Document:

QuickLinks
 -- Click here to rapidly navigate through this document

 

 
 

  Exhibit 10.8.37    
    

 
    LOAN AGREEMENT    
    

        This LOAN AGREEMENT (this "Agreement") is entered into as of August 25, 2008,
among Westaff (USA), Inc., a California corporation (herein, together with its respective successors and assigns, referred to as "Westaff USA"),
Westaff, Inc., a Delaware corporation (herein, together with its respective successors and assigns, referred to as "Westaff"), Westaff
Support, Inc., a California corporation (herein, together with its respective successors and assigns, referred to as "Westaff Support"), and
MediaWorld International, a California corporation (herein, together with its respective successors and assigns, referred to as "MediaWorld" and
together with Westaff (USA), Westaff and Westaff Support, each individually, from time to time, referred to herein as a "Borrower" and collectively as
the "Borrowers") and DelStaff, LLC, a Delaware limited liability company (herein, together with its successors and assigns, called
"Lender") with reference to the following: 

        A.    The
Borrowers desire to have Lender make available to the Borrowers a revolving facility to advance Loans (as defined below) in the aggregate principal amount not to
exceed THREE MILLION and NO/100 DOLLARS ($3,000,000), or such lesser amount as provided herein, in order to provide Borrowers with working capital and for Borrowers' general business purposes, but for
no other purposes without Lender's consent, which Lender may withhold in its sole discretion. 

        B.    The
parties desire to set forth in this Agreement the terms and conditions of such loan. 

        NOW,
THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties agree as follows: 

 
 

  ARTICLE I
  DEFINITIONS    
    

        The following words and terms as used in this Agreement shall have the meanings set forth below: 

        "Advance" means each Loan made by the Lender to the Borrowers. 

        "Advance Date" means any date on which an Advance occurs hereunder. 

        "Aggregate Revolving Commitment" means a principal amount of Advances not to exceed THREE MILLION and NO/100 DOLLARS ($3,000,000)
(exclusive of PIK Interest, the Facility Fee and Expenses hereunder that is added to principal pursuant to the terms of the Note and this Agreement). 

        "Aggregate Revolving Commitment Sublimit" means a principal amount of Advances not to exceed ONE MILLION and NO/100 DOLLARS ($1,000,000)
(exclusive of PIK Interest, the Facility Fee and Expenses hereunder that is added to principal pursuant to the terms of the Note and this Agreement). 

        "Affiliate" means, as to any Person, any other Person which, directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the
management and policies of the other Person, whether through the ownership of voting securities, membership interests, by contract, or otherwise. 

        "Agreement" means this Loan Agreement, as the same may be amended, restated, supplemented, or modified and in effect from time to time. 

        "Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 as amended or modified from time to time (11 U.S.C. §101,  et seq.). 

        "Business Day" means any day other than a Saturday, Sunday or legal holiday on which banks in California are permitted to be closed. 

        "Collateral" shall have the meaning set forth in the Security Agreement. 

        "Default Rate" shall have the meaning set forth in the Note. 

 

        "Expenses" means and shall include, but are not limited to: (i) reasonable attorneys' fees, costs and expenses;
(ii) reasonable accountants' fees, costs and expenses; (iii) court costs and expenses; (iv) court reporter fees, costs and expenses; (v) long distance telephone charges;
(vi) telegram charges; (vii) reasonable expenses for travel, lodging and food; (viii) fees of other professionals, all lien search fees and all filing fees. 

        "Event of Default" shall have the meaning set forth in Section 5.1 hereof. 

        "Facility Fee" shall have the meaning set forth in Section 2.2 hereof. 

        "Governmental Authority" means any nation or government, any state or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other
entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. 

        "Indebtedness" of any Person means, without duplication, (a) all indebtedness for borrowed money; (b) all obligations
issued, undertaken or assumed as the deferred purchase price of property or services (other than trade payables entered into in the ordinary course of business on ordinary terms); (c) all
obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so
evidenced incurred in connection with the acquisition of property, assets or businesses; (d) all indebtedness created or arising under any conditional sale or other title retention agreement,
or incurred as financing, in either case with respect to property acquired by the Person (even though the rights and remedies of the seller or bank under such agreement in the event of default are
limited to repossession or sale of such property); (e) all obligations with respect to capital leases; and (f) all indebtedness referred to in clauses (a) through (e) above
secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon or in property (including accounts and contracts rights) owned
by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness. 

        "Insolvency Proceeding" means, with respect to any Person, (a) any case, action or proceeding with respect to such Person before
any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any
general assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other, similar arrangement in respect of its creditors generally or any substantial portion of its
creditors; undertaken under U.S. federal, state or foreign law, including the Bankruptcy Code. 

        "Intercreditor Agreement" means that certain Intercreditor and Subordination Agreement of even date herewith entered into by and between,
the agent for Senior Lender, Lender and Borrowers, as the same may be amended, restated, supplemented, or modified and in effect from time to time. 

        "Lien" means any pledge, security interest, encumbrance, lien (statutory or otherwise), mortgage, or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or agreement to give any financing statement under
the Uniform Commercial Code of any jurisdiction) or any other type of preferential arrangement for the purpose, or having the effect, of protecting a creditor against loss or securing the payment or
performance of an obligation. 

        "Loan" means the aggregate Advances made by the Lender to the Borrowers. 

        "Loan Documents" means this Agreement, the Security Agreement, the Note and any other document, agreement or instrument of any kind being
delivered pursuant to or in connection with this Agreement. 

        "Material Adverse Change" means a material adverse change, as determined by Lender in good faith, on (i) the Borrowers' (taken as a
whole) ability to perform any of its or their payment or other 

2

 

material
Obligations under this Agreement or any of the other Loan Documents, (ii) the enforceability of the Loan Documents, or (iii) the ability of Lender to exercise any of its
remedies under the Loan Documents or provided by applicable law. 

        "Material Adverse Effect" means a material adverse effect, as determined by Lender in good faith on (i) the Borrowers' (taken as a
whole) (a) business, property, assets, operations, or condition, financial or otherwise, or (b) ability to perform any of its or their payment or other material Obligations under this
Agreement or any of the other Loan Documents, (ii) the enforceability of the Loan Documents, or (iii) the ability of Lender to exercise any of its remedies under the Loan Documents or
provided by applicable law. 

        "Note" means that certain Subordinated Revolving Note dated as of even date herewith by the Borrowers in favor of Lender, as the same may
be amended, restated, supplemented, or modified and in effect from time to time. 

        "Obligations" means all unpaid principal of and accrued and unpaid interest on the Loan, all accrued and unpaid fees arising under the
Loan Documents and all expenses, reimbursements, indemnities and other obligations of the Borrowers to the Lender or any indemnified party hereunder arising under the Loan Documents. 

        "Person" means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, entity, party or government (whether national, federal, state, county, city, its municipality or otherwise, including without limitation any instrumentality, division,
agency, body or department thereof). 

        "PIK Interest" has the meaning as defined in the Note. 

        "Revolving Advance" means an Advance under the Revolving Facility. 

        "Revolving Facility Termination Date" means with respect to Revolving Advances the earliest of (i) August 15, 2009, or
(ii) any earlier date on which the Aggregate Revolving Commitment or Aggregate Revolving Commitment Sublimit, as the case may be, is reduced to zero or otherwise terminated. 

        "Requirement of Law" means, as to any Person, any law (statutory or common), treaty, rule or regulation or determination of an arbitrator
or of a Governmental Authority, in each case applicable to or binding upon the Person or any of its property or to which the Person or any of its property is subject. 

        "Security Agreement" means the Security Agreement dated as of even date hereof made by Borrowers in favor of Lender as the same may be
amended, restated, supplemented or otherwise modified from time to time. 

        "Senior Lender" means, collectively, the agent, lenders, letter of credit issuers and other creditors under the Senior Loan Agreement, and
their respective successors, assigns and replacements under the Senior Loan Agreement and the loan documents described therein. 

        "Senior Loan Agreement" means that certain Financing Agreement dated as of February 14, 2008, by and among Westaff (USA), Senior
Lender, Westaff and certain other parties, as the same may be amended, restated, supplemented, modified, replaced, refinanced or otherwise modified from time to time. 

        "Subsidiary" of a Person means any corporation, association, partnership, limited liability company, joint venture or other business
entity of which more than 50% of the voting stock, membership interests or other equity interests (in the case of Persons other than corporations), is owned or controlled directly or indirectly by the
Person, or one or more of the Subsidiaries of the Person, or a 

3

 

combination
thereof. Unless the context otherwise clearly requires, references herein to a "Subsidiary" refer to a Subsidiary of the Borrowers. 

 
 

  ARTICLE II
  AGREEMENT FOR LOAN    
    

        2.1    Commitment.    From and including the date of this Agreement and prior to the Revolving Facility Termination
Date, the Lender agrees, on the terms and conditions set forth in this Agreement to make Advances to the Borrowers from time to time in amounts not to exceed the Aggregate Revolving
Commitment. Notwithstanding the foregoing, any Advances made by the Lender to the Borrowers that are in excess of the Aggregate Revolving Commitment Sublimit shall be made by the Lender in its sole
discretion. The commitment of the Lender to lend hereunder shall expire on the Revolving Facility Termination Date. All Advances hereunder will be evidenced by a single promissory note of the
Borrowers payable to the order of the Lender and in form and substance satisfactory to the Lender in the amount of the Aggregate Revolving Commitment. Although the Note will be expressed to be payable
in the full Loan amount, the Borrowers will be obligated to pay only the amounts actually disbursed hereunder, together with accrued interest on the outstanding balance at the rates and on the dates
specified in the Note and such other charges provided for herein and therein. Amounts borrowed pursuant to the Aggregate Revolving Commitment or the Aggregate Revolving Commitment Sublimit, as the
case may be, which are repaid or prepaid by the Borrowers may be reborrowed, only with Lender's prior written consent to such reborrowing, which Lender may withhold in its sole discretion. Lender is
hereby authorized to record the principal amount of each Advance hereunder and each repayment on a schedule attached to the Note or otherwise in Lender's records, and such entries shall be prima facie
evidence of the existence and the amounts of the obligations therein recorded; provided however, that neither the failure to so record nor any error in such recordation shall affect the Borrowers'
obligations under the Note. The Borrowers hereby authorize Lender to extend, or continue Advances hereunder based on telephonic notices or email notices made by any authorized officer Lender in good
faith believes to be acting on behalf of Westaff USA. Westaff USA agrees to deliver promptly to Lender a written confirmation if such confirmation is requested by Lender, of each telephonic notice or
email notice signed by an authorized officer. If the written confirmation differs in any material respect from the action taken by Lender, the records of Lender shall govern absent manifest error.
Notwithstanding anything herein or in any Loan Document to the contrary, all Advances made hereunder for the benefit of all the Borrowers shall be paid and made only to Westaff (USA). 

