, Inc. (the “Company”), and the
Company (as parent guarantor) entered into a Third Amended and Restated Forbearance Agreement, dated as of February 13, 2009 (the “Third
Amended and Restated Forbearance Agreement”), with U.S. Bank National Association (as administrative agent and a lender, “U.S. Bank”)
and Wells Fargo Bank, National Association (as a lender, “Wells Fargo”), which became effective on February 18, 2009. The parties to the
Third Amended and Restated Forbearance Agreement are parties to that certain Financing Agreement, dated as of February 14, 2008 (as
amended, the “Financing Agreement”).

Pursuant to the terms of the Third Amended and Restated Forbearance Agreement, the parties agreed, among other things, to the following:

(1) U.S. Bank and Wells Fargo agreed to continue to forbear from exercising any of their default rights and remedies during the
period from February 13, 2009 and ending on April 7, 2009 (the “Forbearance Period”) with regard to the existing events of
default relating to the Borrower’s failure to achieve the fixed charge coverage ratio required by the Financing Agreement for
the applicable fiscal period ended April 19, 2008 and for each applicable fiscal period ending on or before April 7, 2009 (the
“Existing Events of Default”), so long as none of the following events occur during the Forbearance Period:

(a) any termination of the Agreement and Plan of Merger, dated as of January 28, 2009, by and among the Company,
Koosharem Corporation and Select Merger Sub Inc.;

(b) any occurrence of a borrowing base deficiency;

(c) any revocation of any additional guaranty agreements required by U.S. Bank and Wells Fargo as a condition to the
continued forbearance;

(d) any failure by the Borrower to deliver evidence to U.S. Bank by April 1, 2009 that the Borrower’s workers’
compensation insurer, The Travelers Indemnity Company, has extended the term of the Borrower’s workers
compensation insurance policy from April 1, 2009 to April 7, 2009; or

(e) any occurrence, discovery or disclosure of any other event of default other than the Existing Events of Default;

(2) U.S. Bank agreed to amend certain letters of credit outstanding under the Financing Agreement (including an outstanding
letter of credit with a face amount of $27 million in favor of The Travelers Indemnity Company, which is the carrier under the
Company’s existing workers compensation insurance program) to extend the expiration date of such letters of credit from
February 28, 2009 to April 7, 2009; and

(3) the Borrower and the Company agreed, among other things: (a) to a reduction in the aggregate amount of the revolving
credit commitments under the Financing Agreement from $33.0 million to $28.0 million and (b) that the Borrower will have no
right to request revolving loans under the Financing Agreement other than forced loans due to draws upon letters of credit
outstanding under the Financing Agreement.

The foregoing description of the Third Amended and Restated Forbearance Agreement does not purport to be complete and is qualified in its
entirety by reference to the full text of the Third Amended and Restated Forbearance Agreement, a copy of which is attached as Exhibit 10.1 to
this Current Report on Form 8-K and is incorporated herein by reference.

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Item 8.01 Other Events.

The following are updates to the risk factors contained in Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended
November 1, 2008 filed on February 13, 2009 to reflect the Company’s entry into the Third Amended and Restated Forbearance Agreement. In
the following updates, the terms “the Company”, “we,” “our,” and “us” refer to Westaff, Inc., its predecessor and their respective subsidiaries,
unless the context otherwise requires.

ITEM 1A. RISK FACTORS

We are currently in default under our primary credit facility. While we have recently obtained a forbearance through
April 7, 2009 for this default, we no longer have any right to borrow under this credit facility, except for forced loans due to draws
upon letters of credit outstanding under this credit facility. Accordingly, if our available cash is insufficient to satisfy our liquidity
requirements and we are unable to find alternative sources of capital, which may not be available to us on acceptable terms or at
all, we may be unable to continue our operations as a going concern.

