WESTAFF INC
EXHIBIT 10.8.39
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<TYPE>EX-10.8.39
<SEQUENCE>7
<FILENAME>a2190562zex-10_839.htm
<DESCRIPTION>EXHIBIT 10.8.39
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<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><A
NAME="km17603_exhibit_10.8.39"> </A>
<A NAME="toc_km17603_1"> </A>
<BR></FONT><FONT SIZE=2><B>  Exhibit&nbsp;10.8.39    <BR>    </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="km17603_security_agreement"> </A>
<A NAME="toc_km17603_2"> </A></FONT> <FONT SIZE=2><B>  SECURITY AGREEMENT    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS SECURITY AGREEMENT (this "</FONT><FONT SIZE=2><I>Agreement</I></FONT><FONT SIZE=2>"), dated as of August&nbsp;25, 2008, is
entered into by and among DELSTAFF,&nbsp;LLC, a Delaware limited liability company ("</FONT><FONT SIZE=2><I>Lender</I></FONT><FONT SIZE=2>"), WESTAFF (USA),&nbsp;INC., a California corporation
("</FONT><FONT SIZE=2><I>Westaff (USA)</I></FONT><FONT SIZE=2>"), WESTAFF,&nbsp;INC., a Delaware corporation ("</FONT><FONT SIZE=2><I>Westaff</I></FONT><FONT SIZE=2>"), WESTAFF
SUPPORT,&nbsp;INC., a California corporation ("</FONT><FONT SIZE=2><I>Westaff Support</I></FONT><FONT SIZE=2>"), and MEDIAWORLD INTERNATIONAL, a California corporation
("</FONT><FONT SIZE=2><I>MediaWorld</I></FONT><FONT SIZE=2>"; and together with Westaff (USA), Westaff and Westaff Support, each is individually from time to time is referred to herein as a
"</FONT><FONT SIZE=2><I>Grantor</I></FONT><FONT SIZE=2>" and collectively as "</FONT><FONT SIZE=2><I>Grantors</I></FONT><FONT SIZE=2>"), with reference to the following facts: </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="km17603_recitals"> </A>
<A NAME="toc_km17603_3"> </A>
<BR></FONT><FONT SIZE=2><B>  RECITALS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;&nbsp;&nbsp;&nbsp;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
"</FONT><FONT SIZE=2><I>Loan Agreement</I></FONT><FONT SIZE=2>") 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 "</FONT><FONT SIZE=2><I>Loan</I></FONT><FONT SIZE=2>") to Grantors. Any capitalized term used but not defined herein shall have the meaning ascribed thereto in the Loan Agreement. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D.&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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: </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>1.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;DEFINITIONS.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Defined Terms</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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: </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Capital Stock</I></FONT><FONT SIZE=2>" 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&nbsp;3a11-1 of the Rules and Regulations promulgated by the
Securities and Exchange Commission (17 C.F.R. &sect;&nbsp;240.3a11-1) under the Securities and Exchange Act of 1934, as amended). </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Code</I></FONT><FONT SIZE=2>" 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. </FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_km17603_1_2"> </A>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Collateral</I></FONT><FONT SIZE=2>" 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: </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;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; </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;all
of such Grantor's right, title and interest in and to the commercial tort claims; </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;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)&nbsp;all of such Grantor's money, cash, and other funds; (b)&nbsp;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)&nbsp;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)&nbsp;all of such Grantor's franchises, customer lists, insurance refunds; insurance refund claims, tax refunds, tax refund claims, pension plan refunds, pension plan reversions; </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;&nbsp;all
supporting obligations; </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;&nbsp;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 </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)&nbsp;&nbsp;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. </FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Domestic Subsidiary</I></FONT><FONT SIZE=2>" means any Subsidiary that is organized under the laws of the United States or any State or other political
subdivision of the United States. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Excluded Property</I></FONT><FONT SIZE=2>" means collectively, </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;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; </FONT><FONT SIZE=2><I>provided</I></FONT><FONT SIZE=2>, </FONT> <FONT SIZE=2><I>however</I></FONT><FONT SIZE=2>, 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; </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;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 "</FONT><FONT SIZE=2><I>Affected Collateral</I></FONT><FONT SIZE=2>") 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)&nbsp;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&nbsp;9-406(f), 9-407(a) or 9-408(a) of the Code), (B)&nbsp;would give any other party to such contract, agreement, instrument or indenture a legally
enforceable right to terminate its obligations thereunder or (C)&nbsp;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&nbsp;9-406(f), 9-407(a) or 9- 408(a) of the Code) and such </FONT></P>

