**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

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**FORM 10-K/A**

**(Amendment No. 1)**

 

| **x**                                                                                                                           | ** ** | **ANNUAL REPORT PURSUANT TO SECTION 13  OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**     |
|---------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------|
|                                                                                                                            |
| **For the fiscal year ended November 1, 2008**                                                                             |
| ** **                                                                                                                      |
| **o**                                                                                                                           | ** ** | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                                                                                                      |
| **For the transition period from        to        ** |

 

**CommissionFile Number 000-24990**

 

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**WESTAFF,INC.**

(Exact name of registrant asspecified in its charter)

 

| **DELAWARE**(State or other jurisdiction of  incorporation or organization) | ** ** | **94-1266151**(I.R.S. Employer  Identification No.) |
|-----------------------------------------------------------------------------|------------|-----------------------------------------------------|

 

**298 NORTHWIGET LANE, WALNUT CREEK, CA 94598-2453**

(Address of principalexecutive offices, including zip code)

 

**(925)930-5300**

(Registrant’s telephonenumber, including area code)

 

Securities registeredpursuant to Section 12(b) of the Act:

**CommonStock, $0.01 par value per share**

 

| **Title of class**             | ** ** | **Name of each exchange on which registered** |
|------------------------------------------|------------|-----------------------------------------------------------------------------|
| Common Stock.  $0.01 par value per share |       | NASDAQ Stock  Market LLC (NASDAQ Global Market)                             |

 

Securities registered pursuant to Section 12(g) ofthe Act:

**None**

 

Indicateby check mark if the registrant is a well-known seasoned issuer, as defined in405 of the Securities Act. Yes o  No x

 

Indicateby check mark if the registrant is not required to file reports pursuant to Section 13or Section 15(d) of the Exchange Act. Yes o  No x

 

Indicateby check mark whether the registrant: (1) has filed all reports requiredto be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. Yes x  No o

 

Indicateby check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, to the bestof registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or anyamendment to this Form 10-K. x

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reporting company. Seedefinition of “large accelerated filer,” “accelerated filer” and “smallerreporting company” in Rule 12b-2 of the Exchange Act.

 

| Large accelerated filer o |   | Accelerated filer o |   | Non-accelerated filer o(Do not check if a smaller  reporting company) |   | Smaller reporting company x |
|---------------------------|--------|---------------------|--------|-----------------------------------------------------------------------|--------|----------------------------------|

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act). Yes o No x

 

Asof April 19, 2008, which was the last business day of the registrant’smost recently completed second fiscal quarter, the aggregate market value ofthe registrant’s common stock held by non-affiliates of the registrant was$34,228,871 based on the closing sale price as reported on the NASDAQ GlobalMarket.

 

Asof February 25, 2009, the Registrant had outstanding 16,702,651 shares ofCommon Stock.

 

**DOCUMENTSINCORPORATED BY REFERENCE: None.**

 

 

 

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**EXPLANATORYNOTE:**

 

This Amendment No. 1 to the Annual Report on Form 10-Kof Westaff, Inc. (the “Registrant”) amends the Registrant’s Annual Reporton Form 10-K for the fiscal year ended November 1, 2008 that wasoriginally filed with the Securities and Exchange Commission (the “SEC”) on February 13,2009 (the “Original Form 10-K”). This Amendment No. 1 is being filed solely to include theinformation required in Part III (Items 10, 11, 12, 13 and 14) of Form 10-Kthat was previously omitted from the Original Form 10-K in reliance uponGeneral Instruction G(3) to Form 10-K.  General Instruction G(3) to Form 10-Kallows such omitted information to be filed as an amendment to the Original Form 10-Kor incorporated by reference from the Registrant’s definitive proxy statementwhich involves the election of directors not later than 120 days after the endof the fiscal year covered by the Original Form 10-K.  As of the date of this Amendment No. 1,the Registrant does not intend on filing a definitive proxy statementcontaining the information required in Part III within such 120-dayperiod.  Accordingly, the Registrant isfiling this Amendment No. 1 to include such omitted information as part ofthe Original Form 10-K.

 

Except as described in this explanatory note, no otherinformation in the Original Form 10-K is being modified or amended by thisAmendment No. 1, and this Amendment No. 1 does not otherwise reflectevents occurring after February 13, 2009, which is the filing date of theOriginal Form 10-K.  Accordingly,this Amendment No. 1 should be read in conjunction with the Original Form 10-Kand the Registrant’s other filings with the SEC.  This Amendment No. 1 consists solely ofthe preceding cover page, this explanatory note, Part III (Items 10, 11,12, 13 and 14), the signature page and the certifications required to befiled as exhibits to this Amendment No. 1.

 

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**PART III**

 

*Referencesin this Amendment No. 1 to the “Company,” the “Registrant,” “Westaff,” “we,”“our,” and “us” refer to Westaff, Inc., its predecessor and theirrespective subsidiaries, unless the context otherwise requires.*

 

**ITEM10.  DIRECTORS, EXECUTIVE OFFICERS ANDCORPORATE GOVERNANCE.**

 

Our Board ofDirectors consists of nine directors and is divided into three classes,designated Class I, Class II and Class III, with each classhaving a three-year term.  Our directorsserve in such capacity until the annual meeting of stockholders correspondingto the end of their respective terms or until their successors are duly electedand qualified unless they have earlier resigned or been removed.

 

The followingtable provides information regarding our executive officers and directors andtheir respective ages as of February 27, 2009.

 
| **Name**            | ** ** | **Age** | ** ** | **Position(s) Held**                          |
|---------------------|------------|---------|------------|----------------------------------------------------|
| Michael T. Willis   |       | 64      |       | Chief Executive Officer  and Chairman of the Board |
| Stephen J. Russo    |       | 52      |       | President and Chief  Operating Officer             |
| Christa C. Leonard  |       | 51      |       | Senior Vice President  and Chief Financial Officer |
| Kristi Kennedy      |       | 43      |       | Senior Vice President,  Field Operations           |
| Sean Wong           |       | 42      |       | Vice President and  Controller                     |
| John G. Ball        |       | 69      |       | Director                                           |
| John R. Black       |       | 45      |       | Director                                           |
| Janet M. Brady      |       | 55      |       | Director                                           |
| Walter W. Macauley  |       | 66      |       | Director                                           |
| Michael R. Phillips |       | 34      |       | Director                                           |
| Don K. Rice         |       | 60      |       | Director                                           |
| Ronald D. Stevens   |       | 65      |       | Director                                           |
| Gerald E. Wedren    |       | 72      |       | Director                                           |

 

*ExecutiveOfficers*

 

*MichaelT. Willis,*Class II director*,*was appointed as our President and Chief Executive Officer effective May 1,2007.  He was appointed Chairman of theBoard at the same time and his term expires at the annual meeting ofstockholders in 2011.  Upon Stephen J.Russo being named as President of the Company on January 1, 2009, Mr. Willisis currently our Chief Executive Officer and Chairman of the Board.  Mr. Willis has more than 35 years of staffingindustry experience having participated in the acquisition and integration ofmore than 70 companies in his career.  Hemost recently was the CEO and President of COMSYS, an information technologystaffing business, from 1999 to 2006. Prior to COMSYS, Mr. Willis was Chairman, CEO and President ofMetamor Worldwide, a publicly traded consolidator of staffings and solutionsbusinesses founded by Mr. Willis in 1993 under the name CORESTAFF.  Mr. Willis founded and operated TalentTree, a personnel services company concentrating on clerical and administrativestaffing services, from 1976 to 1993.

 

*StephenJ. Russo* wasappointed Executive Vice President and Chief Operating Officer on June 16,2008.  On January 1, 2009, Mr. Russowas named President of the Company in addition to his position as ChiefOperating Officer.  Mr. Russopreviously served as Chief Operating Officer at Prudential California Realtyfrom June 2007 to June 2008.  Prior to that, Mr. Russo wasChief Financial Officer at Prudential California from May 2006 to June 2007. Prior to that, Mr. Russo was Senior Vice President, Field Operations, ofthe Company from July 2005 to March 2006 and Zone Manager of theCompany from July 2004 to July 2005.  Prior to that, Mr. Russowas a partner at ECP Group in Walnut Creek, California, an organizational andindividual development consulting partnership, from October 2001 to June 2004.

 

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*ChristaC. Leonard* wasappointed Senior Vice President and Chief Financial Officer on June 16,2008.  Ms. Leonard previously servedas Chief Financial Officer at Prudential California Realty from June 2007to June 2008.  Prior to that, Ms. Leonard was Controller atPrudential California Realty from June 2006 to June 2007.  Priorto that, Ms. Leonard was Vice President and Treasurer of the Company from November 2000to April 2006.

 

*KristiKennedy* wasappointed Senior Vice President, Field Operations on October 15, 2007. Ms. Kennedypreviously served as Senior Vice President, Operations at CORESTAFF from December 2001to October 2007. Prior to that, Ms. Kennedy held various leadershippositions at CORESTAFF’s division level, including Central Division President,from January 1996 to November 2001.

 

*SeanWong.*  Mr. Wong was appointed Vice Presidentand Controller on September 22, 2008. Mr. Wong formerly served asInterim Vice President and Chief Financial Officer at Tiburon, Inc., adivision of CompuDyne. He had also formerly served as Controller at Tiburon, Inc.from May 2005 to July 2007.  Prior to that, Mr. Wong wasVice President of Finance, Corporate Controller, at BriteSmile, Inc. from March 2004to March 2005. Prior to that, Mr. Wong worked as an independentconsultant to early stage and emerging growth companies from October 2001to March 2004.

