10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended January 1, 2006

Commission file number: 1-11997

SPHERION CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	36-3536544
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

2050 Spectrum Boulevard, Fort Lauderdale, Florida 33309

(Address of principal executive offices)        (Zip code)

(954) 308-7600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
COMMON STOCK—$.01 PAR VALUE	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o  No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o  No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer x Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨  No x

The aggregate market value of the voting stock held by non-affiliates of the Registrant, computed by reference to the closing price of the Registrant’s Common Stock, par value $.01 per share (“Common Stock”), as of July 1, 2005 on the New York Stock Exchange, was $402,926,119.

Number of shares of Registrant’s Common Stock outstanding on January 27, 2006 was 58,712,517.

Documents Incorporated by Reference:

Certain specified portions of the registrant’s definitive proxy statement to be filed within 120 days after January 1, 2006, are incorporated herein by reference in response to Part III, Items 11, 13 and 14, inclusive, and to certain portions of Part III, Items 10 and 12.

PART I

Item 1.BUSINESS

As used in this report, the terms “we,” “us,” “our,” “Spherion” and the “Company” refer to Spherion Corporation and its consolidated subsidiaries, unless otherwise expressly stated or the context otherwise requires.

Company Overview

Spherion Corporation was founded in 1946 and provides temporary staffing, managed services and permanent placement services. We are headquartered in Fort Lauderdale, Florida, and operate a network of over 650 locations within North America. Spherion Corporation is incorporated under the laws of the State of Delaware. As of January 1, 2006, we had 477 company-owned offices, 94 licensed locations and 87 franchised locations.

We provide temporary staffing services, managed services and permanent placement services within North America. Temporary staffing services include personnel in the following skill categories: clerical, light industrial, information technology, finance and accounting, legal, engineering, sales and marketing, human resources, and administrative. Managed services include services where we manage certain aspects of a customer function such as: recruiting, administrative services, data center or network operations. Permanent placement is a service where our employees locate talent on behalf of our customers, screen the candidates and assist in the recruitment efforts.

During 2004, we announced our intention to sell our operations in the United Kingdom, The Netherlands and in the Asia/Pacific region, as well as our court reporting operation and call center outsourcing business in the United States. This decision was due to changes in client demand and is consistent with our strategy to focus on the North American staffing and recruiting markets. The international operations, as well as the court reporting business, were all sold prior to December 31, 2004. The remaining business unit, the call center outsourcing business, was comprised of four call centers, of which three were sold in 2005 and the fourth one is undergoing due diligence with a potential purchaser. As a result of our decision to dispose of these businesses, operating results for all periods presented and the related assets and liabilities as of January 1, 2006 and December 31, 2004, have been reclassified as discontinued operations in the accompanying consolidated statements of operations.

During 2003, in connection with a three-year old agreement, we acquired 85% of our Canadian franchise operation for consideration of $21.6 million, including $10.9 million of debt assumed. The results of this operation are included in the Staffing Services operating segment and our consolidated results of operations as of the acquisition date.

During 2002, we adopted a plan to dispose of certain technology consulting businesses in the United Kingdom and The Netherlands and Saratoga, a human capital measurement business in the United States. We completed the disposal of one of these subsidiaries prior to December 27, 2002 and disposed of the remaining two subsidiaries during the first half of 2003.

Industry Overview

Spherion Corporation is a diversified staffing company operating in North America. The North American staffing market was estimated to be approximately $108.3 billion in 2005. This market includes temporary staffing, permanent placement and other services similar to those provided by Spherion. The North American staffing market in 2005 is estimated to have grown by approximately 6% to 11% and at a faster rate for high demand skill sets such as legal, engineering, and finance and accounting due to a continued increase in regulatory and reporting requirements.

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Up to 50% of the staffing industry is estimated to be concentrated in professional skills, including information technology, finance and accounting, legal, administrative and other skills that are consistent with those offered within Spherion’s Professional Services operating segment. The balance of the North American staffing market is concentrated on services in the clerical and light industrial skill sets, similar to those offered in Spherion’s Staffing Services operating segment.

Business conditions in the staffing industry are economically sensitive. In 2001 and 2002, the industry experienced a decline in revenues, but economic conditions began to change through 2003. In 2004 and 2005, Spherion and many of its peers benefited from the growth in revenues. Companies have continued to experience success in the usage of temporary help, which has facilitated rapid workforce adjustments as economic conditions improve. This practice has increased the demand for temporary help in North America, which as of December 2005 was almost 2% of the total workforce, an increase from 1.0% in the early 1990’s. Demographics of the labor force continue to indicate that the overall labor pool may shrink over the next 10 years, creating a shortage of qualified job candidates, especially for certain professional workers. As unemployment continues to decrease, this shortage increases the need for companies to continue to use the services of Spherion and other companies within the staffing industry. The 10-year average growth rate for the North American staffing industry is estimated at 7.6%.

Operations Overview

The Company is organized around two basic operating segments—Staffing Services and Professional Services. Within our Staffing Services operating segment, we provide three primary services—temporary staffing, managed services, and permanent placement. Within our Professional Services operating segment, we provide temporary staffing and permanent placement services. These services are further described as follows:

·Temporary staffing—This is a service where our employees work at customer locations under the supervision of customer personnel. The duration of the assignment can be from a day or less to a period of several months. The number of our temporary employees at any given time is directly related to our customers’ requirements and these employees are generally only paid when on assignment with a customer. We provide temporary employees with clerical, light industrial, information technology, finance and accounting, legal, engineering, marketing and administrative skill sets. We are responsible for all employment related taxes of these temporary employees, workers’ compensation and federal and state unemployment (burden costs). Services are generally billed by the hour for the number of hours worked. Bill rates are often determined as a mark-up over pay or a mark-up over pay plus burden.

·Managed services—This is a service where we manage aspects of the operation and management of a customer function such as, recruiting, administrative services, data center or network operations and generally provide that service under long-term contracts. Managed services are provided by our employees who typically manage and staff aspects of the customer function. In certain cases we may only manage the customer function which could be staffed by a combination of Spherion, customer or other third-party employees. We are responsible for the operation of the customer function and generally are required to meet minimum service level agreements and provide customer driven reporting. Fees are determined based on a combination of headcount, service level provided and/or fixed fee per transaction/unit processed.

·Permanent placement—This is a service where we identify candidates on behalf of our customers, screen the candidates and assist in the recruitment efforts. If the customer hires the candidate, our billing is generally a percentage of first year compensation for the candidate placed. Billing is contingent upon filling the assigned position.

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The following table represents the 2005 revenues derived from each of these services within our two operating segments (in thousands):

	Staffing Services					Professional Services
	Amount		%			Amount		%
Temporary staffing	$	1,312,515		86.2	%	$	402,286		89.4	%
Managed services	191,232			12.6	%	—			—
Permanent placement	17,739			1.2	%	47,893			10.6	%
Total	$	1,521,486		100.0	%	$	450,179		100.0	%

Within the services described above, the Staffing Services operating segment concentrates on placement and temporary staffing of individuals with administrative clerical and light industrial skill sets. Managed services are provided within the Staffing Services operating segment. The Professional Services operating segment concentrates on temporary staffing and placement of professional skill sets in the areas of information technology, finance and accounting, legal, engineering, sales and marketing, human resources, and administrative. See Note 15, Segment Information, in the accompanying consolidated financial statements for additional information regarding the revenues, profits and losses and total assets for both our Staffing Services and Professional Services operating segments for 2005, 2004 and 2003.

Location Structure

Our locations are company-owned, licensed or franchised. We believe that we can increase profitability and serve our customer base through a combination of these locations. For 2005, 86.5% of revenues were derived from company-owned locations, with the remaining derived from franchised and licensed locations.

The following table details the number of locations:

	Fiscal Years
	2005		2004		2003
Company-owned locations		477		531		550
Licensed locations		94		95		94
Franchised locations		87		86		91
Discontinued operations		1		4		76
Total		659		716		811
United States		626		680		703
Canada		32		32		32
Discontinued operations-International		—		—		50
Discontinued operations-North America		1		4		26
Total		659		716		811

Company-Owned Locations

We operate both company-owned branch and customer on-premise locations. A branch location is designed to serve multiple customers in a geographic market, while the customer on-premise location is established at the customer’s location to serve only that customer. As of January 1, 2006, we operated 477 company-owned branch and customer on-premise locations. Future new or closed locations are driven by sales success creating the need for new company-owned branches and customer on-premise locations. During 2005, the number of company-owned locations decreased primarily as a result of the loss of a large managed service contract.

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Licensed Locations

	Fiscal Years
	2005			2004			2003
Licensee revenues (in thousands)	$	256,411		$	238,140		$	201,797
Licensee commissions as a % of gross profit	70		%	68		%	68		%
Number of licensees	52			50			51
Number of licensee locations	94			95			94

We grant licenses, which give the licensee the right to establish a recruitment business utilizing our trade names, service marks, advertising materials, sales programs, operating procedures, manuals and forms within a designated territory. We typically grant licensees the exclusive right to establish an office to market and provide light industrial and clerical temporary personnel within a designated geographic area. We also assist our licensees in obtaining business from our national accounts and provide them with national, regional and cooperative local advertising. License agreements are generally for an initial term of 10 years and are renewable for successive 5-year terms at our discretion. Our licensees operate in the Staffing Services operating segment.

Licensees operate within the framework of our policies and standards. We provide workers’ compensation, general liability, professional liability, fidelity bonding and state unemployment coverage for temporary employees. We bill all customers serviced by licensees in our name and collect the remittances as Spherion owns the client contract. Licensees use our computer systems.

In our licensee arrangements, we act as the principal in customer transactions through direct contractual relationships with the customers, owning related customer receivables and being the legal employer of the temporary employee and the licensee acts as our agent providing certain sales and recruiting services. Sales by the licensed locations are included in our revenues and the direct costs of services (payroll for the temporary employees and related payroll taxes and employee benefits) are included in our cost of services. We are responsible for paying the wages of the temporary employees and all related payroll taxes, employee benefits and insurance and collecting accounts receivable. The licensee is responsible to reimburse us up to 100% of uncollected accounts receivable, but we bear the loss in cases where the licensee does not have sufficient financial wherewithal to reimburse uncollectible accounts.

The licensee is responsible for establishing its location and paying its related administrative and operating expenses, such as the rent, utilities and salaries of their full-time office employees. The licensee receives a commission from us, which averaged 70% of the licensed offices’ gross profit for the year ended January 1, 2006. Our consolidated statements of operations reflect the licensee commission as an operating expense, but do not include the rent, utilities and salaries of the licensee’s full-time office employees since these expenses are the responsibility of the licensee. Our consolidated balance sheets include the accounts receivable, payroll liabilities for temporary employees and related employee benefit liabilities and the licensee commission payable. The only exception to this financial statement presentation is the circumstance when we are required to consolidate certain licensees. See Note 14, Variable Interest Entities, in the accompanying consolidated financial statements for further discussion of these licensees.

From time to time, we may finance a portion of the purchase price of the license at market rates of interest or provide working capital loans to licensees. The outstanding principal balance of such notes receivable was $0.6 million as of January 1, 2006.

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Franchised Locations

	Fiscal Years
	2005			2004			2003
Franchisee royalty revenues (in thousands)	$	8,976		$	8,370		$	7,267
Royalty revenues as a % of franchisee sales	4.0		%	4.0		%	4.2		%
Number of franchisees	23			22			24
Number of franchisee locations	87			86			91

We have been granting franchises for approximately 40 years. Most franchise agreements are 10 years in length and renewable every 5 years thereafter. A number of franchisees are second-generation owners and most operate more than one franchise.

