**EXHIBIT 10.7**

 

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**WESTAFF, INC.**

 

***EMPLOYEE STOCKPURCHASE PLAN***

 

***(As Amended andRestated April 16, 2008)***

 

**I.****              PURPOSEOF THE PLAN**

 

This Employee Stock Purchase Plan is intended to promote the interestsof Westaff, Inc. by providing eligible employees with the opportunity toacquire a proprietary interest in the Corporation through participation in apayroll-deduction based employee stock purchase plan designed to qualify under Section 423of the Code.

 

Capitalized terms herein shall have the meanings assigned to such termsin the attached Appendix.

 

**II.****            ADMINISTRATIONOF THE PLAN**

 

The Plan Administrator shall have full authority to interpret andconstrue any provision of the Plan and to adopt such rules and regulationsfor administering the Plan as it may deem necessary in order to comply with therequirements of Code Section 423. Decisions of the Plan Administratorshall be final and binding on all parties having an interest in the Plan.

 

**III.****          STOCKSUBJECT TO PLAN**

 

**A.**            Thestock purchasable under the Plan shall be shares of authorized but unissued orreacquired Common Stock, including shares of Common Stock purchased on the openmarket. The maximum number of shares of Common Stock which may be issued overthe term of the Plan shall not exceed One Million Three Hundred Sixty-TwoThousand and Five Hundred (1,362,500) shares.

 

**B.**            Shouldany change be made to the Common Stock by reason of any stock split, stockdividend, recapitalization, combination of shares, exchange of shares or otherchange affecting the outstanding Common Stock as a class without theCorporation’s receipt of consideration, appropriate adjustments shall be madeto (i) the maximum number and class of securities issuable under the Plan,(ii) the maximum number and class of securities purchasable perParticipant on any one Purchase Date and (iii) the number and class ofsecurities and the price per share in effect under each outstanding purchaseright in order to prevent the dilution or enlargement of benefits thereunder.

 

**IV.****          PURCHASEPERIODS**

 

**A.**            Sharesof Common Stock shall be offered for purchase under the Plan through a seriesof successive purchase periods until such time as (i) the maximum numberof shares of Common Stock available for issuance under the Plan shall have beenpurchased or (ii) the Plan shall have been sooner terminated. The Boardshall have the power to change the duration of purchase periods (including thecommencement and termination dates thereof) with respect to future purchaseperiods without stockholder approval if such change is announced at leastfifteen (15) days prior to the scheduled beginning of the first purchaseperiod to be affected thereafter.

 

**B.**            Eachpurchase period shall have a duration of six (6) months. Purchase periodsshall run from the first business day in February to the last business dayin July each year and from the first business day in August each yearto the last business day in January of the following year. The firstpurchase period began on November 3, 1996 and ended on the last businessday in January 1997.

 

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**V.****            ELIGIBILITY**

 

**A.**            Eachindividual who is an Eligible Employee on the start date of any purchase periodshall be eligible to participate in the Plan for that purchase period.

 

**B.**            Toparticipate in the Plan for a particular purchase period, the Eligible Employeemust complete the Enrollment/Change Form prescribed by the Plan Administrator(including a Stock Purchase Agreement) and file such forms with the PlanAdministrator (or its designate) on or before the start date of the purchaseperiod.

 

**VI.****          PAYROLLDEDUCTIONS**

 

**A.**            Thepayroll deduction authorized by the Participant for purposes of acquiringshares of Common Stock under the Plan may be any multiple of one percent (1%)of the Cash Earnings paid to the Participant during each purchase period, up toa maximum of ten percent (10%). The deduction rate so authorized shall continuein effect for the entire purchase period. The Participant may not increase hisor her rate of payroll deduction during a purchase period. However, theParticipant may, at any time during the purchase period, reduce his or her rateof payroll deduction to become effective as soon as possible after filing theappropriate form with the Plan Administrator. The Participant may not, however,effect more than one (1) such reduction per purchase period.

 

**B.**            Payrolldeductions shall begin on the first pay day following the start date of thepurchase period and shall (unless sooner terminated by the Participant)continue through the pay day ending with or immediately prior to the last dayof the purchase period. The amounts so collected shall be credited to theParticipant’s book account under the Plan, but no interest shall be paid on thebalance from time to time outstanding in such account. The amounts collectedfrom the Participant shall not be held in any segregated account or trust fundand may be commingled with the general assets of the Corporation and used forgeneral corporate purposes.

