Document:

EXHIBIT 10.1

AGREEMENT

This
AGREEMENT, effective as of the 29th day of June, 2007 (the “Effective Date”) by
and between Vyyo Inc., a Delaware corporation with an address at 6625 The
Corners Parkway, Suite 100, Norcross, Georgia 30092 (“Inc”), and Vyyo Ltd., an
Israeli company with an address at 4 Hanegev Street Kiryat Sde Hateufa P.O.Box
197, Ben-Gurion Airport, 70100 Israel (“Ltd”, and together with Inc, the “Parties”).

RECITALS

WHEREAS,
Inc owns 100% of the issued and outstanding shares of Ltd;

WHEREAS,
Inc has made loans (the “Loans”) to Ltd in an aggregate principal amount of $77,139,471
(the “Loan Amount”);

WHEREAS,
a total of $17,062,294 of interest payable from Ltd to Inc has accrued on the
Loans from the dates on which the Loans were made through the Effective Date
(the “Accrued Interest”), and none of the Accrued Interest has been paid;

WHEREAS,
Inc and Ltd wish to convert the Loan Amount (as such term is defined below) into
a convertible capital note of Ltd.

NOW,
THEREFORE, for good and valuable consideration, the Parties hereto agree as
follows:

1.                         Inc hereby forgives all of the Accrued
Interest owed to it by Ltd.

2.                         The Loans are hereby replaced, and the Loan
Amount is hereby converted into a capital note in the form of Exhibit A hereto
(the “Conversion”).  The Conversion is
effective as of the Effective Date.

3.                         This Agreement shall be governed by the laws
of the State of Israel without reference to the conflict of laws provisions
thereof.

IN WITNESS WHEREOF, the
Parties have executed this Agreement as of the date first above written.

	
  VYYO INC.

  	
   

  	
  VYYO LTD.

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ WAYNE H. DAVIS

  	
   

  	
  By:

  	
  /s/ JACOB KRUK

  
	
   

  	
   

  	
   

  
	
  Name: Wayne H. Davis

  	
   

  	
  Name: Jacob Kruk

  
	
   

  	
   

  	
   

  
	
  Title: Chief Executive Officer

  	
   

  	
  Title: General Manager

  
					

 1
 

Exhibit A

Convertible
Capital Note

This Convertible Capital
Note (“Capital Note”) in
the amount of US$77,139,471 (the “Principal”)
is entered into effect as of January 1st, 2007, by and between Vyyo Inc,  a corporation duly incorporated
under the laws of the State of Delaware (the “Holder”), and Vyyo Ltd., a company registered
and existing under the laws of the State of Israel (“Company”).

1.                                       Interest
Rate; Payment

(a)                                  The
outstanding balance of the Principal shall bear no interest.

(b)                                 The
Company will repay the Principal at such time as the Company and the Holder
shall jointly determine; provided that no such repayment shall be made until
the second anniversary of the date of this Capital Note. The Holder shall have
no right to demand the repayment of the Principal, or any balance thereof,
whether under Israeli or other applicable law. 
The Company shall not be entitled to repay or redeem the Capital Note
prior to the liquidation or dissolution of the Company, unless agreed otherwise
with the Holder.

2.                                       Conversion

(a)                                  This
Capital Note may be converted into ordinary shares of the Company, nominal
value NIS 1.00 per share (“Ordinary
Shares”), which conversion may be made, at the option of Holder,
at any time and from time to time, by a written notice to the Company. The
number of Ordinary Shares to be issued to the Holder shall be determined in
accordance with the Company’s fair market value at the date of such conversion,
as determined by the Company’s Board of Directors at such time.  Notwithstanding any other provision herein to
the contrary, the Company may satisfy its repayment obligation hereunder by
converting the Principal of this Capital Note into Ordinary Shares, which
conversion may be made, at the option of Company, at any time, by written
notice to the Holder. The number of Ordinary Shares to be issued to the Holder
upon any conversion shall be calculated by dividing (i) the amount of the
Principal being converted by (ii) US$500,000.

