EXHIBIT 10.1


 


EMPLOYMENT
AGREEMENT


 


This Employment Agreement (“Agreement”) deemed effective as of June 16,
2008 and is entered into by and among Westaff Support, Inc., Westaff (USA), Inc.
and Westaff, Inc. (collectively, the “Company”) and Stephen J. Russo (the “Executive”).
The parties agree to the following terms and conditions of the Executive’s
employment.


 


1.  EMPLOYMENT.  The
Company hereby employs the Executive, and the Executive hereby accepts such
employment, upon the terms and subject to the conditions hereinafter set forth.


 


2.  DUTIES.


 


(a)           Position
and Responsibilities. The
Executive shall be employed as the Company’s Executive Vice President and Chief
Operating Officer.  After six (6) months
of employment, the Executive shall assume the title of President in addition to
Chief Operating Officer, contingent upon achieving mutually agreed upon targets
which will be set in writing between the Company and the Executive within the
first two (2) weeks of employment. Executive shall have such responsibilities
and duties as are consistent with his position, and any other duties that the
Company may assign to him.  The Executive
shall devote his full working time, attention and energies to the performance
of his duties for the Company and the Executive shall at all times comply with
the Company’s Conflict of Interest Policy and Code of Business Conduct and
Ethics and abide by the rules, regulations, and practices as adopted or
modified from time to time by the Company.


 


(b)           Term.
The Executive’s
employment shall commence on Monday, June 16, 2008, and his employment
shall be of indefinite duration, subject to termination under Section 4 of
this Agreement. The Executive acknowledges that there is no express or implied
agreement between him and the Company or any of its subsidiaries, whether
domestic or foreign, for any specific period of employment or for continuing or
long-term employment.


 


(c)           Other Activities.  Except upon the prior written consent of the
Company, the Executive will not, during the term of this Agreement, (i) accept
any other employment, or (ii) engage, directly or indirectly, in any other
business activity (whether or not pursued for pecuniary advantage) that might
interfere with Executive’s duties and responsibilities hereunder or create a
conflict of interest with the Company.


 


(d)           No Conflict.  Executive represents and warrants that his
execution of this Agreement, employment with the Company, and the performance
of his proposed duties under this Agreement shall not violate any obligations
he may have to any other employer, person or entity, including any obligations
with respect to proprietary or confidential information of any other person or
entity.


 


3.  COMPENSATION
AND BENEFITS.  In consideration for the services of the Executive,
the Company shall compensate the Executive as follows:


 


(a)           Base
Salary. The Company
shall pay the Executive an initial annual base salary of $375,000 (“Base Salary”),
less required and authorized withholdings, which shall be paid to the Executive
in accordance with the Company’s normal payroll practices and schedule.


 


(b)           Benefits.  As
the Executive becomes eligible, he shall have the right to participate in and
to receive benefits from all present and future employee benefit plans
specified in the Company’s policies and generally made available to similarly
situated employees of the Company. The amount and 


 


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extent of benefits to which the Executive is entitled shall be governed
by the specific benefit plan, as amended.


 


(c)           Expenses.
The Company shall
reimburse the Executive for all reasonable travel and other business expenses
incurred by the Executive in the performance of his duties, in accordance with
Company policies, as they may be amended in the Company’s sole discretion.


 


(d)           Incentive
Compensation. The Executive
shall be eligible for an annual bonus of up to 50% of his Base Salary, prorated
for FY 2008.  The bonus will be based on
the Company’s performance metrics and will be approved annually by the
Compensation Committee.  The Executive
will not be eligible for any bonus or incentive compensation payment if his
employment with the Company terminates for cause before such bonus or incentive
compensation payment is earned or paid.   If the Executive’s employment with the
Company terminates without Cause prior to such bonus or incentive compensation
payment being earned or paid, Executive will be entitled to a prorated portion
of such bonus or incentive compensation.


 


(e)           Stock
Options.  Subject to approval from the Company’s Board
of Directors (or a duly authorized committee of the Company’s Board of
Directors) (the “Board”),  the
Executive will be eligible to participate in the Company’s 2006 Stock Incentive
Plan (the “Stock Option Plan”).  If
approved, Executive will be awarded 150,000 stock options pursuant to the terms
stated in the Company’s Stock Option Plan and the Notice of Stock Option Award
(including, but not limited to the vesting schedule for the option shares).