        2.2    Facility Fee:    The Borrowers, collectively, shall pay to Lender a fee of One Hundred Thousand Fifty Thousand
and NO/100 Dollars ($150,000) (the "Facility Fee"), which shall be added to the outstanding principal amount of the Note (although it will not reduce
the Aggregate Revolving Commitment or Aggregate Revolving Commitment Sublimit, as the case may be) and shall bear interest at the Interest Rate set forth in the Note beginning on the date of
disbursement of the initial Advance hereunder. The Facility Fee shall not be due until the Revolving Facility Termination Date, provided however such Facility Fee shall be fully earned on the date of
disbursement of the initial Advance hereunder. 

        2.3    Place of Payment; Order of Application; No Offset or Reduction.    All payments to Lender shall be made at the
Lender's principal place of business or at such other place or places as Lender may designate in writing to Westaff USA. All of such payments to Persons other than Lender shall be payable at such
place or places as Lender may designate in writing to Westaff USA. All payments shall be applied in such order of application as Lender may determine in its sole discretion. All payments are to be
made by the Borrowers without offset or other reduction. Payment and performance of all of the Obligations shall be secured by the Collateral pursuant to the Security Agreement, which Lien shall be
subordinate to the Lien of Senior Lender pursuant to the Intercreditor Agreement. 

4

 

        2.4    Subordination.    Notwithstanding anything contained in this Agreement to the contrary, this Agreement and the
rights and obligations evidenced hereby are subordinate in the manner and the extent set forth in the Intercreditor Agreement. 

        2.5    Prepayment and Termination.    The Borrowers shall have the right to prepay the Obligations under this
Agreement, terminate the Aggregate Revolving Commitment and terminate this Agreement at any time, in whole or in part, without any penalty or fee. 

        2.6    Loan Purpose.    The proceeds from Advances hereunder may be used by any Borrower for working capital purposes
and for any Borrower's general business purposes, but for no other purposes without Lender's consent, which Lender may withhold in its sole discretion. 

        2.7    Right of First Refusal.    If at any time prior to the Revolving Facility Termination Date, Westaff USA desires
to obtain any additional contractual subordinate financing (other than from Lender or Senior Lender), Westaff USA shall give written notice thereof (the "Financing
Notice") to Lender which shall state (i) the name of the Person with whom Westaff USA desires to obtain such subordinate financing from, and (ii) the terms of
such financing. For a period of 5 Business Days after receipt of the Financing Notice (the "Option Period"), the Lender (or its designee) shall have the
option to provide the subordinate financing on substantially the same terms contained in the Financing Notice. If the Lender (or its designee) elects to exercise its right of first refusal, the
closing of the financing, subject to Westaff USA's satisfaction of usual and customary financing conditions precedent, shall occur no later than 30 days after the date of Lender's election to
provide such financing or at such other time as the parties to the transaction may agree. The failure of the Lender (or its designee) to deliver written notice of exercise to Westaff USA within the
Option Period shall be deemed to be an election by the Lender not to provide the financing. If the Lender elects to not provide such financing, Westaff USA shall be free, subject to the provisions of
the Loan Documents, including Section 2 of the Note, to obtain such subordinate financing from such Person on substantially the same economic
terms contained in the Financing Notice; provided that if Westaff USA has not consummated the closing of such financing within 90 days after the expiration of the Option Period, the
restrictions provided for in this Section 2.7 shall again become effective. 

 
 

  ARTICLE III
  CONDITIONS PRECEDENT    
    

        3.1    Conditions Precedent.    Borrowers hereby agree that Lender's obligation to disburse any Advance is conditioned
upon the following, all of which shall be deemed to be conditions precedent to such disbursement: 

        (a)    Performance.    Borrowers shall have performed, observed and complied with all of their agreements and
covenants herein and in the other Loan Documents; 

        (b)    Representations and Warranties.    All of the representations, warranties and covenants of Borrowers contained
in this Agreement or the other Loan Documents shall be and remain true and correct in all material respects; 

        (c)    No Event of Default.    No Event of Default shall exist hereunder or under any of the other Loan Documents; and 

        (d)    No Material Adverse Change.    No event or circumstance has occurred or exists that reasonably could be expect
to cause or result in a Material Adverse Change. 

5

 

        3.2    Documents to be Furnished for Disbursement.    As a condition precedent to the disbursement of the initial
Advance hereunder, Borrowers shall furnish or cause to be furnished to Lender the following documents, all in form and substance satisfactory to the Lender: 

        (a)    Basic Documents.    This Agreement and duly executed originals of each of the Loan Documents and a consent from
Borrowers to the Intercreditor Agreement; 

        (b)    Resolutions.    Copies of the resolutions of the directors of the Borrowers duly adopted and which authorize
the execution, delivery and performance by Borrowers of this Agreement and the Loan Documents, certified as of the date of the initial Advance hereunder; 

        (c)    Payment of Fees.    To the extent permitted by the Intercreditor Agreement, evidence of payment by the
Borrowers of all accrued and unpaid Expenses to Lender to the extent then due and payable on the date hereof, together with reasonable attorney costs of the Lender; provided however that Borrowers may
elect to have the Facility Fee (but not the Expenses and other fees and costs arising out of the preparation and negotiation of the Loan Documents and the closing of this facility) added to the
outstanding principal amount of the Note (which principal amount shall continue to accrue interest at the Interest Rate); and 

        (d)    Other Documents.    Such other approvals, opinions, documents or materials as the Lender may request. 

        3.3    Conditions to All Advances.    The obligation of the Lender to make any Advance to be made by it (including its
initial Advance) is subject to the satisfaction of the following conditions precedent on the relevant Advance Date: 

        (a)    Continuation of Representations and Warranties.    The representations and warranties contained herein shall be
true and correct in all material respects on and as of such Advance Date with the same effect as if made on and as of such Advance Date (with the exception of such representations and warranties that
are expressly made as of an earlier date, in which case such representations and warranties contained herein shall be true and correct in all material respects on and as of such earlier date); 

        (b)    No Existing Default.    No Event of Default shall exist or shall result from such borrowing. Each Advance
request submitted by the Borrowers hereunder shall constitute a representation and warranty by the Borrowers hereunder, as of the date of each such notice and as of each Advance Date that the
conditions in this section are satisfied; and 

        (c)    No Material Adverse Change.    No Material Adverse Change shall have occurred and be continuing. 

 
 

  ARTICLE IV
  REPRESENTATIONS, WARRANTIES AND COVENANTS    
    

        To induce Lender to make the Loan hereunder, Borrowers each represent, warrant and covenant to the Lender as follows: 

        4.1    Company Existence and Power.    Each party: (a) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization; (b) has the power and authority and all authorizations, consents and approvals to own its assets, carry on its business and
to execute, deliver, and perform its obligations under the Loan Documents; (c) is duly qualified and is licensed and in good standing under the laws of each jurisdiction where its ownership,
lease or operation of property or the conduct of its business requires such qualification or license; and (d) is in compliance in all material respects with all Requirements of Law, except in
the case of (c) and (d), where the failure to be in compliance with such representation is not reasonably likely to result in a Material Adverse Effect. 

6

 

        4.2    Company Authorization; No Contravention.    The execution, delivery and performance by the Borrowers of this
Agreement and each other Loan Document to which any Borrower is party, have been duly authorized by all necessary action, and do not and will not: (a) contravene the terms of any of the
organizational documents of the Borrowers; or (c) violate any Requirement of Law in any material respect. 

        4.3    Binding Effect.    This Agreement and each other Loan Document to which the Borrowers are party constitute the
legal, valid and binding obligations of the Borrowers, enforceable against the Borrowers, in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting the enforcement of creditors' rights generally or by equitable principles relating to enforceability. 

        4.4    Notices.    The Borrowers shall promptly notify the Lender of the occurrence of any Event of Default, and of
the existence of any event or circumstance that foreseeably will become an Event of Default. 

        4.5    Inspection of Property and Books and Records.    The Borrowers shall maintain proper books of record and
account, in which full, true and correct entries in conformity with GAAP consistently applied shall be made of all financial transactions and matters involving the assets and business of the
Borrowers. As long as no Event of Default exists, no more than one time prior to the Revolving Facility Termination Date, the Borrowers shall permit representatives and independent contractors of the
Lender to visit and inspect any of their respective properties, to examine their respective corporate, financial and operating records, and make copies thereof or abstracts therefrom, and to discuss
their respective affairs, finances and accounts with their respective directors, officers, and independent public accountants, all at such reasonable time during normal business hours upon reasonable
advance notice to the Borrowers; provided, however, that when an Event of Default exists the Lender may do any of the foregoing from time to time during normal business hours at the expense of the
Borrowers and at any time and without advance notice. 

        Notwithstanding
the foregoing, to the extent the principal place of business of multiple Borrowers exist at the same address, Lender shall be permitted to conduct only one such audit at
such address prior to the Revolving Termination Date, so long as no Event of Default has occurred and is continuing. 

        4.6    Further Assurances.    Borrowers will execute and deliver or cause to be executed and delivered any and all
further documents and instruments and to take any and all further actions as may be determined by the Lender to be necessary or appropriate to the transactions contemplated herein or in the other Loan
Documents. 

        4.7    Use of Proceeds.    Borrowers shall only use the proceeds from any Advance hereunder as provided in  Section 2.6 hereof.

        4.8    Full Disclosure.    No representation or warranty made by any Borrower in this Agreement or the Security
Agreement contains or will contain at the time such representation is made, any untrue
statement of a material fact or omits or will omit to state any material fact or any fact necessary to make the statements contained herein or therein not misleading in any material respect. 