(b)                                 Upon
conversion of this Capital Note into Ordinary Shares in accordance herewith,
such Ordinary Shares shall confer upon the Holder all rights and obligations
conferred by all other issued and outstanding Ordinary Shares of the Company
upon the holders thereof for all intents and purposes, including, without
limitation, the right to receive notices of, and to attend, all annual or
special meeting of the shareholders of the Company in accordance with the 

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Israeli Companies Law 1999; the right to one vote per
each share held at all such annual or special meetings or shareholders resolutions
for all purposes; the right to participate and share equally, on a per share
basis, in distribution of dividends; and to participate and share equally, on a
per share basis, in distribution of surplus assets and funds in the Company,
including upon any liquidation of dissolution of the Company.

(c)                                  The
Company covenants that it will, at all relevant times, reserve and keep
available the necessary amount of its authorized Ordinary Shares solely for the
purpose of issue or delivery upon conversion of this Capital Note as hereof
provided.

3.                                       Subordination

The Company covenants and agrees, that the repayment
of the Principal is hereby expressly made subordinate and junior in right to
all other indebtedness of the Company, existing on the date hereof or in the
future. Notwithstanding the foregoing, nothing in this section shall prevent
the conversion of this Capital Note in accordance with the terms hereof.

4.                                       Rights
as a Shareholder

In its capacity as Holder of this Capital Note and
prior to any conversion, Holder shall not be entitled to any rights of a
shareholder of the Company, including, without limitation, the right to vote or
to receive dividends or other distributions.

5.                                       Accounting
and Tax Treatment

The Company and the Holder acknowledge that they will
treat this Capital Note as equity for all U.S. Federal income tax purposes and
as an equity investment for U.S. accounting purposes.

6.                                       Successors
and Assigns

This Capital Note shall inure to the benefit of and be
binding upon the successors and permitted assigns of the parties hereto. The
Holder and the Company may not assign any of their rights under this Capital
Note without the prior written consent of the other, as the case may be.

7.                                       Liquidation
Event

Subject to section 3 above, in  the event (i) of any dissolution, liquidation
or winding-up of the Company; (ii) any bankruptcy, insolvency or reorganization
proceeding under any bankruptcy or insolvency or similar law, whether voluntary
or involuntary, is properly commenced by or against the Company; or (iii) a
receiver or liquidator has been appointed to all or substantially all of the 

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Company’s assets (each, a “Liquidation”), the Holder shall
receive the greater of (i) the Principal or (ii) the amount that the Holder
would have received if this Capital Note would have been converted into
Ordinary Shares immediately prior to such Liquidation.

8.                                       Amendments
and Waiver

(a)                                  No
failure or delay on the part of the Company or the Holder in exercising any
right, power or remedy hereunder shall operate as a waiver thereof. Nor shall
any single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy.

(b)                                 Any
amendment, supplement or modification of or to any provision of this Capital
Note, any waiver of any provision of this Capital Note and any consent to any
departure by the Company from the terms of any provision of this Capital Note,
shall be effective (i) only if it is made or given in writing and signed by the
Company and the Holder, and (ii) only in the specific instance and for the
specific purpose for which made or given.

9.                                       Headings

The headings in this Capital Note are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.

10.                                 Governing
Law

This Capital Note shall be governed by and construed
in accordance with the laws of the State of Israel, without regard to the
conflicts of law principles thereof.

11.                                 Consent
to Jurisdiction

The parties hereby irrevocably consent to the
nonexclusive jurisdiction of the court of the Tel-Aviv-Jaffa District, Israel,
in connection with any action or proceeding arising out of or relating to this
Capital Note or any document or instrument delivered pursuant to this Capital
Note.

12.                                 Severability

In the event that any one of the provisions of this
Capital Note is for any reason held to be invalid or unenforceable, the
remaining provisions of this Capital Note will be unimpaired, and the invalid
or unenforceable provision will be replaced by a mutually acceptable provision,
which being valid and enforceable, comes closest to the intention of the
parties underlying the invalid or unenforceable provision.

