Document:

QuickLinks
 -- Click here to rapidly navigate through this document

Exhibit 10.3.8  

 
 

EMPLOYMENT AGREEMENT    
  

        This Employment Agreement ("Agreement") deemed effective as of January 14, 2002 is entered into by and among Westaff Support, Inc., a California
corporation (the "Company"), its ultimate parent company known as Westaff, Inc., a Delaware corporation ("Westaff"), and Dwight S. Pedersen (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 President and Chief Executive Officer of the
Company and Westaff as well as all the other domestic subsidiaries of Westaff. 

        (b)  The Executive shall have such executive responsibilities and duties as are consistent with his position. The Executive
agrees to devote his full working time, attention and energies to the performance of his duties for the Company and Westaff and the Executive shall at all times comply with the Westaff Conflict of
Interest Policy. 

        (c)  Term. The Executive's employment commenced on January 14, 2002, and his employment shall be of indefinite
duration, subject to termination under Section 5 of this Agreement. The Executive acknowledges that there is no express or implied agreement between him and the Company or Westaff or any of its
subsidiaries, whether domestic or foreign, for any specific period of employment or for continuing or long-term employment. 

        (d)  Directorships. Having served as a director of Westaff since his appointment to its Board of Directors effective
May 1, 2001, the Executive shall continue his service as a director until his successor
is elected and qualified or until his earlier death, resignation or removal, but his resignation from membership on the Audit Committee of the Board of Directors of Westaff shall be effective as of
the date his employment commenced. The Executive shall be appointed to serve as a director of the Company and the other domestic subsidiaries of Westaff and he agrees to serve in those capacities. The
Executive may be appointed to serve as a director of the foreign subsidiaries of Westaff as well and he agrees to serve in those capacities in the event of his appointment. The Executive shall not be
entitled to any additional compensation for his directorships. 

        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, in accordance with its then current payroll practices and schedule, an
annual base salary ("Base Salary"). The initial gross amount of the Base Salary to be paid Executive shall be Four Hundred Thousand Dollars ($400,000),
less withholdings required by law and agreed deductions, if any. The Compensation Committee of the Board of Directors will review the Executive's Base Salary at least once each year on or before the
anniversary of his hire date and make appropriate adjustments as they shall determine in their discretion. 

        (b)  Benefits.

        (i)    Vacation. The Executive shall be entitled to vacation leave of four (4) weeks per year, subject to the Company's
policies with respect to maximum annual accruals. 

        (ii)  Benefit Plans. As the Executive becomes eligible, he shall have the right to participate in and to receive benefits from
all present and future benefit plans specified in the Company's policies and generally made available to similarly situated employees of the Company. The amount and extent of benefits to which the
Executive is entitled shall be 

 

governed by the specific benefit plan, as amended. The Executive shall also be entitled to any benefits or compensation tied to termination as described in Section 5. 

        (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)  Annual Incentive Compensation. The Executive shall be entitled to profit incentives for fiscal 2002 on the following
terms and conditions: if net income at the fiscal year end exceeds Eight Million Dollars ($8,000,000) he will be entitled to a lump sum payment of Fifty Thousand Dollars ($50,000) in cash and if net
income at the fiscal year end exceeds Ten Million Dollars ($10,000,000) he will be entitled to a lump sum payment of One Hundred Thousand Dollars ($100,000) in cash, less withholdings required by law
and agreed deductions, if any. No proration will be made if the specified net income goals are not achieved. For purposes of determining the amount of the Executive's annual incentive compensation for
fiscal 2002, if any, net income shall be from continuing operations (excluding nonrecurring or unusual items) and it shall be calculated based on Westaff's consolidated fiscal year end financial
statements, as audited by Westaff's independent public accountant. All fiscal 2002 incentive or executive bonus payments, if any, will be included as an expense in determining net income, whether
payable to the Executive or to other employees of the Company and its parent or affiliated corporations. Payment of the annual incentive compensation for fiscal 2002, if any, will be made after
January 1, 2003 and not later than January 15, 2003. The Executive's annual incentive compensation for future fiscal years, if any, may be earned at the discretion of the Compensation
Committee of the Board of Directors of Westaff pursuant to an executive bonus plan or plans which the committee may formulate. If the Executive's employment is terminated by the Company or Westaff
without cause after more than six months of employment in the fiscal year, the amount of the annual incentive compensation payment will be prorated for the length of his employment through and
including the termination date. In the event that the Executive resigns or his employment is terminated by the Company before the annual incentive compensation payment is made, he will forfeit such
compensation. 