 
 

  ARTICLE V
  EVENTS OF DEFAULT    
    

        5.1    Event of Default.    Any of the following shall constitute an "Event of
Default": 

        (a)    Non-Payment.    The Borrowers fail to pay, (i) when and as required to be paid herein or in
the Note, any amount of principal of the Loan, or (ii) any interest payable hereunder or under any other Loan Document, or (iii) any fee or any other amount payable hereunder or under
any other Loan Document; provided that the failure to make such payment due to the operation of 

7

 

the
Intercreditor Agreement shall not constitute an Event of Default hereunder, unless and until such payment is permitted to be paid by the terms of the Intercreditor Agreement; however the Interest
Rate from and after such time shall be automatically increased to thirty percent (30%); 

        (b)    Representation or Warranty.    Any representation or warranty by the Borrowers, made herein or in any other
Loan Document is incorrect in any material respect on or as of the date made; 

        (c)    Other Defaults.    The Borrowers fail to perform or observe any other term or covenant contained in this
Agreement or any other Loan Document, and such default shall continue and not be remedied within thirty (30) days after the earlier of: (i) the date upon which the Borrowers knew of such
failure or (ii) the date upon which written notice thereof is given to the Borrowers by the Lender; 

        (d)    Cross-Acceleration; Cross-Default.    (i) The Senior Lender has accelerated the indebtedness under the Senior
Loan Agreement; or (ii) other than such defaults which currently exist under the Senior Loan Agreement as of the date of this Agreement, if any additional Event of Default shall occur and be
continuing after applicable cure periods, if any, under the Senior Loan Agreement and such Event of Default shall not have been waived or subject to forbearance by the Senior Lender within thirty
(30) days after the occurrence of such Event of Default (e.g. pursuant to a waiver or forbearance agreement); or (iii) if the Borrowers fail to make any payment in respect of any
Indebtedness (other
than intercompany Indebtedness), in excess of $2,000,000 when due, after the expiration of any cure period (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise). 

        (e)    Insolvency: Voluntary Proceedings.    Any Borrower (i) ceases or fails to be solvent, or generally fails
or is unable to pay, or admits in writing its inability to pay, its debts as they become due, subject to applicable grace periods, if any, whether at stated maturity or otherwise;
(ii) voluntarily ceases to conduct its business in the ordinary course; (iii) commences any Insolvency Proceeding with respect to itself, or (iv) takes any action to effectuate or
authorize any of the foregoing; provided, however, that a voluntary winding up or dissolution of MediaWorld that is permitted by the terms of the Senior Loan Agreement shall not constitute an Event of
Default hereunder; 

        (f)    Involuntary Proceedings.    (i) Any involuntary Insolvency Proceeding is commenced or filed against any
Borrower, or any writ, judgment, warrant of attachment, execution or similar process, is issued or levied against a substantial part of any Borrower's properties, and any such proceeding or petition
shall not be dismissed, or such writ, judgment, warrant of attachment, execution or similar process shall not be released, vacated or fully bonded within sixty (60) days after commencement,
filing or levy; (ii) any Borrower admits the material allegations of a petition against it in any Insolvency Proceeding, or an order for relief (or similar order under non-U.S. law)
is ordered in any Insolvency Proceeding; or (iii) any Borrower acquiesces in the appointment of a receiver, trustee, custodian, conservator, liquidator, mortgagee in possession (or agent
therefor), or other similar Person for itself or a substantial portion of its property or business; 

        5.2    Remedies.    If any Event of Default occurs, the Lender may, subject to  Section 2.4 hereof: 

        (a)   declare
the commitment of the Lender to make Advances to be terminated whereupon such commitment and obligation shall be terminated; and/or 

        (b)   declare
the unpaid principal amount of the outstanding Loan, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other
Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrowers; and/or 

8

 

        (c)   exercise
all rights and remedies available to the Lender under the Loan Documents or applicable law and to pursue any and all available remedies for collection of such
principal and interest, including but not limited to the exercise of all rights and remedies against Borrowers and the Collateral; and/or 

        (d)   require
the Borrowers make the Collateral and the records pertaining to the Collateral available to Lender at a place designated by Lender which is reasonably convenient
or may take repossession of the Collateral and the records pertaining to the Collateral; and/or 

        (e)   except
as otherwise provided by law, sell the Collateral at public or private sale upon such terms and conditions as Lender may reasonably deem proper and Lender may
purchase the Collateral at any such sale, upon commercially reasonable terms, and apply the net proceeds, after deducting all costs, expenses and attorneys' fees incurred by Lender at any time in the
collection of the indebtedness and in the protection and sale of the Collateral, to the payment of the Obligations, returning the remaining proceeds, if any, to the Borrowers; and/or 

        (f)    grant
extensions, compromise claims, and settle accounts receivable for less than face value, all without prior notice to the Borrowers. 

To
the extent permitted by applicable law, all remedies contained herein or by law afforded shall be cumulative and are not exclusive of any other rights, powers, privileges or remedies provided by
law or in equity, or under any other instrument, document or agreement now existing or hereafter arising and all shall be available to Lender until the Obligations hereunder have been paid and
satisfied in full. During the existence of an Event of Default shall occur, interest, in lieu of the interest set forth in the Note, shall accrue on the Obligations then due and owing from the date of
the same until cured, if cure is allowed, at the Default Rate set forth in the Note. 

 
 

  ARTICLE VI
  MISCELLANEOUS    
    

        6.1    Amendment; Assignment.    This Agreement and the other Loan Documents may not be modified, altered or amended
except by an agreement in writing signed by Borrowers and Lender. Borrowers may not sell, assign or transfer this Agreement, the other Loan Documents or any portion thereof, including without
limitation Borrowers' rights, titles, interests, remedies, powers and/or duties thereunder, without Lender's prior written consent. Borrowers hereby consent to Lender's sale, assignment, transfer or
other disposition at any time and from time to time hereafter of this Agreement, or the other Loan Documents, or of any portion thereof, including without limitation, Lender's rights, titles,
interests, remedies, powers and/or duties. In case of any such action by Lender, and provided that Lender has notified Borrowers in writing, Borrowers will accord full recognition thereto and hereby
agrees that all rights and remedies of Lender in connection with the interests so transferred shall be enforceable against Borrowers by such transferee with the same force and effect and to the same
extent as the same would have been enforceable by Lender but for such assignment.
Lender shall provide Borrowers with prior notice of any such sale, assignment, transfer or other disposition, provided however that the failure of Lender to give Borrowers prior notice of any such
sale, assignment, transfer or other disposition shall in no way affect such sale, assignment, transfer or other disposition. Lender shall have the right to share information concerning the Borrowers
and the Loan documents with any potential transferees, subject to the obligations of Section 6.14 hereof. 

        6.2    Waiver.    Lender's failure at any time or times hereafter to require strict performance by Borrowers of any
provision of this Agreement shall not waive, affect or diminish any right of Lender thereafter to demand strict compliance and performance therewith. Any suspension or waiver by Lender of an Event of
Default by Borrowers under this Agreement or the other Loan Documents shall not suspend, waive or affect any other Event of Default by Borrowers under this Agreement or the other Loan Documents,
whether the same is prior or subsequent thereto and whether of the same or of 

9

 

a
different type. None of the undertakings, agreements, warranties, covenants and representations of Borrowers contained in this Agreement or the other Loan Documents, and no Event of Default by
Borrowers under this Agreement or the other Loan Documents, shall be deemed to have been suspended or waived by Lender unless such suspension or waiver is by an instrument in writing signed by an
officer of Lender and directed to Borrowers specifying such suspension or waiver. 

        6.3    Severability.    If any provision of this Agreement or any of the other Loan Documents or the application
thereof to any Person or circumstance is held invalid or unenforceable, the remainder of this Agreement and the other Loan Documents and the application of such provision to other Persons or
circumstances will not be affected thereby and shall be enforced to the greatest extent permitted by law. 

        6.4    Binding Effect.    This Agreement and the other Loan Documents shall be binding upon and inure to the benefit
of the successors and assigns of Borrowers and Lender and their respective heirs, executors, administrators, personal representatives, successors and assigns. 

        6.5    Other Loan Documents.    The provisions of the other Loan Documents are incorporated in this Agreement by this
reference thereto. Except as otherwise provided in this Agreement and except as otherwise provided in the other Loan Documents by specific reference to the applicable provision of this Agreement, if
any provision contained in this Agreement is in conflict with, or inconsistent with, any provision in the other Loan Documents, the provision contained in this Agreement shall govern and control. 

        6.6    Transactions Prior to Termination.    Except to the extent provided to the contrary in this Agreement and in
the other Loan Documents, no termination or cancellation (regardless of cause or procedure) of this Agreement or the other Loan Documents shall in any way affect or impair the powers, obligations,
duties, rights and liabilities of Borrowers or Lender in any way or respect relating to (i) any transaction
or event occurring prior to such termination or cancellation, or (ii) any of the undertakings, agreements, covenants, warranties and representations of Borrowers contained in this Agreement or
the Note. All such undertakings, agreements, covenants, warranties and representations shall survive such termination or cancellation. 

        6.7    Borrowers Waiver of Notice, Etc.    Except as otherwise specifically provided in this Agreement, Borrowers
waive any and all notice or demand which Borrowers might be entitled to receive with respect to this Agreement or the Note, or any document executed in connection herewith, by virtue of any applicable
statute or law, and waives presentment, demand and protest and notice of presentment, protest, default, dishonor, non-payment, maturity, release, compromise, settlement, extension or
renewal of any or all commercial paper, accounts, contract rights, documents, instruments, chattel paper and guaranties at any time held by Lender on which Borrowers may in any way be liable and
hereby ratifies and confirms whatever Lender may do in this regard. 

        6.8    Governing Law.    THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER
AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF CALIFORNIA (WITHOUT REFERENCE TO CONFLICTS OF LAW PRINCIPLES). 

        6.9    Costs and Expenses.    

        (a)   The
Borrowers, collectively, shall pay or, as applicable, reimburse Lender, and its successors and assigns, for all reasonable costs, fees,
out-of-pocket expenses and obligations incurred by Lender, in connection with, arising out of, or related to: (1) the entering into, negotiation, preparation, closing,
administration (including amendment, waiver, or other consent) of this Agreement, the Note and all other agreements contemplated herein, or the exercise of any of the rights or remedies of Lender
under any Loan Document; (2) any transaction contemplated by the Loan Documents; and (3) any inspection, audit, appraisal, or verification of the Collateral 

10

 

or
of the Borrowers; however, unless an Event of Default has occurred and is existing, Lender shall not seek reimbursement from the Borrowers for more
than a total of one periodic, repeat audit (i.e., exclusive of any business audit in connection with any acquisition) per calendar year undertaken by
Lenders' auditors or field examiners of the Borrowers, collectively (including of the Collateral). 