We grant franchisees the right to market and furnish staffing services within a designated geographic area using our trade names, service marks, advertising materials, sales programs, operating procedures, manuals and forms. We provide franchisees with our national, regional and local advertising. Franchisees operate their businesses autonomously within the framework of our policies and standards and recruit, employ and pay their own full-time and temporary employees. Franchisees are responsible for all employment related taxes and workers’ compensation costs of their employees. Franchisees do not use our computer systems. We receive royalty fees from each franchise based upon the franchisee’s revenues.

From time to time, we may finance a portion of the purchase price of the franchise at market rates of interest or provide working capital loans to franchisees. The outstanding principal balance of such notes receivable was $2.2 million as of January 1, 2006.

Acquisitions

We currently have no specific plan to undertake any significant acquisitions. However, from time to time we evaluate various acquisition opportunities and may acquire competitors to accelerate our growth.

In 2003, in connection with a three-year old agreement, we acquired 85% of our Canadian franchise operation for consideration of $21.6 million, including $10.9 million of debt assumed. We also entered into a put/call agreement with the minority interest holder, whereby the minority interest holder can put the remaining 15% interest in the Canadian operations back to us any time after December 31, 2005, or, as amended, we can call the remaining 15% interest any time after January 1, 2008.

We are generally the purchaser of choice when a Spherion franchisee or licensee decides to sell its business. We have a right of first refusal on any franchise or license sale at the same terms and conditions as may be agreed with another purchaser (who ultimately must be approved by us, even if we waive our right of first refusal), and we have a standard end of term purchase option on our licenses and our more recently granted franchises, however we are not obligated in our standard agreements to repurchase either our franchised or licensed locations.

Competition

We operate in highly competitive and fragmented markets in our operating segments. Within temporary staffing and permanent placement services, there are low barriers to entry. Within managed services, there can be more significant barriers to entry as capital and systems requirements are higher.

The staffing industry is served by thousands of competitors with most of them small, local operations. There are several very large national and international competitors who also directly compete with us. The local competitors are generally characterized as independent operators serving local marketplaces. The ability to fund working capital requirements is one of the key success factors for these competitors. Local competitors may also be more flexible in offering alternatives to their customers in either attracting

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candidates or in servicing the customer, but generally cannot service national customers due to a lack of systems or geographic coverage. We compete with local competitors in all of our jurisdictions generally when the customer is a local or retail customer, and we expect to continue to do so.

Many of the large national and international competitors are characterized by very broad geographic coverage, large and complex information systems that can handle numerous legal and regulatory requirements and substantial financial resources. We compete against these companies for the largest customers (primarily Fortune 500 companies) where the customer requires broad geographic coverage, competitive national pricing and typically consolidated reporting to assist it in better controlling costs. Since most national customers use a central procurement department, the industry has moved towards consolidated competitive bidding with these customers with pricing as one of the key selection criteria in obtaining the contract. This has led to intense price competition within the staffing and recruitment industry and a focus on reducing back office processing costs, primarily by installing enterprise-wide information systems. To keep pace with our major national and international competitors, we have implemented an enterprise-wide information system to reduce our back office processing costs and increase our reporting capabilities. We anticipate that price competition with these larger competitors will continue.

We believe that our customers primarily focus on the following key factors in selecting a service provider: location or geographic coverage, price and service delivery. Geographic coverage is important from the customer and candidate standpoint. Customers require that their providers be able to service most, if not all, of their locations. Location is important to the candidate because many candidates are unwilling to travel outside of their particular geographic market for a position. We have over 650 locations in North America and believe that our coverage is adequate in the markets we serve. During 2004, we sold all of our international operations with the exception of Canada; our lack of international coverage could put us at a disadvantage compared to our larger competitors in obtaining new business from multinational customers. However, we do not believe our North American focus to be a significant disadvantage in competing for business in our targeted small and mid-sized customer segments. Service delivery is understanding the customers’ specific job requirements through consultative assessments, the ability to provide the right candidate for the right job and the ability to measure the quality of job performance. Factors in obtaining qualified candidates for employment assignments with customers include the quality of available opportunities, wages, responsiveness to work schedules and the number of available work hours. No single customer accounted for 10 percent or more of our consolidated revenues in 2005.

Within the Staffing Services operating segment, some of our largest competitors are Adecco S.A., Manpower Inc. and Kelly Services, Inc. Within the Professional Services operating segment, we compete with Robert Half International Inc., MPS Group, Inc. and Kforce Inc., among others.

Trademarks

Through our subsidiaries, we maintain a number of trademarks, trade names and service marks in the United States and certain other countries. We believe that many of these marks and trade names, including SPHERION®, NORRELL®, ON-PREMISE® and THE MERGIS GROUP® are important to our business. In addition, we maintain other intangible property rights including  registered trademarks on the following: MAKING THE WORKPLACE WORK BETTER®, EMERGING WORKFORCE® and SALESFIT®.

Our United States trademark registration for SPHERION® expires October 9, 2011, but is renewable indefinitely for successive ten-year terms.  Our United States trademark registration for NORRELL® expires on March 8, 2013, but is renewable indefinitely for successive ten-year terms.  Our United States trademark registration for INTERIM® expires April 6, 2013, but is renewable indefinitely for successive ten-year terms.

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Governmental Regulation

Staffing firms are generally subject to one or more of the following types of government regulations: (i) regulation of the employer/employee relationship between a firm and its flexible staff, (ii) registration, licensing, record keeping and reporting requirements and (iii) substantive limitations on its operations. Staffing firms are the legal employers of their temporary workers. Therefore, staffing firms are governed by laws regulating the employer/employee relationship such as tax withholding or reporting, social security or retirement, anti-discrimination and workers’ compensation.

We also have operations in Canada. In this country, there is significant national, provincial or local regulations of staffing services. These laws may require that part-time, temporary and contract workers receive benefits similar to full-time workers, such as vacation, welfare plan contributions, notice prior to termination and severance pay. In some cases, hours of work and the duration of assignments are limited and workers may not be assigned to certain industries. We do not anticipate that these legal structures and requirements will have a material effect on our growth or prospects. However, any material change in national, provincial or local regulation of staffing services could have a material adverse effect on us.

Our sale of franchises and licenses is regulated by the Federal Trade Commission and by authorities in approximately 14 states and is subject to statutory requirements in certain Canadian provinces. Under these laws, we must deliver a franchise offering circular or disclosure document (similar to a prospectus) to prospective franchisees and licensees. These and other state laws may also apply substantive standards that govern the relationship between franchisors and franchisees. In states where we are selling franchises or licenses, we have filed either the appropriate registration or obtained an exemption from registration. We do not anticipate that these requirements or other state laws will have a material effect on our ability to sell franchises or licenses or operate our business through franchised or licensed offices.

Employees

We estimate that we employed approximately 302,000 people in 2005. On average, approximately 59,000 billable personnel were assigned with our customers, at any given time.

Seasonality and Cyclical Nature of Business

Seasonality—Our businesses are seasonal in nature with customer related demand generally at its highest point during the third and fourth quarters and lowest during the first quarter. The third and fourth quarters are normally higher as our customers increase their temporary workforces for the holiday season. We typically experience a decrease of approximately 6 to 12% in our first quarter revenues in comparison with fourth quarter revenues. The decrease in first quarter revenues in comparison with the preceding fourth quarters for 2005, 2004 and 2003 was 12%, 0%, and 8%, respectively. First quarter revenues of 2005 in comparison with the preceding fourth quarter growth decreased partially due to the fact that first quarter 2005 was comprised of thirteen weeks, whereas fourth quarter 2004 was comprised of fourteen. First quarter revenues of 2004 in comparison with the preceding fourth quarter growth remained stable due to a higher volume of contract-based work in managed services and increased demand experienced from the economic recovery. The fluctuation of first quarter revenues of 2003 was usual to the seasonality of the business.

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Cyclical Nature of the Business—The staffing industry has historically been considered to be cyclical, often acting as an indicator of both economic downswings and upswings. Staffing customers tend to use temporary staffing to supplement their existing workforces and generally hire permanent workers when long term demand is expected to increase. As a consequence of this, our revenues tend to increase quickly when the economy begins to grow. Conversely, our revenues also tend to decrease quickly when the economy begins to weaken as our customers reduce temporary workers before terminating their own employees. While we have longer-term managed service contracts which are not as directly dependent upon the economic cycle, these revenues are not significant enough to offset the impact of cyclical economic activity in our larger service offerings.

Executive Officers of the Registrant

Our executive officers are:

Name and Age	Position
Roy G. Krause, 59	President and Chief Executive Officer since October 2004; President and Chief Operating Officer from July 2003 to October 2004; Executive Vice President and Chief Financial Officer from October 1995 to July 2003.
William J. Grubbs, 48	Chief Marketing and Corporate Development Officer since November 2005. From March 2002 to September 2005, Chief Operating Officer, Spring Group plc. From April 2001 to February 2002, CEO Spring Technology Staffing Services, Spring Group plc. From October 2000 to March 2001, CEO Spring ASP, Spring Group plc.
William G. Halnon, 47	Senior Vice President and Chief Information Officer since January 2005. From April 1997 to December 2004, Vice President-Chief Information Officer for DIMON Incorporated.
Lisa G. Iglesias, 40	Senior Vice President, General Counsel and Secretary since August 2003; General Counsel, Vice President and Secretary from July 1999 to August 2003.
Richard A. Lamond, 59	Senior Vice President and Chief Human Resources Officer since November 2002. From 1973 to 2002, Senior Vice President—Human Resources and Administration for Millennium Chemicals Inc.
Byrne K. Mulrooney, 45	President, Staffing Services since September 2003. President, Operations Solutions—Midwest Region of Electronic Data Systems (“EDS”) from July 2001 to August 2003; Vice President, Portfolio Management of EDS from January 2000 to July 2001; Vice President, Distributed Systems Services of EDS from May 1999 to January 2000.
Mark W. Smith, 43	Senior Vice President and Chief Financial Officer since July 2003; Vice President, Business Services from September 2002 to July 2003; Vice President, Business Services and Controller from August 2001 to September 2002; Vice President, Finance and Administration from June 2000 to August 2001; Vice President, Finance from June 1997 to June 2000.

Availability of Reports and Other Information

Our corporate website is http://www.spherion.com. We make available on this website, free of charge, access to our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statement on Schedule 14A and amendments to those materials filed or furnished

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pursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934 as soon as reasonably practicable after we electronically submit such materials to the Securities and Exchange Commission. Also available on our website, or in print to any shareholder that requests it, are Spherion’s Corporate Governance Principles, Code of Business Conduct and Ethics, as well as charters for the Audit Committee, Compensation Committee, Corporate Governance Committee, Executive Committee and Nominating Committee. In addition, the Commission’s website is http://www.sec.gov. The Commission makes available on its website, free of charge, reports, proxy and information statements, and other information regarding issuers, such as us, that file electronically with the Commission. Information provided on our website or on the Commission’s website is not part of this Annual Report on Form 10-K.

Item 1A.RISK FACTORS

We are affected by a wide range of factors which could materially affect future developments and performance. In addition to the factors affecting specific business operations identified in connection with the description of these operations and the financial results of these operations elsewhere in this report, the following are some of the factors that could affect our operations:

We operate in highly competitive markets with low barriers to entry, and may be unable to compete successfully against existing or new competitors.