        (e)  Stock Options. When documented by resolutions of the Primary Committee of the Board ("the Primary Committee"), the
Executive shall be granted an option to purchase five hundred fifty thousand (550,000) shares of Westaff's common stock (the "Option Shares") as of the date his employment begins or the date the
Primary Committee approves such grant, as the committee may determine in its discretion. The terms of such grant shall be stated in one or more Stock Option Agreements (the "Stock Option Agreements"),
which both parties shall sign in accordance with the Westaff, Inc. 1996 Stock Option/Stock Issuance Plan, as amended and restated as of May 23, 2001 (the "Plan"). The exercise price per
share shall be Two Dollars and Thirty-Five Cents ($2.35) which was the Fair Market Value, as defined by the Plan, on the Executive's hire date. Two hundred fifty thousand (250,000) of the
Option Shares shall vest immediately as of the Executive's hire date (the "Vesting Commencement Date"). The remaining three hundred thousand (300,000) Option Shares will vest in three (3) equal
annual installments of one hundred thousand (100,000) of such shares with vesting of each installment to occur upon the last trading days of fiscal 2002, 2003 and 2004,  provided that the closing selling
price of Westaff's common stock on the Nasdaq National Market ("Nasdaq") on the specified dates is at least Four
Dollars ($4.00) per share on November 1, 2002, at least Five Dollars ($5.00) per share on October 31, 2003, and at least Six Dollars ($6.00) per share on October 29, 2004. Any
remaining option shares that have not yet vested by January 13, 2007 will vest at that date and may vest earlier in the event of a Corporate Transaction or a Change in Control of Westaff, as
defined in the Plan. At termination of the employment relationship by either party, the vested options must be exercised within three (3) months from the date of termination unless the Primary
Committee in its discretion allows a further extension of time in which to exercise as provided by the Plan; however, should termination 

2

 

of the Executive's employment be for Misconduct as defined by the Plan, such option shares will be cancelled. 

        4.    TERMINATION OF EMPLOYMENT.    

        (a)  Definition of Cause. For purposes of this Agreement, termination shall be for "cause" 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 or Westaff; 

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

        (iii)  exhibits,
in regard to his employment, unfitness or unavailability for service, unsatisfactory performance, misconduct, dishonesty, habitual neglect of duties or
incompetence; 

        (iv)  is
convicted of a crime involving dishonesty; 

        (v)  breaches
any material term of this agreement; or 

        (vi)  is
disabled and therefore unable to perform the essential duties of his position for a period of ninety (90) days within any twelve (12)-month period. 

        (b)  Termination by Employer Not For Cause. At any time, the Company or Westaff may terminate the Executive's employment for
any reason, without Cause, by providing the Executive two (2) weeks' advance written notice or paying him in lieu of notice. If the Executive's employment is terminated without Cause, the
Company shall pay the Executive his earned but unpaid Base Salary and accrued vacation pay through the date of termination and his earned but unpaid annual incentive pay, if any. Should the
Executive's employment be terminated due to a Change in Control of Westaff, as defined in the Plan, he shall be entitled to a lump sum cash payment of severance pay equal to six (6) months of
his then current Base Salary or he may elect to receive such severance pay in installments according to the Company's standard payroll schedule. All of the foregoing payments shall be less
withholdings required by law and agreed deductions, if any. 

        (c)  Termination by Employer for Cause. At any time, and without prior notice, the Company or Westaff may terminate the
Executive for Cause. If his employment shall be terminated by the Company or Westaff for Cause as defined by Section 4(a), the Company shall pay the Executive all compensation
then due and owing hereunder. No compensation or benefits will accrue or be owed to the Executive for any period after the effective date of termination. 

        (d)  Resignation by Executive. At any time, the Executive may terminate his employment for any reason by providing the Company
and Westaff two (2) weeks' advance written notice. The Company shall pay the Executive his earned but unpaid Base Salary and accrued vacation pay, and shall provide him benefits under the
applicable benefit plans, through the date of termination and otherwise as required by law. 

        5.    TERMINATION OBLIGATIONS.    

        (a)  Representations and Warranties. The representations and warranties contained in this Agreement and the Executive's
obligations under Section 6 on Proprietary Information and Non-Solicitation shall survive the termination of employment. 