 

**C.**            Payrolldeductions shall automatically cease upon the termination of the Participant’spurchase right in accordance with the provisions of the Plan.

 

**D.**            TheParticipant’s acquisition of Common Stock under the Plan on any Purchase Dateshall neither limit nor require the Participant’s acquisition of Common Stockon any subsequent Purchase Date.

 

**VII.****         PURCHASERIGHTS**

 

**A.*****            Grant of PurchaseRight*.**  A Participant shall begranted a separate purchase right on the start date of each purchase period inwhich he or she participates. The purchase right shall provide the Participantwith the right to purchase shares of Common Stock on the Purchase Date upon theterms set forth below. The Participant shall execute a stock purchase agreementembodying such terms and such other provisions (not inconsistent with the Plan)as the Plan Administrator may deem advisable.

 

Under no circumstances shall purchase rightsbe granted under the Plan to any Eligible Employee if such individual would,immediately after the grant, own (within the meaning of Code Section 424(d))or hold outstanding options or other rights to purchase, stock possessing fivepercent (5%) or more of the total combined voting power or value of all classesof stock of the Corporation or any Corporate Affiliate.

 

**B.*****            Exercise of thePurchase Right*.**  Each purchaseright shall be automatically exercised on the Purchase Date, and shares ofCommon Stock shall accordingly be purchased on behalf of each Participant(other than any Participant whose payroll deductions have previously beenrefunded pursuant to the Termination of Purchase Right provisions below) onsuch date. The purchase shall be effected by applying the Participant’s payrolldeductions for the purchase period ending on such Purchase Date to the purchaseof shares of Common Stock (subject to the limitation on the maximum number ofshares purchasable per Participant on any one Purchase Date) at the purchaseprice in effect for that purchase period.

 

**C.*****            Purchase Price*.**  The purchase price per share at which CommonStock will be purchased on the Participant’s behalf on each Purchase Date shallbe equal to ninety percent (90%) of the *lower*of (i) the Fair Market Value per share of Common Stock on the start dateof the purchase period or (ii) the Fair Market Value per share of CommonStock on that Purchase Date.

 

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**D.*****            Number of PurchasableShares*.**  The number of shares ofCommon Stock purchasable by a Participant on each Purchase Date shall be thenumber of whole shares obtained by dividing the amount collected from theParticipant through payroll deductions during the purchase period ending withthat Purchase Date by the purchase price in effect for that Purchase Date.However, the maximum number of shares of Common Stock purchasable perParticipant on any one Purchase Date shall not exceed one thousand one hundredtwenty-five (1,125) shares, subject to periodic adjustments in the event ofcertain changes in the Corporation’s capitalization.

 

**E.*****             Excess PayrollDeductions*.**  Any payrolldeductions not applied to the purchase of shares of Common Stock on anyPurchase Date because they are not sufficient to purchase a whole share ofCommon Stock shall be held for the purchase of Common Stock on the nextPurchase Date. However, any payroll deductions not applied to the purchase ofCommon Stock by reason of the limitation on the maximum number of sharespurchasable by the Participant on the Purchase Date shall be promptly refunded.

 

**F.*****             Termination ofPurchase Right*.**  The followingprovisions shall govern the termination of outstanding purchase rights:

 

**1.**             AParticipant may, at any time prior to the last day of the purchase period,terminate his or her outstanding purchase right by filing the appropriate formwith the Plan Administrator (or its designate), and no further payrolldeductions shall be collected from the Participant with respect to the terminatedpurchase right. Any payroll deductions collected during the purchase period inwhich such termination occurs shall, at the Participant’s election, beimmediately refunded or held for the purchase of shares on the next PurchaseDate. If no such election is made at the time such purchase right isterminated, then the payroll deductions collected with respect to theterminated right shall be refunded as soon as possible.

 

**2.**             Thetermination of such purchase right shall be irrevocable, and the Participant maynot subsequently rejoin the purchase period for which the terminated purchaseright was granted. In order to resume participation in any subsequent purchaseperiod, such individual must re-enroll in the Plan (by making a timely filingof the prescribed Enrollment/Change Form) on or before the start date of thenew purchase period.