        (b)   The
Borrowers, collectively, shall pay or, as applicable, reimburse Lender, and its successors and assigns, for all reasonable costs, fees, expenses and obligations
incurred by Lender, following the occurrence and during the continuance of an Event of Default, which are in connection with, arise out of, or are related to: (1) enforcing any obligation or in
foreclosing against any of the Collateral or exercising, enforcing or preserving any other right or remedy available by reason of any Event of Default, (2) any refinancing or restructuring of
the credit arrangements provided under the Loan
Documents in the nature of a "work-out" or in any insolvency or bankruptcy proceeding, (3) commencing, defending or intervening in any litigation or in filing a petition, complaint,
answer, motion or other pleadings in any legal proceeding related to the Borrowers and related to or arising out of the transactions contemplated by the Loan Documents, (4) taking any other
action in or with respect to any suit or proceeding (whether in bankruptcy or otherwise), (5) protecting, preserving, collecting, leasing, selling, taking possession of, or liquidating any of
the Collateral or (6) attempting to enforce or enforcing any Lender's liens on any of the Collateral or any other rights under the Loan Documents. Expenses are part of the Obligations, payable
upon Lender's demand, and shall be secured by the Collateral. 

All
obligations, including, but not limited to, the payment of any Expenses, described under this Section 6.9 shall survive any termination of
any Loan Document. 

        6.10    Notices.    All notices, demands and other communications to be given or delivered under or by reason of the
provisions of this Loan Agreement and the other Loan Documents shall be in writing and shall be deemed to have been given when personally delivered or delivered by facsimile, one Business Day after
deposit with Federal Express or similar reputable overnight courier service or three Business Days after being mailed by first class mail, return receipt requested. Notices, demands and communications
to Borrowers and Lender shall, unless another address is specified in writing, be sent to the addresses indicated below: 

Notices to Borrowers:

Westaff
(USA), Inc.

298 North Widget Lane

Walnut Creek, CA 94598

Attention: Chief Financial Officer

Facsimile: (925) 934-5489 

Westaff, Inc.

298 North Widget Lane

Walnut Creek, CA 94598

Attention: General Counsel

Facsimile: (949) 481-7083 

Westaff
Support, Inc.

298 North Widget Lane

Walnut Creek, CA 94598

Attention: Chief Financial Officer

Facsimile: (925) 934-5489 

11

 

MediaWorld
International

298 North Widget Lane

Walnut Creek, CA 94598

Attention: Chief Financial Officer

Facsimile: (925) 934-5489 

with
copies to: 

Morrison &
Foerster LLP

Attention: Jill Feldman

425 Market Street

San Francisco, CA 94105

Facsimile: (415) 276-7298 

Notices to Lender:

DelStaff, LLC

c/o H.I.G. Capital, LLC

855 Boylston St.

Boston, MA 02116

Attention: John Black and Michael Phillips

Facsimile: (617) 262-1505 

with
a copy to:  

Greenberg
Traurig, LLP

77 West Wacker Dr., Suite 2500

Chicago, IL 60601

Attention: Paul Quinn

Facsimile: 312-899-0333 

        6.11    No Third-Party Beneficiaries.    This Agreement is solely for the benefit of the parties hereto, their
successors and assigns, and no other person or entity shall acquire or have any right hereunder, with the exception of the Senior Lender in respects of  Section 2.4 hereof. 

        6.12    Counterparts.    This Agreement may be executed in any number of counterparts and by the different parties
hereto on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement. Receipt of an executed
signature page to this Agreement by facsimile or other electronic transmission shall constitute effective delivery thereof. Electronic records of executed Loan Documents maintained by the Lender shall
deemed to be originals thereof. 

        6.13    Indemnification.    Whether or not the transactions contemplated hereby are consummated, the Borrowers, joint
and severally, shall indemnify, defend and hold the Lender and its officers, directors, representatives, advisors, successors and assigns (each, an "Indemnified
Person") harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, charges, expenses and disbursements
(including reasonable attorney fees) of any kind or nature whatsoever which may at any time (including at any time following repayment of the Loan) be imposed on, incurred by or asserted against any
such Person in any way relating to or arising out of this Agreement or the other Loan Documents or the transactions contemplated hereby, or any action taken or omitted by any such Person under or in
connection with any of the foregoing, whether or not any Indemnified Person is a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided, that the Borrowers shall have no obligation hereunder to any Indemnified Person with respect to
Indemnified Liabilities resulting solely from the gross negligence or willful misconduct of such Indemnified Person. The agreements in this section shall survive payment of all other Obligations. 

12

 

        6.14    Confidentiality.    Lender agree to use commercially reasonable efforts (equivalent to the efforts Lender
applies to maintaining the confidentiality of its own confidential information) to maintain as
confidential all confidential information provided to them by Borrowers and their Affiliates and designated as confidential, except that Lender may disclose such information (a) to Persons
employed or engaged by Lender who are informed of the confidentiality obligation hereunder; (b) to any bona fide assignee or participant or potential assignee or participant that has agreed to
comply with the covenant contained in this Section 6.14 (and any such bona fide assignee or participant or potential assignee or participant may
disclose such information to Persons employed or engaged by them as described in clause (a) above); (c) as required or requested by any Governmental Authority or reasonably believed by
Lender to be compelled by any court decree, subpoena or legal or administrative order or process; (d) as is required by law; (e) in connection with the exercise of any right or remedy
under the Loan Documents or in connection with any litigation to which Lender is a party; or (f) that ceases to be confidential through no fault of Lender or any of their employees or agents. 

        6.15    Dissolution of MediaWorld.    Notwithstanding anything herein to the contrary, upon a legal dissolution of
MediaWorld as permitted under the Senior Loan Agreement, MediaWorld shall cease to be a Borrower under and for the purposes of this Agreement and the other Loan Documents. 

        6.16    Joint and Several Liability.    The obligations of each Borrower under this Agreement and the Loan Documents
shall be joint and several. The joint and several obligations of each Borrower under this Agreement and the Loan Documents shall be absolute and unconditional and shall remain in full force and effect
until all Obligations shall have been paid and, until such payment has been made, shall not be discharged, affected, modified or impaired on the happening from time to time of any event, including,
without limitation, any of the following, whether or not with notice to or the consent of any of the undersigned: (a) the waiver, compromise, settlement, release or termination (including,
without limitation, any extension or postponement of the time for payment or performance or renewal or refinancing) of any or all of the Obligations or agreements of any of the undersigned under this
Agreement or any other Loan Documents; (b) the failure to give notice to any or all of the Borrowers of the occurrence of an Event of Default under the terms and provisions of this Agreement or
any other Loan Documents, other than as required herein or as required by law; (c) the release, substitution or exchange by the Lender of any Collateral (whether with or without consideration)
or the acceptance by the Lender of any additional collateral or the availability or claimed availability of any other collateral or source of repayment or any nonperfection or other impairment of any
Collateral; (d) the release of any person primarily or secondarily liable for all or any part of the obligations, whether by Lender or in connection with any voluntary or involuntary
liquidation, dissolution, receivership, insolvency, bankruptcy, assignment for the benefit of creditors or similar event or proceeding affecting any or all of the undersigned or any other person or
entity who, or any of whose property, shall at the time in question be obligated in respect of the Obligations or any part thereof; or (e) to the extent permitted by law, any other event,
occurrence, action or circumstance that would, in the absence of this clause, result in the release or discharge of any or all of the Borrowers from the performance or observance of any obligation,
covenant or agreement contained in this Agreement or any other Loan Documents. The joint and several obligations of each Borrower to Lender under this Agreement shall remain in full force and effect
(or be reinstated) until Lender has received payment in full of all Obligations and the expiration of any applicable preference or similar period pursuant to any bankruptcy, insolvency,
reorganization, moratorium or similar law, or at law or equity, without any claim having been made before the expiration of such period asserting an interest in all or any part of any payment(s)
received by Lender. Each Borrower expressly agrees that the Lender shall not be required first to institute any suit or to exhaust its remedies against any Borrower or any other person or party to
become liable hereunder or against any Collateral, in order to enforce this Agreement; and expressly agrees that, notwithstanding the occurrence of any of the foregoing, each Borrower shall be and
remain, directly and primarily liable for all sums due under this Agreement and under the Loan Documents. 

[SIGNATURES ARE ON THE FOLLOWING PAGE]

13

 

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

							
	 BORROWERS:	 	 LENDER:
	

WESTAFF (USA), INC., a California corporation	
 	
DELSTAFF, LLC, a Delaware limited liability company
	
By:	
 	
/s/ Christa C. Leonard

 	
 	
By:	
 	
/s/ Michael Phillips

 
	
Its:	
 	
Chief Financial Officer

 	
 	
Its:	
 	
Manager

 
	
Printed Name:	
 	
Christa C. Leonard

 	
 	
Printed Name:	
 	
Michael Phillips

 
	

WESTAFF, INC., a Delaware corporation	
 	

 	
 	

 
	
By:	
 	
/s/ Christa C. Leonard

 	
 	

 	
 	

 
	
Its:	
 	
Chief Financial Officer

 	
 	

 	
 	

 
	
Printed Name:	
 	
Christa C. Leonard

 	
 	

 	
 	

 
	

WESTAFF SUPPORT, INC.,

a California corporation	

 	

 	

 	

 
	
By:	
 	
/s/ Christa C. Leonard

 	
 	

 	
 	

 
	
Its:	
 	
Chief Financial Officer

 	
 	
 	
 	

 
	
Printed Name:	
 	
Christa C. Leonard

 	
 	

 	
 	

 
	

MEDIAWORLD INTERNATIONAL,

a California corporation	
 	

 	
 	

 
	
By:	
 	
/s/ Christa C. Leonard

 	
 	

 	
 	

 
	
Its:	
 	
Chief Financial Officer

 	
 	

 	
 	

 
	
Printed Name:	
 	
Christa C. Leonard

 	
 	

 	
 	

 

Signature Page to Loan Agreement

14

QuickLinks

Exhibit 10.8.37

LOAN AGREEMENT

ARTICLE I DEFINITIONS

ARTICLE II AGREEMENT FOR LOAN

ARTICLE III CONDITIONS PRECEDENT

ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS

ARTICLE V EVENTS OF DEFAULT

ARTICLE VI MISCELLANEOUSQuickLinks
 -- Click here to rapidly navigate through this document

 

 
 

  Exhibit 10.8.39    
    

 
    SECURITY AGREEMENT    
    

        THIS SECURITY AGREEMENT (this "Agreement"), dated as of August 25, 2008, is
entered into by and among DELSTAFF, LLC, a Delaware limited liability company ("Lender"), WESTAFF (USA), INC., a California corporation
("Westaff (USA)"), WESTAFF, INC., a Delaware corporation ("Westaff"), WESTAFF
SUPPORT, INC., a California corporation ("Westaff Support"), and MEDIAWORLD INTERNATIONAL, a California corporation
("MediaWorld"; and together with Westaff (USA), Westaff and Westaff Support, each is individually from time to time is referred to herein as a
"Grantor" and collectively as "Grantors"), with reference to the following facts: 

 
 

  RECITALS    
    

        A.    Grantors
and Lender are entering into a Loan Agreement of even date herewith among Grantors and the Lender as the same has been amended or modified from time to time (the
"Loan Agreement") pursuant to which Lender proposes to provide Advances in an aggregate principal amount of up to THREE MILLION and NO/100 DOLLARS
($3,000,000) (the "Loan") to Grantors. Any capitalized term used but not defined herein shall have the meaning ascribed thereto in the Loan Agreement. 