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

3

 

        (c)  Resignation of Directorships. The Executive shall be deemed to have immediately resigned his directorships on the Boards
of Directors of the Company and Westaff and all of its subsidiaries, whether domestic or foreign, immediately upon the effective date of termination of employment. 

        (d)  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 Westaff or any of its subsidiaries, whether domestic or foreign,
and shall be returned promptly to the Company or Westaff upon termination of employment. In addition, the Executive shall immediately return to or arrange for prompt delivery to the Company or Westaff
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 and Westaff or its subsidiaries, whether
domestic or foreign, constitute Proprietary Information, including all information that is known only to the Executive or the Company or Westaff or such subsidiaries, and relating to the business of
the Company or Westaff 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, formulae, 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, Westaff and such subsidiaries. The Executive will be required
to sign, as a condition of employment or continuing employment, the Company's Confidential Information and Invention Agreement. 

        (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, (i) solicit, induce, or influence any employee, consultant, or independent contractor of the Company or Westaff or any of its subsidiaries,
whether domestic or foreign, to terminate his or her employment or relationship with the Company or Westaff 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 Westaff or such subsidiaries), divert, or attempt to divert the business of any client or customer of the Company or Westaff in any
district, territory, state or country where the Company or Westaff conducts business. For purposes of this non-solicitation covenant, a customer of the Company or Westaff is defined as any
person, firm or corporation that the Company or Westaff or any of its subsidiaries has serviced within one year preceding the termination of the Executive's employment and an employee of the Company
or Westaff is defined as any person who has received salary or wages from the Company or Westaff or any of its subsidiaries within one year preceding the termination of the Executive's employment. 

        (c)  Non-Competition During Severance Period. During any period in which the Executive is receiving severance
payments from the Company, the Executive may not engage in any business activity that is or may be competitive with the Company or Westaff or in any district, territory, state or country where the
Company or Westaff conducts business. Such period of non-competition shall not exceed one (1) year following the date of employment termination. 

4

 

        7.    GENERAL.    

        (a)  Injunctive Relief for Violation. The Executive acknowledges that the obligations and restrictions set forth in this
Employment Agreement are reasonably necessary for the protection of the Company's and Westaff's business, goodwill, property, customer and employee relationships. The Executive recognizes that
irreparable damage will result to the Company or Westaff in the event of any violation of this Employment Agreement 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 or Westaff may have. 

        (b)  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. 

        (c)  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. 

        (d)  Entire Agreement. This Agreement, the Stock Option Agreements, the Confidential Information and Invention Agreement, and
the Company's employment policies to the extent not inconsistent with the provisions of this Agreement, contain the entire understanding of the parties, supersede all prior agreements and
understandings relating to the subject matter and shall not be amended except by a written instrument hereafter signed by each of the parties. 

        (e)  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 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. 

        (f)    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 or Westaff with, or its merger into, any other entity, or the sale by Westaff or the Company of all or substantially all of its assets,
or the otherwise lawful assignment by Westaff or 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. 

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

5

 

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

	EXECUTIVE:
	

/s/  DWIGHT S. PEDERSEN      
 Dwight S. Pedersen
	
COMPANY:

WESTAFF SUPPORT, INC.
	

By:	
 	

 
	 	 	/s/  W. ROBERT STOVER      
 W. Robert Stover
	Title:	 	Chairman of the Board
	
WESTAFF:

WESTAFF, INC.
	

By:	
 	

 
	 	 	/s/  W. ROBERT STOVER      
 W. Robert Stover
	Title:	 	Chairman of the Board

6

QuickLinks

EMPLOYMENT AGREEMENTQuickLinks
 -- Click here to rapidly navigate through this document
  

Exhibit 10.3.8.1  

 
 

WESTAFF, INC.
  NOTICE OF GRANT OF STOCK OPTION    
  

        Notice is hereby given of the following option grant (the "Option") to purchase shares of the Common Stock of Westaff, Inc. (the "Corporation"): 

        Optionee:    Dwight S. Pedersen 

        Grant Date:    March 1, 2002 

        Vesting Commencement Date:    January 14, 2002 

        Exercise Price:    $2.35 per share 

        Number of Option Shares:    127,659 shares 

        Expiration Date:    January 13, 2012 

        Type of Option:    Incentive Stock Option 

        Exercise Schedule:    The Option shall vest in accordance with the following schedule. In no event shall the Option become
exercisable for any additional Option Shares after Optionee's cessation of Service. 

