SECURITY AGREEMENT

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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

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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).

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        " 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.

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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.

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        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 Le