 


(f)            Vacation. 
The Executive shall
accrue four (4) weeks of vacation per year, subject to the Company’s
policies with respect to maximum vacation accruals.


 


(g)           Indemnification.  The Company and the Executive
shall enter into the Company’s customary form of indemnification agreement
applicable to directors and executive officers of the Company, in the form
attached as Exhibit A (the “Indemnification Agreement”).


 


4.  TERMINATION
OF EMPLOYMENT.


 


(a)           Termination
of Employment For Cause.  For purposes of this Agreement, the Company
may terminate the Executive’s employment for “Cause” at any time, without any
notice, if the Executive does any one or more of the following:


 


(i)            acts in bad faith,
or in breach of trust, to the detriment of the Company;


 


(ii)           refuses or fails to
act in accordance with any policy of the Company or any specific direction or
order of the Company;


 


(iii)          exhibits, in regard
to his employment and as determined by the Company in its sole discretion,
unfitness or unavailability for service, unsatisfactory or inadequate
performance (including but not limited to the Executive’s 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, moral turpitude, or physical harm to any person;


 


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(v)           breaches any
material term of this Agreement or any other agreement that the Executive has
entered into with the Company (including but not limited to his Confidentiality,
Invention, Design Agreement, which is attached hereto and incorporate herein as
Exhibit B);


 


(vi)          dies; or


 


(vii)         becomes disabled and
therefore unable to perform the essential duties of his position for a period
of more than 12 workweeks within any twelve (12)-month period.


 


If the Executive’s employment shall be terminated by the Company for
Cause as defined above, the Company shall pay the Executive his earned but
unpaid Base Salary and accrued but unused vacation pay, and shall provide his
benefits under the applicable benefit plans through the date of termination and
otherwise as required by law.  The Executive
shall not be eligible or entitled to a severance payment described in Section 4(b) below
if his employment is terminated for Cause and no other compensation or benefits
will accrue or be owed to the Executive for any period after the effective date
of termination in the event of a termination for Cause.


 


(b)           Termination
by Employer Not For Cause.  The Company may terminate the Executive’s
employment at any time for any reason.  If
the Executive’s employment is terminated without Cause, the Company shall pay
the Executive his earned but unpaid Base Salary, his accrued but unused
vacation pay and his earned but unpaid bonus, if any, and shall provide his
benefits under the applicable benefit plans through the date of termination and
otherwise as required by law.  In
addition, the Executive shall be entitled to a severance payment, as set forth
below (the “Severance Payment”), provided he signs a separation agreement and
general release of claims (to be prepared by the Company at the time of
termination) in exchange for such severance payment:


 


(i)            If the Executive’s
employment is terminated without Cause within one year from his date of hire, or
if the Company relocates its headquarter offices outside a thirty-five (35)
mile radius of 298 N. Wiget Lane, Walnut Creek, CA  94598, or Executive’s duties and
responsibilities are significantly reduced without Cause, Executive’s Severance
Payment shall be equal to six (6) months’ pay at his current Base Salary,
less required and authorized withholdings, which shall be paid to the Executive
in the form of salary continuation for a period of six (6) months
following the effective date of termination, payable in accordance with the
Company’s normal payroll practices and schedule.


 


The Company shall be
entitled to cease its payment of the Severance Payment in the event that the Executive
breaches or violates any of his obligations under this Agreement or his
Confidential Information and Invention Agreement during the applicable
severance period.  Notwithstanding any other provision of this Agreement to the contrary,
the Company, in its sole discretion and without the Executive’s consent, may
amend or modify this Agreement in any manner to provide for the application and
effects of Section 409A of the Internal Revenue Code (the “Code”)
(relating to deferred compensation arrangements) and any related regulatory or
administrative guidance issued by the Internal Revenue Service.  The Company shall have the authority to delay
the payment of any benefits described under this Agreement to the extent it
deems necessary or appropriate to comply with Section 409A(a)(2)(B)(i) of
the Code (relating to payments made to certain “key employees” of certain
publicly-traded companies) and in such event, any such payments to which the Executive
would otherwise be entitled during the six (6) month period immediately
following the Executive’s separation from service will be paid on the first
business day following the expiration of such six (6) month period.