</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>2</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_km17603_1_3"> </A>
<UL>
<BR>

<P style="font-family:times;"><FONT SIZE=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&nbsp;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; </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;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&nbsp;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&nbsp;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); </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;&nbsp;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; </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;&nbsp;any
indebtedness or obligations owing by Westaff (Australia) Pty Limited to any Grantor; and </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)&nbsp;&nbsp;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. </FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Foreign Subsidiary</I></FONT><FONT SIZE=2>" means any Subsidiary that is not a Domestic Subsidiary and shall include Westaff NZ Limited, Westaff (Australia) Pty
Limited and Westaff (Singapore) Limited). </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Governmental Authority</I></FONT><FONT SIZE=2>" 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). </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Government Contracts</I></FONT><FONT SIZE=2>" 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. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Lien</I></FONT><FONT SIZE=2>" 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). </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>3</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_km17603_1_4"> </A>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Permit</I></FONT><FONT SIZE=2>" 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). </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Permitted Lien</I></FONT><FONT SIZE=2>" means the Lien granted to the Senior Lender, any Lien granted to a subordinate lender pursuant to </FONT> <FONT SIZE=2><I>Section&nbsp;2.7</I></FONT><FONT SIZE=2> 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. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Person</I></FONT><FONT SIZE=2>" means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, limited
liability company, corporation, institution, entity, party or Governmental Authority. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Surety Account</I></FONT><FONT SIZE=2>" means that certain U.S. Bank National Association Account no.&nbsp;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. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;"</FONT><FONT
SIZE=2><I>Westaff Australia</I></FONT><FONT SIZE=2>" means Westaff (Australia) Pty Limited. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Other Definitional Provisions; Construction</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Unless otherwise specified, </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;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. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;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. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;"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. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;&nbsp;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. </FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>2.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;GRANT OF SECURITY INTEREST; SET-OFF AND RELATED MATTERS.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Security Interest</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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 "</FONT><FONT SIZE=2><I>Obligations</I></FONT><FONT SIZE=2>"), 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. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Government Contracts</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>4</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<P style="font-family:times;"><FONT SIZE=2>3.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;PERFECTION OF LENDER'S SECURITY INTEREST; DUTY OF CARE.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Required Grantor Actions</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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)&nbsp;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)&nbsp;upon the occurrence and the continuance of any Event of Default, transferring inventory to warehouses approved by Lender,
(iv)&nbsp;placing notations on such Grantor's books of account to disclose Lender's security interest and Lien therein, and (v)&nbsp;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; </FONT><FONT SIZE=2><I>provided
that</I></FONT><FONT SIZE=2>, in no case shall any Grantor be required to: (i)&nbsp;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)&nbsp;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)&nbsp;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. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Financing Statements; Notices</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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)&nbsp;indicate the Collateral (i)&nbsp;as all assets of such Grantor,
whether now owned or hereafter acquired or arising, and all proceeds and products thereof, (ii)&nbsp;as being of an equal or lesser scope or with greater detail, and (b)&nbsp;provide any other
information required by Part&nbsp;5 of Article&nbsp;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. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>5</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Impositions; Protection of Lender's Interests</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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)&nbsp;discharge any Liens (other than Permitted Liens) which are levied or placed on the Collateral after the date
hereof, (ii)&nbsp;pay any insurance to the extent any Grantor has failed to timely pay the same, (iii)&nbsp;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)&nbsp;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 </FONT><FONT SIZE=2><I>Section&nbsp;3.3</I></FONT><FONT SIZE=2> will be part of the Obligations,
payable on Lender's demand and secured by the Collateral. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Lender's Duty of Care</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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)&nbsp;such property is accorded treatment
substantially equal to that which Lender accords its own property or (ii)&nbsp;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 </FONT><FONT SIZE=2><I>Section&nbsp;3.4</I></FONT><FONT SIZE=2> 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)&nbsp;Lender failed to comply with any request of any Grantor or (b)&nbsp;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. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.5</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Verification</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.6</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Electronic Chattel Paper and Transferable Records</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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&nbsp;201 of the Federal Electronic Signatures in Global and National Commerce Act, or in Section&nbsp;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&nbsp;9-105 of the Uniform Commercial Code, of such electronic chattel paper or control under Section&nbsp;201 of the Federal Electronic Signatures in Global and National
Commerce Act or, as the case may be, Section&nbsp;16 of the Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of such transferable record. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.7</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Letter of Credit Rights</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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)&nbsp;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)&nbsp;arrange for Lender to become the beneficiary of the letter of credit. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.8</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Commercial Tort Claims</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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 </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>6</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>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. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>4.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;POWER OF ATTORNEY.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Grant of Power</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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)&nbsp;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)&nbsp;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)&nbsp;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)&nbsp;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)&nbsp;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. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Duration; Ratification of Acts</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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</FONT><FONT SIZE=2><I> Section&nbsp;4.  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>5.</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;WARRANTIES AND REPRESENTATIONS</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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: </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Jurisdiction of Organization; Places of Business, etc</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Such Grantor's (i)&nbsp;jurisdiction of
organization is the jurisdiction identified on</FONT><FONT SIZE=2><I> Exhibit&nbsp;5.1</I></FONT><FONT SIZE=2>, (ii)&nbsp;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</FONT><FONT SIZE=2><I> Section&nbsp;6.2</I></FONT><FONT SIZE=2>), (iii)&nbsp;chief executive office and principal place of business are set
forth on</FONT><FONT SIZE=2><I> Exhibit&nbsp;5.1 </I></FONT><FONT SIZE=2>(as may be updated from time to time as provided in</FONT><FONT SIZE=2><I> Section&nbsp;6.2</I></FONT><FONT SIZE=2>),
(iv)&nbsp;offices or locations where such Grantor keeps the Collateral (except for inventory in transit) or conducts any of its business are listed on</FONT><FONT SIZE=2><I> Exhibit&nbsp;5.1  </I></FONT><FONT SIZE=2>(as may be updated from time to
time as provided in</FONT><FONT SIZE=2><I> Section&nbsp;6.2</I></FONT><FONT SIZE=2>), and (vi)&nbsp;organizational identification number in
its jurisdiction of organization is identified on</FONT><FONT SIZE=2><I> Exhibit&nbsp;5.1.  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Instruments</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>Exhibit&nbsp;5.2</I></FONT><FONT SIZE=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. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;State of Title.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>7</FONT></P>