We operate in highly competitive and fragmented markets in both of our operating segments. There are low barriers to entry by potential competitors at the local level. We face significant competition in the markets we serve and will continue to face significant competition in any geographic markets or industry sectors that we may enter. The majority of competitors are significantly smaller than us. However, certain of our competitors are larger, have greater marketing, technical and financial resources, and have stronger brand name recognition than us. As a result, some of our competitors may be in a better position to capitalize on new technologies and changes in customer requirements, and to devote more resources than we can to the development, promotion and sale of their service offerings. Some of our competitors can provide broader geographic coverage than us and this can limit our ability to service large customers who wish to consolidate services.

There has been a significant increase in the number of customers consolidating their staffing services purchases with a single provider or with a small number of providers. The trend to consolidate purchases has in some cases made it more difficult for us to obtain or retain customers. In the first quarter of 2005, we were notified of a customer non-renewal representing approximately $75 million in annual revenues. We also face the risk that certain of our current and prospective customers may decide to provide similar services internally. Additionally, pricing pressures have intensified as customers have continued to competitively bid new contracts. This trend is expected to continue for the foreseeable future. As a result, we cannot assure you that we will not encounter increased competition in the future.

Any significant economic downturn could result in lower revenues.

Because demand for personnel services and recruitment services is sensitive to changes in the level of economic activity, our business may suffer during economic downturns. As economic activity slows down, companies tend to reduce their use of temporary employees and recruitment services before undertaking layoffs of their regular employees, resulting in decreased demand for our personnel. Also, as businesses reduce their hiring of permanent employees, revenues from our recruitment services is adversely affected. As a result, any significant economic downturn could have a material adverse effect on our business, financial condition or results of operations. During 2001 and 2002, the slowdown in the U.S. economy significantly impacted the staffing market, which in turn reduced our revenues significantly. Economic conditions improved in 2004 and 2005; however, there is no assurance that this will continue in 2006 or that our revenues will increase.

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A significant reduction in demand from our customers may result in a material impact on the results of our operations. A material impact may also result from the loss of customers or a deterioration of their financial condition.

We may experience a reduction in business from a significant customer or a number of customers from one of our operating segments, or we may lose such customers.  We cannot guarantee that we will be able to retain long-term relationships or secure renewals of short-term relationships with our more substantial customers in the future. Our customers may experience a deterioration in their current financial condition or future prospects, or may experience a bankruptcy. A significant reduction in demand from our customers may result in an adverse impact on our business and results of operations in future periods.

We may not achieve the intended effects of our business strategy.

Our business strategy is primarily based on profitable growth in our North American operations. We are implementing steps to continue increasing our growth rates by concentrating in local markets with small and mid-sized clients through relationship selling, targeting new accounts by providing integrated services, and continuing to improve operating leverage. We also plan to grow within our Professional Services segment by providing more services to existing staffing group segment customers. If we are not successful in achieving these objectives with our customers, our revenues, costs and overall profitability could be negatively affected. If we are unable to leverage our investment in technology effectively, our productivity and costs’ competitiveness could be negatively affected.

Our contracts contain termination provisions and pricing risks that could decrease our revenues, profitability and cash flow.

Some of our customer contracts permit termination in the event our performance is not consistent with service levels specified in those contracts. Our customers’ ability to terminate contracts creates uncertain revenue streams. In addition, if customers are not satisfied with our level of performance, our reputation in the industry may suffer, which could materially and adversely affect our business, financial condition, results of operations and cash flow. Some of our contracts contain pricing provisions that allow customers to pay a set fee for our services regardless of whether our costs to perform these services exceed the amount of the set fee. Some of our contracts provide for credits to our customers if we fail to achieve specific contract standards. Some of our contracts contain re-pricing provisions that can result in reductions of our fees for performing our services. In these situations, we could incur significant unforeseen costs or financial penalties in performance under the contracts.

The termination of a customer contract or the deterioration of the financial condition or prospects of a customer may result in an impairment of the net book value of the assets we use in connection with that contract.

Our failure or inability to perform under customer contracts could result in damage to our reputation and give rise to legal claims against us.

Certain areas of our business require us to assume a greater level of responsibility for developing or maintaining processes on behalf of our customers. Many of these processes are critical to the operation of our customers’ businesses. Our failure or inability to complete these engagements satisfactorily could have a material adverse effect on our customers’ operations and consequently may give rise to claims against us for actual or consequential damages or otherwise damage our reputation. Any of these claims could have a material adverse effect on our business, financial condition or results of operations.

The disposition of businesses previously sold, or in the process of being sold, may create contractual liabilities associated with indemnifications provided.

We have disposed of several business units over the past four years. The disposition of these businesses usually requires that we indemnify the purchaser for liabilities that arose prior to the disposition

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date. These liabilities are typically related to audits of tax liabilities by local authorities and other pre-existing liabilities such as lease obligations. Additionally, in the contracts we make a number of representations and warranties and from time to time claims are made against us related to these items. During 2005, we recorded $5.7 million as part of discontinued operations for these matters. The fair value of these indemnifications are recorded at the time of the sale. Subsequently if any liabilities become known and are both probable and reasonably estimable, they are recorded as an expense. For some of the dispositions, we have or may have future claims which are not yet probable and reasonably estimable and have not been recorded as an expense. Future earnings from discontinued operations could be materially adversely affected if we are not successful in defending our positions with the purchasers of these discontinued operations. Additionally, if we are required to make cash payments for any of these liabilities, our financial condition could be materially adversely affected.

Regulatory challenges to our tax filing positions could result in additional taxes.

In 2002, we engaged in transactions that generally had the effect of accelerating certain future projected tax deductions and losses, resulting in an increase in the amount of net operating losses and capital losses available for carry back into prior tax years. As a result of these transactions, our tax refund for the 2002 filing year was increased by approximately $60 million. We believe that we have appropriately reported these transactions in our tax returns, and that we have established adequate reserves with respect to any tax liabilities that may arise in relation to these transactions should our position be successfully challenged by tax authorities. However, an unfavorable settlement or adverse resolution could result in the repayment of some or all of the refund received.

Government regulation may significantly increase our costs, including payroll-related costs and unemployment taxes.

In conducting our business, we are required to pay a number of payroll and related costs and expenses, including unemployment taxes, workers’ compensation and medical insurance for our personnel. Unemployment insurance premiums paid by employers typically increase during periods of increased levels of unemployment. Workers’ compensation costs may increase in the future if states have raised benefit levels and liberalized allowable claims. Future earnings could be adversely affected if we are not able to increase the fees charged to customers to absorb the increased costs related to unemployment insurance or workers’ compensation benefits. Future earnings could also be adversely affected if state governments successfully challenge prior year unemployment experience ratings.

We are subject to business risks associated with international operations in Canada, which could make our international operations significantly more costly.

Operation in this market is subject to risks inherent in international business activities, including,

·fluctuations in currency exchange rates;

·varying economic and political conditions;

·overlapping or differing tax structures; and

·multiple regulations concerning pay rates, benefits, vacation, statutory holiday pay, workers’ compensation, union membership, termination pay and the termination of employment.

We may be exposed to employment-related claims and costs that could have a material adverse affect on our business, financial condition and results of operations.

We employ and place people in the workplaces of other businesses. Attendant risks of such activity that could increase our cost of doing business include:

·possible claims of discrimination and harassment;

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·errors and omissions by the personnel we place, particularly for the acts of temporary professionals (e.g., accountants, attorneys and information technology consultants);

·misuse or misappropriation of customer funds or proprietary information; and

·payment of workers’ compensation and other similar claims.

Although we maintain insurance coverage for general and professional liability, errors and omissions and employee theft, such insurance coverage may not be adequate in scope or amount to cover any such liability. A failure of any of our personnel to observe our policies and guidelines intended to reduce exposure to these risks could have a material adverse effect upon us. We cannot assure that we will not experience such problems in the future.

We retain a portion of the risk under our workers’ compensation, general liability/professional liability, employment practices liability insurance programs and health insurance benefits programs. Changes in the estimates of these accruals are charged or credited to earnings in the period determined, and therefore a large fluctuation in any given quarter could materially adversely affect earnings in that period.

We are dependent upon availability of qualified personnel, and may not be able to attract and retain sufficient numbers of qualified personnel necessary to succeed.

We depend upon our ability to attract qualified personnel who possess the skills and experience necessary to meet the staffing requirements of our customers or to successfully bid for new customer projects. We must continually evaluate and upgrade our base of available qualified personnel to keep pace with changing customer needs and emerging technologies. Competition for individuals with proven professional or technical skills always exists. We could have difficulty attracting and retaining sufficient numbers of qualified personnel necessary for our business to succeed.

We may lose our key personnel, and therefore, our business may suffer.

Our operations are dependent on the continued efforts of our officers and executive management. In addition, we are dependent on the performance and productivity of our local managers and field personnel. Our ability to attract and retain business is significantly affected by local relationships and the quality of service rendered. The loss of those key officers and members of executive management who have acquired significant experience in our industry may cause a significant disruption to our business. Moreover, the loss of our key managers and field personnel may jeopardize existing customer relationships with businesses that continue to use our services based upon past relationships with these local managers and field personnel. The loss of such key personnel could materially adversely affect our operations, because it may result in an inability to establish and maintain customer relationships and otherwise operate our business.

Managing or integrating any future acquisitions may strain our resources.

In the future, we may acquire other businesses to expand our service offerings, broaden our customer base or expand our geographic presence. Acquisitions involve a number of additional risks, including the diversion of management’s attention from our existing operations, the failure to retain key personnel or customers of an acquired business, the assumption of unknown liabilities of the acquired business for which there are inadequate reserves, the potential impairment of acquired intangible assets and the ability to successfully integrate the business. We could experience financial or other setbacks if any of the businesses that we acquire have liabilities or problems of which we are not aware. Further, we cannot assure you that any future acquired businesses will generate anticipated revenues or earnings. As a result, the anticipated benefits from future acquisitions may not be achieved.

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Failure to meet certain covenant requirements under our revolving lines of credit could impact part or all of our availability to borrow under our revolving lines of credit.

Our revolving lines of credit provide for certain affirmative and negative covenants which may limit the total availability under this line of credit based upon our ability to meet these covenants. These covenants include, but are not limited to: a fixed charge coverage ratio; limitations on capital expenditures, additional debt incurred, mergers, consolidations or sales; and transactions with subsidiaries and related parties. Failure to meet compliance with one or more of these covenants in the future could affect the amount of availability we have to borrow against and as a result, our liquidity and financial condition may be adversely affected. While we currently have not drawn on these revolving lines of credit, we may need to if we grow as planned. Any limitation on our ability to borrow in this situation could inhibit our growth.

We are a defendant in a variety of litigation and other actions from time to time, which may have a material adverse effect on our business, financial condition and results of operations.

We and our subsidiaries are regularly involved in a variety of litigation arising out of our business. Occasionally, this litigation can be material. We cannot assure you that our insurance will cover all claims that may be asserted against us. Should the ultimate judgments or settlements exceed our insurance coverage, they could have a material adverse effect on our results of operations, financial position and cash flows. We also cannot assure you that we will be able to obtain appropriate types or levels of insurance in the future or that adequate replacement policies will be available on acceptable terms, if at all. See Part I, Item 3, Legal Proceedings for more information.