We are currently in default under the Financing Agreement, dated as of February 14, 2008 (as amended, the “Financing
Agreement”), among Westaff (USA), Inc. (as borrower), the Company (as parent guarantor), U.S. Bank National Association (as
agent for the lenders, letter of credit issuer and a lender) and Wells Fargo Bank, National Association (as a lender), which is our
primary credit facility. We have financed our operations primarily through cash generated by our operating activities and through
borrowings under our revolving line of credit under the Financing Agreement. On May 23, 2008, we received a notice of default from
U.S. Bank (as agent for itself and Wells Fargo Bank) stating that (1) an Event of Default (as defined in the Financing Agreement) had
occurred due to our failure to achieve a minimum required Fixed Charge Coverage Ratio (as defined in the Financing Agreement) for
our fiscal period ended April 19, 2008; and (2) as a result of the Event of Default, effective May 21, 2008, U.S. Bank increased the rate
of interest to the default rate of interest on the borrowings outstanding under our line of credit. We had no borrowings outstanding
under the Financing Agreement, but do have $27.3 million of outstanding letters of credit supporting our workers’ compensation
obligations. The Company previously entered into a series of forbearance agreements providing for the lenders to forbear from
exercising their default rights and remedies under the Financing Agreement through December 19, 2008. However, on January 28,
2009, The Travelers Indemnity Company, which is the carrier under the Company’s existing workers compensation insurance program
and the beneficiary of a letter of credit with a face amount of $27 million expiring on February 28, 2009 previously issued by U.S. Bank
under the Financing Agreement, was notified by U.S. Bank that such letter of credit will not be renewed. On February 17, 2009, the
Company entered into a new forbearance agreement, which became effective on February 18, 2009, subject to the terms and
conditions of which, among other things: (1) the lenders agreed to forbear from exercising their default rights and remedies under the
Financing Agreement during the period from February 13, 2009 and ending on April 7, 2009, (2) certain outstanding letters of credit
expiring on February 28, 2009 (including the outstanding letter of credit in favor of The Travelers Indemnity Company) previously
issued by U.S. Bank under the Financing Agreement were extended to April 7, 2009 and (3) the Company’s ability to borrow under the
Financing Agreement (other than forced loans due to draws upon the outstanding letters of credit) was terminated. Because the
Company no longer has any right to borrow under the Financing Agreement (other than forced loans due to draws upon the
outstanding letters of credit), if the Company’s available cash is insufficient to satisfy the Company’s liquidity requirements and the
Company is unable to find alternative sources of capital, the Company may be unable to continue its operations as a going concern.
Under these circumstances, unless the pending merger with Koosharem is completed, the Company may be required to seek
alternative transactions and/or consider filing for bankruptcy protection. There can be no assurance that any alternative sources of
capital and/or alternative transactions would be available to us on acceptable terms or at all in the current challenging economic
environment. In addition, while the Company was able to obtain a forbearance under this new forbearance agreement, there can be
no assurances that the Company will be able to continue to satisfy the conditions required for the forbearance or that waivers or
additional forbearances can be obtained by the Company on acceptable terms in the future. If the Company is unable to obtain
waivers or additional forbearances from the lenders on acceptable terms in the future, the lenders would be able to elect at any time to
pursue further remedies available to them under the Financing Agreement, including (1) electing not to renew or extend letters of
credit issued under the Financing Agreement or (2) under specified conditions and at certain times, limiting the Company’s ability to
use its cash to pay ordinary course expenses and possibly disrupting the Company’s business operations.

In response to our short term forbearance issues, on August 25, 2008, the Company secured a

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$3.0 million Subordinated Loan facility with its principal stockholder, DelStaff, LLC. This facility may be used by the Company for
working capital and general business purposes during the term of the facility. The unpaid principal balance under the Subordinated
Loan bears interest at an annual rate of twenty percent (20%). Interest is payable-in-kind and accrues monthly in arrears on the first
day of each month as an increase in the principal amount of the Subordinated Loan. A default rate applies on all obligations under the
Subordinated Loan Agreement from and after the Maturity Date (August 15, 2009) and also during the existence of an Event of
Default (as defined in the Subordinated Loan Agreement) at an annual rate of ten percent (10%) also payable-in-kind over the then-
existing applicable interest rate and if principal is not repaid on the Maturity Date, an additional 5% of outstanding principal must be
paid along with the default rate interest. The obligations under the Subordinated Loan Agreement are secured by a security interest
in substantially all of the existing and future assets (the “Subordinated Collateral”) of the Company. The lien granted to the
Subordinated Lender in the Subordinated Collateral is subordinated to the lien in that same collateral granted to U.S. Bank.
Borrowings in excess of $1.0 million require the Subordinated Lender approval. The Subordinated Loan may be prepaid without
penalty, subject to approval by U.S. Bank and the terms of an Intercreditor Agreement. Under certain circumstances, the Company
must prepay all or a portion of any amounts outstanding under the Subordinated Loan Agreement, subject to the terms of the
Intercreditor Agreement. The outstanding loan balance at November 1, 2008 was $2.2 million, which includes a $0.2 million facility fee
that was added to the loan balance upon receipt of the initial advance. Accrued and unpaid interest on this note at November 1, 2008
was $40,000. The Company borrowed an additional $500,000 on the subordinated loan on January 7, 2009 and an additional $500,000
on January 29, 2009.