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 </FONT> <FONT SIZE=2>
6.</FONT><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;COLLATERAL COVENANTS.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;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: </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Claims Against Collateral</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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). </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Notice of Change in Place of Business; Names, etc</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;(i) Give Lender at least 30 Business Days advance notice
in writing of any change in any Grantor's (a)&nbsp;chief executive office or (b)&nbsp;exact legal name as set forth in the first paragraph of this Agreement, and (ii)&nbsp;not, without the prior
written consent of Lender, change Grantor's jurisdiction of organization. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Notice of Adverse Information</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.4</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Equipment</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Maintain the equipment in good operating condition and repair in accordance with the Grantors'
standard business practice, ordinary wear and tear excepted. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.5</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Insurance</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Insure the Collateral in accordance with the Senior Loan Agreement. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.6</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;No Liens</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>7.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;TERM.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Subject to </FONT><FONT SIZE=2><I>Section&nbsp;11.6</I></FONT><FONT SIZE=2> below, this Agreement will terminate
on the payment in full of the Obligations under the Note and under the Loan Agreement. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>8.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;LENDER'S RIGHTS AND REMEDIES.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Remedies</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Subject to the terms of the Intercreditor Agreement, (i)&nbsp;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: </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;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 </FONT><FONT SIZE=2><I>Section&nbsp;8.1</I></FONT><FONT SIZE=2>; </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;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; </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;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; </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;require
Grantors, at their joint and several cost, to assemble the Collateral and make it available at a place designated by Lender; </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;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)&nbsp;bringing
suit on anyone or more of the accounts, chattel paper, instruments, documents, leases or other agreements (collectively, "</FONT><FONT SIZE=2><I>Contracts</I></FONT><FONT SIZE=2>") in the name of any
Grantor or Lender, and exercise all such other rights respecting </FONT></P>