	DATE
 
	 	VESTED OPTION SHARES

	Vesting Commencement Date	 	42,553
	The earlier to occur of (i) October 31, 2003, (ii) the moment immediately prior to the effective date of a Corporate Transaction or (iii) a Change in Control, provided that the Corporation's Fair Market Value per share of Common Stock equals at least $5.00 or more on each such date or time.	 	42,553
	

The earlier to occur of (i) October 29, 2004, (ii) the moment immediately prior to the effective date of a Corporate Transaction or (iii) a Change in Control, provided that the
Corporation's Fair Market Value per share of Common Stock equals at least $6.00 or more on each such date or time.	
 	

42,553
	

January 13, 2007	
 	

Any remaining shares that have not yet vested

        Optionee
understands and agrees that the Option is granted subject to and in accordance with the terms of the Westaff, Inc. 1996 Stock Option/Stock Issuance Plan (the "Plan").
Optionee further agrees to be bound by the terms of the Plan and the terms of the Option as set forth in the Stock Option Agreement attached hereto as Exhibit A. 

        Optionee
hereby acknowledges receipt of a copy of the official prospectus for the Plan and a copy of the Plan in the forms attached hereto as Exhibit B. 

        No Employment or Service Contract.    Nothing in this Notice or in the attached Stock Option Agreement or in the Plan shall
confer upon Optionee any right to continue in Service for any period of 

1

 

specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Parent or Subsidiary employing or retaining Optionee) or of Optionee, which rights are
hereby expressly reserved by each, to terminate Optionee's Service at any time for any reason, with or without cause. 

        Definitions.    All capitalized terms in this Notice shall have the meaning assigned to them in this Notice, the Plan or in the
attached Stock Option Agreement. 

	 
	 	 
	 	 
	 

	March 1, 2002	 	 	 	 	 
	

 	
 	

WESTAFF, INC.	

 
	

 	
 	

By:	
 	

 	

 
	 	 	 	 	/s/  W. ROBERT STOVER      
 W. Robert Stover	 
	

 	
 	

Title:	
 	

Chairman of the Board	

 
	

 	
 	

 	
 	

 	

 
	 	 	 	 	/s/  DWIGHT S. PEDERSEN      
 Dwight S. Pedersen	 
	 	 	Address:	 	8041 Golden Eagle Way

Pleasanton, CA 94588	 

2

 
 

EXHIBIT A
  
    STOCK OPTION AGREEMENT    
  

 
 
 

WESTAFF, INC.
  STOCK OPTION AGREEMENT    
  

RECITALS  

        A.    The
Corporation has adopted the Plan for the purpose of retaining the services of selected Employees, non-employee members of the Board or the board of
directors of any Parent or Subsidiary and consultants and other independent advisors who provide services to the Corporation (or any Parent or Subsidiary). 

        B.    Optionee
is to render valuable services to the Corporation (or a Parent or Subsidiary), and this Agreement is executed pursuant to, and is intended to carry out the
purposes of, the Plan in connection with the Corporation's grant of an option to Optionee. 

        C.    All
capitalized terms in this Agreement shall have the meaning assigned to them in the attached Appendix. 

NOW, THEREFORE, it is hereby agreed as follows: 

        1.    Grant of Option.    The Corporation hereby grants to Optionee, as of the Grant Date, an option to purchase up to
the number of Option Shares specified in the Grant Notice. The Option Shares shall be purchasable from time to time during the option term specified in Paragraph 2 at the Exercise Price. 

        2.    Option Term.    This option shall have a term of ten (10) years measured from the Grant Date and shall
accordingly expire at the close of business on the Expiration Date, unless sooner terminated in accordance with Paragraph 5 or 6. 

        3.    Limited Transferability.    This option shall be neither transferable nor assignable by Optionee other than by
will or by the laws of descent and distribution following Optionee's death and may be exercised, during Optionee's lifetime, only by Optionee. 

        4.    Dates of Exercise.    This option shall become exercisable for the Option Shares in one or more installments as
specified in the Grant Notice. As the option becomes exercisable for such installments, those installments shall accumulate and the option shall remain exercisable for the accumulated installments
until the Expiration Date or sooner termination of the option term under Paragraph 5 or 6. 