The price of our common stock may fluctuate significantly, which may result in losses for our investors.

The market price for our common stock has been and may continue to be volatile. For example, during the fiscal year ended January 1, 2006, the prices of our common stock as reported on the New York Stock Exchange ranged from a high of $10.53 to a low of $5.00. Our stock price can fluctuate as a result of a variety of factors, including factors listed in these “Risk Factors” and others, many of which are beyond our control. These factors include:

·actual or anticipated variations in our quarterly operating results;

·announcement of new services by us or our competitors;

·announcements relating to strategic relationships or acquisitions;

·changes in financial estimates or other statements by securities analysts; and

·changes in general economic conditions.

Because of this volatility, we may fail to meet the expectations of our shareholders or of securities analysts, and our stock price could decline as a result.

Item 1B.UNRESOLVED STAFF COMMENTS

We have not received any written comments regarding our periodic or current reports from the staff of the Securities and Exchange Commission that were issued 180 days or more preceding the end of our fiscal year ended January 1, 2006, as a result, no issues remain unresolved.

Item 2.PROPERTIES

Our corporate headquarters are located at 2050 Spectrum Boulevard, Fort Lauderdale, Florida, in a 125,000 square-foot building owned by us, plus a leased annex of 30,000 square feet of additional space in the immediate vicinity. In addition, we lease approximately 70,000 square feet in Alpharetta, Georgia for operating functions. All other field locations operate in space held primarily under three to five year leases providing fixed monthly rentals. Our corporate headquarters and our field locations are used by both our

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Staffing Services and our Professional Services operating segments. We believe that our facilities are adequate for our needs.

Item 3.LEGAL PROCEEDINGS

In the ordinary course of our business, we are or may be threatened with or named as a defendant in various lawsuits. We maintain insurance in such amounts and with such coverages and deductibles as we believe are reasonable and prudent. The principal risks that we insure against are workers’ compensation, personal injury, bodily injury, property damage, professional malpractice, errors and omissions, employment practices and fidelity losses. Our management does not expect that the outcome of any pending lawsuits relating to such matters, individually or collectively, will have a material adverse effect on our financial condition, results of operations or cash flows.

Interim HealthCare Inc., Catamaran Acquisition Corp. and Cornerstone Equity Investors IV, L.P. filed an action against Spherion in the Delaware Court of Chancery in 2001 related to the divestiture of Interim HealthCare (the “Healthcare Divestiture”). They sought damages of approximately $10.0 million for breach of contract, reformation of the purchase agreement to reduce the purchase price by approximately $24.0 million, or rescission of the contract. The same parties also sought damages against Spherion in an action in Delaware Superior Court alleging multiple breach of contract claims arising out of the Healthcare Divestiture. Our motion for summary judgment was granted for the reformation claim. The cases went to trial in December 2003 and the court issued its opinion in February 2005. The opinion provided that we did not have to pay damages on any of the claims, except for one breach of contract claim for which the damages awarded to the plaintiffs total approximately $1.1 million plus pre- and post-judgment interest and attorneys’ fees. After the parties stipulated to the amount of pre-judgment interest and attorneys’ fees, the judge entered an order of judgment in June 2005 directing us to pay a total of approximately $1.7 million, and in August 2005 this amount was paid to the plaintiffs. In June 2005, the plaintiffs filed a notice of appeal and oral argument was heard in the Delaware Supreme Court in October 2005. On October 31, 2005, the Delaware Supreme Court issued its opinion affirming the trial court’s ruling in all respects.

On December 13, 2004, and as amended on January 13, 2005 and October 31, 2005, Glidepath Holding B.V. and Jeimon Holdings N.V. filed an action against Spherion in the U.S. District Court of the Southern District of New York. Glidepath and Jeimon Holdings, investors in the entity that acquired the Cyber Center business of Spherion Technology (UK) Limited, a subsidiary of Spherion, in 2002, sued Spherion for fraud, negligent misrepresentation, aiding and abetting breach of fiduciary duty and unjust enrichment and seek $32.0 million in damages, and treble for punitive damages, plus attorneys’ fees, expert fees and costs. Glidepath and Jeimon Holdings allege that an individual who was an officer of Spherion Technology (UK), fraudulently induced them to invest in a corporation formed to purchase the Cyber Center business, while he remained in the employ of Spherion Technology (UK) and was to be paid an incentive bonus for the sale by us. They allege that he misled them as to his employment status at the time, as to the prospects for the Cyber Center, and as to whether the newly formed corporation was assuming the indebtedness of Spherion Technology (UK) associated with the Cyber Center business. They allege that in doing so, he was acting as our agent. We intend to vigorously defend this matter. Although this claim is in the preliminary stages, we have a reserve of $0.1 million related to this matter. We do not have insurance coverage for this claim.

Item 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended January 1, 2006.

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PART II

Item 5.MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market for the Registrant’s Common Equity

Our common stock is traded on The New York Stock Exchange under the symbol “SFN.” The following table sets forth, for the periods indicated, the high and low prices per share of the common stock as reported on The New York Stock Exchange:

2005	High		Low
First Quarter	$	8.41	$	7.21
Second Quarter	7.66		5.00
Third Quarter	8.23		6.40
Fourth Quarter	10.53		6.62

2004	High		Low
First Quarter	$	10.98	$	8.18
Second Quarter	11.18		8.82
Third Quarter	10.37		7.00
Fourth Quarter	8.50		6.80

On January 27, 2006, there were approximately 2,300 holders of record of our common stock.

We did not pay cash dividends in 2005 and 2004, and do not intend to pay cash dividends in the foreseeable future. Our U.S. revolving line of credit provides for certain covenants which restrict our ability to pay cash dividends in the event of default or under certain circumstances. Our Canadian revolving line of credit covenants do not allow us to pay cash dividends.

The information required by Item 201(d) of Regulation S-K is set forth in Part III, Item 12 of this Annual Report on Form 10-K.

Issuer Purchases of Equity Securities

			Average			Total Number of
			Price			Shares Purchased		Maximum Number
	Total Number		Paid			as Part of a		of Shares that May
	of Shares		per			Publicly Announced		Yet Be Purchased
Period	Purchased		Share			Program		Under the Program
October 3, 2005 through October 30, 2005		260,300		$	7.50		260,300		3,872,400
October 31, 2005 through November 27, 2005		428,300		9.01			428,300		3,444,100
November 28, 2005 through January 1, 2006		484,600		9.94			484,600		2,959,500
		1,173,200		$	9.06		1,173,200		2,959,500

(a)The program was announced on May 24, 2005.

(b)The repurchase program approved by the Board of Directors is for six million shares.

(c)There is no expiration date on the repurchase program.

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Item 6.SELECTED FINANCIAL DATA

The following table summarizes selected financial information for each of the most recent five fiscal years and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the accompanying consolidated financial statements included in this Annual Report on Form 10-K. We sold our court reporting business and staffing operations in the United Kingdom, the Asia/Pacific region and The Netherlands during 2004. The remaining business unit, the call center outsourcing business, is comprised of four call centers, of which three were sold in 2005 and the fourth one is undergoing due diligence with a potential purchaser. If that sale cannot be completed we will report this unit in continuing operations.

	Fiscal Years
	(in thousands, except per share data
	and operating information)
	2005(3)		2004(1,4)		2003(5)			2002(6)			2001(7)
Statement of Operation Data:
Revenues excluding Michael Page	$	1,971,665	$	2,032,715	$	1,733,761		$	1,771,119		$	2,151,576
Michael Page(2)	—		—		—			—			179,642
Total revenues	1,971,665		2,032,715		1,733,761			1,771,119			2,331,218
Gross profit	434,290		425,611		388,128			419,453			649,621
Earnings (loss) from continuing operations	19,346		15,196		(1,585		)	(219,172		)	117,506
Net earnings (loss)	12,029		35,829		(13,913		)	(903,272		)	106,961
Earnings (loss) per share—Basic:
Earnings (loss) from continuing operations	$	0.32	$	0.25	$	(0.03	)	$	(3.69	)	$	1.97
Net earnings (loss) per share	0.20		0.59		(0.23		)	(15.20		)	1.80
Earnings (loss) per share—Diluted:
Earnings (loss) from continuing operations	$	0.31	$	0.24	$	(0.03	)	$	(3.69	)	$	1.88
Net earnings (loss) per share	0.20		0.58		(0.23		)	(15.20		)	1.72
Weighted Average Shares:
Basic	60,938		61,036		59,951			59,417			59,502
Diluted	61,430		62,313		59,951			59,417			65,934
Balance Sheet Data(8):
Total assets	$	742,644	$	830,266	$	864,834		$	863,695		$	1,876,299
Long-term debt, net of current portion	3,735		4,766		98,073			105,250			215,751
Working capital	129,909		119,828		225,489			280,583			410,131
Operating Information(8):
Operating locations	659		716		811			822			941

(1)The 2004 fiscal year contains 53 weeks. All other years contain 52 weeks.

(2)Operating results for Michael Page are included through the date of disposition in April 2001.

(3)The 2005 results include pre-tax restructuring charges of $1.8 million and a net loss from discontinued operations of $7.3 million.

(4)The 2004 results included pre-tax restructuring and other charges of $8.4 million and earnings from discontinued operations of $20.6 million, which includes the recognition of a previously deferred tax benefit of $25.3 million.

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(5)The 2003 results include the Canadian results of operations from the date of acquisition (April 4, 2003); pre-tax restructuring charges of $4.2 million; and a net loss from discontinued operations of $12.3 million.

(6)The 2002 results include a pre-tax goodwill impairment charge of $230.7 million; pre-tax restructuring, and other charges of $10.4 million; and a pre-tax gain on the retirement of a portion of our convertible subordinated notes of $10.5 million. The 2002 results also include a net loss from discontinued operations of $68.5 million and the cumulative effect of a change in accounting principle to adopt SFAS No. 142, “Goodwill and Other Intangibles” of $615.6 million after-tax.

(7)The 2001 results include a pre-tax gain on the sale of Michael Page of $305.7 million ($186.3 million after-tax); pre-tax restructuring, asset impairment and other charges of $130.8 million; and a pre-tax gain on the sale of marketable securities of $2.4 million. The 2001 results also include a net loss from discontinued operations of $9.4 million and the cumulative effect of a change in accounting principle to adopt SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” of $1.1 million after-tax.

(8)At end of period.

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Item 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Organization of Information

Management’s discussion and Analysis provides a narrative on our financial performance that should be read in conjunction with the accompanying consolidated financial statements. It includes the following sections:

·Company Overview

·Executive Summary

·Operating Results

·Liquidity and Capital Resources

·Contractual Obligations and Commitments

·Off-Balance Sheet Arrangements

·Critical Accounting Policies

·New Accounting Pronouncements

·Inflation

·Seasonality and Cyclical Nature of Business

·Forward-Looking Statements-Safe Harbor

Company Overview

Spherion Corporation provides temporary staffing services, managed services and permanent placement services. Founded in 1946, we are headquartered in Fort Lauderdale, Florida, and operate a network of over 650 locations within North America. Our locations are company-owned, licensed or franchised. As of January 1, 2006, we had 477 company-owned offices, 94 licensed locations and 87 franchised locations.

The Company is organized around two basic operating segments—Staffing Services and Professional Services. The Staffing Services segment provides temporary staffing, managed services and permanent placement of employees with primarily clerical and light industrial skills. The Professional Services segment provides temporary staffing and permanent placement of employees with professional-level skill sets, such as information technology, finance and accounting, legal, engineering, marketing and administrative. See the Operations Overview section of Part I of this Annual Report on Form 10-K for a further description of our operating segments.