 

**3.**             Shouldthe Participant cease to remain an Eligible Employee for any reason (includingdeath, disability or change in status) while his or her purchase right remainsoutstanding, then that purchase right shall immediately terminate, and all ofthe Participant’s payroll deductions for the purchase period in which thepurchase right so terminates shall be immediately refunded. However, should theParticipant cease to remain in active service by reason of an approved unpaidleave of absence, then the Participant shall have the right, exercisable upuntil the last business day of the purchase period in which such leavecommences, to (a) withdraw all the payroll deductions collected to date onhis or her behalf during such purchase period or (b) have such funds heldfor the purchase of shares on the next scheduled Purchase Date. In no event,however, shall any further payroll deductions be collected on the Participant’sbehalf during such leave. Upon the Participant’s return to active service, hisor her payroll deductions under the Plan shall automatically resume at the ratein effect at the time the leave began, unless the Participant withdraws fromthe Plan prior to his or her return.

 

**G.*****            Corporate******Transaction*.**  IntheeventofaproposedCorporateTransaction,eachoutstandingpurchaserightshallbeassumedbysuchsuccessorcorporationoraparentorsubsidiaryofsuchsuccessorcorporation,unlessthePlanAdministrator,intheexerciseofitssolediscretionandinlieuofsuchassumption,determinestoshortenthepurchaseperiodtheninprogressbysettinganewPurchaseDate(the“NewPurchaseDate”).IfthePlanAdministratorshortensthepurchaseperiodtheninprogressinlieuofassumptionintheeventofaCorporateTransaction,thePlanAdministratorshallnotifyeachParticipantinwritingatleastten(10)businessdayspriortotheNewPurchaseDate,thatthePurchaseDatefortheParticipant’soptionhasbeenchangedtotheNewPurchaseDateandthat*either*:

 

**1.**             theParticipant’s purchase right will be exercised automatically on the NewPurchase Date, unless prior to such date the Participant has terminated his orher purchase right as provided in Section VII.F.1; or

 

**2.**             theCompany shall pay to the Participant on the New Purchase Date an amount incash, cash equivalents, or property as determined by the Plan Administratorthat is equal to the difference in the Fair Market Value of the shares subjectto the purchase right and the purchase price due had the Participant’s purchaseright been exercised automatically under clause 1 above.

 

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For purposes of this Subsection, a purchase right granted under thePlan shall be deemed to be assumed if, in connection with the CorporateTransaction, the purchase right is replaced with a comparable purchase rightwith respect to shares of the successor corporation or parent thereof. Thedetermination of purchase right comparability shall be made by the PlanAdministrator prior to the Corporate Transaction and its determination shall befinal, binding and conclusive on all persons.

 

**H.*****            Proration of PurchaseRights*.**  Should the total numberof shares of Common Stock which are to be purchased pursuant to outstandingpurchase rights on any particular date exceed the number of shares thenavailable for issuance under the Plan, the Plan Administrator shall make apro-rata allocation of the available shares on a uniform and nondiscriminatorybasis, and the payroll deductions of each Participant, to the extent in excessof the aggregate purchase price payable for the Common Stock pro-rated to suchindividual, shall be refunded.

 

**I.*****              Assignability*.**  The purchase right shall be exercisable onlyby the Participant and shall not be assignable or transferable by theParticipant.

 

**J.*****             Stockholder Rights*.**  A Participant shall have no stockholderrights with respect to the shares subject to his or her outstanding purchaseright until the shares are purchased on the Participant’s behalf in accordancewith the provisions of the Plan and the Participant has become a holder ofrecord of the purchased shares.

 

**VIII.****       ACCRUAL LIMITATIONS**

 

**A.**            NoParticipant shall be entitled to accrue rights to acquire Common Stock pursuantto any purchase right outstanding under this Plan if and to the extent suchaccrual, when aggregated with (i) rights to purchase Common Stock accruedunder any other purchase right granted under this Plan and (ii) similarrights accrued under other employee stock purchase plans (within the meaning ofCode Section 423) of the Corporation or any Corporate Affiliate, wouldotherwise permit such Participant to purchase more than Twenty-Five ThousandDollars ($25,000) worth of stock of the Corporation or any Corporate Affiliate(determined on the basis of the Fair Market Value of such stock on the date ordates such rights are granted) for each calendar year such rights are at anytime outstanding.

 

**B.**            Forpurposes of applying such accrual limitations, the following provisions shallbe in effect:

 

**1.**             Theright to acquire Common Stock under each outstanding purchase right shallaccrue on the Purchase Date in effect for the purchase period for which suchright is granted.

