Westaff Signs New Forbearance Agreement, Emphasizes Strength of Ongoing Operations

  
    
  
  
    
      Westaff, Inc. (NASDAQ:WSTF), a leading provider of staffing services, 
      announced today that it has reached a new forbearance agreement with 
      U.S. Bank National Association and Wells Fargo Bank, National 
      Association. Westaff CEO and Chairman Michael T. Willis further outlined 
      operational steps designed to set the stage for renewed growth.
    
    
      Westaff entered into a Second Amended and Restated Forbearance Agreement 
      with U.S. Bank National Association and Wells Fargo Bank, National 
      Association effective September 30, 2008. Under the terms of this 
      Forbearance Agreement, the banks have agreed to forebear from exercising 
      any remedies that they may have against the Company through November 21, 
      2008 as a result of certain events of default under its credit facility 
      which occurred on April 19, 2008.
    
    
      “The Banks willingness to grant an additional 
      period of forbearance is very favorable for the Company and we are 
      committed to working diligently and cooperatively with our banking 
      partners to agree upon a longer-term resolution,” 
      commented Westaff CEO and Chairman Michael T. Willis. “Westaff 
      is continuing to focus on growing our U.S. operations and achieving 
      additional milestones toward improving our business.”
    
    
      Willis underlined that the Forbearance Agreement has a positive effect 
      in that it allows the Company to focus on ongoing operations. Willis 
      added that at present, the credit facility’s 
      sole purpose is to provide collateral for Westaff’s 
      workers’ compensation insurance program. “Westaff 
      has sufficient working capital to fund our operations and strategic 
      growth objectives. Our business remains sound, and we are continuing to 
      accomplish our financial, sales and customer service objectives,” 
      said Willis. “The recent sale of our 
      Australia and New Zealand subsidiaries, whereby the Company expects to 
      receive net cash proceeds of approximately US $7.5 million following 
      payment of taxes, transaction expenses and repaying subsidiary 
      indebtedness, underscores this fact. The recently reported $3.0 million 
      loan from Westaff’s largest stockholder, 
      DelStaff, LLC, also demonstrates the positive support that we have from 
      our largest investor.”
    
    
      About Westaff
    
    
      Westaff provides staffing services and employment opportunities for 
      businesses in global markets. Westaff annually employs more than 100,000 
      people and services thousands of client accounts throughout the United 
      States. For more information, please visit the company Web site at www.westaff.com.
    
    
      This press release contains forward-looking statements within the 
      meaning of the U.S. securities laws. Forward-looking statements in this 
      release are generally identified by words such as “expects,” 
      “believes,” “will,” 
      “should” and 
      similar expressions that are intended to identify forward-looking 
      statements. You are cautioned not to place undue reliance on these 
      forward-looking statements, which speak only as of the date hereof. All 
      forward-looking statements are qualified in their entirety by this 
      cautionary statement. Forward-looking statements contained herein 
      include, but are not limited to, statements regarding (i) Westaff's 
      expectations regarding the company's growth prospects; (ii) Westaff's 
      expectations that the banks will enter into a longer-term agreement; 
      (iii) Westaff’s expectation that it will be 
      able to arrange a long-term solution; (iv) that Westaff continues to 
      streamline its costs, build its leadership team and focus on growth and 
      improved financial performance; and (v) Westaff’s 
      belief that it has the working capital resources needed to deliver on 
      its long and short-term objectives. The forward-looking statements 
      contained herein involve a number of assumptions, risks and 
      uncertainties that could cause actual results to differ materially from 
      those expressed or implied by these forward-looking statements. Many of 
      these risks and uncertainties cannot be controlled by the Company. These 
      risks and uncertainties include, but are not limited to: our ability to 
      obtain sufficient collateral to permit us to renew our workers’ 
      compensation insurance program at the beginning of November 2008; our 
      ability to negotiate a further forbearance under or otherwise 
      restructure our credit facility on terms acceptable to us during a 
      period of severe disruption in the credit markets; possible declines in 
      demand resulting from recessionary economic conditions; our ability to 
      compete in a highly priced sensitive market; our significant working 
      capital needs and our ability to borrow to meet those needs; our ability 
      to borrow under our credit facilities and our compliance with their debt 
      covenants; the sufficiency of our workers’ 
      compensation claims reserve; variability of employee-related costs, 
      including workers’ compensation liabilities; 
      possible adverse effects of fluctuations in the general economy; our 
      ability to collect on our accounts receivable; risks related to 
      franchise agent operations; risks related to international operations 
      and fluctuating exchange rates; reliance on executive management and key 
      personnel; our ability to attract and retain the services of qualified 
      temporary personnel; the ability of our customers to terminate our 
      service agreement on short notice; variability of the cost of 
      unemployment insurance for our temporary employees; any difficulty with 
      our information technology system; government regulation; potential 
      exposure to employment-related claims; the volatility of the Company’s 
      stock price; increased regulatory compliance costs; and litigation and 
      other claims. Additional information concerning the risks and 
      uncertainties listed above, and other factors you may wish to consider, 
      is contained in the Company’s filings with 
      the Securities and Exchange Commission, including the Company’s 
      most recent Annual Report on Form 10-K for the year ended November 3, 
      2007 and Quarterly Report on Form 10-Q for the quarterly period ended 
      July 12, 2008.
    
    
      Forward-looking statements are based on the beliefs and assumptions of 
      the Company's management and on currently available information. The 
      Company undertakes no responsibility to publicly update or revise any 
      forward-looking statement except as required by applicable laws and 
      regulations.