Executive Summary

The staffing industry experienced three years of declining revenues prior to 2004; however, economic conditions began to improve significantly in 2004 and continued to improve in 2005. Even though in 2004 and 2005, the staffing industry’s growth in jobs improved significantly, the industry remains economically sensitive and continues to operate within a highly competitive environment. We are anticipating continued industry revenue growth in 2006; however, we expect to continue experiencing intense pricing pressures, increased state unemployment costs as well as increased employee benefit costs.

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The following is a brief summary of our primary 2005 objectives and accomplishments:

·Building our business through targeted growth. Overall, revenue decreased 3.0% during 2005 compared with the prior year or 1.7% after considering the impact of the 53rd week in 2004. Revenue growth in temporary staffing and permanent placement were more than offset by the loss of a large managed service contract in early 2005, the loss of other managed service business and the decline in demand for outplacement services. Revenue from temporary staffing and permanent placement increased 2.1% and 18.2%, respectively. Revenues from small and mid-sized customers, targeted customer segments, increased 9.3%.

·Gross profit margin expansion. Overall, gross profit margin was 22.0%, an increase of 110 basis points compared with the prior year. Gross profit margin expansion is primarily due to lower employee benefit costs, particularly workers’ compensation, pricing increases, and a higher proportion of permanent placement revenue (3.3% of our 2005 revenue, an increase of 60 basis points from the same prior year period).

·Operational effectiveness. During 2005, we leveraged the technology infrastructure investments and reinvested some of the savings from the implementation of our enterprise-wide information system into extending our technology to better serve our clients and candidates. Our operating margin increased to 1.5% of revenues compared with 1.2% in the prior year.

·Financial discipline. We generated $72.3 million in operating cash flow compared with $6.1 million in the prior year. Cash flow was primarily provided by higher earnings from continuing operations, depreciation and a reduction in working capital due mostly to lower accounts receivable. We were able to reduce DSO (Days Sales Outstanding, a measure of how quickly we collect receivables), by 6 days from 60 days at the end of 2004 to 54 days at the end of 2005.

In 2006 we plan to focus on three key operating objectives:

·First, to accelerate our growth rates by expanding the depth and breadth of our services with existing accounts:

-Through rigorous account planning and sales management, we plan to leverage existing client relationships to increase total sales to these companies, especially professional services.

-During 2005, our local staffing sales efforts were concentrated on small and mid-sized clients which generated more growth than the growth rate on our larger accounts. Growth rates continue to be strong in this area as we strive to continue changing our overall revenue mix through increased business development in the local branches where pricing pressures tend to be less severe.

·Second, to target new accounts by providing integrated services:

-We have specific targeting criteria that focus on high growth, mid-market companies and companies undergoing significant change. We have determined that a certain range of volume deals require lower cost delivery by maximizing the utilization of new technology introduced in 2005 which centralizes sourcing and screening activities.

·Third, to continue improving operating leverage:

-During 2005, gross profit margins increased primarily as a result of pricing increases and lower employee benefit costs. We have a sales focus on small and mid-sized clients where pricing pressures tend to be less severe.

-During 2005, we increased sales and recruiter headcount by 8.1%. We expect to capitalize on increased recruiter productivity as new sales personnel continue to gain experience.

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-During 2005, we implemented new technology which centralizes sourcing and screening activities. Our operations and delivery teams will focus on migrating mid-sized clients to a lower cost centralized delivery model.

Operating Results

Consolidated Operating Results

Fiscal 2005 compared with 2004

·Revenue in 2005 was $1,971.7 million, a decrease of 3.0% compared with the prior year or 1.7% after considering the impact of the 53rd week in 2004. Temporary staffing revenue grew 2.1%, which was slower than the Bureau of Labor Statistics estimated 6.6% increase in the number of temporary employees compared with the prior year. Demand for permanent placement services, particularly within Professional Services, remained strong with total year over year growth of 18.2%. The loss of the large managed services contract and intentional exit of certain staffing clients who did not meet minimum thresholds at the start of the second quarter of 2005 affected year over year comparisons.

·Gross profits in 2005 were $434.3 million, an increase of 2.0% from the prior year despite lower revenues. Gross profit margin increased to 22.0% in 2005 compared with 20.9% last year. Gross profit margins were positively impacted by (i) lower workers’ compensation costs of $8.1 million due to improvements in prior year loss estimates (20 basis points), lower costs for current year losses (20 basis points) and lower employee benefits (30 basis points), (ii) higher temporary staffing pricing within Staffing Services (40 basis points), and (iii) a shift in revenue mix toward permanent placement services (15 basis points). The increase in gross profit margin was partially offset by higher state unemployment taxes (15 basis points).

·Selling, general and administrative expenses were $404.4 million, an increase of 0.7% from the prior year. As a percentage of revenues, these costs increased due to higher recruiter costs in the Professional Services segment and higher advertising expense. Unallocated corporate costs decreased by $6.8 million, a decrease of 33.0% from the prior year due primarily to the completion of the implementation of our enterprise-wide information system late in 2004.

·Interest expense was $3.2 million, a decrease of 44.4% from the prior year. The decrease in interest expense relates primarily to the retirement of convertible notes in October 2005 and August 2004.

·Restructuring and other charges decreased by $6.6 million to $1.8 million in 2005 versus $8.4 million in 2004. The 2004 costs include the termination of an employment contract with our former chief executive officer.

·Our effective tax rate from continuing operations was 33.3% and was lower than the US Federal Statutory tax rate of 35.0% due primarily to (i) the impact of work opportunity and other employment tax credits, (ii) the recognition of previously unrecognized net operating loss benefits and (iii) the reduction of state tax reserves due to the favorable resolution of several state income tax audits.

·Earnings from continuing operations were $0.31 per diluted share for the 2005 period compared with $0.24 in the prior year.

·Discontinued operations incurred pre-tax losses of $11.6 million in 2005, which includes losses primarily from call center operations of $5.9 million and an estimated loss on sale of $5.7 million during 2005 related primarily to indemnifications and other matters associated with the previously sold United Kingdom and Asia/Pacific staffing operations. Discontinued operations resulted in a loss of $0.12 per share compared with earnings of $0.33 per share in the prior year which included the recognition of a previously deferred tax benefit in the amount of $25.3 million.

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·DSO decreased to 54 days at the end of 2005 compared with 60 days at the end of 2004.

Fiscal 2004 compared with 2003

·Revenues in 2004 were $2,032.7 million, up 17.2% from 2003 due to increased demand including 1.5% of growth due to the additional week in 2004. The Bureau of Labor Statistics reported an estimated increase of approximately 7.7% in the number of temporary employees in comparison with the prior year.

·Gross profit increased to $425.6 million, up 9.7% from the prior year primarily due to the increase in revenues. Our overall gross profit rate decreased to 20.9% from 22.4% in the prior year due primarily to pricing pressure (125 basis points) and increased state unemployment and federal employment taxes (75 basis points), which has only been partially offset by lower employee benefit costs, including workers’ compensation costs (50 basis points).

·Selling, general and administrative expenses were $401.5 million, an increase of 4.3% over prior year. Selling, general and administrative expenses as a percentage of revenues decreased to 19.8% from 22.2% in the prior year. We continued to reduce costs and incurred restructuring and other charges of $8.4 million in 2004 versus $4.2 million in 2003.

·We completed the implementation of our enterprise-wide information system, spending $5.8 million in capital on this system in 2004. Our selling, general and administrative expenses included $7.3 million of non-capitalizable costs associated with this system, down $1.6 million from 2003.

·Interest expense decreased marginally in 2004 compared with 2003, as the decrease in interest expense relating to the retirement of our remaining 41¤2% convertible subordinated notes during 2004 was largely offset by increased expense related to debt outstanding on our U.S. and Canadian revolving lines of credit.

·Our effective tax rate (benefit) from continuing operations for 2004 was (18.0%) versus (9.5%) for 2003. The rate for 2004 is lower than the federal statutory rate due to the impact of work opportunity and other employment tax credits and due to state tax benefits. The rate for 2003 was lower than the federal statutory rate of 35.0% as a result of the state tax expense impact that reduced the overall tax benefit on operating losses.

·Discontinued operations incurred pre-tax losses of $14.0 million in 2004, which includes losses primarily from the United Kingdom and Asia Pacific staffing operations and the call centers of $9.6 million and an estimated loss on sale of $4.4 million during 2004.

·DSO increased to 60 days at the end of 2004 compared with 55 days at the end of 2003.

Discontinued Operations

During 2004, we assessed the profitability of our operations and made decisions to exit five business units. We sold our court reporting business and our staffing operations in the United Kingdom, the Asia/Pacific region and The Netherlands during 2004. The remaining business unit, the call center outsourcing business, was comprised of four call centers, of which three were sold in 2005 and the fourth one is undergoing due diligence with a potential purchaser. If that sale cannot be completed we will report this unit in continuing operations. These business units’ operating results are included in discontinued operations in the accompanying consolidated statements of operations through the dates of their disposition.

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For the fiscal years ended January 1, 2006, December 31, 2004 and December 26, 2003, discontinued operations through the dates of their disposition, as applicable, had revenues of $20.4 million, $226.7 million and $340.7 million, respectively, and had pre-tax operating losses of $5.9 million, $9.6 million and $14.9 million, respectively.

During 2005, we recorded, a charge of $5.7 million for the estimated settlement of certain warranty indemnification and other matters associated with our former operations in Australia and the United Kingdom.

See Note 2, Discontinued Operations, in the accompanying consolidated financial statements for further discussion.

Restructuring and Other Charges

The following is a summary of current and prior period restructuring activities. This should be read in conjunction with Note 13, Restructuring and Other Charges, in the accompanying consolidated financial statements. A summary of the charges is as follows (in thousands):

	Fiscal Years
	2005			2004			2003
Restructuring	$	2,230		$	3,431		$	4,811
Restructuring reversal of over accrual	(175		)	(672		)	(606		)
Other charges	(292		)	5,636			—
	$	1,763		$	8,395		$	4,205

Restructuring Charges

Restructuring charges for the year ended January 1, 2006 totaled $2.2 million for severance related costs for the elimination of 112 positions. The restructuring charges were primarily as a result of an announced termination of a customer contract and other changes within the managed services portion of the Staffing Services operating segment.

During the second half of 2003, we identified certain cost reduction opportunities primarily related to the realignment of our operating segments and the implementation of our enterprise-wide information system and adopted a restructuring plan (the “2003 Plan”) to eliminate redundancies, reduce excess capacity and centralize business support functions. Restructuring charges relating to this plan totaled $3.4 million and $4.8 million for the years ended December 31, 2004 and December 26, 2003, respectively.

The charges above were partially offset by the reversal of $0.2 million, $0.7 million and $0.6 million for 2005, 2004 and 2003, respectively, due to the favorable resolution of prior year restructuring items.

Other Charges

During the second quarter of 2005, we identified $0.3 million of other charges recorded in the prior year for facility closures that were unnecessary and reversed these charges to income. During 2004, we incurred other charges of $5.6 million to terminate the employment contract of our former chief executive officer.