        B.    Grantors
are members of an affiliated group of companies that includes each other Grantor. Grantors are engaged in related businesses, and each Grantor will derive
substantial direct and indirect benefit from the making of the Loan under the Note. 

        C.    It
is a condition to the effectiveness of the Loan Agreement that each Grantor enter into this Agreement with Lender and hereby grant Lender a security interest in the
Collateral described below to secure the payment and performance of such Grantor's obligations to Lender under the Loan Agreement and the other Loan Documents entered into in connection with the Loan
Agreement. 

        D.    To
induce Lender to enter into the Loan Agreement and the other Loan Documents with Grantors and provide Grantors the Loan contemplated thereunder, each Grantor is
willing to enter into this Agreement with Lender and grant Lender a security interest in the Collateral. 

        NOW,
THEREFORE, for and in consideration of any Loan or Advance (including any loan or advance by renewal or extension) heretofore or hereafter made to Grantors or to their successors or
assigns by the Lender pursuant to the Loan Agreement or the Note, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree
as follows: 

1.    DEFINITIONS.    

        1.1    Defined Terms.    In addition to the other terms defined in this Agreement, whenever the following capitalized
terms (whether or not underscored) are used, they shall be defined as follows: 

        "Capital Stock" means all shares, interests, participations, rights to purchase, options, warrants, general or limited partnership
interests, or limited liability company interests or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity, whether
voting or nonvoting, including common stock, preferred stock or any other "equity security" (as such term is defined in Rule 3a11-1 of the Rules and Regulations promulgated by the
Securities and Exchange Commission (17 C.F.R. § 240.3a11-1) under the Securities and Exchange Act of 1934, as amended). 

        "Code" means the Uniform Commercial Code, as enacted in the applicable jurisdiction, as amended or superseded from time to time after the
date of this Agreement. 

 

        "Collateral" means all of each Grantor's right, title and interest in and to all of each such Grantor's personal property and assets,
tangible and intangible, now existing or hereafter acquired or arising, and wherever located, including: 

          (i)  all
of such Grantor's accounts, chattel paper, deposit accounts, documents, equipment, fixtures, instruments, inventory, investment property, general intangibles,
goods, and letter-of-credit rights; 

         (ii)  all
of such Grantor's right, title and interest in and to the commercial tort claims; 

        (iii)  without
limiting the description of the property or any rights or interests in the property described above in this definition of Collateral, all of such Grantor's
right, title and interest in and to (a) all of such Grantor's money, cash, and other funds; (b) all attachments, accessions, parts and appurtenances to, all substitutions for, and all
replacements of any and all of such Grantor's equipment, fixtures and other goods; (c) all of such Grantor's agreements, as extracted collateral, tangible chattel paper, electronic chattel
paper, health-care-insurance receivables, leases, lease contracts, lease agreements, payment intangibles, proceeds of letters of credit, promissory notes, records and software;
and (d) all of such Grantor's franchises, customer lists, insurance refunds; insurance refund claims, tax refunds, tax refund claims, pension plan refunds, pension plan reversions; 

        (iv)  all
supporting obligations; 

         (v)  all
of the products and proceeds of all of the foregoing described property and interests in property, including cash proceeds and noncash proceeds, and including
proceeds of any insurance, whether in the form of original collateral or any of the property or rights or interests in property described above in this definition of Collateral; and 

        (vi)  all
of the foregoing, whether now owned or existing or hereafter acquired or arising, or in which such Grantor now has or hereafter acquires any right, title or
interest; provided, however, that the Collateral shall not include any Excluded Property. 

        "Domestic Subsidiary" means any Subsidiary that is organized under the laws of the United States or any State or other political
subdivision of the United States. 

        "Excluded Property" means collectively, 

          (i)  any
equipment, fixture, inventory or other goods of such Grantor which is subject to a Permitted Lien, but solely to the extent that the documents evidencing such
Permitted Lien explicitly prohibit the grant of a security interest in or Lien on such property or asset; provided,  however, that at such time as such
property or asset is no longer subject to such Lien or such prohibition, such property or asset shall (without any
act or delivery by any Person) constitute Collateral hereunder; 

         (ii)  any
rights of such Grantor under any general intangible existing prior to the date hereof (other than with respect to any account, payment intangible, chattel paper or
promissory note related thereto or as may otherwise be provided under applicable law) (the "Affected Collateral") if and solely to the extent the
creation by the relevant Grantor of a security interest pursuant to this Agreement in such Grantor's right, title and interest in such Affected Collateral (A) is prohibited by legally
enforceable provisions of any contract, agreement, instrument or indenture governing such Affected Collateral and such prohibition is not otherwise ineffective as a matter of law (such as pursuant
Section 9-406(f), 9-407(a) or 9-408(a) of the Code), (B) would give any other party to such contract, agreement, instrument or indenture a legally
enforceable right to terminate its obligations thereunder or (C) is permitted only with the consent of another party, if the requirement to obtain such consent is legally enforceable and is not
otherwise ineffective as a matter of law (such as pursuant Section 9-406(f), 9-407(a) or 9- 408(a) of the Code) and such 

2

 

consent
has not been obtained, provided, that in any event any account or any money or other amounts due or to become due under any such contract, agreement, instrument or indenture shall not be
Excluded Property to the extent that any of the foregoing is (or if it contained a provision limiting the transferability or pledge thereof would be) subject to Section 9-406 of the
Code); provided, however, that, notwithstanding the foregoing, at such time as such Affected Collateral is no longer subject to such prohibition, such right of termination or such consent requirement,
as the case may be, such Affected Collateral shall (without any act or delivery by any Person) constitute Collateral hereunder; 

        (iii)  35%
of each class of the issued and outstanding voting Capital Stock of any Foreign Subsidiary owned by any Grantor, if and solely to the extent that the grant of a
Lien herein in the Capital Stock
of such Foreign Subsidiary would constitute an investment of earnings in United States property under Section 956 (or a successor provision) of the Internal Revenue Code, which investment would
trigger any increase in the gross income of a United States shareholder of such Grantor pursuant to Section 951 (or a successor provision) of the Internal Revenue Code (it being understood and
agreed that the remaining 65% of each class of the issued and outstanding voting Capital Stock of each such Foreign Subsidiary and all non voting Capital Stock of each such Foreign Subsidiary shall
constitute Collateral hereunder owned by any Grantor); 

        (iv)  as
long as Westaff Support is prohibited from pledging the Capital Stock of Westaff (Australia) Pty Limited pursuant to a subordinated deed in favor of the lender to
Westaff Australia Pty Limited, the Capital Stock of Westaff Australia, provided that the Collateral shall, automatically and without further action, include 65% of Capital Stock of Westaff Australia
upon the termination, extinguishment or other removal of such prohibition; 

         (v)  any
indebtedness or obligations owing by Westaff (Australia) Pty Limited to any Grantor; and 

        (vi)  any
Permit now or hereafter acquired or held by any Grantor, together with all amendments, modifications, extensions, renewals and replacements of any thereof, solely
to the extent the granting of a security interest therein in favor of Lender would be prohibited by applicable law and such prohibition is not otherwise ineffective as a matter of law; provided,
however, that at such time as such Permit is no longer subject to such prohibition, such Permit shall (without any act or delivery by any Person) constitute Collateral hereunder. 

        "Foreign Subsidiary" means any Subsidiary that is not a Domestic Subsidiary and shall include Westaff NZ Limited, Westaff (Australia) Pty
Limited and Westaff (Singapore) Limited). 

        "Governmental Authority" means any nation or government, any state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, government or any agency or instrumentality thereof (including any central bank). 

        "Government Contracts" means each of the contracts entered into by any Grantor with Government Authorities, as such contracts may be
amended, restated, replaced, extended or reaffirmed from time to time. 

        "Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment, deposit arrangement, charge, security interest, encumbrance,
lien (statutory or other), or any preference, priority or other security agreement or any preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title
retention agreement, any lease deemed under the UCC to be intended for security, and the authorized filing by or against a Person as debtor of any financing statement under the UCC or comparable law
of any jurisdiction). 

3

 

        "Permit" means any and all permits, certificates, approvals, authorizations, consents, licenses, variances, franchises or other
instruments, however characterized, of any Governmental Authority (or any Person acting on behalf of a Government Authority). 

        "Permitted Lien" means the Lien granted to the Senior Lender, any Lien granted to a subordinate lender pursuant to  Section 2.7 of the Loan Agreement, and any other
Lien permitted or allowed under the Senior Loan Agreement, including but not limited to the
Liens granted hereunder. 

        "Person" means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, limited
liability company, corporation, institution, entity, party or Governmental Authority. 

        "Surety Account" means that certain U.S. Bank National Association Account no. 98554000 which has been pledged by Westaff (USA) to
the Washington State Department of Labor and Industries as security for providing workers' compensation benefits and assessments in the event of default by the self insurer. 

        "Westaff Australia" means Westaff (Australia) Pty Limited. 

        1.2    Other Definitional Provisions; Construction.    Unless otherwise specified, 

          (i)  As
used in this Agreement, accounting terms relating to Grantors not defined in this Agreement have the respective meanings given to them in accordance with GAAP. 

         (ii)  The
definition of any document, instrument or agreement includes all schedules, attachments and exhibits thereto and all renewals, extensions, supplements, restatements
and amendments thereof. All Exhibits and Schedules attached to this Agreement are incorporated into, made and form an integral part of this Agreement for all purposes. 