        5.    Cessation of Service.    The option term specified in Paragraph 2 shall terminate (and this option shall
cease to be outstanding) prior to the Expiration Date should any of the following provisions become applicable: 

        (a)  Should
Optionee cease to remain in Service for any reason (other than death, Permanent Disability or Misconduct) while this option is outstanding, then Optionee shall
have a period of three (3) months (commencing with the date of such cessation of Service) during which to exercise this option, but in no event shall this option be exercisable at any time
after the Expiration Date. 

        (b)  Should
Optionee die while this option is outstanding, then the personal representative of Optionee's estate or the person or persons to whom the option is transferred
pursuant to Optionee's will or in accordance with the laws of descent and distribution shall have the right to exercise this option. Such right shall lapse, and this option shall cease to be
outstanding, upon the earlier of (i) the expiration of the twelve (12)-month period measured from the date of Optionee's death or (ii) the Expiration Date. 

        (c)  Should
Optionee cease Service by reason of Permanent Disability while this option is outstanding, then Optionee shall have a period of twelve (12) months
(commencing with the 

1

 

date of such cessation of Service) during which to exercise this option. In no event shall this option be exercisable at any time after the Expiration Date. 

        (d)  Should
Optionee's Service be terminated for Misconduct, then this option shall terminate immediately and cease to remain outstanding. 

        (e)  During
the applicable post-Service exercise period, this option may not be exercised in the aggregate for more than the number of vested Option Shares for
which the option is exercisable at the time of Optionee's cessation of Service. Upon the expiration of such exercise period or (if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding for any vested Option Shares for which the option has not been exercised. However, this option shall, immediately upon Optionee's cessation of Service for any reason, terminate
and cease to be outstanding with respect to any Option Shares in which Optionee is not otherwise at that time vested or for which this option is not otherwise at that time exercisable. 

        6.    Special Acceleration of Option.    

        (a)  This
option, to the extent outstanding at the time of a Corporate Transaction but not otherwise fully exercisable, shall automatically accelerate so that this option
shall, immediately prior to the effective date of the Corporate Transaction, become exercisable for all of the Option Shares at the time subject to this option and may be exercised for any or all of
those Option Shares as fully-vested shares of Common Stock. No such acceleration of this option, however, shall occur if and to the extent: (i) this option is, in connection with the Corporate
Transaction, either to be assumed by the successor corporation (or parent thereof) or to be replaced with a comparable option to purchase shares of the capital stock of the successor corporation (or
parent thereof) or (ii) this option is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing on the Option Shares at the time of the
Corporate Transaction (the excess of the Fair Market Value of those Option Shares over the aggregate Exercise Price payable for such shares) and provides for subsequent pay-out in
accordance with the option exercise schedule set forth in the Grant Notice. The determination of option comparability under clause (i) shall be made by the Plan Administrator, and such
determination shall be final, binding and conclusive. 

        (b)  Immediately
following the Corporate Transaction, this option, to the extent not previously exercised, shall terminate and cease to be outstanding or exercisable, except
to the extent assumed by the successor corporation (or parent thereof) in connection with such Corporate Transaction. 

        (c)  If
this option is assumed in connection with a Corporate Transaction, then this option shall be appropriately adjusted, immediately after such Corporate Transaction, to
apply to the number and class of securities which would have been issuable to Optionee in consummation of such Corporate Transaction had the option been exercised immediately prior to such Corporate
Transaction, and
appropriate adjustments shall also be made to the Exercise Price, provided the aggregate Exercise Price shall remain the same. 

        (d)  This
Agreement shall not in any way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to
merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 

        7.    Adjustment in Option Shares.    Should any change be made to the Common Stock by reason of any stock split,
stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the outstanding Common Stock as a class without the Corporation's receipt of consideration,
appropriate adjustments shall be made to (i) the total 

2

 

number and/or class of securities subject to this option and (ii) the Exercise Price in order to reflect such change and thereby preclude a dilution or enlargement of benefits hereunder. 

        8.    Stockholder Rights.    The holder of this option shall not have any stockholder rights with respect to the
Option Shares until such person shall have exercised the option, paid the Exercise Price and become a holder of record of the purchased shares. 

        9.    Manner of Exercising Option.    

        (a)  In
order to exercise this option with respect to all or any part of the Option Shares for which this option is at the time exercisable, Optionee (or any other person or
persons exercising the option) must take the following actions: 

        (i)    Execute
and deliver to the Corporation a Notice of Exercise for the Option Shares for which the option is exercised. 