 

*Directors(other than Michael T.  Willis)*

 

*JohnG. Ball,* Class Idirector, was appointed as a director of the Company effective May 11,2007 and his term expires at the annual meeting of stockholders in 2009. Mr. Ballis a cofounder and principal with XRoads Solutions Group, a 125 personprofessional services firm formed in 1997 where he leads the services andmanufacturing practices. While at XRoads, he has been involved in leading andadvising a number of temporary staffing firms. Prior to XRoads, Mr. Ballwas a partner of High Performance Partners, a firm of financial, strategicplanning, marketing and turnaround consultants from 1989 to 1997. Mr. Ballis also currently a director of Encompass Group Affiliates, Inc., formerly knownas Advanced Communications Technologies, Inc., a New York-based companythat specializes in the consumer electronic aftermarket service and supplychain, known as reverse logistics, having served since August 2007.

 

*JohnR. Black,* Class IIdirector, was appointed as a director of the Company effective May 11,2007 and his term expires at the annual meeting of stockholders in 2010. He isa managing director with H.I.G. Capital, a private equity firm headquartered inMiami with offices in Atlanta, Boston, San Francisco, London, Paris andHamburg, since July 1996. He has 11 years of experience investing inmiddle market transactions. Prior to H.I.G. Capital, Mr. Black was asenior professional with several leading consulting firms, including Ernst &Young, LLP where he began his business career. He sits on the boards of severalportfolio companies of H.I.G. Capital. Mr. Black graduated from HarvardUniversity in 1987 with a dual degree in applied mathematics and economics.

 

*JanetM. Brady*, Class IIdirector, was appointed as a director of the Company effective September 19,2002 and her term expires at the annual meeting of stockholders in 2010. Shewas employed by The Clorox Company for almost twenty-seven years having startedas a Brand Assistant in 1976. After a series of promotions, including as VicePresident-Corporate Marketing Services of that company, she was named VicePresident-Human Resources in 1993 where she served until her retirement in January 2003.She was a former director of American Protective Services, Inc., aprivately held guard service company and I.P.S.A., a privately heldinvestigative and protective services company. She is currently a director onthe Advisory Board of the MBK Foundation a privately held organization.

 

*WalterW. Macauley,* Class IIIdirector, was appointed as a director of the Company effective July 25,2007 and his term expires at the annual meeting of stockholders in 2011. Mr. Macauleypreviously served the Company as a board member from 2002-2004 and brings morethan 30 years of staffing leadership experience to the position. In histwo most recent positions, he served as the CEO of Adia Services, Inc.,and Career Horizons, Inc. Since 1999, he has been a private investor.

 

*MichaelR. Phillips*, Class IIdirector, was appointed as a director of the Company effective May 11,2007 and his term expires at the annual meeting of stockholders in 2010. He iscurrently a managing director with H.I.G. Capital, a private 

 

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equity firm headquarteredin Miami with offices in Atlanta, Boston, San Francisco, London, Paris andHamburg, since August 2004. He has 10 years of experience investing inmiddle market transactions. Prior to H.I.G. Capital, Mr. Phillips was amanagement consultant with Bain & Company and an investment bankerwith Lehman Brothers, from November 2002 to August 2004. He sits onthe boards of several portfolio companies of H.I.G. Mr. Phillips graduatedfrom Princeton University with a B.S.E. in electrical engineering in 1996 andreceived an M.B.A. in Finance from the Wharton School in 2002.

 

*DonK. Rice*, Class IIIdirector, was appointed as a director of the Company effective November 1,2007 and his term expires at the annual meeting of stockholders in 2011. He iscurrently Chairman and Chief Executive Officer of Ascend AcquisitionCorporation, a publicly owned, specified purpose acquisition company. Mr. Riceis also managing and founding partner and investment committee member ofCapital Point Partners, an investment management firm providing mezzaninesecurities to middle markets through the United States, from 2005 to present.Additionally, Mr. Rice is managing and founding partner and investmentcommittee member of RSTW Partners, a private debt and equity firm, from 1992 topresent. Mr. Rice has more than 20 years experience in principalinvesting. He has been an active professional investor since 1984. Hisexperience includes mezzanine and equity investing, senior lending, operatingmanagement, investment banking, and securities analysis.

 

*RonaldD. Stevens,* Class Idirector, was appointed as a director of the Company effective February 24,2002 and his term expires at the annual meeting of stockholders in 2009. Hebegan his business career in 1967 with Arthur Andersen & Co. andbecame an audit partner in that organization in 1977. He left Arthur Andersen & Co.at the end of 1990 and joined in opening Productivity Consulting Group, Inc.From October 1996 until his retirement in April 2002, Mr. Stevenswas the Executive Vice President and Chief Financial Officer of Robertson-CecoCorporation. He is a certified public accountant on inactive status.

 

*GeraldE. Wedren,* Class Idirector, was appointed as a director of the Company effective May 11,2007 and his term expires at the annual meeting of stockholders in 2009. He iscurrently the owner and President of Craig Capital Co., a Washington D.C.and Miami based firm concentrating on mergers and acquisitions, businessturnarounds and liquidations since 1972. Since 1960, he has been associatedwith several firms in both business and legal capacities. Mr. Wedren wasthe owner and President of Little Tavern Shops, a chain of approximately 30fast food restaurants in the Washington, D.C. and Baltimore, M.D.areas from 1981 to 1988. He currently is a director and chairman of theCompensation Committee of American Eagle Outfitters, Inc., having servedsince 1998. Mr. Wedren is also currently a director of Encompass GroupAffiliates, Inc., formerly known as Advanced Communications Technologies, Inc.,a New York-based company that specializes in the consumer electronicaftermarket service and supply chain, known as reverse logistics, having servedsince August 2007.

 

There are nofamily relationships among our executive officers or directors.

 

**BOARD MEETINGS AND COMMITTEES**

 

The standingcommittees of our Board of Directors consist of the following: (1) theAudit Committee, (2) the Compensation Committee, (3) the ExecutiveCommittee and (4) the Nominating and Corporate Governance Committee. Themembership and functions of these committees are described below.

 
| **Directors**        | ** ** | **Audit  Committee** | ** ** | **Compensation  Committee** | ** ** | **Executive  Committee** | ** ** | **Nominating and  Corporate  Governance  Committee** | ** ** |
|----------------------|------------|----------------------|------------|-----------------------------|------------|--------------------------|------------|-----------------------------------------------------------|------------|
| John G. Ball         |       | X                    |       | X                           |       | X                        |       |                                                      |       |
| John R. Black        |       |                 |       |                        |       |                     |       | X                                                         |       |
| Janet M. Brady       |       |                 |       | Chairperson                 |       |                     |       | X                                                         |       |
| Walter W.  Macauley  |       |                 |       |                        |       | X                        |       |                                                      |       |
| Michael R.  Phillips |       |                 |       | X                           |       | X                        |       |                                                      |       |
| Don K. Rice          |       |                 |       |                        |       |                     |       |                                                      |       |
| Ronald D.  Stevens   |       | Chairperson          |       |                        |       |                     |       |                                                      |       |
| Gerald E. Wedren     |       | X                    |       |                        |       |                     |       | Chairperson                                               |       |
| Michael T.  Willis   |       |                 |       |                        |       | X                        |       |                                                      |       |

 

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*Meetingsof Directors.*  During our fiscal year ended November 1,2008 (“fiscal year 2008”), our Board of Directors held 11 meetings, the AuditCommittee held eight meetings, the Compensation Committee held three meetings,the Executive Committee held 12 meetings and the Nominating and CorporateGovernance Committee held three meetings. The Board acted by unanimous writtenconsent on nine occasions. The active committees of our Board of Directors infiscal year 2008 were the Audit Committee, the Compensation Committee, theExecutive Committee and the Nominating and Corporate Governance Committee. Infiscal year 2008, each of the incumbent directors attended at least 75% of theaggregate of (i) all Board meetings held during the respective period forwhich he or she has been a director and (ii) all meetings held by eachcommittee of the Board on which he or she served during the respective periodthat he or she served on such committee.

 

*AuditCommittee.*  The Audit Committee’s duties includereviewing internal financial information, reviewing our internal controls,reviewing our internal audit plans and programs, reviewing with our independentaccountants the results of all audits upon their completion, overseeing thequarterly unaudited reporting process and taking such other action as may benecessary to assure the adequacy and integrity of all financial informationdistributed by us. The Audit Committee is also directly responsible for theappointment, compensation, retention and oversight of the work of the Company’sindependent auditors, including the resolution of disagreements betweenmanagement and the auditors regarding financial reporting. Additionally, theAudit Committee must review and approve all related party transactions that arerequired to be disclosed pursuant to Item 404 of Regulation S-K.

 

The currentmembers of the Audit Committee are Messrs. Stevens, Wedren and Ball and Mr. Stevensis the Chairperson. The Audit Committee is required to have at least threemembers, all of whom must be “independent directors” as defined in the NASDAQlisting standards. Our Board of Directors has determined that it has an “auditcommittee financial expert,” as defined in Item 407(d)(5) of RegulationS-K serving on the Audit Committee, Ronald D. Stevens, and that Mr. Stevensand each of the other Audit Committee members is an “independent director” asdefined in Rule 4200(a)(15) of the NASDAQ listing standards. The Board hasadopted a written charter for the Audit Committee, which was amended on August 15,2007. A copy of the amended Audit Committee charter is available on the Company’swebsite at *http://www.westaff.com*.