        (iii)  "Hereunder,"
"herein," "hereto," "this Agreement" and words of similar import refer to this entire document; "including" is used by way of illustration and not by way
of limitation, unless the context clearly indicates the contrary; the singular includes the plural and conversely; and any action required to be taken by Grantors is to be taken promptly, unless the
context clearly indicates the contrary. 

        (iv)  All
of the uncapitalized terms contained in this Agreement which are now or hereafter defined under the Code will, unless the context indicates otherwise, have the
meanings provided for now or hereafter in the Code. 

2.    GRANT OF SECURITY INTEREST; SET-OFF AND RELATED MATTERS.    

        2.1    Security Interest.    As security for the full, prompt and complete payment and performance by each Grantor of
its respective obligations under the Loan Agreement and the other Loan Documents, including, without limitation, the joint and several obligations of Grantors under the Loan Agreement (collectively,
for purposes of this Agreement, the "Obligations"), each Grantor hereby grants to, and creates in favor of Lender, for the benefit of Lender, a
continuing security interest in, and Lien on, all of the Collateral subject to the terms of the Intercreditor Agreement. 

        2.2    Government Contracts.    In addition to, and without limiting any of the foregoing, in order to support the
payment and performance of the Obligations and subject to the terms of the Intercreditor Agreement and the rights of the Senior Lender therein, and until the full repayment of the Note, each Grantor
hereby absolutely assigns, sells and transfers to Lender, for benefit of the Lender, all claims and moneys due or to become due under the Government Contracts, and agrees that all payments due or to
become due under the Government Contracts shall be made to and at the direction of Lender. 

4

 

3.    PERFECTION OF LENDER'S SECURITY INTEREST; DUTY OF CARE.    

        3.1    Required Grantor Actions.    Until the termination of this Agreement and subject to the terms of the
Intercreditor Agreement and the rights of the Senior Lender in and to the Collateral, each Grantor shall perform any and all steps and take all actions reasonably requested by Lender from time to time
to perfect, maintain, protect, and enforce Lender's security interest in, and Lien on, the Collateral, including (i): executing and delivering all appropriate documents and instruments as Lender may
determine are necessary or reasonably desirable to perfect, preserve, or enforce Lender's interest in the Collateral, all in form and substance satisfactory to Lender, (ii) delivering to Lender
any warehouse receipts or other documents of title covering that portion of the Collateral which may be located in
warehouses and in respect of which warehouse receipts are issued, (iii) upon the occurrence and the continuance of any Event of Default, transferring inventory to warehouses approved by Lender,
(iv) placing notations on such Grantor's books of account to disclose Lender's security interest and Lien therein, and (v) taking such other steps and actions as deemed necessary or
reasonably desirable by Lender to perfect and enforce Lender's security interest in, and Lien on, and other rights and interests in, the Collateral; provided
that, in no case shall any Grantor be required to: (i) obtain a bailee letter agreement or financing agreement with regard to Collateral that is subject to such a bailee
letter or financing agreement in favor of the Senior Lender or that is otherwise having a value less $100,000 individually or $250,0000 in the aggregate which is in the possession or control of any
warehouseman or any of Grantor's consignees, agents, processors, customers or other bailees, (ii) deliver a control agreement with regard to Collateral in any deposit, investment or securities
accounts which are subject to a control agreement in favor of the Senior Lender to that otherwise have a balance of less than $25,000 (or $750,000 with respect to the Surety Account), or in the
aggregate have balances of less than $250,000 (excluding the $750,000 maintained in the Surety Account) and (iii) deliver any promissory notes or tangible chattel paper evidencing obligations
owing to such Grantor that have been delivered to the Senior Lender or that otherwise are in an amount less than $100,000 (individually or as part of a series of related transactions) or which
consists of Excluded Property. 

        3.2    Financing Statements; Notices.    Each Grantor hereby irrevocably authorizes Lender at any time and from time
to time to file in any filing office in any jurisdiction any initial financing statements and amendments thereto that (a) indicate the Collateral (i) as all assets of such Grantor,
whether now owned or hereafter acquired or arising, and all proceeds and products thereof, (ii) as being of an equal or lesser scope or with greater detail, and (b) provide any other
information required by Part 5 of Article 9 of the Uniform Commercial Code as enacted in any jurisdiction for the sufficiency or filing office acceptance of any financing statement or
amendment, including whether such Grantor is an organization, the type of organization and any organizational identification number issued to such Grantor. Each Grantor hereby irrevocably authorizes
Lender at any time and from time to time to correct or complete, or to cause to be corrected or completed, any financing statements, continuation statements or other such documents as have been filed
naming such Grantor as debtor and Lender as secured party. Each Grantor agrees to furnish any such information to Lender promptly upon request. At Lender's request and in accordance with the terms of
the Intercreditor Agreement, each Grantor will execute notices appropriate under any applicable requirements of law that Lender deems desirable to evidence, perfect, or protect its security interest
in and other Liens on the Collateral in such form(s) as are satisfactory to Lender. Each Grantor, jointly and severally, agrees to pay the cost of filing all financing statements and other notices in
all public offices where filing is deemed by Lender to be necessary or desirable to perfect, protect or enforce the security interest and Lien granted to Lender hereunder. A carbon, photographic,
photostatic or other reproduction of this Agreement or of a financing statement is sufficient as a financing statement. Lender is hereby authorized to give notice to any creditor, landlord or any
other Person as maybe necessary or desirable under applicable laws to evidence, protect, perfect, or enforce the security interest and Lien granted to Lender in the Collateral. 

5

 

        3.3    Impositions; Protection of Lender's Interests.    To protect, perfect, or enforce, from time to time, Lender's
rights or interests in the Collateral, Lender may, in its discretion (but without any obligation
to do so) and in accordance with the terms of the Intercreditor Agreement, (i) discharge any Liens (other than Permitted Liens) which are levied or placed on the Collateral after the date
hereof, (ii) pay any insurance to the extent any Grantor has failed to timely pay the same, (iii) if determined by the Lender, in its reasonable judgment, to be necessary to protect the
Collateral, maintain guards where any Collateral is located if an Event of Default has occurred and is continuing, and (iv) obtain any record from any service bureau and pay such service bureau
the cost thereof. All costs and expenses incurred by Lender in exercising its discretion under this Section 3.3 will be part of the Obligations,
payable on Lender's demand and secured by the Collateral. 

        3.4    Lender's Duty of Care.    Lender shall have no duty of care with respect to the Collateral except that Lender
shall exercise reasonable care with respect to the Collateral in Lender's custody. Lender shall be deemed to have exercised reasonable care if (i) such property is accorded treatment
substantially equal to that which Lender accords its own property or (ii) Lender takes such action with respect to the Collateral as the applicable Grantor shall reasonably request in writing.
Lender will not be deemed to have, and nothing in this Section 3.4 may be construed to deem that Lender has, failed to exercise reasonable care
in the custody or preservation of Collateral in its possession merely because either (a) Lender failed to comply with any request of any Grantor or (b) Lender failed to take steps to
preserve rights against any Persons in such property. Each Grantor agrees that Lender has no obligation to take steps to preserve rights against any prior parties. 

        3.5    Verification.    After the occurrence and during the continuance of any Event of Default, Lender, in its own
name or in the name of others, may periodically communicate with each Grantor's account debtors, customers and other obligors to verify with them, to Lender's satisfaction, the existence, amount and
terms of any sums owed by such account debtors, customers or other obligors to each Grantor and the nature of any such account debtor's, customer's or other obligor's relationship with such Grantor. 

        3.6    Electronic Chattel Paper and Transferable Records.    From and after the date of the repayment in full of all
indebtedness and other obligations owing to the Senior Lender, if any Grantor at any time holds or acquires an interest in any electronic chattel paper or any "transferable record," as that term is
defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant
jurisdiction, such Grantor shall promptly notify Lender thereof and, at the request and option of Lender, shall take such action as Lender may reasonably request to vest in Lender control, under
Section 9-105 of the Uniform Commercial Code, of such electronic chattel paper or control under Section 201 of the Federal Electronic Signatures in Global and National
Commerce Act or, as the case may be, Section 16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record. 

        3.7    Letter of Credit Rights.    From and after the date of the repayment in full of all indebtedness and other
obligations owing to the Senior Lender , if any Grantor is at any time now or hereafter a beneficiary under a letter of credit having a face amount in excess of $100,000, such Grantor shall promptly
notify Lender thereof and, at the request and option of Lender, such Grantor shall, pursuant to an agreement in form and substance satisfactory to Lender, either, at the option of Lender,
(i) arrange for the issuer and any confirmed or other nominated person of such letter of credit to consent to an assignment to
Lender of the proceeds of the letter of credit or (ii) arrange for Lender to become the beneficiary of the letter of credit. 

        3.8    Commercial Tort Claims.    If any Grantor shall at any time hold or acquire a commercial tort claim for an
asserted amount in excess of $100,000, such Grantor shall promptly notify Lender in a writing signed by such Grantor of the particulars thereof and grant to Lender in such writing a security 

6

 

interest
therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Lender. 

4.    POWER OF ATTORNEY.    

        4.1    Grant of Power.    Subject to the terms of the Intercreditor Agreement, each Grantor does hereby severally
make, constitute and appoint Lender (or any officer or agent of Lender) as such Grantor's true and lawful attorney-in-fact, with full power of substitution, in the name of such
Grantor or in the name of Lender or otherwise, for the use and benefit of Lender, but at the joint and several cost and expense of Grantors, (i) to endorse the name of such Grantor on any
instruments, notes, checks, drafts, money orders, or other media of payment (including payments payable under any policy of insurance on the Collateral) or Collateral that may come into the possession
of Lender or any affiliate of Lender in full or part payment of any of the Obligations; (ii) upon the occurrence and during the continuance of any Event of Default, to sign and indorse the name
of such Grantor on any invoice, freight or express bill, bill of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications and notices in connection with any
Collateral, and any instrument or document relating thereto or to any of such Grantor's rights therein; (iii) to file financing statements pursuant to the Code and other notices appropriate
under applicable law as Lender deems necessary to perfect, preserve, and protect Lender's rights and interests under this Agreement; (iv) after an Event of Default has occurred and is
continuing, to give written notice to the United States Post Office to effect change(s) of address so that all mail addressed to such Grantor may be delivered directly to Lender; and (v) to do
any and all things necessary or desirable to perfect Lender's security interest in, and Lien on, and other rights and interests in, the Collateral, to preserve and protect the Collateral and to
otherwise carry out this Agreement. 