        (ii)  Pay
the aggregate Exercise Price for the purchased shares in one or more of the following forms: 

        (A)  cash
or check made payable to the Corporation; 

        (B)  shares
of Common Stock held by Optionee (or any other person or persons exercising the option) for the requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market Value on the Exercise Date; or 

        (C)  to
the extent this option is exercised for vested Option Shares, through a special sale and remittance procedure pursuant to which Optionee (or any other person or
persons exercising the option) shall concurrently provide irrevocable written instructions (I) to a Corporation-designated brokerage firm to effect the immediate sale of the purchased shares
and remit to the Corporation, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate Exercise Price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to be withheld by the Corporation by reason of such exercise and (II) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete the sale transaction. Except to the extent the sale and remittance procedure is utilized in connection with the option exercise,
payment of the Exercise Price must accompany the Notice of Exercise delivered to the Corporation in connection with the option exercise. 

        (iii)  Furnish
to the Corporation appropriate documentation that the person or persons exercising the option (if other than Optionee) have the right to exercise this option. 

        (iv)  Make
appropriate arrangements with the Corporation (or Parent or Subsidiary employing or retaining Optionee) for the satisfaction of all Federal, state and local income
and employment tax withholding requirements applicable to the option exercise. 

        (b)  As
soon as practical after the Exercise Date, the Corporation shall issue to or on behalf of Optionee (or any other person or persons exercising this option) a
certificate for the purchased Option Shares, with the appropriate legends affixed thereto. 

        (c)  In
no event may this option be exercised for any fractional shares. 

        10.    Compliance with Laws and Regulations.    

        (a)  The
exercise of this option and the issuance of the Option Shares upon such exercise shall be subject to compliance by the Corporation and Optionee with all applicable 

3

 

requirements of law relating thereto and with all applicable regulations of any stock exchange (or the Nasdaq National Market, if applicable) on which the Common Stock may be listed for trading at
the time of such exercise and issuance. 

        (b)  The
inability of the Corporation to obtain approval from any regulatory body having authority deemed by the Corporation to be necessary to the lawful issuance and sale
of any Common Stock pursuant to this option shall relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained. The Corporation, however, shall use its best efforts to obtain all such approvals. 

        11.    Successors and Assigns.    Except to the extent otherwise provided in Paragraphs 3 and 6, the provisions of
this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and Optionee, Optionee's assigns and the legal representatives, heirs and legatees of
Optionee's estate. 

        12.    Notices.    Any notice required to be given or delivered to the Corporation under the terms of this Agreement
shall be in writing and addressed to the Corporation at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the
address indicated below Optionee's signature line on the Grant Notice. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly
addressed to the party to be notified. 

        13.    Construction.    This Agreement and the option evidenced hereby are made and granted pursuant to the Plan and
are in all respects limited by and subject to the terms of the Plan. All decisions of the Plan Administrator with respect to any question or issue arising under the Plan or this Agreement shall be
conclusive and binding on all persons having an interest in this option. 

        14.    Governing Law.    The interpretation, performance and enforcement of this Agreement shall be governed by the
laws of the State of California without resort to that State's conflict-of-laws rules. 

        15.    Excess Shares.    If the Option Shares covered by this Agreement exceed, as of the Grant Date, the number of
shares of Common Stock which may without stockholder approval be issued under the Plan, then this option shall be void with respect to those excess shares, unless stockholder approval of an amendment
sufficiently increasing the number of shares of Common Stock issuable under the Plan is obtained in accordance with the provisions of the Plan. 

        16.    Additional Terms Applicable to an Incentive Option.    In the event this option is designated an Incentive
Option in the Grant Notice, the following terms and conditions shall also apply to the grant: 

        (a)  This
option shall cease to qualify for favorable tax treatment as an Incentive Option if (and to the extent) this option is exercised for one or more Option Shares:
(A) more than three (3) months after the date Optionee ceases to be an Employee for any reason other than death or Permanent Disability or (B) more than twelve (12) months
after the date Optionee ceases to be an Employee by reason of Permanent Disability. 

        (b)  No
installment under this option shall qualify for favorable tax treatment as an Incentive Option if (and to the extent) the aggregate Fair Market Value (determined at
the Grant Date) of the Common Stock for which such installment first becomes exercisable hereunder would, when added to the aggregate value (determined as of the respective date or dates of grant) of
the Common Stock or other securities for which this option or any other Incentive Options granted to Optionee prior to the Grant Date (whether under the Plan or any other option plan of the
Corporation or any Parent or Subsidiary) first become exercisable during the same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the 

4

 

aggregate. Should such One Hundred Thousand Dollar ($100,000) limitation be exceeded in any calendar year, this option shall nevertheless become exercisable for the excess shares in such calendar
year as a Non-Statutory Option. 