We may be unable to adequately collateralize our workers’ compensation obligations at their current levels or at all.

We are contractually obligated to collateralize our workers’ compensation obligations under our workers’ compensation
program through irrevocable letters of credit, surety bonds or cash. As of November 1, 2008, our aggregate collateral requirements
under these contracts have been secured through $27.3 million of letters of credit obtained through the Financing Agreement. Our
workers’ compensation policy, which had been originally set to expire on November 1, 2008, has been extended through April 1, 2009.
As part of the extension, the Company paid $1.0 million in cash collateral on October 31, 2008 and is required to pay an additional
$250,000 by February 28, 2009. These collateral requirements are significant, place pressure on our liquidity and working capital
capacity and are dependent on the Company having sufficient accounts receivable and cash balances. If we are not able to obtain a
renewal of our letters of credit at a level sufficient to meet our collateral requirements, we could be unable to obtain sufficient workers’
compensation coverage to support our operations.

On January 28, 2009, The Travelers Indemnity Company, which is the Company’s workers’ compensation carrier, was
notified by U.S. Bank that the letter of credit issued in favor of The Travelers Indemnity Company and expiring on February 28, 2009
would not be renewed. On February 17, 2009, the Company entered into a new forbearance agreement, which became effective on
February 18, 2009, subject to the terms and conditions of which, among other things, U.S. Bank agreed to extend certain outstanding
letters of credit expiring on February 28, 2009 (including the outstanding letter of credit in favor of The Travelers Indemnity Company)
previously issued by U.S. Bank under the Financing Agreement to April 7, 2009. While the Company was able to obtain an extension
of the letters of credit under this new forbearance agreement, there can be no assurances that the Company will be able to continue to
satisfy the conditions required for the extension and thereby obtain sufficient workers’ compensation coverage to support the
Company’s operations. In addition, the carrier has the right to draw on the letter of credit prior to the expiration. If the carrier draws on
the Letter of Credit, U.S. Bank may require the Company to fund the draw in cash which would force the Company to borrow under
the Financing Agreement. If no waiver or forbearance is then currently effective and the lenders elect to pursue remedies under the
Financing Agreement, such as calling the loan, there can be no assurance that the Company would be able to find alternative sources
of capital to repay the loan, in which case the Company may be unable to continue its operations as a going concern.

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Item 9.01 Financial Statements and Exhibits.

(d) Exhibit

Exh ibit No. De scription of Docu m e n t

10.1 Third Amended and Restated Forbearance Agreement

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.

WESTAFF, INC.

By: /s/ Christa C. Leonard

Christa C. Leonard
Senior Vice President and Chief Financial Officer

Date: February 20, 2009

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EXHIBIT INDEX

Exh ibit No. De scription of Docu m e n t

10.1 Third Amended and Restated Forbearance Agreement

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 the reserve against
Revolving Credit Availability that it maintains in accordance with Section 8 below to cover the Borrower’s payroll and payroll tax obligations.

7. Amendments to Definitions.

A. Amendments to Definitions of “Borrowing Base” and “Borrowing Base Deficiency.” Section 1.1 of the Financing
Agreement is hereby amended such that the definitions of “Borrowing Base” and “Borrowing Base Deficiency” shall be amended and restated
in their entirety as follows:

“Borrowing Base” means, as of any time, an amount in Dollars equal to the sum of:

(i) the Eligible Billed Receivables Advance Rate applied to the Net Amount of Eligible Billed Receivables then
outstanding; plus

(ii) the Eligible Unbilled Receivables Advance Rate applied to an amount equal to the lesser of (a) the Net
Amount of Eligible Unbilled Receivables then outstanding and (b) an amount equal to 20% of the Net Amount of Eligible Billed Receivables
then outstanding; plus

(iii) Available Cash (including the Additional Guarantor Collateral); less

(iv) the then Reserve Amount.