</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>8</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>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)&nbsp;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; </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;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; </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;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)&nbsp;obligated on the Collateral to make payment or otherwise render performance to or for the benefit of Lender and (2)&nbsp;that, without limiting the generality of
clause&nbsp;(1), the Contracts and general intangibles have been assigned to Lender and that payments should be made directly to Lender; </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;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; </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp;sign
any endorsements, assignments or other writings of conveyance or transfer in connection with any disposition of the Collateral; </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;&nbsp;&nbsp;&nbsp;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; </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;&nbsp;&nbsp;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; </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;&nbsp;&nbsp;&nbsp;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 </FONT></P>

</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>9</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>obligated
on collateral, in any case directly or through collection agencies or other collection specialists; and </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)&nbsp;&nbsp;without
limiting the provisions of </FONT><FONT SIZE=2><I>Section&nbsp;2.3</I></FONT><FONT SIZE=2> above, apply (or instruct another Person to apply) to the
Obligations the balance of any deposit account that is part of the Collateral. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)&nbsp;&nbsp;&nbsp;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 </FONT><FONT SIZE=2><I>Section&nbsp;8.1</I></FONT><FONT SIZE=2>, 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)&nbsp;clean up or otherwise prepare any of the Collateral for sale, (ii)&nbsp;pursue any Person to collect any of the
Obligations or (iii)&nbsp;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. </FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Notice of Disposition; Allocations</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;If any notice is required by law to effectuate any sale or other
disposition of the Collateral, (i)&nbsp;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)&nbsp;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. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Payment of Expenses</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>9.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;INDEMNIFICATION.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;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 </FONT> <FONT SIZE=2><I>Section&nbsp;9</I></FONT><FONT SIZE=2> each is an "</FONT><FONT
SIZE=2><I>Indemnified Party</I></FONT><FONT SIZE=2>") harmless from and against any and all claims, losses,
obligations and liabilities arising out of or resulting from any or all of (i)&nbsp;this Agreement and (ii)&nbsp;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 </FONT> <FONT SIZE=2><I>Section&nbsp;9</I></FONT><FONT SIZE=2>
is in addition to, and not in limitation of, any other indemnification or insurance provided by any Grantor to Lender. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>10.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;NOTICE.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Any notice, certificate, request, notification and other communication required, permitted or contemplated
hereunder must be in writing and given in accordance with </FONT><FONT SIZE=2><I>Section&nbsp;6.10</I></FONT><FONT SIZE=2> of the Loan Agreement. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>10</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_ko17603_1_11"> </A>

<P style="font-family:times;"><FONT SIZE=2>11.</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;GENERAL.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Severability</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.2</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;GOVERNING LAW</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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). </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.3</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Survival and Continuation of Representations and Warranties</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;All of each Grantor's representations and
warranties contained in this Agreement shall (i)&nbsp;survive the execution, delivery and acceptance hereof by the parties hereto and the closing of the transactions described herein or related
hereto and (ii)&nbsp;shall be brought down from time to time as provided in the Loan Agreement. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.4</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Lender's Additional Rights Regarding Collateral</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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)&nbsp;exchange, enforce, waive or release any of the Collateral or portion thereof,
(ii)&nbsp;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)&nbsp;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. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.5</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Application of Payments; Revival of Obligations</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.6</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Additional Waivers by Grantors</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.7</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Equitable Relief</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.8</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Entire Agreement; Counterparts; Fax Signatures</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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 </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>11</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_ko17603_1_12"> </A>
<BR>