        (c)  Should
the exercisability of this option be accelerated upon a Corporate Transaction, then this option shall qualify for favorable tax treatment as an Incentive Option
only to the extent the aggregate Fair Market Value (determined at the Grant Date) of the Common Stock for which this option first becomes exercisable in the calendar year in which the Corporate
Transaction occurs does not, when added to the aggregate value (determined as of the respective date or dates of grant) of the Common Stock or other securities for which this option or one or more
other Incentive Options granted to Optionee prior to the Grant Date (whether under the Plan or any other option plan of the Corporation or any Parent or Subsidiary) first become exercisable during the
same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should the applicable One Hundred Thousand Dollar ($100,000) limitation be exceeded in the calendar year of such
Corporate Transaction, the option may nevertheless be exercised for the excess shares in such calendar year as a Non-Statutory Option. 

        (d)  Should
Optionee hold, in addition to this option, one or more other options to purchase Common Stock which become exercisable for the first time in the same calendar
year as this option, then the foregoing limitations on the exercisability of such options as Incentive Options shall be applied on the basis of the order in which such options are granted. 

        17.    Leave of Absence.    The following provisions shall apply upon the Optionee's commencement of an authorized
leave of absence: 

        (a)  The
exercise schedule in effect under the Grant Notice shall be frozen as of the first day of the authorized leave, and the option shall not become exercisable for any
additional installments of the Option Shares during the period Optionee remains on such leave. 

        (b)  Should
Optionee resume active Employee status within sixty (60) days after the start date of the authorized leave, Optionee shall, for purposes of the exercise
schedule set forth in the Grant Notice, receive Service credit for the entire period of such leave. If Optionee does not resume active Employee status within such sixty (60)-day period,
then no Service credit shall be given for the period of the leave. 

        (c)  If
the option is designated as an Incentive Stock Option in the Grant Notice, then the following additional provision shall apply: 

If
the leave of absence continues for more than ninety (90) days, then the option shall automatically convert to a Non-Statutory Option under the federal tax laws on the day three
(3) months and one (1) day following the ninety-first (91st) day of such leave, unless the Optionee's reemployment rights are guaranteed by statute or by written agreement. Following any
such conversion of the option, all subsequent exercises of such option, whether effected before or after Optionee's return to active Employee status, shall result in an immediate taxable event, and
the Corporation shall be required to collect from Optionee the federal, state and local income and employment withholding taxes applicable to such exercise. 

        (d)  In
no event shall this option become exercisable for any additional Option Shares or otherwise remain outstanding if Optionee does not resume Employee status prior to
the Expiration Date of the option term. 

5

 
 

EXHIBIT I
  
    NOTICE OF EXERCISE    
  

        I hereby notify Westaff, Inc. (the "Corporation") that I elect to purchase shares of the Corporation's Common Stock (the "Purchased Shares") at the option
exercise price of $2.35 per share (the "Exercise Price") pursuant to an Incentive Stock Option (the "Option") granted to me under the Corporation's 1996 Stock Option/Stock Issuance Plan on
March 1, 2002. 

        Concurrently
with the delivery of this Exercise Notice to the Corporation, I shall hereby pay to the Corporation the Exercise Price for the Purchased Shares in accordance with the
provisions of my agreement with the Corporation (or other documents) evidencing the Option and shall deliver whatever additional documents may be required by such agreement as a condition for
exercise. Alternatively, I may utilize the special broker-dealer sale and remittance procedure specified in my agreement to effect payment of the Exercise Price for any Purchased Shares in which I am
at the time vested. 

	 
	 	 
	 	 

	                                        
        , 200    

Date	 	 	 	 
	 	 	
 Dwight S. Pedersen
	

 	
 	

Address:	
 	

8041 Golden Eagle Way

Pleasanton, CA 94588

	 
	 	 

	Print name in exact manner it is to appear on the stock certificate:	 	

	

Address to which certificate is to be sent, if different from address above:	
 	

	

 	
 	

 
	 	 	

	

Social Security Number:	
 	

	

Employee Number:	
 	

  

 
 

APPENDIX    
  

        The following definitions shall be in effect under the Agreement: 

        A.    Agreement shall mean this Stock Option Agreement. 

        B.    Board shall mean the Corporation's Board of Directors. 

        C.    Code shall mean the Internal Revenue Code of 1986, as amended. 

        D.    Common Stock shall mean the Corporation's common stock, with par value of $0.01 per share. 

        E.    Corporate Transaction shall mean either of the following stockholder approved transactions to which the Corporation is a
party: 

        (a)  a
merger or consolidation in which securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation's outstanding securities are
transferred to a person or persons different from the persons holding those securities immediately prior to such transaction, or 

        (b)  the
sale, transfer or other disposition of all or substantially all of the Corporation's assets in complete liquidation or dissolution of the Corporation. 