 

*CompensationCommittee.*  The Compensation Committee adopted aCompensation Committee Charter on February 27, 2006, which was amended on August 15,2007. The Compensation Committee charter is available on the Company’s websiteat *http://www.westaff.com*. TheCompensation Committee currently consists of three directors, Janet M.Brady, John G. Ball and Michael R. Phillips. Ms. Brady is itsChairperson. The Compensation Committee is required to have at least threemembers, all of whom must be “independent.” The Compensation Committee reviewsand makes recommendations to the Board regarding the Company’s compensation,incentive-compensation and equity based plans and other elements of theexecutive compensation program including, but not limited to, executive basesalaries, annual and long-term incentives, benefit plans, retirement plans,deferred compensation programs, stock award programs, executive perquisiteprograms and other matters which the Compensation Committee deems significant.To the extent directed or authorized by the Board, the Compensation Committeeadopts or administers such plans on behalf of the Board and the Company. Withrespect to the CEO and all other executive officers, the Compensation Committeeis required to annually review and approve corporate goals and objectivesrelevant to compensation, evaluate performance in light of those goals andobjectives, and determine and approve compensation levels based on thisevaluation.

 

The CompensationCommittee works with senior executive officers on benefit and compensationprograms for employees and makes recommendations to the Board, includingmatters related to participation in profit sharing, bonus plans and stockoption plans and preparing reports to the extent necessary to comply withapplicable disclosure requirements established by the Securities and ExchangeCommission or other regulatory bodies. Our Chief Executive Officer is notpresent and does not participate in the deliberation or voting of theCompensation Committee for his compensation.

 

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*ExecutiveCommittee.*  The Executive Committee consists of four directors,John G. Ball, Michael R. Phillips, Michael T. Willis andWalter W. Macauley. The Executive Committee does not have a chairperson.The Executive Committee adopted a charter of the Executive Committee of ourBoard of Directors by board resolution on August 15, 2007. The ExecutiveCommittee charter is available on the Company’s website at *http://www.westaff.com*. The ExecutiveCommittee exercises the powers of the Board in managing the business andaffairs of the Company during the intervals between Board meetings, when actionby the Board is necessary or desirable but convening a special Board meeting isnot warranted or practical. The Executive Committee is subject at all times tothe control of the Board which has the power to revise or alter any actiontaken by the Executive Committee; provided, however, that no rights of thirdparties are affected thereby.

 

*Nominatingand Corporate Governance Committee.*  The Nominatingand Corporate Governance Committee (the “Nominating Committee”) consists ofthree directors, Gerald E. Wedren, Janet M. Brady and John R.Black. Mr. Wedren is its Chairperson. All of its members are “independent.”The Nominating Committee adopted a charter of the Nominating Committee of ourBoard of Directors by unanimous consent on February 22, 2006, which wasamended on August 15, 2007. The Nominating Committee charter is availableon the Company’s website at *http://www.westaff.com*.The Nominating Committee identifies, screens and reviews individuals qualifiedto serve as directors; reviews each current director and recommends to theBoard whether such director should stand for re-election; and recommends to theBoard the nominees for election or re-election at the next annual meeting ofstockholders and for filling vacancies that may occur at other times, subjectto limitations set forth in the corporate governance guidelines of the Company.

 

The Company has apolicy regarding the consideration of any director candidates recommended bysecurity holders. Nominations of directors by stockholders must be madepursuant to timely notice in writing to the Secretary of the Company forbringing business before a meeting of stockholders. To be timely, a stockholder’snotice must be delivered to or mailed and received at the principal executiveoffices of the Company (a) in the case of an annual meeting, not less than60 days nor more than 90 days prior to the first anniversary of thepreceding year’s annual meeting, and (b) in the case of a special meetingat which directors are to be elected, not later than the close of business onthe 10th day following the earlier of the day on which notice of the dateof the meeting was mailed or public disclosure was made. Such stockholder’snotice is required to set forth (a) as to each person whom the stockholderproposes to nominate for election or reelection as a director, all informationrelating to such person that is required to be disclosed in solicitations ofproxies for election of directors, or is otherwise required, in each casepursuant to Regulation 14A under the Exchange Act, (including such person’swritten consent to being named in the proxy statement as a nominee and toserving as a director if elected); (b) as to the stockholder giving thenotice (i) the name and address, as they appear on the Company’s books, ofsuch stockholder and (ii) the class and number of shares of Common Stockwhich are beneficially owned by such stockholder and also which are owned ofrecord by such stockholder; and (c) as to the beneficial owner, if any, onwhose behalf the nomination is made, (i) the name and address of suchperson and (ii) the class and number of shares of Common Stock which arebeneficially owned by such person. In addition, the Nominating Committeeremains open to candidates for Directors. The Nominating Committee considersmultiple sources for identifying and evaluating nominees for Directors,including, but not limited to, referrals from existing directors or officers,recommendations from a third-party search firm, or suggestions from stockholders.In evaluating individuals for nomination as director, the Nominating Committeeis required to endeavor to select individuals who (i) have skills andexperience that can be of assistance to management in operating the Company’sbusiness, (ii) demonstrate integrity, accountability and judgment, and (iii) canbe expected to add to the total mix of individuals on our Board of Directors soas to give the Company a board of directors that is effective, collegial,diverse and responsive to the needs of the Company.

 

The NominatingCommittee determines the required selection criteria and qualifications ofdirector nominees based upon the Company’s needs at the time nominees areconsidered. In general, directors should possess personal and professionalethics, integrity and values, and be committed to representing the long-terminterests of Westaff’s stockholders. Directors should also have an inquisitiveand objective perspective, practical wisdom and mature judgment, and be willingand able to challenge management in a constructive manner. Westaff endeavors tohave its Board represent diverse skills and experience at policymaking levelsin finance, human resources, marketing, technology and other aspects ofbusiness relevant to Westaff’s activities. Directors should be willing todevote sufficient time to carrying out their duties and responsibilities 

 

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effectively, and shouldbe committed to serving on the Board for an extended period of time. The numberof Boards of publicly traded companies or Audit Committees on which outsidedirectors sit should not exceed three (in addition to the Company) without theconcurrence of the Nominating Committee and may not, in any event, constitute aconflict of interest. The Nominating Committee will consider these samecriteria for candidates regardless of whether the candidate was identified bythe Nominating Committee, by stockholders, or any other source.

 

**DirectorIndependence**

 

Our Board ofDirectors has determined that eight of our non-employee directors are “independent”as defined under the applicable listing standards of the NASDAQ Stock Market.The non-employee directors determined to be independent are as follows:John G. Ball, John R. Black, Janet M. Brady, Walter W. Macauley,Michael R. Phillips, Don K. Rice, Ronald D. Stevens andGerald E. Wedren. Accordingly, our Board of Directors has determined thatat least a majority of the members of our Board of Directors is independentunder the applicable listing standards of the NASDAQ Stock Market.Michael T. Willis is not considered independent because Mr. Willis isthe current Chief Executive Officer of the Company. In making thesedeterminations, our Board of Directors considered transactions andrelationships between each director and his or her immediate family and theCompany and our subsidiaries, including those reported in Item 13 “CertainRelationships and Related Transactions” below. The purpose of this review wasto determine whether any such relationships or transactions were material and,therefore, inconsistent with a determination that the director is independent.

 

**DirectorCompensation**

 

The followingtable sets forth the aggregate compensation of each director who is not a NamedExecutive Officer (as defined under Item 11 “Executive Compensation—SummaryCompensation Table for Fiscal Year 2008” below) for fiscal year 2008.

 

**Director Compensation for Fiscal Year 2008**

 
| **Name**                | ** ** | **Fees Earned  or Paid  in Cash  ($)** | ** ** | **Stock  Awards  ($)** | ** ** | **Option  Awards  ($)** | ** ** | **Non-Equity  Incentive  Plan  Compensation  ($)** | ** ** | **Change in  Pension  Value and  Nonqualified  Deferred  Compensation  Earnings** | ** ** | **All Other  Compensation  ($)** | ** ** | **Total  Compensation  ($)** | ** ** |
|-------------------------|------------|-------------------------------------------------------|------------|------------------------|------------|-------------------------|------------|----------------------------------------------------|------------|---------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|------------------------------|------------|
| John G. Ball            |       | 34,500                                                |       | —                 |       | 10,701                  |       | —                                             |       | —                                                                                      |       | —                                |       | 57,202                       |       |
| John R. Black(1)        |       | 32,000                                                |       | —                 |       | —                  |       | —                                             |       | —                                                                                      |       | —                                |       | 32,000                       |       |
| Janet M. Brady          |       | 38,500                                                |       | —                 |       | 10,125                  |       | —                                             |       | —                                                                                      |       | —                                |       | 48,625                       |       |
| Walter W.  Macauley     |       | 31,500                                                |       | —                 |       | 10,167                  |       | —                                             |       | —                                                                                      |       | —                                |       | 41,667                       |       |
| Michael R.  Phillips(2) |       | 29,000                                                |       | —                 |       | —                  |       | —                                             |       | —                                                                                      |       | —                                |       | 29,000                       |       |
| Don K. Rice             |       | 30,000                                                |       | —                 |       | —                  |       | —                                             |       | —                                                                                      |       | —                                |       | 30,000                       |       |
| Ronald D. Stevens       |       | 40,000                                                |       | —                 |       | 10,125                  |       | —                                             |       | —                                                                                      |       | —                                |       | 50,125                       |       |
| Gerald E. Wedren        |       | 32,966                                                |       | —                 |       | 10,701                  |       | —                                             |       | —                                                                                      |       | —                                |       | 43,667                       |       |

 

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(1)                                  In lieu of board fees payable to Mr. Black,management fees in the same amount are paid to H.I.G. Capital Management, Inc.pursuant to the Governance Agreement, as amended. In addition, Mr. Blackdid not receive any option awards.