“Borrowing Base Deficiency” means the failure, as of any time, of Revolving Credit Availability to be greater than or
equal to Zero Dollars.

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B. Addition of Definition of “Additional Guarantor Collateral.” Section 1.1 of the Financing Agreement is hereby
further amended and supplemented by adding therein a new definition of “Additional Guarantor Collateral” as follows:

“Additional Guarantor Collateral” shall mean (i) any cash collateral in a blocked deposit account at U.S. Bank in which
the Agent has a first-priority security interest perfected by control, securing the obligation of an Additional Guarantor under its Additional
Guaranty, or (ii) any irrevocable standby letter of credit issued by a commercial bank reasonably satisfactory to the Agent and the Lenders,
naming the Agent as beneficiary, securing the obligation of an Additional Guarantor under its Additional Guaranty.

8. 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 equal to the sum of
(i) the Borrower’s actual accrued Federal Unemployment Tax Act and State Unemployment Tax Authority payroll tax liabilities, which liabilities
the Borrower shall accrue weekly and (ii) the estimated amount of the Borrower’s payroll obligations to temporary employees, which estimate
shall be adjusted each week, based upon the Borrower’s average payroll obligations for the immediately preceding two weeks (excluding any
holiday week). The payroll reserve required under this Section 8 shall constitute the Reserve Amount for the purpose of calculating the
Borrowing Base.

9. Continued Imposition of Default Interest. The Agent shall continue to assess interest on the Obligations at the
Default Rate throughout the Forbearance Period.

10. Suspension of Agent Advances. The Agent hereby agrees not to incur any Agent Advances pursuant to
Section 13.10.6 of the Financing Agreement so long as no Forbearance Event of Default occurs. The Borrower and the Lenders acknowledge
and agree that the Agent may incur Agent Advances, subject to the limitations set forth in Section 13.10.6 of the Financing Agreement, from
and after the occurrence of a Forbearance Event of Default as the Agent in its discretion may deem necessary or desirable to enforce the
available Default Rights and Remedies of the Agent and the Lenders, provided that such Agent Advances do not cause a Borrowing Base
Deficiency.

11. Deletion of Overadvances Provision. Section 13.11 of the Financing Agreement is hereby amended and restated to
read in its entirety as follows:

“13.11 Intentionally Deleted.”

12. General Release. In consideration of the agreement of the Agent and the Lenders to enter into this Agreement and
hereby conditionally forbear from exercising their available Default Rights and Remedies throughout the Forbearance Period, the Borrower and
the Parent hereby release, discharge and acquit the Agent, each Lender and their respective agents, servants, employees, successors and
assigns from any and all claims, demands, liabilities, obligations and causes of action, whether known or unknown, against them, which the
Borrower or the Parent now own or hold, which the Borrower or the Parent has at any time heretofore owned or held, or which the Borrower or
the Parent hereafter may own or

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hold, by reason of any action, matter, cause or thing whatsoever done prior to the date of this Agreement, including specifically, but not
limited to, any and all claims, demands, rights and causes of action whatsoever arising out of or which could be alleged to arise out of the
Financing Agreement or any of the other Loan Documents.

It is the intention of the Borrower and the Parent in executing this Agreement that the same shall be effective as a
bar to each and every claim, demand, and cause of action hereinabove specified, and in furtherance of this intention the Borrower and the
Parent each waives and relinquishes all rights and benefits under Section 1542 of the Civil Code of the State of California, which provides:

“A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor
at the time of executing the release, which if known by him or her might have materially affected his or her
settlement with the debtor.”

The Borrower and the Parent acknowledge that each of them may hereafter discover facts different from or in addition to those now known or
believed to be true with respect to such claims, demands, or causes of action and agree that this Agreement shall be and remain effective in all
respects notwithstanding any such differences or additional facts.