13.                                 Entire
Agreement

This Capital Note is the sole and final expression of
the parties’ agreement and intended to be a complete and exclusive statement of
the agreement and understanding of the parties hereto in respect of the subject
matter hereof. There 

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are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein.

14.                                 Further
Assurances

The Company shall execute such documents and perform
such further acts (including, without limitation, obtaining any consents,
exemptions, authorizations or other actions by, or giving any notices to, or
making any filings with, any governmental authority or any other person) as may
be reasonably required or desirable to carry out or to perform the provisions
of this Capital Note.

IN WITNESS WHEREOF, the
parties hereto have executed this Capital Note.

	
  Vyyo Inc.

  	
   

  	
  Vyyo Ltd.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ WAYNE H. DAVIS

  	
   

  	
  By:

  	
  /s/ JACOB KRUK

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Wayne H. Davis

  	
   

  	
  Jacob Kruk

  
	
   

  	
   

  	
   

  
	
  Chief Executive Officer

  	
   

  	
  General Manager

  (Name & Title of Signatory)

  
	
   

  	
   

  	
   

  
	
  Date: June 29, 2007

  	
   

  	
  Date: June 29, 2007

  

 

 

 5EXHIBIT 10.1

EXECUTIVE
EMPLOYMENT AGREEMENT

This Executive Employment
Agreement (the “Agreement”), dated June 1st, 2007 (the “Effective Date”), is
between WESTAFF SUPPORT, INC., WESTAFF
(USA), INC., and
WESTAFF, INC. (collectively, the “Company”), and MICHAEL T.
WILLIS (“Executive”).

I.                                         POSITION AND RESPONSIBILITIES

A.            Term.  The Company shall employ
Executive from the Effective Date until the three-year anniversary of the
Effective Date, unless Executive’s employment is terminated earlier in
accordance with Sections III or IV below (the “Term”).  On the three-year anniversary of the
Effective Date, the Term shall automatically be extended for one (1) additional
year, unless the Company provides written notice of non-renewal to Executive at
least ninety (90) days prior to such renewal date.

B.            Position.  Executive is employed by the Company to
render services to the Company in the positions of President and Chief
Executive Officer of Westaff, Inc. (“WSTF”). 
Executive shall perform such duties and responsibilities as are normally
related to such positions in accordance with the standards of the industry and
any additional duties now or hereafter assigned to Executive by the Board of
Directors of Westaff, Inc. (the “Board”). 
Executive shall abide by the rules, regulations, and practices as
adopted or modified from time to time by the Board in its sole discretion.

C.            Other Activities.  Except upon the prior written consent of the
Company, 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.

II.                                     COMPENSATION AND BENEFITS

A.            Base Salary.  In consideration of the services to be
rendered under this Agreement, the Company shall pay Executive a salary at the
rate of Five Hundred and Fifty Thousand Dollars ($550,000) per year (“Base
Salary”).  The Base Salary shall be paid
in accordance with the Company’s regularly established payroll practice.  Executive’s first salary payment following
the Effective Date shall include Base Salary for the period from May 1,
2007 through the Effective Date, less any consulting fees received from the
Company during that period.

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B.            Performance-Based Incentive Bonus.  Executive shall be eligible for a
performance-based incentive bonus for each fiscal year of his employment with
the Company.

1.             Fiscal Year 2007 Bonus:  In lieu of a performance-based bonus for
fiscal year 2007, Executive shall receive a guaranteed bonus in the amount
of One Hundred and Fifty Thousand Dollars ($150,000), which shall be payable on
November 1, 2007.

2.             Fiscal Year 2008 Bonus:  For fiscal year 2008 (“FY2008”),
Executive shall be eligible to earn a bonus based on achievement of
quantitative goals described below and qualitative goals established by the
Board.  The quantitative portion of this
bonus (“Target Bonus”) shall equal up to seventy-five percent (75%) of
Executive’s Base Salary and shall be based on the Company’s Earnings Before
Taxes, Interest, Depreciation and Amortization for FY2008, as calculated and
reported by the Company in accordance with its accounting policies currently in
effect (“EBITDA”):

	
  EBITDA for FY2008

  	
   

  	
  Percentage of
  Quantitative Component Earned

  
	