 

**2.**             Noright to acquire Common Stock under any outstanding purchase right shall accrueto the extent the Participant has already accrued in the same calendar year theright to acquire Common Stock under one (1) or more other purchase rightsat a rate equal to Twenty-Five Thousand Dollars ($25,000) worth of Common Stock(determined on the basis of the Fair Market Value per share on the date ordates of grant) for each calendar year such rights were at any timeoutstanding.

 

**3.**             Ifby reason of such accrual limitations, any purchase right of a Participant doesnot accrue for a particular purchase period, then the payroll deductions whichthe Participant made during that purchase period with respect to such purchaseright shall be promptly refunded.

 

**C.**            Inthe event there is any conflict between the provisions of this Article andone or more provisions of the Plan or any instrument issued thereunder, theprovisions of this Article shall be controlling.

 

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**IX.****          EFFECTIVEDATE AND TERM OF THE PLAN**

 

**A.**            ThePlan was adopted by the Board on April 25, 1996 and became effective on November 3,1996, *provided* no purchase rightsgranted under the Plan were to be exercised, and no shares of Common Stock wereto be issued hereunder, until (i) the Plan had been approved by thestockholders of the Corporation and (ii) the Corporation had complied withall applicable requirements of the 1933 Act (including the registration of theshares of Common Stock issuable under the Plan on a Form S-8 registrationstatement filed with the Securities and Exchange Commission), all applicablelisting requirements of any stock exchange (or the Nasdaq Global Market, ifapplicable) on which the Common Stock is listed for trading and all otherapplicable requirements established by law or regulation. In the event suchstockholder approval were not obtained, or such compliance were not effected,within twelve (12) months after the date on which the Plan is adopted bythe Board, the Plan was to have terminated and have no further force or effectand all sums collected from Participants during the initial purchase periodhereunder were to have been refunded.

 

**B.**            Unlesssooner terminated by the Board, the Plan shall terminate upon the *earliest* to occur of (i) the lastbusiness day in January 2017, (ii) the date on which all sharesavailable for issuance under the Plan shall have been sold pursuant to purchaserights exercised under the Plan or (iii) the date on which all purchaserights are exercised in connection with a Corporate Transaction. No furtherpurchase rights shall be granted or exercised, and no further payrolldeductions shall be collected, under the Plan following such termination.

 

**X.****            AMENDMENTOF THE PLAN**

 

The Board may alter, amend, suspend or discontinue the Plan at any timeto become effective immediately following the close of any purchaseperiod.  To the extent necessary tocomply with Section 423 of the Code (or any successor rule orprovision or any other applicable law), the Company shall obtain stockholderapproval in such a manner and to such degree as required.

 

On July 26, 2006, the Board adopted and approved an amendment andrestatement of the Plan to extend the term of the Plan to the last business dayof January, 2017 and, effective for purchase periods commencing on and after August 1,2006, to modify the purchase price per share discount from eighty-five percent(85%) to ninety percent (90%) and to expand the actions the Company may take inconnection with a Corporate Transaction and to modify the list of ParticipatingCorporations who extend the benefits of the Plan to their Eligible Employees.

 

**XI.****          GENERALPROVISIONS**

 

**A.**            Allcosts and expenses incurred in the administration of the Plan shall be paid bythe Corporation.

 

**B.**            Nothingin the Plan shall confer upon the Participant any right to continue in theemploy of the Corporation or any Corporate Affiliate for any period of specificduration or interfere with or otherwise restrict in any way the rights of theCorporation (or any Corporate Affiliate employing such person) or of theParticipant, which rights are hereby expressly reserved by each, to terminate suchperson’s employment at any time for any reason, with or without cause.

 

**C.**            Theprovisions of the Plan shall be governed by the laws of the State of Californiawithout resort to that State’s conflict-of-laws rules.

 

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** **

**Schedule A**

 

**CURRENT LIST OF PARTICIPATING CORPORATIONS**

 

***Domestic***

 

Westaff, Inc., a Delaware corporation

 

Westaff (USA), Inc., a Californiacorporation

 

Westaff Support, Inc., a Californiacorporation

 

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** **

**APPENDIX**

 

The following definitions shall be in effectunder the Plan:

 

**A.*****            Board*** shallmean the Corporation’s Board of Directors.

 

**B.*****            Cash Earnings***shall mean the (i) regular base salary paid to a Participant by one ormore Participating Companies during such individual’s period of participationin one or more offering periods under the Plan plus (ii) any pre-taxcontributions made by the Participant to any Code Section 401(k) salarydeferral plan or any Code Section 125 cafeteria benefit program now orhereafter established by the Corporation or any Corporate Affiliate plus (iii) allovertime payments, bonuses, commissions, current profit-sharing distributionsand other incentive-type payments. However, Cash Earnings shall **not** include any contributions (other thanCode Section 401(k) or Code Section 125 contributions) made onthe Participant’s behalf by the Corporation or any Corporate Affiliate underany employee benefit or welfare plan now or hereafter established.