Operating Segments

We evaluate the performance of our operating segments and allocate resources based on revenues, gross profit and segment operating profit. Segment operating profit from continuing operations is defined as income before unallocated corporate costs, amortization expense, interest expense, interest income, income taxes and special items (restructuring and other charges and gain (loss) on retirement of debt). All

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material intercompany revenues and expenses have been eliminated. Additionally, amounts related to discontinued operations have been excluded from the segment information below and are presented as discontinued operations in the consolidated statements of operations.

Information on operating segments and a reconciliation to earnings (loss) from continuing operations before income taxes, discontinued operations and cumulative effect of changes in accounting principle for the periods indicated are as follows (in thousands):

	Fiscal Years
	2005					2004					2003
				% of Total					% of Total					% of Total
Revenues:
Staffing Services	$	1,521,486		77.2	%	$	1,623,133		79.9	%	$	1,382,964		79.8	%
Professional Services	450,179			22.8	%	409,582			20.1	%	350,797			20.2	%
Total	$	1,971,665		100.0	%	$	2,032,715		100.0	%	$	1,733,761		100.0	%
				% of Revenues					% of Revenues					% of Revenues
Gross Profit:
Staffing Services	$	291,147		19.1	%	$	297,147		18.3	%	$	275,243		19.9	%
Professional Services	143,143			31.8	%	128,464			31.4	%	112,885			32.2	%
Total	$	434,290		22.0	%	$	425,611		20.9	%	$	388,128		22.4	%
Segment Operating Profit:
Staffing Services	$	24,917		1.6	%	$	25,475		1.6	%	$	29,746		2.2	%
Professional Services	19,236			4.3	%	19,769			4.8	%	4,717			1.3	%
Total	44,153			2.2	%	45,244			2.2	%	34,463			2.0	%
Unallocated corporate costs	(13,832		)			(20,637		)			(30,801		)
Amortization expense	(416		)			(543		)			(448		)
Interest expense	(3,205		)			(5,766		)			(6,178		)
Interest income	4,072					3,815					5,105
Restructuring and other charges	(1,763		)			(8,395		)			(4,205		)
Gain (loss) on retirement of debt	—					(841		)			313
Earnings (loss) from continuing operations before income taxes and discontinued operations	$	29,009				$	12,877				$	(1,751	)

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Segment Operating Results

Staffing Services

Information on the Staffing Services operating segment’s skill sets and service lines for the periods indicated are as follows (in thousands):

	Fiscal Years
	2005						2004						2003
				% of Total						% of Total						% of Total
Revenue by Skill*:
Clerical	$	935,523			61.5	%	$	1,022,651			63.0	%	$	925,121			66.9	%
Light Industrial	585,963				38.5	%	600,482				37.0	%	457,843				33.1	%
Segment Revenue	$	1,521,486			100.0	%	$	1,623,133			100.0	%	$	1,382,964			100.0	%
Revenue by Service:
Temporary Staffing	$	1,312,515			86.2	%	$	1,310,755			80.8	%	$	1,054,516			76.2	%
Managed Services*	191,232				12.6	%	297,627				18.3	%	316,355				22.9	%
Permanent Placement	17,739				1.2	%	14,751				0.9	%	12,093				0.9	%
Segment Revenue	$	1,521,486			100.0	%	$	1,623,133			100.0	%	$	1,382,964			100.0	%
Gross Profit Margin by Service:
(As % of Applicable Revenue)
Temporary Staffing	16.8		%				15.7		%				17.0		%
Managed Services	27.8		%				25.7		%				26.5		%
Permanent Placement	100.0		%				100.0		%				100.0		%
Total Staffing Services	19.1		%				18.3		%				19.9		%

*Managed services revenue and revenue by skill for 2004 and 2003 have not been adjusted for the movement of certain managed services contracts within Staffing Services during the second quarter of 2005 to temporary staffing within Professional Services. The amount moved for the fiscal year ended January 1, 2006 was $14.1 million. Management responsibility for these contracts moved to Professional Services.

Fiscal 2005 Compared with 2004

Revenues—Staffing Services revenue decreased 6.3% to $1,521.5 million in 2005 from $1,623.1 million in the prior year, or 5.1% after considering the impact of the 53rd week in 2004. Revenue decreases are primarily due to a decrease in managed services of $106.4 million, which includes the loss of one large managed service customer and several smaller contracts primarily as the result of the intentional exit of certain staffing clients who did not meet minimum thresholds, lower outplacement revenues due to a slowdown in corporate downsizing trends, the movement of $14.1 million in revenue for locally based technology services contracts from this segment to our Professional Services segment. The U.S. economy has continued to produce solid job growth, however, the GDP increase has slowed down to 3.5% from 4.4% in the prior year. In this segment, revenues from our largest 250 customers decreased while revenues from our smaller customers increased due to our focus in targeted growth with small and mid-sized customers. Customers in the telecommunications, information technology (IT), manufacturing, media and pharmaceutical industries represented our largest revenue decrease. This decrease was partially offset by higher growth in the transportation, service, retail and food services industries.

·By skill—Clerical revenue decreased 8.5% and light industrial revenue decreased 2.4% from prior year levels, or 7.4% and 1.2% after considering the impact of the 53rd week in 2004. The decrease in clerical revenues was primarily due to decreases in managed services as discussed below.

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·By service—Managed services revenue decreased 35.7% from prior year levels due to the loss of one large managed service customer and several smaller contracts, lower outplacement revenues due to a slowdown in corporate downsizing trends and, the movement of $14.1 million in revenue for locally based technology services contracts from this segment to our Professional Services segment. During 2005, managed services revenues stabilized and showed sequential growth of 3.4% in the fourth quarter of 2005 compared with the prior quarter as a result of an increase in recruitment outsourcing activity. Permanent placement revenues increased 20.3% over the prior year due to the addition of recruiters. Temporary staffing revenue improved slightly over the prior year despite the impact of the extra week in 2004. During 2005 we focused on pricing discipline and our growth may have been somewhat limited from potential and some existing customers that did not meet minimum pricing thresholds.

Gross Profit—Gross profit decreased 2.0% to $291.1 million from $297.1 million in the prior year. The overall gross profit margin was 19.1% in 2005 compared with 18.3% in the prior year, or an increase of 80 basis points. The increase in the gross profit margin was primarily due to (i) pricing increases which resulted in improved pay/bill spreads and higher profit recruitment processing outsourcing (75 basis points) and (ii) a decrease in insurance costs (60 basis points), particularly for workers’ compensation due to improvements in prior year loss estimates, improved safety programs, and favorable law changes. These increases were partially offset by a shift in service mix away from the managed services (40 basis points) and higher state unemployment taxes (15 basis points).

Segment Operating Profit—Staffing Services segment operating profit was $24.9 million compared with $25.5 million in the prior year. The decrease from prior year was due to lower gross profits of $6.0 million partially offset by lower operating expenses of $5.4 million. Operating expenses decreased 2.0% compared with 2004, a slower decline than the revenue decrease of 6.3%. Decreases in operating expenses were primarily associated with cost reductions made due to the managed services customer loss and lower outplacement activity. Operating expenses as a percentage of revenue increased to 17.5% compared with 16.7% in the prior year primarily due to revenue volume decreases at a higher rate than cost reductions.

Outlook—The market remains highly competitive and is characterized by intense pricing pressures and competitive bidding. We plan to monitor pricing practices so that we can grow at market rates while maintaining pricing discipline. If the US economy continues to produce solid job growth, we would expect to see continued increases in permanent placement and temporary staffing. The outlook for managed services in 2006 appears to be stabilizing, and we expect to see increased recruitment outsourcing opportunities. We plan to continue focusing our resources by continuing to target small and mid-sized customers where pricing pressures tend to be less severe. We will also try to increase account penetration by building on relationships with existing clients to whom we are currently providing services. Despite these efforts and economic growth, there is no assurance that revenues will grow in 2006.

Fiscal 2004 Compared with 2003

Revenues—Staffing Services revenues increased 17.4% to $1,623.1 million in 2004 from $1,383.0 million in the prior year, including acquisition growth of 1.5% from our Canadian operations and an increase of approximately 1.4% due to an additional week in 2004. This year over year growth was due to economic growth (GDP increased 4.4% during 2004) and the success of our marketing efforts within the United States. A number of new marketing initiatives were undertaken and our Staffing Services operating segment grew at a faster rate than our largest competitors. Our largest 250 customers grew at a slower rate than the smaller customers in this operating segment. Customers in the telecommunications, manufacturing, retail, consulting and information technology (IT) industries represented our largest revenue growth.

·By skill—Clerical revenues increased 10.5% and light industrial revenues increased 31.2% from the prior year due to the reasons mentioned above.

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·By service—Temporary staffing increased 24.3%, compared with the prior year, due to the reasons mentioned above. Managed services decreased 5.9% from the prior year as customer losses and decreases in revenues from existing customers particularly for IT managed services such as help desk and data centers more than offset increases in outsourced recruitment and administrative services. Permanent placement revenues increased 22.0% over the prior year due to the addition of recruitment resources and increased market demand.

Gross Profit—Gross profits increased 8.0% to $297.1 million from $275.2 million in the prior year. Of this increase, $3.9 million or 1.4% was acquisition growth from our Canadian operations, and $18.0 million, or 6.6% organic growth. The overall gross profit percentage was 18.3% in 2004 compared to 19.9% in the prior year, or a decrease of about 160 basis points. The decrease in the gross profit margin is due primarily to pricing pressure that we began to experience in 2003 (75 basis points), a shift in the mix of business to lower margin temporary staffing services (40 basis points), and an increase in state unemployment and federal employment taxes (90 basis points), partially offset by a decrease in employee benefit costs (45 basis points).

Segment Operating Profit—Staffing Services segment operating profit was $25.5 million compared to $29.7 million in the prior year. The decrease from the prior year was due to higher operating expenses of $26.1 million which was partially offset by the increase in gross profits of $21.9 million described above. The increased operating expenses were primarily associated with a higher revenues base, and included higher bonus, bad debt expenses, temporary help, salaries and licensee commissions, which was only partially offset by lower travel and meeting expenses. Operating expenses as a percentage of revenues decreased to 16.7% compared with 17.8% in the prior year due to greater leveraging of expenses.

Professional Services

Information on the Professional Services operating segment’s skill sets and service lines for the periods indicated are as follows (in thousands):

	Fiscal Years
	2005						2004						2003
				% of Total						% of Total						% of Total
Revenue by Skill*:
Information Technology	$	288,309			64.1	%	$	267,108			65.2	%	$	229,186			65.3	%
Finance & Accounting	105,001				23.3	%	94,190				23.0	%	83,393				23.8	%
Other	56,869				12.6	%	48,284				11.8	%	38,218				10.9	%
Segment Revenues	$	450,179			100.0	%	$	409,582			100.0	%	$	350,797			100.0	%
Revenue by Service:
Temporary Staffing*	$	402,286			89.4	%	$	368,788			90.0	%	$	319,699			91.1	%
Permanent Placement	47,893				10.6	%	40,794				10.0	%	31,098				8.9	%
Segment Revenues	$	450,179			100.0	%	$	409,582			100.0	%	$	350,797			100.0	%
Gross Profit Margin by Service:
(As % of Applicable Revenue)
Temporary Staffing	23.7		%				23.8		%				25.6		%
Permanent Placement	100.0		%				100.0		%				100.0		%
Total Professional Services	31.8		%				31.4		%				32.2		%

*Temporary staffing revenue and revenue by skill for 2004 and 2003 have not been adjusted for the movement of certain managed services contracts within Staffing Services during the second quarter of

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2005 to Professional Services. The amount moved for the fiscal year ended January 1, 2006 was $14.1 million. Management responsibility for these contracts moved to Professional Services.