  <$12M

  	
   

  	
  None

  
	
  $12M-$13.99M

  	
   

  	
  25% of Quantitative Component

  
	
  $14M-$15.99M

  	
   

  	
  50% of Quantitative Component

  
	
  $16M-$16.99M

  	
   

  	
  75% of Quantitative Component

  
	
  >$17M

  	
   

  	
  100% of Quantitative Component

  

 

Executive shall be eligible for additional bonus compensation, equivalent
to up to twenty-five percent (25%) of his Base Salary, based on achievement of
qualitative objectives established by the Board in its discretion.  In no event shall Executive’s aggregate bonus
compensation for FY2008 exceed 100% of Executive’s Base Salary.  Executive’s FY2008 bonus will be paid in
cash, provided that the Board may elect to pay up to thirty percent (30%) of
Executive’s FY2008 bonus in fully vested and unrestricted WSTF stock (priced at
the fair market value of the stock as of the date of the stock bonus).  Executive’s FY2008 bonus will be paid on or
prior to March 15, 2009.

3.             Fiscal Year 2009 Bonus:  For fiscal year 2009, Executive shall be
eligible to earn a bonus based on achievement of goals to be established by the
Board at the end of FY2008.  Such goals
shall be based on the expectation that the Company’s EBITDA will exceed Twenty
Million Dollars ($20,000,000) by the three-year anniversary of the Effective
Date, excluding EBITDA related to acquisitions or other transactions.  Executive’s FY2009 bonus program will be
established within 90 days of the beginning of FY2009 after consultation with
Executive, and will be similar in nature and effect to the FY2008 bonus
program, but containing targets, expectations and goals established by the
Board for FY2009.  Executive’s FY2009
bonus will be paid in cash, provided that the Board may elect to pay up to
thirty percent (30%) of Executive’s FY2009 bonus in fully vested and
unrestricted WSTF stock (priced at the fair market value of the stock as of the
date of the stock bonus.)  Executive’s
FY2009 bonus will be paid on or prior to March 15, 2010.

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4.             Bonuses for Subsequent Fiscal
Years:  Executive’s
bonus program for any subsequent fiscal year will be established within 90 days
of the beginning of each fiscal year after consultation with Executive, and
will be similar in nature and effect to the FY2009 bonus program, but
containing targets, expectations and goals established by the Board for such
fiscal year.

C.            Stock Options.  The Company shall recommend to the Board of
Directors that Executive be provided with an option to purchase One Hundred
Thousand (100,000) shares of the Common Stock of Westaff, Inc.  This recommendation will be considered for approval
at the Company’s next Board of Directors’ meeting.  Any approved stock options will be priced at
their fair market value as of the date of the grant, in accordance with the
terms of the Stock Option Plan. 
Executive’s entitlement to any stock options that may be approved is
conditioned upon Executive’s signing of the Stock Option Agreement and is
subject to its terms and the terms of the Stock Option Plan under which the
options are granted, including vesting requirements.

D.            Living Allowance and Travel
Reimbursements.  For a
period of twelve (12) months following the Effective Date, the Company shall
pay Executive an allowance of Six Thousand Dollars ($6,000) per month for
housing, automobile, and other personal expenses (“Living Allowance”).  During this period, the Company also shall reimburse
Executive for his airfare between his home in Houston and the Company’s
headquarters in San Francisco, up to one round trip ticket per week.  Executive shall be
allowed to travel one grade above economy/coach class.  Whenever possible, Executive will upgrade
with travel coupons, and the Company shall pay the cost of such coupons.  The Company also shall reimburse Executive’s
reasonable expenses of transportation to and from the airport.  Following this twelve (12) month period, the
Company shall determine any further personal allowances or travel
reimbursements in its discretion.

E.             Financial Planning Reimbursement.  During the Term, the Company shall reimburse
Executive for his expenditures on personal financial planning services, up to a
maximum reimbursement of Ten Thousand Dollars ($10,000) per year.

F.             Benefits.  Executive shall be eligible to participate in
the benefits made generally available by the Company to similarly-situated
executives, in accordance with the benefit plans established by the Company,
and as may be amended from time to time in the Company’s sole discretion.