 

(2)                                  In lieu of board fees payable to Mr. Phillips,management fees in the same amount are paid to H.I.G. Capital Management, Inc.pursuant to the Governance Agreement, as amended. In addition, Mr. Phillipsdid not receive any option awards.

 

Non-employeemembers of our Board of Directors each received an annual fee $25,000 pursuantto the Governance Agreement, dated April 29, 2007, which was amended in July 2007and January 2008. They received an additional fee of 

 

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$1,000 for each meetingattended in person. In the event a Board meeting and a committee meeting wereheld on the same day, the total meeting fee was not more than $1,000 per day.They also received a fee of $500 for each telephonic meeting attended, ifcalled by the Chairperson of our Board of Directors or an employee member ofour Board of Directors. The Chairperson of the Compensation Committee and theChairperson of the Audit Committee received an additional fee of $1,500 perquarter. Pursuant to the Governance Agreement, as amended, board fees payableto Mr. Black and Mr. Phillips are paid to H.I.G. Capital Management, Inc.as management fees.  

 

Non-employee members ofour Board of Directors also were reimbursed for their reasonable expensesincurred in connection with attending Board of Directors’ meetings.

 

We anticipate noincrease in our directors’ compensation during fiscal year 2009. No additionalcompensation was paid to any of the directors during fiscal year 2008 for theircommittee service.

 

In addition,non-employee Board of Directors members are eligible to receive periodic optiongrants under the Automatic Option Grant Program in effect under our 2006 StockOption/Stock Issuance Plan (the “Stock Option Plan”). Under the AutomaticOption Grant Program, each individual who subsequently joins our Board ofDirectors as a non-employee director will receive at that time an option grantof 3,000 shares, provided such individual has not previously been in ouremploy. In addition, at each annual stockholders’ meeting each individual whocontinues to serve as a non-employee Board of Directors member presently isentitled to an option grant of 3,000 shares with an exercise price equal to thefair market value of the option shares on the grant date, provided suchindividual has served as a Board of Directors member for at least six months.

 

Each automaticoption grant will have a maximum term of ten years measured from the grantdate, subject to earlier termination following the optionee’s cessation ofBoard of Directors’ service. The option will become exercisable for all theoption shares upon the optionee’s completion of one year of Board of Directors’service measured from the grant date. However, the option will becomeimmediately exercisable for all the option shares should the optionee ceaseBoard of Directors service by reason of death or disability or should theCompany be acquired by merger or asset sale or change of control during theperiod of the optionee’s service on our Board of Directors.

 

Except for Mr. Rice(who had not served as a “Board of Directors member for at least six months atthe time of the annual stockholders’ meeting), Mr. Black and Mr. Phillips,each non employee member of our Board of Directors received an option topurchase 3,000 shares of Common Stock during fiscal year 2008 pursuant to theterms of the Automatic Option Grant Program.

 

**Codeof Ethics**

 

Our Board ofDirectors has adopted a Code of Ethics that applies to all our principalexecutive, financial and accounting officers. The Code of Ethics is posted onour website at *www.westaff.com*.We intend to satisfy the requirements under Item 5.05 of Form 8-Kregarding disclosure of amendments to, or waivers from, provisions of our Codeof Ethics that apply, by posting such information on our website. Copies of theCode of Ethics will be provided, free of charge, upon written request directedto Investor Relations, Westaff, Inc., P.O. Box 9280, WalnutCreek, CA 94598.

 

8

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**ITEM11.  EXECUTIVE COMPENSATION.**

 

**SummaryCompensation Table for Fiscal Year 2008**

 

The followingtable sets forth the aggregate cash and other compensation for servicesrendered during fiscal year 2008 and fiscal year 2007 by (1) theindividual who served as our principal executive officer (the “PEO”) duringfiscal year 2008, (2) our two most highly compensated executive officers(other than the PEO) whose total compensation each exceeded $100,000 duringfiscal year 2008 and (3) up to two additional individuals for whomdisclosure would have been required to be provided under (2) above but forthe fact that the individual was not serving as one of our executive officersat the end of fiscal year 2008. The individuals listed in the following tableare collectively referred to as our “Named Executive Officers”.

 

[still beingupdated]

 

**Summary Compensation Table for Fiscal Year 2008**

 
| **Name and Principal  Position**                  | ** ** | **Year** | ** ** | **Salary  ($)** | ** ** | **Bonus  ($)** | ** ** | **Stock  Award(s)  ($)(1)** | ** ** | **Option  Award(s)  ($)(1)** | ** ** | **Non-Equity  Incentive  Plan  Compensation  ($)** | ** ** | **Change in  Pension  Value and  Nonqualified  Deferred  Compensation  Earnings  ($)** | ** ** | **All Other  Compensation  ($)** | ** ** | **Total  Compensation  ($)** | ** ** |
|-------------------------------------------------------------|------------|----------|------------|-----------------|------------|----------------|------------|-----------------------------|------------|------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|------------------------------|------------|
| Michael T. Willis  (a)                                      |       | 2008     |       | 550,000         | (2)        | —         |       | —                      |       | —                       |       | —                                             |       | —                                                                                           | ** ** | 83,743                                | (3)        | 633,744                      | ** ** |
| *Chief Executive Officer (PEO)*                             |       | 2007     |       | 275,000         | (4)        | 150,000        | (5)        | —                      |       | 15,710                       |       | —                                             |       | —                                                                                           |       | 41,676                                | (6)        | 482,386                      |       |
| Kristi Kennedy  (b)                                         |       | 2008     |       | 320,000         | (7)        | —         |       | —                      |       | —                       |       | —                                             |       | —                                                                                           |       | —                                |       | 320,000                      |       |
| *Senior Vice President, Field**Operations*                  |       |     |       |            |       |           |       |                        |       |                         |       |                                               |       |                                                                                             |       |                                  |       |                         |       |
| Stephen J  Russo(c)*President and Chief Operating Officer*  |       | 2008     |       | 144,231         | (8)        | —         |       | —                      |       | 7,506                        |       | —                                             |       | —                                                                                           |       | —                                |       | 151,737                      |       |
| Jeffrey A.  Elias(d)                                        |       | 2008     |       | 173,965         | (9)        | —         |       | —                      |       | —                       |       | —                                             |       | —                                                                                           |       | 136,474                               | (10)       | 310,439                      |       |
| *Former Senior Vice President,  Corporate Services*         |       | 2007     |       | 198,584         | (11)       | 63,333         | (12)       | —                      |       | 12,927                       |       | —                                             |       | —                                                                                           |       | 18,886                                | (13)       | 293,730                      |       |
| Dawn M.  Jaffray(e)                                         |       | 2008     |       | 165,676         | (14)       | —         |       | —                      |       | —                       |       | —                                             |       | —                                                                                           |       | 20,932                                | (15)       | 186,608                      |       |
| *Former Senior Vice President  and Chief Financial Officer* |       | 2007     |       | 68,038          | (16)       | —         |       | —                      |       | 6,796                        |       | —                                             |       | —                                                                                           |       | 9,749                                 | (17)       | 84,583                       |       |

 

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(a)                                  Mr. Willis was appointed as ourPresident and Chief Executive Officer effective May 1, 2007.  Upon Stephen J. Russo being named asPresident of the Company on January 1, 2009, Mr. Willis is currentlyour Chief Executive Officer and Chairman of the Board.

 

(b)                                 Ms. Kennedy was appointed as ourSenior Vice President, Field Operations effective October 15, 2007

 

(c)                                  Mr. Russo was appointed as ourExecutive Vice President and Chief Operating Officer effective June 16,2008.  On January 1, 2009, Mr. Russowas named President of the Company in addition to his position as ChiefOperating Officer.

 

(d)                                 Mr. Elias resigned as our SeniorVice President, Corporate Services effective May 22, 2008.

 

(e)                                  Ms. Jaffray resigned as Senior VicePresident and Chief Financial Officer effective May 12, 2008.

 

(1)                                  The amounts reported reflect the dollaramount recognized for financial statement reporting purposes for fiscal year2008, in accordance with Financial Accounting Standards Board Statement No. 123R(Share-Based Payment) (“FAS 123R”), except that estimated forfeitures wereexcluded in the determination.

 

(2)                                  Pursuant to Mr. Willis’ employmentagreement, he received base pay of $550,000 in fiscal year 2008.

 

9

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(3)                                  Includedin this amount are an allowance of $6,000 per month for housing, automobile andother personal expenses ($72,000), airfare between his home in Houston and theCompany’s headquarters, up to one round trip per week, and reasonable expensesof transportation to and from the airport ($11,743).

 

(4)                                  Pursuantto Mr. Willis’ employment agreement, he received base pay of $275,000 infiscal year 2007.

 

(5)                                  Pursuantto Mr. Willis’ employment agreement, he received a guaranteed bonus of$150,000 in fiscal year 2007.

 

(6)                                  Includedin this amount are an allowance of $6,000 per month for housing, automobile andother personal expenses ($36,000), airfare between his home in Houston and theCompany’s headquarters, up to one round trip per week, and reasonable expensesof transportation to and from the airport ($5,676).

 

(7)                                  Ms. Kennedyreceived a base salary of $320,000 in fiscal year 2008.

 

(8)                                  Pursuantto Mr. Russo’s employment agreement, he received base pay of $144,231 infiscal year 2008.

 

(9)                                  Pursuantto Mr. Elias’ employment agreement, he received base pay of $156,731 infiscal year 2008 and $17,234 for accrued vacation.