 


(c)           Resignation
by Executive. At any
time, the Executive may terminate his employment for any reason by providing
the Company two (2) weeks’ advance written notice.  If the Executive’s employment is terminated
due to the Executive’s resignation, the Company shall pay the 


 


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Executive his earned but unpaid Base Salary and accrued vacation pay,
and shall provide his benefits under the applicable benefit plans, through the
date of termination and otherwise as required by law.  The Executive shall not be entitled to the
Severance Payment under Section 4(b) if he resigns for any reason,
and no other compensation or benefits will accrue or be owed to the Executive
for any period after the effective date of termination in the event of that he
resigns for any reason.


 


5.  TERMINATION
OBLIGATIONS.


 


(a)           Representations
and Warranties.  The Executive shall sign, as a condition of
employment, the Company’s Confidential Information and Invention Agreement.  The representations and warranties contained
in this Agreement and the Executive’s obligations under his Confidential
Information and Invention Agreement shall survive the termination of employment
for any reason.  Nothing in this
Agreement shall be deemed to modify or limit the Executive’s obligations under his
Confidential Information and Invention Agreement, and nothing in the
Confidential Information and Invention Agreement shall be deemed to modify or
limit the Executive’s obligations under this Agreement.


 


(b)           Cooperation
in Pending Work. Following
any termination of employment, the Executive shall fully cooperate with the
Company in all matters relating to the winding up of pending work on behalf of
the Company and the orderly transfer of work to other executives/employees of
the Company or any of its domestic subsidiaries.


 


(c)           Return
of Company Property.  All property including, without limitation,
all equipment, tangible Proprietary Information as defined in Section 6(a),
documents, books, records, reports, notes, contracts, lists, computer disks
(and other computer-generated files and data), and copies thereof, created on
any medium and furnished to, obtained by, or prepared by the Executive in the
course of or incident to his employment, belongs to the Company or any of its
subsidiaries, whether domestic or foreign, and shall be returned promptly to
the Company upon termination of employment for any reason.  In addition, the Executive shall immediately
return to or arrange for prompt delivery to the Company all equipment,
supplies, keys, manuals, and other property or equipment of whatever nature in his
possession or control or which he may have entrusted to any other party.


 


6.  PROPRIETARY
INFORMATION AND NON-SOLICITATION.


 


(a)           Proprietary
Information. The Executive
recognizes and acknowledges that certain assets of the Company or its
subsidiaries, whether domestic or foreign, constitute “Proprietary Information,”
including all information that is known only to the Executive or the Company or
such subsidiaries, and relating to the business of the Company or such
subsidiaries (including, without limitation, information regarding employees,
clients, customers, bill and pay rates, employees’ pay and skills, pricing
policies, methods of operation, operating manuals, sales, sales techniques,
advertising materials, products, costs, markets, key personnel, formulas,
product applications, technical processes, other statistical information,
confidential data, and trade secrets), and that protection of such information
is essential to the interests of the Company and such subsidiaries.


 


(b)           Non-Solicitation
of Employees and Clients. The Executive acknowledges and agrees that the pursuit of activities
forbidden by this subsection would necessarily involve the use or disclosure of
Proprietary Information in breach of the Company’s Confidential Information and
Invention Agreement.  To forestall this
disclosure, use, and breach, and in consideration of the employment under this
Agreement, the Executive agrees that for a period of one (1) year after
termination of his employment, he shall not, directly or indirectly, for or on behalf of any other person, firm,
corporation or other entity that directly competes with the Company:  (i) solicit, induce, or influence any
employee, consultant, or independent contractor of the Company or any of its
subsidiaries, whether domestic or foreign, to terminate 


 


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his employment or relationship with the Company or any of such
subsidiaries or to work for any other business entity or person; or (ii) solicit
(other than on behalf of the Company or such subsidiaries), divert, or attempt
to divert the business of any client or customer of the Company in any
district, territory, state or country where the Company conducts business, unless the Executive can prove that any action
taken in violation of this Section 6(b) was taken without the use of
any of the Company’s Proprietary Information. For purposes of this
non-solicitation covenant, a customer of the Company is defined as any person,
firm or corporation that the Company or any of its subsidiaries has serviced
within one year preceding the termination of the Executive’s employment and with whom the Executive is or became
familiar as a result of his employment with the Company.  For
purposes of this non-solicitation covenant,  an
employee of the Company is defined as any person who has received salary or
wages from the Company or any of its subsidiaries within one year preceding the
termination of the Executive’s employment and with whom the Executive is or became familiar as a result of his
employment with the Company.