<P style="font-family:times;"><FONT SIZE=2>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)&nbsp;may be relied on by Lender as if the document were a
manually signed original and (ii)&nbsp;will be binding on such Grantor for all purposes of the Loan Documents. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.9</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Headings</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Section headings in this Agreement are included for convenience of reference only and shall not
relate to the interpretation or construction of this Agreement. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.10</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Cumulative Remedies</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.11</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Waivers and Amendments in Writing</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.12</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Recourse to Directors or Officers</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.13</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Assignment</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Lender shall have the right to assign this Agreement and the other Loan Documents in
accordance with </FONT><FONT SIZE=2><I>Section&nbsp;6.1</I></FONT><FONT SIZE=2> 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. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.14</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Conflict</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.15</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;WAIVER OF JURY TRIAL</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.16</FONT><FONT
SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;Release of Lien</I></FONT><FONT SIZE=2>.&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding anything to the contrary contained herein or in any Loan Document, the
Lender agrees that, (a)&nbsp;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)&nbsp;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. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>[SIGNATURES ARE ON THE FOLLOWING PAGE]</B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>12</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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. </FONT></P>

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<TD WIDTH="12" style="font-family:times;"></TD>
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<TD WIDTH="12" style="font-family:times;"></TD>
<TD WIDTH="65" style="font-family:times;"></TD>
<TD WIDTH="12" style="font-family:times;"></TD>
<TD WIDTH="148" style="font-family:times;"></TD>
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<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><B> GRANTORS:</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><BR><FONT SIZE=2>WESTAFF (USA),&nbsp;INC., a California corporation</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>By:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>/s/ Christa C. Leonard<BR>


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<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Printed Name:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Christa C. Leonard<BR>


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<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Title:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Chief Financial Officer<BR>


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<TD style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><BR><FONT SIZE=2>WESTAFF,&nbsp;INC., a Delaware corporation</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>By:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>/s/ Christa C. Leonard<BR>


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<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Printed Name:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Christa C. Leonard<BR>


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<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Title:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Chief Financial Officer<BR>


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</TR>
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<TD style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><BR><FONT SIZE=2>WESTAFF SUPPORT,&nbsp;INC.,<BR>
a California corporation</FONT></TD>
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<TD style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>By:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>/s/ Christa C. Leonard<BR>


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</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Printed Name:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Christa C. Leonard<BR>


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<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Title:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Chief Financial Officer<BR>


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<TD style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><BR><FONT SIZE=2>MEDIAWORLD INTERNATIONAL,<BR>
a California corporation</FONT></TD>
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<TD style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>By:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>/s/ Christa C. Leonard



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<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Printed Name:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Christa C. Leonard<BR>


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<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Title:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Chief Financial Officer<BR>


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<TD style="font-family:times;"><BR><FONT SIZE=2><B> LENDER:</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>
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<TD COLSPAN=3 VALIGN="TOP" style="font-family:times;"><BR><FONT SIZE=2>DELSTAFF,&nbsp;LLC,<BR>
a Delaware limited liability company</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><BR><FONT SIZE=2>By:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>/s/ Michael Phillips<BR>


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<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>Printed Name:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Michael Phillips<BR>


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<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>Title:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Manager<BR>


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<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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</TABLE></DIV>
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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>13</FONT></P>

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<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=6,SEQ=13,EFW="2190562",CP="WESTAFF, INC.",DN="7",CHK=567870,FOLIO='13',FILE='DISK128:[09ZAL3.09ZAL17603]KO17603A.;13',USER='CHE105060',CD='11-FEB-2009;01:21' -->
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<P><br><A NAME="09ZAL17602_7">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<UL>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_km17603_1">Exhibit 10.8.39</A></FONT><BR>
</UL>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_km17603_2">SECURITY AGREEMENT</A></FONT><BR>
<FONT SIZE=2 style="font-family:times;"><A HREF="#toc_km17603_3">RECITALS</A></FONT><BR>
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