 

(10)                            Includedin this amount are a severance payment equal to twenty-six (26) weeks of hisbase salary ($125,000) pursuant to a Settlement Agreement and Release in Fulldated June 2, 2008 and an allowance not to exceed $3,000 per month forcommuting expenses between his home in Palms Springs, California and theCompany’s headquarters in Walnut Creek, California ($11,474).

 

(11)                            Pursuantto Mr. Elias’ employment agreement, he received base pay of $198,584 infiscal year 2007.

 

(12)                            Inconsideration of Mr. Elias agreeing to remain in his position and performhis duties through the retention date of October 31, 2007, he received aone-time lump sum payment equal to four months of his base salary or $63,333.

 

(13)                            Includedin this amount are his relocation expenses from Palm Springs, California toWalnut Creek, California, which includes airfare & meals ($12,404),temporary housing ($3,326) and transportation ($3,156).

 

(14)                            Pursuantto Ms. Jaffray’s employment agreement, she received base pay of $149,461in fiscal year 2008 and $16,215 for accrued vacation.

 

(15)                            Includedin this amount is an allowance not to exceed $3,000 per month for commutingexpenses between her home in Indio, California and the Company’s headquartersin Walnut Creek, California ($20,932).

 

(16)                            Pursuantto Ms. Jaffray’s employment agreement, she received base pay of $68,038 infiscal year 2007.

 

(17)                            Includedin this amount are her temporary housing ($7,734), airfare between her home inIndio, California and Walnut Creek, California ($1,126) and transportation($889).

 

10

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**OutstandingEquity Awards at Fiscal Year-End for Fiscal Year 2008**

 

The followingtable sets forth the stock option and stock awards of each of our NamedExecutive Officers outstanding at the end of fiscal year 2008.

 

**Outstanding Equity Awards at Fiscal Year-End forFiscal Year 2008**

 
| ** **        | ** ** | **Option Awards**                                                             | ** ** | **Stock Awards**                                                                | ** ** |
|-------------------|------------|------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------|------------|
| **Name**          | ** ** | **Number of  Securities  Underlying  Unexercised  Options  Exercisable  (#)** | ** ** | **Number of  Securities  Underlying  Unexercised  Options  Unexercisable  (#)** | ** ** | **Equity  Incentive  Plan Awards:  Number of  Securities  Underlying  Unexercised  Unearned  Options  (#)** | ** ** | **Option  Exercise  Price  ($)** | ** ** | **Option  Expiration  Date** | ** ** | **Number of  Shares or  Units of  Stock That  Have Not  Vested  (#)** | ** ** | **Market  Value of  Shares or  Units of  Stock  That  Have Not  Vested  ($)** | ** ** | **Equity  Incentive  Plan  Awards:  Number of  Unearned  Shares,  Units or  Other  Rights  That Have  Not Vested  (#)** | ** ** | **Equity  Incentive  Plan  Awards:  Market or  Payout  Value of  Unearned  Shares,  Units or  Other  Rights  That Have  Not Vested  ($)** | ** ** |
| Michael T. Willis |       | 33,331                                                                             |       | 66,669                                                                               |       | — |   | 4.34 |   | 8/14/2017 |   | — |   | — |   | — |   | — |   |
| Stephen J. Russo  |       | —                                                                             |       | 150,000                                                                              |       | — |   | 1.05 |   | 6/24/2015 |   | — |   | — |   | — |   | — |   |
| Kristi Kennedy    |       | 12,500                                                                             |       | 37,500                                                                               |       | — |   | 4.02 |   | 10/14/2014 |   | — |   | — |   | — |   | — |   |
| Dawn M. Jaffray   |       | —                                                                             |       | —                                                                               |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   |
| Jeffrey A. Elias  |       | —                                                                             |       | —                                                                               |       | — |   | — |   | — |   | — |   | — |   | — |   | — |   |

 

**PotentialPayments to Current Named Executive Officers Upon Termination of Employment orChange in Control**

 

Mr. Willis, Mr. Russoand Ms. Kennedy are current Named Executive Officers who have employmentagreements and/or change in control agreements with the Company that providethem with certain benefits upon a termination of employment or change incontrol.  Ms. Jaffray and Mr. Eliashave been excluded from the discussion below, as they resigned from theCompany, effective May 12, 2008 and May 22, 2008, respectively.

 

On January 28,2009, the Company entered into an Agreement and Plan of Merger (the “MergerAgreement”) with Koosharem Corporation, a California corporation doing businessas Select Staffing (“Koosharem”) and Select Merger Sub Inc., a Delawarecorporation and wholly-owned subsidiary of Koosharem (“Merger Sub”), pursuantto which Merger Sub will be merged with and into the Company, with the Companycontinuing after the merger as the surviving corporation and a wholly-ownedsubsidiary of Koosharem (the “Merger”), in accordance with and subject to theterms and conditions set forth in the Merger Agreement. For additionalinformation regarding the Merger Agreement and the proposed merger, pleaserefer to the definitive proxy statement that the Company filed with the SEC onFebruary 23, 2009 and mailed to the Company’s stockholders in connection withthe planned special meeting of stockholders to be held on March 17, 2009 and atwhich the Company’s stockholders will be asked to consider and vote upon aproposal to adopt the Merger Agreement and the transactions contemplatedthereby.

 

*MichaelT. Willis*

 

Under Mr. Willis’ employment agreement if hisemployment is terminated by the Company without cause or by him for good reasonwithin 12 months following a change of control: (1) any Company stockoptions awarded to him that vest solely upon length of service will becomeimmediately vested and exercisable and (2) the Company will make alump-sum 

 

11

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cash payment to him equal to 50% of his then-currentbase salary, pro-rated based on the number of calendar months he is employedduring the fiscal year in which such termination occurs.

 

Under Mr. Willis’ employment agreement, a “changeof control” means a change in ownership or control of the Company effectedthrough a merger, consolidation or acquisition by any person or related groupof persons (other than an acquisition by the Company or by a Company-sponsoredemployee benefit plan or by a person or persons that directly or indirectly controls,is controlled by, or is under common control with the Company) of beneficialownership (within the meaning of Rule 13d-3 of the Exchange Act) ofsecurities possessing more than 50% of the total combined voting power of theoutstanding securities of the Company, but does not include any changes priorto the date of his employment agreement or any changes pursuant to actionstaken by DelStaff, LLC, which is our principal stockholder (“DelStaff”).

 

If Mr. Willis’ employment is terminated by theCompany without cause or by him for good reason within 12 months following theconsummation of the proposed Merger, then, in addition to any benefitsunrelated to a change of control for which he is eligible under his employmentagreement (described below): (1) the estimated lump-sum cash amountpayable to him will be equal to $275,000 assuming he is employed for a full 12calendar months during the fiscal year in which his termination occurs and (2) hewould not receive any benefit from the immediate vesting and exercisability ofany Westaff stock options awarded to him, as the exercise prices of his optionsare greater than the merger consideration provided under the Merger Agreement.

 

Mr. Willis’s employment agreement also providesfor severance benefits to Mr. Willis in the event his employment isterminated by the Company without cause or by him for good reason equal to thelesser of (a) salary continuation based upon his then-current base salaryfor a period of 18 months following his termination or (b) salary continuationbased upon his then-current base salary for a period commencing on the date ofhis termination and ending on June 1, 2010. Furthermore, if Mr. Willisis terminated by the Company without cause or by him for good reason and Mr. Williselects to maintain his medical coverage under COBRA than the Company isobligated to pay Mr. Willis’ COBRA premiums until the earlier of (1) thedate on which Mr. Willis ceases to receive the severance benefitsdiscussed above or (2) the date on which Mr. Willis becomes eligiblefor coverage under another employer’s health plan.

 

As a result of Westaff’s severance obligation under Mr. Willis’semployment agreement, if Mr. Willis’ employment is terminated by theCompany without cause or by him for good reason, then he would be entitled to alump-sum cash payment equal to $825,000 (excluding the value of any COBRApremiums paid by the Company).

 

Under Mr. Willis’ employment agreement, atermination “without cause” would be a termination by the Company other than atermination resulting from: Mr. Willis’s commission of a crime involvingdishonesty, breach of trust, or physical harm to any person, Mr. Williswillfully engaging in conduct that is in bad faith and materially injurious tothe Company, including but not limited to, misappropriation of trade secrets,fraud or embezzlement; Mr. Willis committing a material breach of hisemployment agreement (subject to a cure period), Mr. Willis willfullyrefusing to implement or follow a lawful policy or directive of Westaff (subjectto a cure period), or Mr. Willis engaging in misfeasance or malfeasancedemonstrated by a pattern of failure to perform job duties diligently andprofessionally.

 

Under Mr. Willis’ employment agreement, aresignation by Mr. Willis would be for “good reason” if it is based uponany of the following events if effected by the Company without Mr. Willis’sconsent: (1) a change in Mr. Willis’s position with the Company whichmaterially reduces his duties, responsibilities or authority; or (2) amaterial reduction in Mr. Willis’s base salary or bonus eligibility,except for reductions that are comparable to reductions generally applicable toall similarly situated senior executives of the Company; or (3) Mr. Willisis removed from our Board of Directors (other than for cause, as determinedunder Delaware law) or not elected by the Company’s stockholders to serve onthe board of directors.