 


(c)           Injunctive
Relief for Violation. The
Executive acknowledges that the obligations and restrictions set forth in this Section 6
are reasonably necessary for the protection of the Company’s business, goodwill,
property, customer and employee relationships. 
The Executive further acknowledges that the character, duration and
geographical scope of his obligations under this Section 6 are reasonable
in light of the circumstances as they exist on the date upon which this
Agreement has been executed. The Executive recognizes that irreparable damage
will result to the Company in the event of any violation of his obligations
under this Section 6 and agrees to the issuance of a restraining order
and/or an injunction against him for such a material violation in addition to
any other legal or equitable remedies that the Company may have.


 


7.  GENERAL.


 


(a)           Severability.
If any provision of
this Agreement is or becomes invalid, illegal or unenforceable in any respect
under any law, the validity, legality or enforceability of the remaining
provisions hereof shall not in any way be affected or impaired.  If any provision of this Agreement is found
by a court of competent jurisdiction to be invalid, illegal or unenforceable,
the affected provisions of this Agreement shall automatically and without
requirement of further action by the parties be deemed reformed solely to the
extent required to render such provisions valid, enforceable and legal and this
Agreement, including such reformed provisions, shall continue in full force and
effect.  If such reformation is not
possible, then the affected provisions shall be eliminated from this Agreement
to the extent necessary to permit the remaining provisions to be enforced.


 


(b)           Counterparts.
This Agreement may be
executed in multiple counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.


 


(c)           Entire Agreement.  This Agreement is intended to be the final, complete, and exclusive
statement of the terms of the Executive’s employment by the Company and may not
be contradicted by evidence of any prior or contemporaneous statements or
agreements, except for agreements specifically referenced herein (including the
Indemnification Agreement attached as Exhibit A, the Confidentiality
Agreement attached as Exhibit B, and the Stock Plan and Stock Option
Agreement of the Company).  To the extent
that the practices, policies or procedures of the Company, now or in the
future, apply to the Executive and are inconsistent with the terms of this
Agreement, the provisions of this Agreement shall control.  Any subsequent change in the Executive’s
duties, position, or compensation will not affect the validity or scope of this
Agreement.


 


(d)           Amendments;
Waivers. This
Agreement may not be amended except by an instrument in writing, signed by each
of the parties. No failure to exercise and no delay in exercising any right,
remedy, or power under this Agreement shall operate as a waiver thereof, nor
shall any single or 


 


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partial exercise of any right, remedy, or power under this Agreement
preclude any other or further exercise thereof, or the exercise of any other
right, remedy, or power provided herein or by law or in equity.


 


(e)           Assignment;
Successors and Assigns. The
Executive agrees that he will not assign, sell, transfer, delegate, or
otherwise dispose of, whether voluntarily or involuntarily, or by operation of
law, any rights or obligations under this Agreement. Any such purported
assignment, transfer, or delegation shall be void. Nothing in this Agreement
shall prevent the consolidation of the Company with, or its merger into, any
other entity, or the sale by the Company of all or substantially all of its
assets, or the otherwise lawful assignment by the Company of any rights or
obligations under this Agreement. 
Subject to the foregoing, this Agreement shall be binding upon and shall
inure to the benefit of the parties and their respective heirs, legal
representatives, successors, and permitted assigns, and shall not benefit any
person or entity other than those specifically enumerated in this Agreement.


 


(f)            Governing
Law. This Agreement
and the performance hereof shall be construed and governed in accordance with
the laws of the State of California.


 


The parties have duly executed this Agreement as of the date and year
first above written.


 


 


	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Stephen J. Russo

  	
   

  
	
   

  	
  Stephen
  J. Russo

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Michael T. Willis

  	
   

  
	
   

  	
   

  	
   Michael
  T. Willis

  
	
   

  	
  Title: COB, President & CEO

  
				



 


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