        4.2    Duration; Ratification of Acts.    This power of attorney, being coupled with an interest, will be irrevocable
for the term of this Agreement and all transactions under this Agreement and thereafter until the Obligations have been paid in full. Each Grantor jointly and severally ratifies and approves all acts
of such attorney, and neither Lender nor its attorney will be liable for any acts or omissions or for any error of judgment or mistake of factor law, other than as results from such Person's own gross
negligence or willful misconduct. Each Grantor shall execute and deliver promptly to Lender all instruments necessary or desirable, as determined in Lender's discretion, to further Lender's exercise
of the rights and powers granted it in this Section 4.  

5.    WARRANTIES AND REPRESENTATIONS.    To induce Lender to make the Loan pursuant to the Loan Documents,
each Grantor severally represents to Lender that the following statements are, and will continue throughout the term of this Agreement to be, true: 

        5.1    Jurisdiction of Organization; Places of Business, etc.    Such Grantor's (i) jurisdiction of
organization is the jurisdiction identified on Exhibit 5.1, (ii) exact legal name is as set forth in the first paragraph of this Agreement
(as may be updated from time to time as provided in Section 6.2), (iii) chief executive office and principal place of business are set
forth on Exhibit 5.1 (as may be updated from time to time as provided in Section 6.2),
(iv) offices or locations where such Grantor keeps the Collateral (except for inventory in transit) or conducts any of its business are listed on Exhibit 5.1  (as may be updated from time to
time as provided in Section 6.2), and (vi) organizational identification number in
its jurisdiction of organization is identified on Exhibit 5.1.  

        5.2    Instruments.    Exhibit 5.2
lists all of such Grantor's rights, titles or interests in, or with respect to, any instruments, including promissory notes having an outstanding or committed principal amount in excess of $100,000,
as of the date of this Agreement. 

        5.3    State of Title.    Such Grantor has good and marketable title to, and ownership of, all the Collateral not
owned by the other Grantors, free and clear of all Liens except to the extent, if any, of the Liens in favor the Senior Lender and Permitted Liens. 

7

 

  
6.    COLLATERAL COVENANTS.    Until the Obligations are fully paid, performed and satisfied and this Agreement is terminated and in
accordance with terms of the Intercreditor Agreement, each Grantor shall: 

        6.1    Claims Against Collateral.    Maintain the Collateral, as the same is constituted from time to time, free and
clear of all Liens, except to the extent, if any, of the Permitted Liens, and defend or cause to be defended the Collateral against all of the claims and demands of all Persons whomsoever (except to
the extent, if any, of the Permitted Liens). 

        6.2    Notice of Change in Place of Business; Names, etc.    (i) Give Lender at least 30 Business Days advance notice
in writing of any change in any Grantor's (a) chief executive office or (b) exact legal name as set forth in the first paragraph of this Agreement, and (ii) not, without the prior
written consent of Lender, change Grantor's jurisdiction of organization. 

        6.3    Notice of Adverse Information.    Promptly notify Lender in writing of any Lien or claim known to the Grantors
which could reasonably be expected to materially and adversely affect the value of any material portion of the Collateral or the rights of Lender with respect thereto. 

        6.4    Equipment.    Maintain the equipment in good operating condition and repair in accordance with the Grantors'
standard business practice, ordinary wear and tear excepted. 

        6.5    Insurance.    Insure the Collateral in accordance with the Senior Loan Agreement. 

        6.6    No Liens.    Not create or permit to be created or to exist any Lien on any of the Collateral except to the
extent, if any, of the Permitted Liens. 

7.    TERM.    Subject to Section 11.6 below, this Agreement will terminate
on the payment in full of the Obligations under the Note and under the Loan Agreement. 

8.    LENDER'S RIGHTS AND REMEDIES.    

        8.1    Remedies.    Subject to the terms of the Intercreditor Agreement, (i) On the occurrence and during the
continuance of an Event of Default and after the lapse of any applicable period of cure, if any, Lender may immediately, at any time, while such Event of Default is continuing, take anyone or more of
the following actions, without notice, demand or legal process of any kind (except as may be required by law), all of which each Grantor waives to the fullest extent permitted by law: 

        (a)   proceed
to enforce payment of the Obligations and to exercise all of the rights and remedies afforded to Lender by the Uniform Commercial Code as enacted in any
jurisdiction, under the terms of the Loan Documents and by law and in equity provided, including those set forth below in this Section 8.1; 

        (b)   take
possession of the Collateral and maintain such possession on any Grantor's premises at no cost to Lender, or remove the Collateral, or any part thereof, to such
other place(s) as Lender may desire; 

        (c)   enter
on any premises on which the Collateral, or any part or records thereof, may be situated and remove the same therefrom, for which action no Grantor shall assert
against Lender any claim for trespass, breach of the peace or similar claim and no Grantor shall hinder Lender's efforts to effect such removal; 

        (d)   require
Grantors, at their joint and several cost, to assemble the Collateral and make it available at a place designated by Lender; 

        (e)   collect,
compromise, take, sell or otherwise deal with the Collateral and proceeds thereof in its own name or in the name of any Grantor, including (l) bringing
suit on anyone or more of the accounts, chattel paper, instruments, documents, leases or other agreements (collectively, "Contracts") in the name of any
Grantor or Lender, and exercise all such other rights respecting 

8

 

the
Contracts, in the name of any Grantor or Lender, including the right to accelerate or extend the time of payment, settle, release in whole or in part any amounts owing on any Contract and issue
credits in the name of any Grantor or Lender, and including proceeding against any collateral or security provided in respect of any Contract and (2) bringing suit on any one or more of the
general intangibles, in the name of any Grantor or Lender, and exercise all such other rights respecting the general intangibles, including the right to accelerate or extend the time of payment,
settle, release in whole or in part any amounts owing on any general intangible and issue credits in the name of any Grantor or Lender, and including proceeding against any collateral or security
provided in respect of any general intangible; 

        (f)    sell
part or all of the Collateral at public or private sale(s), for cash, upon credit or otherwise, at such prices and upon such terms as Lender deems advisable, at
Lender's discretion, and Lender may, if Lender deems it reasonable, postpone or adjourn any sale of the Collateral from time to time by an announcement at the time and place of sale or by announcement
at the time and place of such postponed or adjourned sale, without being required to give a new notice of sale, and without being obligated to make any sale of the Collateral regardless of notice of
sale having been given; 

        (g)   to
the extent Lender has not so acted or is currently so acting pursuant to the other terms of this Agreement, notify any Grantor's customers, account debtors and any
other Persons (1) obligated on the Collateral to make payment or otherwise render performance to or for the benefit of Lender and (2) that, without limiting the generality of
clause (1), the Contracts and general intangibles have been assigned to Lender and that payments should be made directly to Lender; 

        (h)   require
any Grantor, using such form as Lender may approve, to notify such Grantor's customers, account debtors and any other Persons, and to indicate on all of any such
Grantor's correspondence to such customers, account debtors and other Persons, that the Contracts and general intangibles must be paid to Lender directly; 

        (i)    sign
any endorsements, assignments or other writings of conveyance or transfer in connection with any disposition of the Collateral; 

        (j)    sell,
assign, transfer or otherwise dispose of all or any part of the Collateral in any manner permitted by law and do any other thing and exercise any other right or
remedy which Lender may, with or without judicial process, do or exercise under applicable law, and in any such sale Lender may sell,
assign, transfer or otherwise dispose of all or any part of the Collateral without giving any warranties and Lender may specifically disclaim any warranties of title and the like; 

        (k)   apply
for and have a receiver appointed under state or federal law by a court of competent jurisdiction in any action taken by Lender to enforce its rights and remedies
under this Agreement and, as applicable, the other Loan Documents in order to manage, protect, preserve, and sell and otherwise dispose of all or any portion of the Collateral and continue the
operation of the business of any Grantor, and to collect all revenues and profits thereof and apply the same to the payment of all expenses and other charges of such receivership, including the
compensation of the receiver, and to the payment of the Obligations until a sale or other disposition of such Collateral is finally made and consummated; 

        (l)    enforce
the obligations of an account debtor or other Person obligated on collateral and exercise the rights of the debtor with respect to the obligation of the account
debtor or other Person obligated on collateral to make payment or otherwise render performance to any Grantor, and with respect to any property that secures the obligations of the account debtor or
other Person 

9

 

obligated
on collateral, in any case directly or through collection agencies or other collection specialists; and 

        (m)  without
limiting the provisions of Section 2.3 above, apply (or instruct another Person to apply) to the
Obligations the balance of any deposit account that is part of the Collateral. 

        (n)   Each
Grantor acknowledges that portions of the Collateral could be difficult to preserve and dispose of and be further subject to complex maintenance and management.
Accordingly, Lender, in exercising its rights under this Section 8.1, shall have the widest possible latitude to preserve and protect the
Collateral and Lender's security interest in and lien thereon. Moreover, each Grantor acknowledges and agrees that Lender shall have no obligation to, and each Grantor hereby waives to the fullest
extent permitted by law any right that it may have to require Lender to (i) clean up or otherwise prepare any of the Collateral for sale, (ii) pursue any Person to collect any of the
Obligations or (iii) exercise collection remedies against any Persons obligated on the Collateral. Lender's compliance with applicable local, state or federal law requirements, in addition to
those imposed by the Uniform Commercial Code as enacted in any jurisdiction, in connection with a disposition of any or all of the Collateral will not be considered to adversely affect the commercial
reasonableness of any disposition of any or all of the Collateral under the Uniform Commercial Code as enacted in any jurisdiction. 

        8.2    Notice of Disposition; Allocations.    If any notice is required by law to effectuate any sale or other
disposition of the Collateral, (i) Lender will give the applicable Grantor(s) written notice of the time and place of any public sale or of the time after which any private sale or other
intended disposition thereof will be made, and at any such public or private sale, Lender may purchase all or any of the
Collateral; and (ii) Lender and each Grantor agree that such notice will not be unreasonable as to time if given in compliance with this Agreement ten days prior to any sale or other
disposition. The proceeds of the sale will be applied first to all costs and expenses of such sale including attorneys' fees and other costs and expenses, and second to the payment of all Obligations
in the manner and order determined by Lender in its discretion. Each Grantor shall remain jointly and severally liable to Lender and the Lenders for any deficiency. Unless otherwise directed by law,
Lender will return any excess to Grantors. 