 

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*StephenJ. Russo*

 

Under Mr. Russo’s employment agreement, theCompany may terminate Mr. Russo’s employment at any time for any reason,without cause, in which case he will be entitled to a severance payment. Under Mr. Russo’semployment agreement, “for cause” means he (i) acts in bad faith, or inbreach of trust, to the detriment of the Company, (ii) refuses or fails toact in accordance with any policy of the Company or any specific direction ororder of the Company, (iii) exhibits, in regard to his employment and asdetermined by the Company in its sole discretion, unfitness or unavailabilityfor service, unsatisfactory or inadequate performance (including but notlimited to his failure or inability to meet the Company’s expectations, goals,standards and/or deadlines with respect to his duties), misconduct, dishonesty,habitual neglect of duties or incompetence, (iv) commits, is convicted of,or pleads no contest to a crime involving dishonesty, breach of trust, moralturpitude, or physical harm to any person, (v) breaches any material termof his employment agreement or any other agreement that he has entered intowith the Company, (vi) dies, or (vii) becomes disabled and thereforeunable to perform the essential duties of his position for a period of morethan 12 workweeks within any 12-month period.

 

If his employment is terminated without cause withinone year from his date of hire or if the Company relocates its headquarteroffices outside a thirty-five (35) mile radius of 298 N. Wiget Lane, WalnutCreek, California or his duties and responsibilities are significantly reducedwithout cause, his severance payment shall be equal to six months pay at hiscurrent base salary and paid in the form of salary continuation for a period ofsix months. Assuming such termination were to have occurred on the lastbusiness day of fiscal year 2007 (i.e. October 31, 2008), Mr. Russowould have been eligible to receive $187,500 as his severance payment.

 

Under Mr. Russo’s change in control agreement, ifhis employment is terminated without cause or by him for good reason withinthree months prior to or six months after a change in control, then, inaddition to any benefits unrelated to a change of control (including thosedescribed below): (1) he is entitled to a lump-sum payment equal to atotal of six months of his then-current base salary and (2) if he timelyelects COBRA coverage, Westaff will pay the premiums for his COBRA coverageuntil the earlier of six months following his termination or the first datethat he is covered under another employer’s health benefit program providingsubstantially the same or better benefit options. In addition, under Mr. Russo’schange in control agreement, in the event of a change of control and regardlessof whether he is terminated, any Westaff stock options held by him will becomefully vested and become exercisable upon such change of control.

 

Under Mr. Russo’s change of control agreement, a “changeof control” means the happening of one or more of the following (but excludingany acquisition by DelStaff): (1) a liquidation or dissolution of the Company(excluding transfer to subsidiaries) or the sale of all or substantially all ofthe assets of the Company, (2) as a result of a tender offer, stock purchase,other stock acquisition, merger, consolidation, recapitalization, reverse splitor sale or transfer of assets, any person or group (as such terms are used in Section 13(d)(3) or14(d)(2) of the Exchange Act, but excluding the Company or any subsidiaryor any employee benefit plan sponsored by the Company or any subsidiary)becomes beneficial owner (as defined in Section 13(d) of the ExchangeAct), directly or indirectly, of securities of the Company representing atleast 50% of the Company common stock then outstanding, (3) if at least amajority of the Company’s board of directors is replaced in any 12-month periodby individuals not elected or nominated by a majority of directors then inoffice, or (4) the Company merges or consolidates with any othercorporation (other than an affiliate of the Company) and is not the survivingcorporation (or survives only as a subsidiary of another corporation).

 

If Mr. Russo’s employment is terminated by theCompany without cause or by him for good reason within three months prior to orsix months after consummation of the proposed Merger, in addition to any benefitsunrelated to a change of control for which he is eligible under his employmentagreement: (1) the estimated lump-sum payment payable to him will be equalto $187,500 and (2) the estimated amount of the benefit of the immediatevesting and exercisability of the 150,000 Company stock options currently heldby him will be $30,000.

 

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*Kristi Kennedy*

 

Under Ms. Kennedy’s change in control agreement,if her employment is terminated without cause or by her for good reason withinthree months prior to or six months after a change in control, then, inaddition to any benefits unrelated to a change of control (including thosedescribed below): (1) she is entitled to a lump-sum payment equal to atotal of six months of her then-current base salary and (2) if she timelyelects COBRA coverage, Westaff will pay the premiums for her COBRA coverageuntil the earlier of six months following her termination or the first datethat she is covered under another employer’s health benefit program providingsubstantially the same or better benefit options. In addition, under Ms. Kennedy’schange in control agreement, in the event of a change of control and regardlessof whether she is terminated, any Company stock options held by her will becomefully vested and become exercisable upon such change of control.

 

Under Ms. Kennedy’s change of control agreement,a “change of control” means the happening of one or more of the following (butexcluding any acquisition by DelStaff): (1) a liquidation or dissolutionof the Company (excluding transfer to subsidiaries) or the sale of all orsubstantially all of the assets of the Company, (2) as a result of atender offer, stock purchase, other stock acquisition, merger, consolidation,recapitalization, reverse split or sale or transfer of assets, any person orgroup (as such terms are used in Section 13(d)(3) or 14(d)(2) ofthe Exchange Act, but excluding the Company or any subsidiary or any employeebenefit plan sponsored by the Company or any subsidiary) becomes beneficialowner (as defined in Section 13(d) of the Exchange Act), directly orindirectly, of securities of the Company representing at least 50% of theCompany common stock then outstanding, (3) if at least a majority of theCompany’s board of directors is replaced in any 12-month period by individualsnot elected or nominated by a majority of directors then in office, or (4) theCompany merges or consolidates with any other corporation (other than anaffiliate of the Company) and is not the surviving corporation (or survivesonly as a subsidiary of another corporation). Pursuant to a letter agreementbetween the Company and Ms. Kennedy, Ms. Kennedy is deemed to be involuntarilyterminated upon a Change in Control if the acquirer is Select Staffing, Inc.and/or any of its affiliates.

 

If Ms. Kennedy’s employment is terminated by theCompany without cause or by her for good reason within three months prior to orsix months after consummation of the proposed Merger, in addition to any benefitsunrelated to a change of control for which she is eligible under her employmentagreement: (1) the estimated lump-sum payment payable to her will be equalto $160,000, (2) the estimated amount of the benefit of the immediatevesting and exercisability of the 75,000 Company stock options currently heldby her will be $63,000 and (3) the estimated amount of the benefit of theimmediate vesting and exercisability of the 25,000 Company restricted stockunits held by her will be $31,250.

 

**ITEM12.  SECURITY OWNERSHIP OF CERTAINBENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.**

 

The following table sets forth certain informationregarding the beneficial ownership of Westaff common stock as of February 20,2009 for (1) all persons who are known to Westaff to be beneficial ownersof 5% or more of the outstanding shares of Westaff common stock, (2) eachof Westaff’s directors, (3) Westaff’s named executive officers and (4) allof Westaff’s directors and executive officers as a group. Unless otherwiseindicated, each of the stockholders has sole voting and investment power withrespect to the shares beneficially owned, subject to community property laws,where applicable. For purposes of the following table, beneficial ownershipincludes shares subject to outstanding unexercised rights to acquire that (1) arecurrently exercisable, (2) are exercisable within 60 days following February 20,2009 or (3) if the proposed Merger is completed, would become exercisablein connection with the proposed Merger by operation of applicablechange-in-control provisions.  Unlessotherwise noted, the address of each person identified below is c/o Westaff, Inc.,298 North Wiget Lane, Walnut Creek, California 94598-2453.  The information set forth in the table belowis as of February 20, 2009.

 

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| **Name and Address of Beneficial Owner**                                                                                                                                                                                   | ** ** | **Number of  Shares Owned** | ** ** | **Number of Shares  Subject to Outstanding  Rights to Acquire** | ** ** | **Total Shares  Beneficially  Owned** | ** ** | **Percent of  Outstanding  Shares** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|-----------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|------------------------------------------|------------|
| **5%  Stockholders:**                                                                                                                                                                                                                               |       |                                  |       |                                                                                          |       |                                       |       |                                     |       |
| DelStaff, LLC(1)  H.I.G. Staffing 2007, Ltd.  H.I.G. Capital Partners III, L.P.  H.I.G. Advisors III, L.L.C.   H.I.G.-GPII, Inc.

Sami W. Mnaymneh  Anthony A. Tamer  1001 Brickell Bay Drive, 27th Floor  Miami, FL 33131 |       | 8,262,696                             |       | 0                                                                                             |       | 8,262,696                                  |       | 49.5                                     | %          |
| Sorensen Trust(2)  D. Stephen Sorensen  Shannon P. Sorensen  Koosharem Corporation

3820 State Street  Santa Barbara, CA 93105                                                                                                                      |       | 2,032,903                             |       | 0                                                                                             |       | 2,032,903                                  |       | 12.17                                    | %          |
| Auber  Investments Ltd. (3)  Prince Resources LDC  Prince Capital Partners LLC  David Mayer