Fiscal 2005 Compared with 2004

Revenues—Professional Services revenue increased 9.9%, or $40.6 million, to $450.2 million in 2005 from $409.6 million in the prior year, or 11.7% after considering the impact of the 53rd week in 2004. Customer demand continued to be strong in 2005 and revenue also increased as a result of continued investments in hiring of additional sales and recruiting staff. Most of the increase, $33.5 million, was in temporary staffing revenues and included $14.1 million due to the movement in revenue for locally based technology service contracts from our Staffing Services segment to this segment.

·By skill—Finance and accounting increased 11.5% largely due to continued strong demand, which was primarily due to increased regulatory reporting requirements for US public companies. Information technology (“IT”) increased 2.7% from the prior year (excluding the movement in 2005 of approximately $14.1 million of locally based technology services contracts from Staffing Services) due to increased temporary staffing and permanent placement demand. Revenue from other skills increased primarily due to increased demand for temporary staffing in the legal, human resources, and sales and marketing sectors.

·By service—Temporary staffing increased 9.1% primarily due to continued demand for finance and accounting and IT personnel and the movement of $14.1 million of locally based technology services contracts from Staffing Services. Permanent placement revenue increased 17.4% primarily as a result of an increased focus on IT combined with the addition to the recruiter headcount.

Gross Profit—Professional Services gross profit increased 11.4% to $143.1 million from $128.5million in the same prior year period. The overall gross profit margin was 31.8% in 2005 compared with 31.4%in the prior year. This 40 basis point increase in gross profit margin is primarily due to lower employee benefits and paid time off costs (90 basis points), and a change in service mix as permanent placement has grown faster than temporary staffing (50 basis points). These increases were partially offset by (i) the impact that a change in customer mix had on overall pay/bill spreads; in 2005, we focused on expanding our penetration within existing accounts which have lower pricing (80 basis points) and (ii) higher state unemployment taxes (20 basis points).

Segment Operating Profit—Professional Services segment operating profit was $19.2 million compared with $19.8 million in the prior year. The decrease in operating profit from the prior year was the result of the increase in gross profits of $14.6 million, described above, being more than offset by an increase in operating expenses of $15.2 million. Operating expenses as a percentage of revenues increased to 27.5% compared with 26.5% in the prior year. The increase in operating expenses is primarily due to (i) increased incentive compensation as a result of higher volume, (ii) higher employee costs as a result of growth in personnel due to increased sales and recruiter headcounts, and the initial investment in staff as they increase their productivity levels, and (iii) increased candidate advertising expense.

Outlook—In 2005, Professional Services benefited from the continuation of the 2004 trends of job growth and client investment. The technology skill set experienced continued growth throughout 2005. Growth in IT in 2006 is expected to continue, however, it will largely depend on our ability to further penetrate existing client relationships upon customer project related work. We expect to continue capitalizing on these growth opportunities as a result of the investments we made in 2005 in additional sales and recruiting personnel. Within the finance and accounting skill sets, we expect growth to continue but possibly at a lower rate as projects which resulted from the increased regulatory environment, transition from implementation to maintenance. As a result, there is no assurance that revenues for the finance and accounting skill sets will continue to grow at the same pace in 2006.

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Fiscal 2004 Compared with 2003

Revenues—Professional Services revenues increased 16.8% to $409.6 million in 2004 from $350.8 million in the prior year, including an increase of approximately 1.9% due to an additional week in 2004. Market conditions substantially improved over the prior year and economic recovery (4.4% GDP growth) along with increased governmental regulation contributed to overall growth. Additional recruitment resources are being added to accelerate growth.

·By skill—Information technology increased 16.5% from prior year due to increased market demand for IT consultants. Finance and accounting increased 12.9% as companies continued to actively address increased regulatory reporting requirements in the United States, which more than offset decreases in the mortgage banking industry. Increased revenues in other skill-sets were primarily driven by increased demand for temporary staffing in the legal and human resources sectors.

·By service—Temporary staffing increased to meet demand for technology skills and to a lesser extent for finance and accounting personnel in response to increased regulatory and reporting requirements. Permanent placement services increased 31.2% due to improving market conditions and a higher demand for employees in finance and accounting and an increased emphasis on IT.

Gross Profit—Professional Services gross profits increased 13.8% to $128.5 million in 2004 from $112.9 million in the prior year. The overall gross profit margin was 31.4% in 2004 compared with 32.2% in the prior year or an 80 basis point decrease. This decrease in gross profit margin is due to lower pay/bill spreads experienced in the second half of 2004 (200 basis points), increased state unemployment and federal employment taxes (30 basis points). These factors have been partially offset by a shift in business mix towards permanent placement business (80 basis points), and lower employee benefit costs (70 basis points).

Segment Operating Profit—Professional Services segment operating profit was $19.8 million compared to $4.7 million in the prior year. The increased profit from prior year was due to the increase in gross profit of $15.6 million as described above. Operating expenses increased $0.5 million and as a percentage of revenues were 26.5% compared to 30.8% in the prior year. Operating expenses did not increase significantly as synergies obtained from combining the former technology and professional recruiting business units largely offset higher bonus and commission payments due to higher profits.

Unallocated corporate costs

2005 compared with 2004—Unallocated corporate costs decreased $6.8 million to $13.8 million in 2005 compared with $20.6 million in 2004. The decrease is primarily due to lower costs as a result of the impact of our enterprise-wide information system which was completed during 2004. As a percentage of consolidated revenue, these costs were 0.7% during 2005 compared with 1.0%in 2004.

2004 compared with 2003—Unallocated corporate costs decreased 33.0% to $20.6 million in 2004 compared to $30.8 million in 2003. Unallocated corporate costs decreased in 2004 primarily as a result of the following items: decreases in general corporate overhead ($3.6 million); lower non-capitalizable costs related to the implementation of our enterprise-wide information system ($1.6 million); the recovery of an amount owed under a purchase agreement that was written-off in 2002; and a favorable judgment in the Interim HealthCare lawsuit. During 2004, we recovered $1.4 million owed under a purchase agreement that was written-off in 2002 associated with the sale of a business, unpaid rent costs and the related legal fees. The favorable judgment in the Interim HealthCare lawsuit resulted in a total decrease of $3.6 million in unallocated corporate costs from 2003. See Note 12, Commitments and Contingencies in the accompanying consolidated financial statements for further discussion. As a percentage of consolidated revenues, unallocated corporate costs were 1.0% during 2004 compared to 1.8% in 2003.

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Liquidity and Capital Resources

Historically, we have financed our operations through existing cash balances, operating cash flows and revolving lines of credit. Our principal uses of cash are capital expenditures, working capital needs and repayment of debt. The nature of our business requires payment of wages to our temporary employees and consultants on a weekly basis, while payments from customers are received afterwards. Our DSO at January 1, 2006 was 54 days.

Cash Flows

As of January 1, 2006, we had total cash resources available of $30.2 million (an increase of $25.0 million from December 31, 2004). In 2005 we continued paying-off our long term debt, and as of January 1, 2006, we have $6.9 million in short-term and long-term debt, a decrease of $42.4 million compared with December 31, 2004. Cash flows from operating, investing and financing activities, as reflected in the accompanying consolidated statements of cash flows, are summarized as follows (in thousands):

	Fiscal Years
	2005			2004			2003
Cash Provided By (Used In):
Operating Activities	$	72,285		$	6,077		$	50,040
Investing Activities	18,740			33,997			(82,241		)
Financing Activities	(66,148		)	(56,322		)	(14,047		)
Effect of exchange rates on cash	132			154			2,040
Net increase (decrease) in cash and cash equivalents	$	25,009		$	(16,094	)	$	(44,208	)

Operating cash flows

Operating cash flows for 2005 of $72.3 million are primarily comprised of earnings of $12.0 million plus the accrual for loss on disposal of discontinued operations of $5.7 million, plus non-cash depreciation and amortization of $21.9 million, a reduction in working capital of $21.4 million and a non-cash deferred income tax expense of $6.3 million. Working capital was reduced primarily due to (i) lower accounts receivable as we lowered DSO from 60 days at the end of December 2004 to 54 days as of January 1, 2006 and as we collected accounts receivable from higher revenues in the prior period, and (ii) the receipt of an income tax refund of $7.5 million. Reductions in accounts receivable and tax refunds received were partially offset by increases in payouts for accounts payable and accrued liabilities. Each one day decrease in DSO approximates $5.5 million of working capital.

Operating cash flows for 2004 of $6.1 million are primarily comprised of earnings, excluding the gain on disposal of discontinued operations, of $8.8 million plus non-cash expenses for depreciation and amortization of $28.8 million, offset by working capital usage of $34.0 million and a non-cash deferred income tax benefit of $8.9 million. Working capital was used primarily to fund accounts receivable as DSO increased to 60 days from 55 days in the prior year.

Operating cash flows for 2003 of $50.0 million are primarily comprised of cash provided by reductions in working capital of $28.4 million plus non-cash expenses for depreciation and amortization of $29.3 million and deferred compensation of $7.4 million, partially offset by the net loss, excluding the loss on disposal of discontinued operations, of $9.8 million and non-cash deferred tax benefit of $10.2 million. Working capital for 2003 was provided primarily through federal tax refunds of $80.9 million, partially offset by a use of cash of $38.7 million to fund accounts receivable as DSO increased to 55 days from 49 days in the prior year.

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Investing cash flows

Cash provided by investing activities for 2005 of $18.7 million is primarily related to (i) net withdrawals of $19.1 million from our insurance deposits for claim payments, (ii) proceeds from a note receivable from the 2004 sale of our Australian subsidiary, (iii) proceeds from the dispositions of our call centers of $1.4 million, and (iv) collections on franchise notes, partially offset by capital expenditures of $9.7 million. Capital expenditures were primarily for further enhancements to our enterprise-wide information system and for client and candidate facing software improvements.

Investing cash flows for 2004 of $34.0 million are primarily related to proceeds from the sale of discontinued operations of $43.7 million, offset by capital expenditures of $12.1 million. Proceeds from the sale of discontinued operations (net of cash sold) included $2.0 million, $13.7 million, $25.4 million and $2.6 million from the sale of our operations in The Netherlands, Asia/Pacific region, United Kingdom and the court reporting business, respectively. Capital expenditures included the investment in our enterprise-wide information system, which amounted to $5.8 million.

Investing cash outflows for 2003 of $82.2 million are primarily related to capital expenditures of $60.5 million. These capital expenditures included the investment in our enterprise-wide information system, which amounted to $38.6 million ($45.8 million including notes payable for capital purchases). We also paid $10.7 million (excluding the assumption of debt) to acquire 85% of our Canadian franchise during the second quarter of 2003.

We expect our total 2006 capital expenditures to be between $16.0 million and $18.0 million and to be funded through operating cash flow or through borrowings under our existing revolving lines of credit.

Financing cash flows

Financing cash outflows for 2005 of $66.1 million are primarily due to the repayments of borrowings from lines of credit and notes payable of $45.7 million and the repurchase of common stock of $24.0 million. On May 24, 2005, the Board of Directors authorized the repurchase of up to six million shares or approximately 10% of the Company’s outstanding common stock. Share repurchases continue to be made in open-market transactions or in privately negotiated transactions, and may continue up to the six million shares authorized. The repurchase program does not require Spherion to acquire any specific number of shares and may be terminated at any time.