        8.3    Payment of Expenses.    Grantors shall, jointly and severally, pay to Lender, on its demand, all costs and
expenses, including court costs, attorneys' fees and costs of sale, incurred by Lender in exercising any of its rights or remedies hereunder, all of which constitute part of the Obligations and are
secured by the Collateral. 

9.    INDEMNIFICATION.    In consideration of the execution and delivery of the Loan Agreement and the making of the Loan to
Grantors, each Grantor agrees, jointly and severally, to indemnify and hold Lender and each of Lender's directors, affiliates and agents (for the purposes of this  Section 9 each is an "Indemnified Party") harmless from and against any and all claims, losses,
obligations and liabilities arising out of or resulting from any or all of (i) this Agreement and (ii) the transactions contemplated by this Agreement (including enforcement of this
Agreement), except for claims, losses or liabilities to the extent resulting from an Indemnified Party's gross negligence or willful misconduct. The indemnification provided for in this  Section 9
is in addition to, and not in limitation of, any other indemnification or insurance provided by any Grantor to Lender. 

10.    NOTICE.    Any notice, certificate, request, notification and other communication required, permitted or contemplated
hereunder must be in writing and given in accordance with Section 6.10 of the Loan Agreement. 

10

 

11.    GENERAL.    

        11.1    Severability.    If any term of this Agreement is found invalid under California law or other laws of
mandatory application by a court of competent jurisdiction, the invalid term will be considered excluded from this Agreement and will not invalidate the remaining terms of this Agreement. 

        11.2    GOVERNING LAW.    THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS
OF THE STATE OF CALIFORNIA (WITHOUT REGARD TO CALIFORNIA CONFLICTS OF LAW PRINCIPLES). 

        11.3    Survival and Continuation of Representations and Warranties.    All of each Grantor's representations and
warranties contained in this Agreement shall (i) survive the execution, delivery and acceptance hereof by the parties hereto and the closing of the transactions described herein or related
hereto and (ii) shall be brought down from time to time as provided in the Loan Agreement. 

        11.4    Lender's Additional Rights Regarding Collateral.    All of the Obligations shall constitute one obligation
secured by all of the Collateral. In addition to Lender's other rights and remedies under the Loan Documents, Lender may, in its discretion exercised in good faith, following the occurrence and during
the continuance of any Event of Default, but subject to the terms of the Intercreditor Agreement: (i) exchange, enforce, waive or release any of the Collateral or portion thereof,
(ii) apply the proceeds of the Collateral against the Obligations and direct the order or manner of the liquidation thereof (including any sale or other disposition), as Lender may, from time
to time, in each instance determine, and (iii) settle, compromise, collect or otherwise liquidate any such security in any manner without affecting or impairing its right to take any other
further action with respect to any security or any part thereof. 

        11.5    Application of Payments; Revival of Obligations.    Lender shall have the continuing right to apply or reverse
and reapply any payments to any portion of the Obligations. To the extent any Grantor makes a payment or payments to Lender or Lender receives any payment or proceeds of the Collateral or any other
security for any Grantor's benefit, which payment(s) or proceeds or any part thereof are subsequently voided, invalidated, declared to be fraudulent or preferential, set aside or required to be repaid
to a trustee; receiver or any other party under any bankruptcy act, state or federal law, common law or equitable cause, then, to the extent of such payment(s) or proceeds received, the Obligations or
part thereof intended to be satisfied shall be revived and shall continue in full force and effect, as if such payment(s) or proceeds had not been received by Lender. 

        11.6    Additional Waivers by Grantors.    Each Grantor waives presentment and protest of any instrument and notice
thereof, and, except as expressly provided in the Loan Documents, demand, notice of default and all other notices to which such Grantor might otherwise be entitled. No Grantor shall assert any claim
against Lender on any theory of liability for consequential, special, indirect or punitive damages. 

        11.7    Equitable Relief.    Each Grantor recognizes that, in the event any Grantor fails to perform, observe or
discharge any of its obligations or liabilities under this Agreement, any remedy of law may prove to be inadequate relief to Lender; therefore, each Grantor agrees that Lender, if Lender so requests,
shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages. 

        11.8    Entire Agreement; Counterparts; Fax Signatures.    This Agreement and the other Loan Documents set forth the
entire agreement of the parties with respect to subject matter of this Agreement and supersede all previous understandings, written or oral, in respect thereof. Any request from time to time by any
Grantor for Lender's consent under any provision in the Loan Documents must be in writing, and any consent to be provided by Lender under the Loan Documents from time to time must be in writing in
order to be binding on Lender; however, Lender will have no obligation to provide any consent requested by any Grantor, and Lender may, for any reason in its discretion 

11

 

exercised
in good faith, elect to withhold the requested consent. Two or more duplicate originals of this Agreement may be signed by the parties, each of which shall be an original but all of which
together shall constitute one and the same instrument. Any documents delivered by, or on behalf of, any Grantor by fax transmission (i) may be relied on by Lender as if the document were a
manually signed original and (ii) will be binding on such Grantor for all purposes of the Loan Documents. 

        11.9    Headings.    Section headings in this Agreement are included for convenience of reference only and shall not
relate to the interpretation or construction of this Agreement. 

        11.10    Cumulative Remedies.    The remedies provided in this Agreement and the other Loan Documents are cumulative
and not exclusive of any remedies provided by law. Exercise of one or more remedy(ies) by Lender does not require that all or any other remedy(ies) be exercised and does not preclude later exercise of
the same remedy. 

        11.11    Waivers and Amendments in Writing.    Failure by Lender to exercise any right, remedy or option under this
Agreement or in any Loan Documents or delay by Lender in exercising the same shall not operate as a waiver by Lender of its right to exercise any such right, remedy or option. No waiver by Lender
shall be effective unless it is in writing and then only to the extent specifically stated. This Agreement may only be amended, modified, supplemented or restated in a writing signed by Lender and
each Grantor affected thereby and may not be amended, modified, supplanted or otherwise changed orally. 

        11.12    Recourse to Directors or Officers.    The obligations of each party under this Agreement are solely the
corporate obligations of each party. No recourse shall be had for any obligation or claim arising out of or based upon this Agreement against any stockholder, employee, officer, or director of each
party. 

        11.13    Assignment.    Lender shall have the right to assign this Agreement and the other Loan Documents in
accordance with Section 6.1 of the Loan Agreement. No Grantor may assign, transfer or otherwise dispose of any of its rights or obligations
hereunder, by operation of law or otherwise, and any such assignment, transfer or other disposition without Lender's written consent shall be void. All of the rights, privileges, remedies and options
given to Lender under the Loan Documents shall inure to the benefit of the successors and assigns of Lender, and all the terms, conditions, covenants, provisions and
warranties herein shall inure to the benefit of and bind the permitted successors and assigns of each Grantor and Lender, respectively. 

        11.14    Conflict.    If there is any conflict, ambiguity, or inconsistency, in Lender's judgment, between the terms
of this Agreement and any of the other Loan Documents, then the applicable terms and provisions, in Lender's judgment, providing Lender with greater rights, remedies, powers, privileges, or benefits
will control. 

        11.15    WAIVER OF JURY TRIAL.    AS A SPECIFICALLY BARGAINED INDUCEMENT FOR LENDER TO ENTER INTO THIS AGREEMENT AND
FOR TE LENDERS AND THE OTHER SECURED PARTIES TO EXTEND CREDIT TO GRANTORS, EACH GRANTOR AND LENDER EACH WAIVES TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING IN RESPECT OF OR
ARISING OUT OF THIS AGREEMENT OR THE CONDUCT OF THE RELATIONSHIP BETWEEN LENDER AND GRANTORS. 

        11.16    Release of Lien.    Notwithstanding anything to the contrary contained herein or in any Loan Document, the
Lender agrees that, (a) upon the repayment in full of the Obligations of the Grantors under the Loan Agreement and the Note, the Lender shall take all such actions and execute all such releases
as are requested by the Grantors (at the Grantors' expense) to release the Lender's Lien upon the Collateral; and (b) any sale or transfer of assets of any Grantor permitted under the terms of
the Senior Loan Agreement or otherwise permitted by the Senior Lender shall be made free and clear of the Lender's Lien, and the Lender shall take all such actions and execute all such releases as are
requested by the Grantors (at the Grantors' expense) to release the Lender's Lien upon the Collateral that is subject to such sale. 

        [SIGNATURES ARE ON THE FOLLOWING PAGE]

12

 

        IN
WITNESS WHEREOF, this Agreement has been duly executed by each of the undersigned as of the date first set forth above in the preamble to this Agreement. 

							
	 	 	 	 	 GRANTORS:	 	 
	

 	
 	
 	
 	
WESTAFF (USA), INC., a California corporation
	

 	
 	
 	
 	
By:	
 	
/s/ Christa C. Leonard

 
	 	 	 	 	Printed Name:	 	Christa C. Leonard

 
	 	 	 	 	Title:	 	Chief Financial Officer

 
	

 	
 	
 	
 	
WESTAFF, INC., a Delaware corporation
	

 	
 	
 	
 	
By:	
 	
/s/ Christa C. Leonard

 
	 	 	 	 	Printed Name:	 	Christa C. Leonard

 
	 	 	 	 	Title:	 	Chief Financial Officer

 
	

 	
 	
 	
 	
WESTAFF SUPPORT, INC.,

a California corporation
	

 	
 	
 	
 	
By:	
 	
/s/ Christa C. Leonard

 
	 	 	 	 	Printed Name:	 	Christa C. Leonard

 
	 	 	 	 	Title:	 	Chief Financial Officer

 
	

 	
 	
 	
 	
MEDIAWORLD INTERNATIONAL,

a California corporation
	

 	
 	
 	
 	
By:	
 	
/s/ Christa C. Leonard

 
	 	 	 	 	Printed Name:	 	Christa C. Leonard

 
	 	 	 	 	Title:	 	Chief Financial Officer

 
	
 LENDER:	
 	

 	
 	

 	
 	

 
	
DELSTAFF, LLC,

a Delaware limited liability company	
 	

 	
 	

 
	
By:	
 	
/s/ Michael Phillips

 	
 	

 	
 	

 
	Printed Name:	 	Michael Phillips

 	 	 	 	 
	Title:	 	Manager

 	 	 	 	 

13

QuickLinks

Exhibit 10.8.39

SECURITY AGREEMENT

RECITALS

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00152-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00152-of-00352.parquet"}]]