2 Grand Central Tower  140 East 45th Street,  28th Floor  New York, NY 10017                                                       |       | 1,500,000                             |       | 0                                                                                             |       | 1,500,000                                  |       | 8.98                                     | %          |
| **Directors  and Named Executive Officers:**                                                                                                                                                                                                        |       |                                  |       |                                                                                          |       |                                       |       |                                     |       |
| Gerald E.  Wedren(4)                                                                                                                                                                                                                                |       | —                                |       | 6,000                                                                                         |       | 6,000                                      |       | *                                        |       |
| Ronald D.  Stevens(5)                                                                                                                                                                                                                               |       | —                                |       | 21,000                                                                                        |       | 21,000                                     |       | *                                        |       |
| John G. Ball(6)                                                                                                                                                                                                                                     |       | —                                |       | 6,000                                                                                         |       | 6,000                                      |       | *                                        |       |
| Janet M.  Brady(7)                                                                                                                                                                                                                                  |       | —                                |       | 21,000                                                                                        |       | 21,000                                     |       | *                                        |       |
| John R. Black(8)                                                                                                                                                                                                                                    |       | 8,262,696                             |       | —                                                                                        |       | 8,262,696                                  |       | 49.5                                     | %          |
| Michael R.  Phillips(9)                                                                                                                                                                                                                             |       | 8,262,696                             |       | —                                                                                        |       | 8,262,696                                  |       | 49.5                                     | %          |
| Michael T.  Willis(10)                                                                                                                                                                                                                              |       | 8,262,696                             |       | 100,000                                                                                       |       | 8,362,696                                  |       | 50                                       | %          |
| Don K. Rice(11)                                                                                                                                                                                                                                     |       | —                                |       | 3,000                                                                                         |       | 3,000                                      |       | *                                        |       |
| Walter W.  Macauley(12)                                                                                                                                                                                                                             |       | —                                |       | 6,000                                                                                         |       | 6,000                                      |       | *                                        |       |
| Stephen J.  Russo(13)                                                                                                                                                                                                                               |       | —                                |       | 150,000                                                                                       |       | 150,000                                    |       | *                                        |       |
| Kristi K.  Kennedy(14)                                                                                                                                                                                                                              |       | —                                |       | 150,000                                                                                       |       | 150,000                                    |       | *                                        |       |
| Dawn M.  Jaffray(15)                                                                                                                                                                                                                                |       | —                                |       | —                                                                                        |       | —                                     |       | —                                   |       |
| Jeffrey A.  Elias(16)                                                                                                                                                                                                                               |       | —                                |       | —                                                                                        |       | —                                     |       | —                                   |       |
| All directors  and executive officers as a group:                                                                                                                                                                                                   |       | 8,262,696                             |       | 638,000                                                                                       |       | 8,900,696                                  |       | 53.3                                     | %          |

 

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*                                         Lessthan one percent

 

(1)                                 Securityownership information for the beneficial ownership is taken from the Form SC13D filed with the SEC on March 13, 2007. H.I.G. Staffing 2007, Ltd.(“HIG Staffing”), a member of DelStaff, owns a majority of the outstandingcommon units of DelStaff and thus may be deemed to indirectly have sole powerto direct the voting and disposition of the shares held by DelStaff. H.I.G.Capital Partners III, L.P. (“HIG Capital Partners”) owns a majority of theoutstanding common stock of HIG Staffing and thus may be deemed to indirectlyhave sole power to direct the voting and disposition of the shares held byDelStaff. H.I.G. Advisors III, L.L.C. (“HIG Advisors”) is the general partnerof HIG Capital Partners and thus may be deemed to indirectly have sole power todirect the voting and disposition of the shares held by DelStaff. H.I.G.-GPII, Inc.(“HIG GP”) is the manager of HIG Advisors and thus may be deemed toindirectly have sole power to direct the voting and disposition of the sharesheld by DelStaff. Messrs. Mnaymneh and Tamer control HIG GP and thusmay be deemed to indirectly share power to direct the voting and disposition ofthe shares held by DelStaff. Messrs. Mnaymneh and Tamer each disclaimsbeneficial ownership of such shares.

 

(2)                                 Securityownership information for the beneficial ownership is taken from the Form SC13D/A filed with the SEC on February 2, 2009, but excludes the 8,262,696shares of Westaff common stock owned by DelStaff that are reported asbeneficially owned by Koosharem in such Form SC 13D/A. Subject to theterms and conditions of the stock & note purchase agreement, dated asof January 28, 2009, the excluded 8,262,696 shares of Westaff common stockwill be sold by DelStaff to Koosharem immediately prior to the consummation ofthe proposed Merger.

 

(3)                                 Securityownership information for the beneficial ownership is taken from the Form SC13G/A filed with the Securities and Exchange Commission, or SEC, on January 26,2009.

 

(4)                                 Includesunexercised options to purchase 6,000 shares of Westaff common stockbeneficially owned by Mr. Wedren under the 2006 Stock Incentive Plan.

 

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(5)                                 Includesunexercised options to purchase 21,000 shares of Westaff common stockbeneficially owned by Mr. Stevens under the 1996 Stock Option/StockIssuance Plan and 2006 Stock Incentive Plan.

 

(6)                                 Includesunexercised options to purchase 6,000 shares of Westaff common stockbeneficially owned by Mr. Ball under the 2006 Stock Incentive Plan.

 

(7)                                 Includesunexercised options to purchase 21,000 shares of Westaff common stockbeneficially owned by Ms. Brady under the 1996 Stock Option/Stock IssuancePlan and 2006 Stock Incentive Plan.

 

(8)                                 Mr. Blackis a manager of DelStaff and a Managing Director of H.I.G. Capital, L.L.C., anaffiliate of DelStaff, and, as such, may be deemed to beneficially own sharesof common stock of the Company held by DelStaff. Mr. Black disclaimsbeneficial ownership of such shares. Mr. Black’s address is 855 BoylstonStreet, 11th Floor, Boston, Massachusetts 02116.

 

(9)                                 Mr. Phillipsis a manager of DelStaff and a Principal of H.I.G. Capital, L.L.C, an affiliateof DelStaff, and, as such, may be deemed to beneficially own shares of commonstock of the Company held by DelStaff. Mr. Phillips disclaims beneficialownership of such shares. Mr. Phillips’ address is 855 Boylston Street,11th Floor, Boston, Massachusetts 02116.

 

(10)                           Mr. Willisis a manager and member of DelStaff and, as such, may be deemed to beneficiallyown shares of common stock of the Company held by DelStaff. Mr. Willisdisclaims beneficial ownership of disclaims beneficial ownership of suchshares. Mr. Willis’ address is 1400 Post Oak Boulevard, Suite 200,Houston, Texas 77056. Includes unexercised options to purchase 100,000 sharesof Westaff common stock beneficially owned by Mr. Willis under the 2006Stock Incentive Plan.

 

(11)                           Includesunexercised options to purchase 3,000 shares of Westaff common stockbeneficially owned by Mr. Rice under the 2006 Stock Incentive Plan.

 

(12)                           Includesunexercised options to purchase 6,000 shares of Westaff common stockbeneficially owned by Mr. Macauley under the 2006 Stock Incentive Plan.

 

(13)                           Includesunexercised options to purchase 150,000 shares of Westaff common stockbeneficially owned by Mr. Russo under the 2006 Stock Incentive Plan.

 

(14)                           Includesunexercised options to purchase 125,000 shares of Westaff common stockbeneficially owned by Ms. Kennedy under the 2006 Stock Incentive Plan andunexercised restricted stock units to acquire 25,000 shares of Westaff commonstock beneficially owned by Ms. Kennedy.

 

(15)                           Ms. Jaffrayresigned as our Senior Vice President, Chief Financial Officer effective May 12,2008. Reflects Ms. Jaffray’s beneficial ownership as of her resignationdate based solely on information available to Westaff.

 

(16)                           Mr. Eliasresigned as Senior Vice President, Corporate Services, effective May 22,2008. Reflects Mr. Elias’ beneficial ownership as of his resignation datebased solely on information available to Westaff.

 

**ITEM13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTORINDEPENDENCE.**

 

**Promissory Note Payable to W. RobertStover**

 

Our wholly-owned subsidiary, Westaff (USA), Inc.,previously executed an unsecured subordinated promissory note dated April 1,2002, payable to W. Robert Stover, its former principal stockholder andChairman of our Board of Directors, in the amount of $2.0 million. The initialterm of the note was one year with an interest rate of 12% per annum, payablemonthly on the last business day of each calendar month. On May 17, 2002,the note was amended and restated to extend the maturity date to August 18,2007. Additionally, the interest rate and payment schedule were amended to arate equal to the U.S. Index Rate plus seven percent, compounded monthlypayable 60 calendar days after the end of each of our fiscal quarters. Theinterest rate in effect on November 1, 2008, was 11.00%. Payment ofprincipal and interest is contingent on us meeting minimum availabilityrequirements under our credit facility. Additionally, payments of principal orinterest are prohibited in the event of any default under the credit facility.Following our default at the end of third quarter of fiscal year 2007 , ourlender prohibited the repayment of the note at its maturity and have denied ourrequest to pay quarterly interest. Interest expense on this note for fiscalyear 2008 was $0.3 million, all of which was accrued but unpaid at yearend.  In total, interest expense on thisnote accrued but unpaid is $0.4 million.

 

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**DelStaff Transactions**

 

Some of our directors and executive officers areaffiliated with DelStaff, which is our principal stockholder.  As of February 20, 2009, DelStaff owned8,262,696 shares of Westaff common stock, which represented approximately 49.5%of the total number of shares of Westaff common stock outstanding.  John R. Black, who is a director of Westaff,is a manager of DelStaff and a managing director of H.I.G. Capital, L.L.C., anaffiliate of DelStaff. Michael R. Phillips, who is a director of Westaff, is amanager of DelStaff and a principal of H.I.G. Capital, L.L.C, an affiliate ofDelStaff.  Michael T. Willis, who isWestaff’s chief executive officer and chairman of the board of directors, is amanager and member of DelStaff.