        F.    Corporation shall mean Westaff, Inc., a Delaware corporation. 

        G.    Employee shall mean an individual who is in the employ of the Corporation (or any Parent or Subsidiary), subject to the
control and direction of the employer entity as to both the work to be performed and the manner and method of performance. 

        H.    Exercise Date shall mean the date on which the option shall have been exercised in accordance with Paragraph 9 of
the Agreement. 

        I.    Exercise Price shall mean the exercise price per share as specified in the Grant Notice. 

        J.    Expiration Date shall mean the date on which the option expires as specified in the Grant Notice. 

        K.    Fair Market Value per share of Common Stock on any relevant date shall be determined in accordance with the following
provisions: 

        (a)  If
the Common Stock is at the time traded on the Nasdaq National Market, then the Fair Market Value shall be the closing selling price per share of Common Stock on the
date in question, as the price is reported by the National Association of Securities Dealers on the Nasdaq National Market or any successor system. If there is no closing selling price for the Common
Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such quotation exists. 

        (b)  If
the Common Stock is at the time listed on any Stock Exchange, then the Fair Market Value shall be the closing selling price per share of Common Stock on the date in
question on the Stock Exchange determined by the Plan Administrator to be the primary market for the Common Stock, as such price is officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common Stock on the date in question, then the Fair Market Value shall be the closing selling price on the last preceding date for which such
quotation exists. 

        L.    Grant Date shall mean the date of grant of the option as specified in the Grant Notice. 

        M.  Grant Notice shall mean the Notice of Grant of Stock Option accompanying the Agreement, pursuant to which Optionee has
been' informed of the basic terms of the option evidenced hereby. 

A-1

 

        N.    Incentive Option shall mean an option which satisfies the requirements of Code Section 422. 

        O.    Misconduct shall mean the commission of any act of fraud, embezzlement or dishonesty by Optionee, any unauthorized use or
disclosure by Optionee of confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), or any other intentional misconduct by Optionee adversely affecting the business
or affairs of the Corporation (or any Parent or Subsidiary) in a material manner. The foregoing definition shall not be deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or discharge of Optionee or any other individual in the Service of the Corporation (or any Parent or Subsidiary). 

        P.    Non-Statutory Option shall mean an option not intended to satisfy the requirements of Code Section 422. 

        Q.    Notice of Exercise shall mean the notice of exercise in the form attached hereto as Exhibit I. 

        R.    Option Shares shall mean the number of shares of Common Stock subject to the option as specified in the Grant Notice. 

        S.    Optionee shall mean the person to whom the option is granted as specified in the Grant Notice. 

        T.    Parent shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the
Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other corporations in such chain. 

        U.    Permanent Disability shall mean the inability of Optionee to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which is expected to result in death or has lasted or can be expected to last for a continuous period of twelve (12) months or more. 

        V.    Plan shall mean the Corporation's 1996 Stock Option/Stock Issuance Plan, as amended and restated from time to time. 

        W.    Plan Administrator shall mean either the Board or a committee of Board members, to the extent the committee is at the time
responsible for the administration of the Plan. 

        X.    Service shall mean the Optionee's performance of services for the Corporation (or any Parent or Subsidiary) in the
capacity of an Employee, a non-employee member of the board of directors or a consultant or independent advisor. 

        Y.    Stock Exchange shall mean the American Stock Exchange or the New York Stock Exchange. 

        Z.    Subsidiary shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations in such chain. 

A-2

QuickLinks

WESTAFF, INC. NOTICE OF GRANT OF STOCK OPTION

EXHIBIT A STOCK OPTION AGREEMENT

WESTAFF, INC. STOCK OPTION AGREEMENT

EXHIBIT I NOTICE OF EXERCISE

APPENDIX

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00034-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00034-of-00352.parquet"}]]