G.            Reimbursement of Business Expenses.  The Company shall reimburse Executive for
reasonable business expenses incurred in the performance of Executive’s duties
hereunder in accordance with the Company’s expense reimbursement
guidelines.  Executive shall be allowed
to travel one grade above economy/coach class, for business-related trips.  Whenever possible, Executive will upgrade
with travel coupons, and the Company shall pay the cost of such coupons.  The Company also shall reimburse Executive’s
reasonable expenses of transportation to and from the airport.  For overseas travel, Executive may travel at
an airfare class no higher than business class or its equivalent.

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

I.              Indemnification.  The Company and 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 B (the “Indemnification Agreement”).

III.                                 AT-WILL EMPLOYMENT; TERMINATION BY COMPANY

A.            At-Will Termination by Company.  Executive’s employment with the Company shall
be “at-will” at all times.  Either party
may terminate Executive’s employment with the Company at any time, without any
advance notice, for any reason or no reason at all, notwithstanding anything to
the contrary contained in or arising from any statements, policies or practices
of the Company relating to the employment, discipline or termination of its
employees.  Upon and after such
termination, all obligations of the Company under this Agreement shall cease,
except as otherwise provided herein.

B.            Severance.  Executive shall be eligible for severance
benefits in the event that Executive’s employment is terminated by the Company
without Cause or by Executive for Good Reason during the Term.  If such termination occurs within twelve (12)
months following the Effective Date, Executive will be eligible to receive
severance pay equal to the lesser of (a) twelve (12) months of Executive’s
Base Salary or (b) Executive’s Base Salary for the remainder of the
Term.  If such termination occurs more
than twelve (12) months following the Effective Date, Executive will be
eligible to receive severance pay equal to the lesser of (a) eighteen (18)
months of Executive’s Base Salary or (b) Executive’s Base Salary for the
remainder of the Term.  Such severance pay (“Severance”)
shall be payable in the form of salary continuation, and shall not be reduced
by any remuneration paid to Executive because of Executive’s employment or
self-employment during the severance period. 
The timing of such Severance payments may be subject to delay in
accordance with the provisions of Section XI below.  Additionally, if Executive elects to continue
his medical coverage under COBRA, the Company shall pay the premiums for
Executive’s COBRA coverage until the earlier of (a) the date Executive ceases
to receive Severance payments or (b) the date Executive becomes eligible for
coverage under another employer’s health plan. 
Executive’s eligibility for the foregoing severance benefits is
conditioned on (a) Executive having first signed a general release of claims in
a form provided by the Company, and (b) Executive’s agreement not to compete
with the Company, or its successors or assigns, during the severance
period.  If Executive engages in any
business activity competitive with the Company or its successors or assigns
during the severance period, all severance benefits immediately shall cease.  Executive shall not
be entitled to any severance benefits if Executive’s employment is terminated
(a) For Cause, By Death or By Disability (as defined in Section IV below); (b)
by Executive without Good Reason (as defined in Section IV below); or
(c) by expiration or non-renewal of the Term.

 4
 

C.            “Change of Control.”  In the event Executive’s
employment is terminated by the Company without Cause or by Executive for Good
Reason within twelve (12) months following a Change of Control, (1) any Company
stock options awarded to Executive which vest solely upon length of service
would become immediately vested and exercisable and (2) the Company would make
a lump-sum cash payment to Executive equal to fifty percent (50%) of his
then-current Base Salary, pro-rated based on the number of calendar months
Executive is employed during the fiscal year in which such termination occurs.  For purposes of this Agreement, “Change of
Control” shall mean a change in ownership or control of the Company effected
through a merger, consolidation or acquisition by any person or related group
of persons (other than an acquisition by the Company or by a Company-sponsored
employee benefit plan or by a person or persons that directly or indirectly
controls, is controlled by, or is under common control with, the Company) of
beneficial ownership (within the meaning of Rule 13d-3 of the Securities
Exchange Act of 1934) of securities possessing more than fifty percent of the
total combined voting power of the outstanding securities of the Company.  Notwithstanding the foregoing, a “Change in
Control” shall not include (i) any changes prior to the date of this Agreement;
or (iii) any changes pursuant to actions taken by DelStaff, LLC.  Executive shall not be entitled to any
accelerated vesting under this Section III(C) if Executive’s employment is
terminated (a) For Cause, By Death or By Disability (as defined in Section IV
below); (b) by Executive without Good Reason (as defined in Section IV below);
or (c) by expiration or non-renewal of the Term.