 

*Subordinated Loan Agreement*

 

On August 25, 2008, we entered into asubordinated loan agreement with DelStaff, which provides for a $3.0 millionsubordinated loan facility.  Thissubordinated loan facility may be used by the Company for working capital andgeneral business purposes during the term of the facility. The unpaid principalbalance under this subordinated loan facility bears interest at an annual rateof twenty percent (20%). Interest is payable-in-kind and accrues monthly inarrears on the first day of each month as an increase in the principal amountunder this subordinated loan facility. A default rate applies on allobligations under this subordinated loan facility from and after the maturitydate (August 15, 2009) and also during the existence of an event ofdefault (as specified in the subordinated loan agreement) at an annual rate often percent (10%) also payable-in-kind over the then-existing applicableinterest rate and if principal is not repaid on the maturity date, anadditional 5% of outstanding principal must be paid along with the default rateinterest. The obligations under the subordinated loan agreement are secured bya security interest in substantially all of the existing and future assets (the“Subordinated Collateral”) of the Company. The lien granted to DelStaff in thesubordinated collateral is subordinated to the lien in that same collateralgranted to U.S. Bank. Borrowings in excess of $1.0 million requireDelStaff’s 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 anyamounts outstanding under the subordinated loan agreement, subject to the termsof the intercreditor agreement. The outstanding loan balance at November 1,2008 was $2.2 million, which includes a $0.2 million facility fee that wasadded to the loan balance upon receipt of the initial advance. Accrued andunpaid interest on this note at November 1, 2008 was $40,000. The Companyborrowed an additional $500,000 under the subordinated loan agreement on January 7,2009 and an additional $500,000 on January 29, 2009.

 

*DelStaff Stock & Note Purchase Agreement*

 

Concurrently with the execution of the MergerAgreement, Koosharem and DelStaff entered into a stock & note purchaseagreement.  Subject to the terms andconditions of the stock & note purchase agreement, Koosharem willpurchase: (1) all Westaff common stock owned by DelStaff in exchange forfirst lien term loan debt to be issued by Koosharem under Koosharem’s firstlien credit facility bearing a face amount of $40 million; and (2) allof the then outstanding subordinated notes issued by Westaff to DelStaff underits loan agreement, dated as of August 25, 2008, by and among Westaff,Westaff (USA), Westaff Support, Inc., MediaWorld International (asborrowers) and DelStaff, in exchange for first lien term loan debt to be issuedby Koosharem under Koosharem’s first lien credit facility bearing a face amountequal to the actual principal amount of the then outstanding Westaffsubordinated notes held by DelStaff, but which face amount shall not exceed$3 million.  In addition, subject tothe terms and conditions of the stock & note purchase agreement,DelStaff has agreed (1) to vote all of its shares of Westaff common stockin favor of the merger and against any third-party proposal to acquire Westaffand (2) not to transfer its shares of Westaff common stock other than inaccordance with the merger agreement.

 

**ITEM14.  PRINCIPAL ACCOUNTING FEES ANDSERVICES.**

 

**AuditFees**

 

Aggregate fees billed by BDO Seidman, LLP, its memberfirms and their respective affiliates (collectively the “BDO Entities”) for theaudit of the annual consolidated financial statements included in the Company’sAnnual Report on 

 

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Form 10-K for fiscal year ended November 3,2007 and for the reviews of the consolidated financial statements included inthe Company’s Form 10-Q for quarters ended January 20, 2007 (limitedprocedures to rely on opening balances), April 14, 2007 and July 7,2007 were $555,360.  Aggregate fees billed by the BDO Entities for theaudit of the annual consolidated financial statements included in the Company’sAnnual Report on Form 10-K for fiscal year ended November 1, 2008 andfor the reviews of the consolidated financial statements included in theCompany’s Form 10-Q for quarters ended January 26, 2008, April 19,2008 and July 12, 2008 were $871,696.

 

**Audit-relatedFees**

 

Aggregate fees billed by the BDO Entities for auditrelated services for the fiscal year ended November 3, 2007 were $91,000principally for the statutory audits of the Company’s United Kingdom (UK) andAustralia operations.  Aggregate fees billed by the BDO entities for auditrelated services for the fiscal year ended November 1, 2008 were $80,722 principally relating to cutoffwork performed for the sale of the Company’s UK operations, the statutory audit of the Australiaoperations, consultations during the due diligence process for the sale of the Australiaand New Zealand operations and reviewof****the Form 8-K filingfor the sale of the Australia and New Zealand operations.

 

**TaxFees**

 

There were no tax fees paid to the BDO Entities forthe fiscal year ended November 3, 2007. Aggregate tax fees billed by the BDO Entities for the fiscal year ended November 1,2008 were $25,000.

 

**AllOther Fees**

 

No other fees were billed by the BDO Entities forfiscal years ended November 3, 2007 and November 1, 2008.

 

**AuditCommittee Pre-Approval Policies and Procedures**

 

In accordance with the Securities and ExchangeCommission’s rules requiring that the Audit Committee pre-approve allaudit and non-audit services provided by the Company’s independent auditor, theAudit Committee has adopted a formal policy on auditor independence requiringthe approval by the Audit Committee of all professional services rendered bythe Company’s independent registered public accounting firm prior to thecommencement of the specified services. The Audit Committee may delegate to oneor more committee members the authority to grant pre-approvals. The decision ofany committee member to whom authority is delegated shall be presented to thecommittee at each of its scheduled committee meetings.

 

The Audit Committee approves all services to beprovided by the BDO Entities prior to services being provided. This duty shallbe performed by the Chairman of the Audit Committee with any such pre-approvalreported to the full Audit Committee at its next regularly scheduled meeting.

 

**SECTION 16(a) BENEFICIALOWNERSHIP REPORTING COMPLIANCE**

 

Section 16(a) of the Exchange Act requiresthe Company’s executive officers, directors and persons who beneficially ownmore than 10% of the Common Stock to file initial reports of ownership andreports of changes in ownership with the Securities and Exchange Commission (“SEC”).Such persons are required by SEC regulations to furnish the Company with copiesof all Section 16(a) forms filed by such persons.

 

Based solely on the Company’s review of such forms andamendments thereto furnished to the Company and written representations fromcertain reporting persons, the Company believes that all executive officers,directors and greater than 10% stockholders complied with all filingrequirements applicable to them with respect to transactions during fiscal year2008.

 

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**ITEM15.  EXHIBITS, FINANCIAL STATEMENTSCHEDULES.**

 

The exhibits filed as part of this Amendment No. 1are listed in the Exhibit Index immediately preceding such exhibits, whichExhibit Index is incorporated herein by reference.

 

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**SIGNATURES**

 

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.

 
|          | WESTAFF, INC. |
|----------|---------------|
|     |          |
|     |          |
|     | By:           | /s/ MICHAEL T. WILLIS |
|     |          | Michael T. Willis |
| * * | * *      | *Chief Executive Officer* |
|     |          | Date: March 2, 2009 |

 
| **Signature**        | ** **            | **Title**                                                       | ** ** | **Date**            |
|----------------------|-----------------------|-----------------------------------------------------------------|------------|---------------------|
|                 |                  |                                                            |       |                |
| *                    |                  | Chief Executive Officer  and Chairman of the Board of Directors |       | March 2,  2009 |
| Michael T.  Willis   |                  | (Principal Executive  Officer)                                  |       |                |
|                 |                  |                                                            |       |                |
| *                    |                  | President and Chief  Operating Officer                          |       | March 2,  2009 |
| Stephen J. Russo     |                  | (Principal Operations  Officer)                                 |       |                |
|                 |                  |                                                            |       |                |
| *                    |                  | Senior Vice President  and                                      |       | March 2,  2009 |
| Christa C.  Leonard  |                  | Chief Financial Officer  (Principal Financial Officer)          |       |                |
|                 |                  |                                                            |       |                |
| *                    |                  | Vice President,  Controller                                     |       | March 2,  2009 |
| Sean P. Wong         |                  | (Principal Accounting  Officer)                                 |       |                |
|                 |                  |                                                            |       |                |
| *                    |                  |                                                            |       |                |
| John G. Ball         |                  | Director                                                        |       | March 2,  2009 |
|                 |                  |                                                            |       |                |
| *                    |                  |                                                            |       |                |
| John R. Black        |                  | Director                                                        |       | March 2,  2009 |
|                 |                  |                                                            |       |                |
| *                    |                  |                                                            |       |                |
| Janet M. Brady       |                  | Director                                                        |       | March 2,  2009 |
|                 |                  |                                                            |       |                |
| *                    |                  |                                                            |       |                |
| Walter W.  Macauley  |                  | Director                                                        |       | March 2,  2009 |
|                 |                  |                                                            |       |                |
| *                    |                  |                                                            |       |                |
| Michael R.  Phillips |                  | Director                                                        |       | March 2,  2009 |
|                 |                  |                                                            |       |                |
| *                    |                  |                                                            |       |                |
| Don K. Rice          |                  | Director                                                        |       | March 2,  2009 |
|                 |                  |                                                            |       |                |
| *                    |                  |                                                            |       |                |
| Ronald D.  Stevens   |                  | Director                                                        |       | March 2,  2009 |
|                 |                  |                                                            |       |                |
| *                    |                  |                                                            |       |                |
| Gerald E. Wedren     |                  | Director                                                        |       | March 2,  2009 |
|                 |                  |                                                            |       |                |
| *By:                 | /s/ MICHAEL T. WILLIS |                                                            |       |                |
|                 | Michael T. Willis     |                                                            |       |                |
|                 | Attorney-in-Fact      |                                                            |       |                |
|                      |                       |                                                                 |            |                     |  |  |

** **

**20**

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** **

**EXHIBIT INDEX**

 
| **Exhibit  Number** | ** ** | **Description**                                                                |
|---------------------|------------|--------------------------------------------------------------------------------|
| 31.1                |       | Certification of the  Chief Executive Officer pursuant to Rule 13a-14(a). |
| 31.2                |       | Certification of the  Chief Financial Officer pursuant to Rule 13a-14(a). |

 

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