 

**C.*****            Code*** shallmean the Internal Revenue Code of 1986, as amended.

 

**D.*****            Common Stock***shall mean the Corporation’s common stock.

 

**E.*****             Corporate Affiliate***shall mean any parent or subsidiary corporation of the Corporation (asdetermined in accordance with Code Section 424), whether now existing orsubsequently established.

 

**F.*****             Corporate Transaction***shall mean either of the following stockholder-approved transactions to whichthe Corporation is a party:

 

**1.**             amerger or consolidation in which securities possessing more than fifty percent(50%) of the total combined voting power of the Corporation’s outstandingsecurities are transferred to a person or persons different from the personsholding those securities immediately prior to such transaction;

 

**2.**             thesale, transfer or other disposition of all or substantially all of the assetsof the Corporation in complete liquidation or dissolution of the Corporation;or

 

**3.**             anacquisition in a single or series of related transactions by any person orrelated group of persons (other than the Company or by a Company-sponsoredemployee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3of the Securities Exchange Act of 1934, as amended) of securities possessingmore than fifty percent (50%) of the total combined voting power of the Company’soutstanding securities.

 

**G.*****            Corporation***shall mean Westaff, Inc., a Delaware corporation, and any corporatesuccessor to all or substantially all of the assets or voting stock of Westaff, Inc.which shall by appropriate action adopt the Plan.

 

**H.*****            Eligible Employee***shall mean any person who is employed by a Participating Corporation on a basisunder which he or she is regularly expected to render more than twenty(20) hours of service per week for more than five (5) months percalendar year for earnings considered wages under Code Section 3401(a).

 

**I.*****              Fair Market Value***per share of Common Stock on any relevant date shall be determined inaccordance with the following provisions:

 

**1.**             Ifthe Common Stock is are listed on one or more established stock exchanges ornational market systems, including without limitation The NASDAQ Global SelectMarket, The NASDAQ Global Market and The NASDAQ Capital Market, its Fair MarketValue shall be the closing sales price for such shares (or the closing bid, ifno sales were reported) as quoted on the principal exchange or system on whichthe Common Stock is listed (as determined by the Plan Administrator) on thedate of determination (or, if no closing sales price or closing bid wasreported on that date, as applicable, on the last trading date such closingsales price or closing bid was reported), as reported in The Wall StreetJournal or such other source as the Plan Administrator deems reliable;

 

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**2.**             Ifthe Common Stock is regularly quoted on an automated quotation system(including the OTC Bulletin Board) or by a recognized securities dealer, itsFair Market Value shall be the closing sales price for such shares as quoted onsuch system or by such securities dealer on the date of determination, but ifselling prices are not reported, the Fair Market Value of the Common Stockshall be the mean between the high bid and low asked prices for the CommonStock on the date of determination (or, if no such prices were reported on thatdate, on the last date such prices were reported), as reported in The WallStreet Journal or such other source as the Plan Administrator deems reliable;or

 

**3.**             Inthe absence of an established market for the Common Stock of the type describedin (1) and (2), above, the Fair Market Value thereof shall be determinedby the Plan Administrator in good faith.

 

**J.*****             1933 Act***shall mean the Securities Act of 1933, as amended.

 

**K.*****            Participant***shall mean any Eligible Employee of a Participating Corporation who is activelyparticipating in the Plan.

 

**L.*****            ParticipatingCorporation*** shall mean the Corporation and such Corporate Affiliate orAffiliates as may be authorized from time to time by the Board to extend thebenefits of the Plan to their Eligible Employees. The current ParticipatingCorporations in the Plan are listed in attached Schedule A.

 

**M.*****           Plan*** shall meanthe Corporation’s Employee Stock Purchase Plan, as set forth in this document.

 

**N.*****            Plan Administrator***shall mean the committee of two (2) or more non-employee Board membersappointed by the Board to administer the Plan.

 

**O.*****            Purchase Date***shall mean the last business day of each purchase period. The initial PurchaseDate shall mean January 31, 1997.

 

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