IV.                                OTHER TERMINATIONS

A.            Termination for Cause.  For purposes of this Agreement, “For Cause”
shall mean:  (i) Executive commits a crime
involving dishonesty, breach of trust, or physical harm to any person; (ii)
Executive willfully engages in conduct that is in bad faith and materially
injurious to the Company, including but not limited to, misappropriation of
trade secrets, fraud or embezzlement; (iii) Executive commits a material breach
of this Agreement, which breach is not cured within twenty days after written
notice to Executive from the Company; (iv) Executive willfully refuses to
implement or follow a lawful policy or directive of the Company, which breach
is not cured within twenty days after written notice to Executive from the
Company; or (v) Executive engages in misfeasance or malfeasance demonstrated by
a pattern of failure to perform job duties diligently and professionally.  The Company may terminate Executive’s
employment For Cause at any time, without any advance notice.  The Company shall pay to Executive all
compensation to which Executive is entitled up through the date of termination,
subject to any other rights or remedies of the Company under law; and
thereafter all obligations of the Company under this Agreement shall cease.

B.            By Death.  Executive’s employment shall terminate
automatically upon Executive’s death. 
The Company shall pay to Executive’s beneficiaries or estate, as
appropriate, any compensation then due and owing.  Thereafter all obligations of the Company
under this Agreement shall cease. 
Nothing in this Section shall affect any entitlement of Executive’s
heirs or devisees to the benefits of any life insurance plan or other
applicable benefits.

 5
 

C.            By Disability.  If Executive becomes eligible for the Company’s
long term disability benefits or if, in the sole opinion of the Company,
Executive is unable to carry out the responsibilities and functions of the
position held by Executive by reason of any physical or mental impairment for
more than ninety consecutive days or more than one hundred and twenty days in
any twelve-month period, then, to the extent permitted by law, the Company may
terminate Executive’s employment.  The
Company shall pay to Executive all compensation to which Executive is entitled
up through the date of termination, and thereafter all obligations of the
Company under this Agreement shall cease. 
Nothing in this Section shall affect Executive’s rights under any
disability plan in which Executive is a participant.

D.            Termination for Good Reason.  Executive’s termination shall be for “Good
Reason” if (i) Executive provides written notice to the Company of the event(s)
constituting Good Reason for termination, within ninety (90) days following the
occurrence of such event(s); (ii) Executive provides the Company with a period
of at least thirty (30) days to cure the Good Reason and the Company fails to
cure the Good Reason within that period, and (iii) Executive resigns
within forty-five (45) days following the date of the written notice described
in subsection (i).  For purposes of this
Agreement, “Good Reason” shall mean any of the following events if effected by
the Company without the consent of Executive: 
(A) a change in Executive’s position with the Company which materially
reduces Executive’s duties, responsibilities or authority; or (B) a material
reduction in Executive’s Base Salary or bonus eligibility, except for
reductions that are comparable to reductions generally applicable to all
similarly situated senior executives of the Company; or (C) Executive is
removed from the Board (other than for cause, as determined under Delaware law)
or not elected by WSTF’s stockholders to serve on the Board (other than due to
Executive’s resignation from the Board or Executive’s decision not to stand for
reelection to the Board).

V.                                    TERMINATION OBLIGATIONS

A.            Return of Property.  Executive agrees that all property (including
without limitation all equipment, tangible proprietary information, documents,
records, notes, contracts and computer-generated materials) furnished to or
created or prepared by Executive incident to Executive’s employment belongs to
the Company and shall be promptly returned to the Company upon termination of
Executive’s employment.