13. Forbearance Events of Default. The following events shall constitute Forbearance Events of Default hereunder:

A. Termination of Merger Agreement. If either Koosharem Corporation, a California corporation doing business as
Select Staffing (“Select Staffing”), or the Borrower terminates the Agreement and Plan of Merger dated as of January 28, 2009 by and among
Select Staffing, Select Merger Sub Inc., a Delaware corporation, and the Borrower for any reason;

B. Occurrence of a Borrowing Base Deficiency. If a Borrowing Base Deficiency occurs;

C. Revocation of Additional Guaranty. If any Additional Guarantor revokes its Additional Guaranty;

D. Failure to Extend Term of Travelers Insurance Policy. The Borrower fails to deliver satisfactory evidence to the
Agent by April 1, 2009 that Travelers has extended the term of the Borrower’s workers compensation insurance policy from the current policy
termination date of April 1, 2009 to a new termination date after April 7, 2009 which is reasonably satisfactory to the Agent and the Lenders; or

E. Other Events of Default. The occurrence, discovery or disclosure of any other Event of Default (other than the
Existing Events of Default).

Upon the occurrence of a Forbearance Event of Default, the Agent and the Lenders shall be

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relieved of their respective obligations hereunder to forbear from exercising their available Default Rights and Remedies and immediately may
exercise all such rights and remedies.

14. Conditions Precedent. The effectiveness of this Agreement shall be subject to the satisfaction of each of the following
conditions:

A. This Agreement. The Agent shall have received this Agreement, duly executed by the Borrower, the Parent
Guarantor, the Agent and each of the Lenders;

B. Additional Guaranty. The Agent shall have received any additional Guaranty agreements that are required by the
Agent and the Lenders, in form and substance reasonably satisfactory to the Agent and the Lenders (each, an “Additional Guaranty”), from
one or more Guarantors that are reasonably satisfactory to the Agent and the Lenders (any of such Guarantors being an “Additional
Guarantor”), and if required by the Agent and the Lenders, secured by such cash collateral or letters of credit as are reasonably satisfactory to
the Agent and the Lenders; and

C. Confirmation by Additional Guarantors. Each Additional Guarantor shall have confirmed in writing to the Agent
that this Agreement is acceptable in form and substance to such Additional Guarantor.

15. Reaffirmation and Ratification. The Borrower and the Parent Guarantor hereby reaffirm, ratify and confirm their
respective Obligations under the Financing Agreement and the other Loan Documents, acknowledge that all of the terms and conditions in the
Financing Agreement remain in full force and effect, and further acknowledge that the security interests granted to Agent in the Collateral are
valid and perfected.

16. Integration. This Agreement constitutes the entire agreement of the parties in connection with the subject matter
hereof and cannot be changed or terminated orally. All prior agreements, understandings, representations, warranties and negotiations
regarding the subject matter hereof, if any, are merged into this Agreement.

17. Counterparts. This Agreement may be executed in multiple counterparts, each of which when so executed and
delivered shall be deemed an original, and all of which, taken together, shall constitute but one and the same agreement.

18. Governing Law. This Agreement shall be governed by, and construed and enforced in accordance with, the internal
laws (as opposed to the conflicts of law principles) of the State of California.

[Rest of page intentionally left blank; signature pages follow]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement by their respective duly authorized officers as of
the date first above written.

WESTAFF (USA), INC.,

a California corporation,
as the Borrower

By: /s/ Christa C. Leonard

Christa C. Leonard
Chief Financial Officer

WESTAFF, INC.,
a Delaware corporation,
as the Parent Guarantor

By: /s/ Christa C. Leonard

Christa C. Leonard
Chief Financial Officer

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U.S. BANK NATIONAL ASSOCIATION,

as the Agent

By: /s/ Suzanne E. Geiger

Suzanne E. Geiger
Senior Vice President

U.S. BANK NATIONAL ASSOCIATION,

as a Lender

By: /s/ Suzanne E. Geiger

Suzanne E. Geiger
Senior Vice President

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WELLS FARGO BANK,

NATIONAL ASSOCIATION,
as a Lender

By: /s/ Tony S. Lee

Tony S. Lee
Vice President

3
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SCHEDULE 1.1

REVOLVING CREDIT COMMITMENTS

REVO LVING
C REDIT PRO RATA
LENDER C O MMITMENT S HARE

U.S. Bank National Association $ 16,800,000 60.00%

Wells Fargo Bank, National Association $ 11,200,000 40.00%

Total: $ 28,000,000 100.00%