B.            Resignation and Cooperation.  Upon termination of Executive’s employment,
Executive shall be deemed to have resigned from all offices and directorships
then held with the Company.  Following any
termination of employment, Executive shall cooperate with the Company in the
winding up of pending work on behalf of the Company and the orderly transfer of
work to other employees.  Executive shall
also cooperate with the Company in the defense of any action brought by any
third party against the Company that relates to Executive’s employment by the
Company.

VI.                                INVENTIONS AND CONFIDENTIAL INFORMATION;
PROHIBITION ON THIRD PARTY INFORMATION

A.            Confidentiality Agreement.  Executive agrees to sign and be bound by the
terms of the Company’s Confidentiality, Invention, Design Agreement, which is
attached as Exhibit A (“Confidentiality Agreement”).

 6
 

B.            Non-Solicitation.  Executive acknowledges that because of
Executive’s position in the Company, Executive will have access to material
intellectual property and confidential information.  During the term of Executive’s employment and
for one year thereafter, in addition to Executive’s other obligations hereunder
or under the Confidentiality Agreement, Executive shall not, for Executive or
any third party, directly or indirectly (i) solicit, induce, recruit or
encourage any person employed by the Company to terminate his or her
employment, or (ii) divert or attempt to divert from the Company any business
with any customer, client, member, business partner or supplier about which
Executive obtained confidential information during his employment with the
Company, by using the Company’s trade secrets or by otherwise engaging in
conduct that amounts to unfair competition.

C.            Non-Disclosure of Third Party
Information.  Executive
represents and warrants and covenants that Executive shall not disclose to the
Company, or use, or induce the Company to use, any proprietary information or
trade secrets of others at any time, including but not limited to any
proprietary information or trade secrets of any former employer, if any; and
Executive acknowledges and agrees that any violation of this provision shall be
grounds for Executive’s immediate termination and could subject Executive to
substantial civil liabilities and criminal penalties.  Executive further specifically and expressly
acknowledges that no officer or other employee or representative of the Company
has requested or instructed Executive to disclose or use any such third party
proprietary information or trade secrets.

VII.                            AMENDMENTS; WAIVERS; REMEDIES

This Agreement may not be
amended or waived except by a writing signed by Executive and by a duly
authorized representative of the Company other than Executive.  Failure to exercise any right under this
Agreement shall not constitute a waiver of such right.  Any waiver of any breach of this Agreement
shall not operate as a waiver of any subsequent breaches.  All rights or remedies specified for a party
herein shall be cumulative and in addition to all other rights and remedies of
the party hereunder or under applicable law.

VIII.                        ASSIGNMENT; BINDING EFFECT

A.            Assignment.  The performance of Executive is personal
hereunder, and Executive agrees that Executive shall have no right to assign
and shall not assign or purport to assign any rights or obligations under this
Agreement.  This Agreement may be
assigned or transferred by the Company; and nothing in this Agreement shall
prevent the consolidation, merger or sale of the Company or a sale of any or
all or substantially all of its assets.

B.            Binding Effect.  Subject to the foregoing restriction on
assignment by Executive, this Agreement shall inure to the benefit of and be
binding upon each of the parties; the affiliates, officers, directors, agents,
successors and assigns of the Company; and the heirs, devisees, spouses, legal
representatives and successors of Executive.

 7
 

IX.                                NOTICES

All notices or other
communications required or permitted hereunder shall be made in writing and
shall be deemed to have been duly given if delivered:  (a) by hand; (b) by a nationally recognized
overnight courier service; or (c) by United States first class registered or
certified mail, return receipt requested, to the principal address of the other
party, as set forth below.  The date of
notice shall be deemed to be the earlier of (i) actual receipt of notice by any
permitted means, or (ii) five business days following dispatch by overnight
delivery service or the United States Mail. 
Executive shall be obligated to notify the Company in writing of any
change in Executive’s address.  Notice of
change of address shall be effective only when done in accordance with this
paragraph.

Company’s Notice
Address:

298 North Wiget Lane

Walnut Creek, CA 94598

Attn: Legal Department

Fax: (925) 937-0593

Executive’s Notice
Address:

298 North Wiget Lane

Walnut Creek, CA
94598

X.                                    SEVERABILITY

If any provision of this
Agreement shall be held by a court or arbitrator to be invalid, unenforceable,
or void, such provision shall be enforced to the fullest extent permitted by
law, and the remainder of this Agreement shall remain in full force and
effect.  In the event that the time
period or scope of any provision is declared by a court or arbitrator of
competent jurisdiction to exceed the maximum time period or scope that such
court or arbitrator deems enforceable, then such court or arbitrator shall
reduce the time period or scope to the maximum time period or scope permitted
by law.

XI.                                TAXES

All amounts paid under
this Agreement (including without limitation Base Salary, Living Allowance, or
Severance) shall be paid less all applicable state and federal tax withholdings
and any other withholdings required by any applicable jurisdiction.

The Company shall have
the authority to delay the payment of any amounts under this Agreement to the
extent it deems necessary or appropriate to comply with Section
409A(a)(2)(B)(i) of the Internal Revenue Code (relating to payments made to
certain “specified employees” of certain publicly-traded companies); in such
event, any payment to which Executive would otherwise be entitled during the
six (6) month period following the date of Executive’s termination of
employment will be payable on the first business day following the expiration
of such six (6) month period.

 8
 

XII.                            GOVERNING LAW

This Agreement shall be
governed by and construed in accordance with the laws of the State of
California.

XIII.                        INTERPRETATION

This Agreement shall be
construed as a whole, according to its fair meaning, and not in favor of or
against any party.  Sections and section
headings contained in this Agreement are for reference purposes only, and shall
not affect in any manner the meaning or interpretation of this Agreement.  Whenever the context requires, references to
the singular shall include the plural and the plural the singular.

XIV.                       OBLIGATIONS SURVIVE TERMINATION OF EMPLOYMENT

Executive agrees that any
and all of Executive’s obligations under this agreement, including but not
limited to Exhibits A and B, shall survive the termination of employment and
the termination of this Agreement.

XV.                           COUNTERPARTS

This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original of this Agreement, but all of which together shall constitute one and
the same instrument.

XVI.                       AUTHORITY

Each party represents and
warrants that such party has the right, power and authority to enter into and
execute this Agreement and to perform and discharge all of the obligations
hereunder; and that this Agreement constitutes the valid and legally binding
agreement and obligation of such party and is enforceable in accordance with
its terms.

XVII.                   ENTIRE AGREEMENT

This Agreement is
intended to be the final, complete, and exclusive statement of the terms of 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 Confidentiality Agreement attached as Exhibit
A, the Indemnification 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 Executive and are inconsistent with the terms of
this Agreement, the provisions of this Agreement shall control.  Any subsequent change in Executive’s duties,
position, or compensation will not affect the validity or scope of this
Agreement.

 9
 

XVIII.               EXECUTIVE ACKNOWLEDGEMENT

EXECUTIVE ACKNOWLEDGES
THAT HE HAS HAD THE OPPORTUNITY TO CONSULT LEGAL COUNSEL CONCERNING THIS
AGREEMENT, THAT HE HAS READ AND UNDERSTANDS THE AGREEMENT, THAT HE IS FULLY
AWARE OF ITS LEGAL EFFECT, AND THAT HE HAS ENTERED INTO IT FREELY BASED ON HIS
OWN JUDGMENT AND NOT ON ANY REPRESENTATIONS OR PROMISES OTHER THAN THOSE
CONTAINED IN THIS AGREEMENT.

IN
WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.

	
  WESTAFF, INC.

  	
   

  	
  MICHAEL T. WILLIS

  
	
   

  	
   

  	
   

  
	
  /s/ Jeffrey Elias

  	
   

  	
  /s/ Michael Willis

  
	
  Signature

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
  Sr. VP — Human
  Resources

  	
   

  	
  07-03-07

  
	
  Title

  	
   

  	
  Date

  
	
   

  	
   

  	
   

  
	
  07-03-07

  	
   

  	
   

  
	
  Date

  	
   

  	
   

  

 

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