Financing cash outflows for 2004 of $56.3 million are primarily due to the retirement of the remaining 41¤2% convertible subordinated notes in the amount of $89.7 million, partially offset by net borrowings from lines of credit used to fund working capital.

Financing cash outflows for 2003 of $14.0 million are primarily for the retirement of a portion of our 41¤2% convertible subordinated notes, the repayment of a portion of the debt assumed in conjunction with the Canadian acquisition and repayment of a portion of the short-term notes payable for software and related costs.

Financing

We believe that a combination of our existing cash balances, other liquid assets, operating cash flows, and existing revolving lines of credit, taken together, provide adequate resources to fund ongoing operating requirements, however, our operating cash flow could be impacted by factors outside of our control.

We have a U.S. dollar revolving line of credit in the amount of $250.0 million that is secured by substantially all of our domestic accounts receivable. At our option, the amount available can be increased to $300.0 million. As of January 1, 2006, there were no amounts outstanding under this facility and as of

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December 31, 2004, there was $25.0 million outstanding. Total availability under this facility was $189.2 million as of January 1, 2006 and is calculated as eligible receivables of $221.0 million, less: amounts outstanding, letters of credit of $4.1 million and a one week payroll reserve of $27.7 million. Interest on this line of credit is based upon the duration of the loan, availability under the line and other conditions and would have been approximately 5.96% (LIBOR plus a spread) or approximately 7.00% (prime plus a spread) as of January 1, 2006. We pay an unused line fee in the range of 0.25% to 0.38% per annum that is determined by the unused portion of the revolving line of credit as well as a letter of credit fee of 0.25% per annum. This line of credit expires in 2010.

We also have a Canadian dollar revolving line of credit (secured by Canadian accounts receivable) that matures July 2007. This facility provides up to CAD$13.0 million of on-balance sheet financing (approximately $11.2 million at current exchange rates). As of January 1, 2006, there were no borrowings outstanding under this facility, and as of December 31, 2004, there was $7.1 million outstanding. As of January 1, 2006, the interest rate for amounts borrowed on this facility would have approximated 6.0% (Canadian prime plus a spread). We incurred interest charges under this facility at an average interest rate approximating 5.25% during 2005. A commitment fee of 0.5% per annum is payable based on the unused portion of the revolving line of credit. We guarantee the Canadian dollar revolving line of credit.

Our revolving lines of credit provide for certain affirmative and negative covenants which may limit the total availability under these revolving lines of credit based upon our ability to meet these covenants. These covenants include, but are not limited to: a fixed charge coverage ratio; limitations on capital expenditures; additional debt incurred; mergers, consolidations or sales; and transactions with subsidiaries and related parties. Failure to meet compliance with one or more of these covenants in the future could affect the amount of availability we have to borrow against and as a result, our liquidity and financial condition may be adversely affected. At January 1, 2006, we were in compliance with the requirements of these covenants.

During 2004, we retired our remaining U.S. dollar convertible subordinated notes (the “Notes”) and paid a premium of $0.6 million to retire the Notes and wrote-off the remaining bond issuance costs of $0.2 million, both of which are included in “Other gain (loss)” in the accompanying consolidation statements of operations. During 2003, we retired an aggregate face value of $7.0 million of the Notes for a purchase price of $6.6 million. We recorded a gain, net of bond issuance cost write-offs of $0.3 million for the fiscal year ending December 26, 2003, which is included in “Other gain (loss)” in the accompanying consolidated statements of operations.

In October 2000, we issued $8.0 million of interest-bearing convertible promissory notes due October 1, 2005 in conjunction with the purchase of 80% of the membership interests of JobOptions, LLC. These notes were paid off in full at the end of the third quarter in 2005.

We have a voluntary non-qualified deferred compensation plan for highly compensated employees who are not eligible to participate in Spherion’s 401(k) Benefit Plan. The plan is not funded, however, we maintained investments of $12.9 million, at January 1, 2006, which are included in “Intangibles and other assets” in the accompanying consolidated balance sheets. In January 2006, we surrendered the remaining company-owned life insurance policies of $12.9 million and invested these funds and an additional $10.7 million in a portfolio of mutual funds to fully match the deferred compensation liability of this plan.

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Contractual Obligations and Commitments (in thousands)

	Payments due by period
	Total		2006		2007		2008		2009		2010		Thereafter
Long-term debt obligations	$	2,237	$	1,638	$	300	$	299	$	—	$	—		$	—
Capital lease obligation	5,056		1,589		1,189		636		636		635			371
Operating lease obligations(1)	67,891		24,169		18,197		11,563		7,621		3,988			2,353
Purchase obligations(2)	94,765		22,799		19,187		15,404		14,760		14,774			7,841
Total	$	169,949	$	50,195	$	38,873	$	27,902	$	23,017	$	19,397		$	10,565

(1)Operating lease obligations for rent and equipment will be offset by future sublease income of $2.8 million in 2006, $2.8 million in 2007, $2.7 million in 2008, $2.6 million in 2009, $0.8 million in 2010 and thereafter.

(2)Purchase obligations include normal and customary contracts and minimum spend contracts in the ordinary course of business, primarily information technology, outsourcing and maintenance contracts.

In connection with the acquisition of our Canadian franchise in 2003 we entered into a put/call agreement with the minority interest holder, whereby the minority interest holder can put the remaining 15% interest in the Canadian operations back to us any time after January 1, 2006, or, as amended, we can call the remaining 15% interest any time after January 1, 2008. If the put or the call were exercised, the purchase price would be primarily determined based upon the net assets and gross profits from this operation in future periods. Based upon these factors, the estimated purchase price using 2005 operating results and net assets as of the end of the year would approximate $3.0 million. As this amount is not determinable or certain to be paid at this point in time, it is not included in the table above.

Off-Balance Sheet Arrangements

We do not have any significant off-balance sheet arrangements.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingencies. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be materially different from those estimates. The following policies are those that we consider to be the most critical. See Note 1, Summary of Significant Accounting Policies, for further description of these and all other accounting policies.

Allowance for Doubtful Accounts—Management analyzes aged receivables and the related allowance for doubtful accounts on a quarterly basis. We use historical experience in assessing the adequacy of the reserve and this includes reviewing: net write-offs in relation to revenues, the allowance in comparison to the gross accounts receivable balance and comparative agings. Receivables deemed by management to be uncollectible based on historical trends, are reserved for and/or consequently written-off. Historically, losses from uncollectible accounts have not exceeded our allowance. Due to the judgment used in making these assumptions, the ultimate amount of accounts receivable that become uncollectible could differ from our original estimate due to a worsening financial position in the economy or with our customers and could result in charges or credits to amounts recorded in selling, general and administrative expenses.

Intangible Assets—As required by Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets,” goodwill and other intangible assets with indefinite lives are not

33

amortized, and are tested for impairment on an annual basis, or earlier if an event occurs or circumstances changes that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Spherion performs its annual impairment test of goodwill as of its November month-end. The 2005, 2004 and 2003 tests did not indicate the existence of impairment. Even though these annual impairment tests did not result in impairment, due to the judgment inherent in estimating future cash flows, there could be further charges in future years to operations for up to the full value of our goodwill balance, which is currently $48.9 million, if the markets in which we operate decline or if the market values of competitors decrease.

Accrued Self-Insurance Losses—We retain a portion of the risk under our workers’ compensation, general liability/professional liability, employment practices liability insurance programs and health insurance benefits programs. Estimated losses for workers’ compensation, general liability/professional liability and employment practices have been discounted at 4.4% and 4.2% at January 1, 2006 and December 31, 2004, respectively, and are based on actuarial estimates. Changes in legislation, the cost of health care services, claims processing costs, or increased litigation could affect the adequacy of these estimated liabilities. Prolonged changes in interest rates for risk-free U.S. government bonds could also affect the discount rate used in estimating these liabilities. An increase or decrease of 1% in the discount rate would result in a reduction or increase, respectively, to pre-tax expense of approximately $1.7 million. Management reviews these assumptions and related reserves and changes in the estimates of these accruals are charged or credited to operations in the period determined. Due to the judgment used in recording these reserves, the ultimate amount of reserves that are needed could differ significantly from our original estimate and could result in charges or credits to amounts recorded in cost of services and /or selling, general and administrative expenses.

Stock-Based Compensation—We account for stock-based compensation to employees using the intrinsic value method as prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Accordingly, compensation cost for stock options issued to employees is measured as the excess, if any, of the quoted market price of our stock at the date of grant over the amount an employee must pay for the stock.

No stock-based employee compensation cost relating to stock options is reflected in net earnings (loss), as all options granted under this plan had exercise prices equal to the market value of the underlying common stock on the date of grant. If we had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation, our net earnings for the year ended January 1, 2006 would have been $10.1 million or $0.16 per diluted share. The fair value of options at grant date was estimated using the Black-Scholes multiple option model. Changes in any of the assumptions used in this model for 2005 (expected life of 3.3 years, a weighted-average risk free interest rate of 3.6%, volatility of 52% and no expected dividends), would change the weighted average per share fair value of $3.14. SFAS No. 123(R), “Share-Based Payment,” issued in December 2004, requires us to expense stock options beginning in fiscal year 2006. At that time, changes or additions to assumptions or a change in the option-pricing model used, will impact our financial operating results. If our stock continues to experience a high degree of price volatility or if employees begin to hold options for a longer period of time, the fair value of our options and our cost would increase. The assumptions we used are based upon our historical experience, however future results could differ from these assumptions.

Income Taxes—At January 1, 2006, we had a net deferred tax asset of $161.2 million. This deferred tax asset was evaluated under the guidelines of SFAS No. 109, “Accounting for Income Taxes,” and a determination on the basis of objective factors was made that the asset will be realized through future years taxable earnings. If we determine that future taxable earnings will be insufficient to recover the deferred tax assets, we will be required to write-off all or a portion of the deferred tax asset by a charge to earnings. These objective factors include historical taxable income, normalized for non-recurring income

34

and expense items. Using an average of this income projected to future years, if the asset can be recovered within the statutory carryforward periods there is no impairment. If our future earnings, after being adjusted for non-recurring items, should decrease from present levels and remain low for a period of 1 to 2 years, there could be impairment of the existing deferred tax asset.

New Accounting Pronouncements

See Note 1, Summary of Significant Accounting Policies in the accompanying consolidated financial statements for discussion of New Accounting Pronouncements.

Inflation

The effects of inflation on our operations were not significant during the periods presented in the accompanying consolidated financial statements.

Seasonality And Cyclical Nature Of Business

Seasonality—Our businesses are seasonal in nature with customer related demand generally at its highest point during the third and fourth quarters and lowest during the first quarter. The third and fourth quarters are normally higher as our customers increase their temporary workforces for the holiday season. We typically experience a decrease of approximately 5 to 10% in our first quarter revenues in comparison with fourth quarter revenues. The decrease in first quarter revenues in comparison with the preceding fourth quarters for 2005, 2004 and 2003 was 12%, 0%, and 8%, respectively. First quarter revenues of 2005 compared with the preceding fourth quarter growth decreased partially due to the fact that first quarter 2005 was comprised of twelve weeks, whereas fourth quarter 2004 was comprised of thirteen. First quarter revenues of 2004 in comparison with the preceding fourth quarter growth remained stable due to a higher volume of contract-based work in managed services and increased demand experienced from the economic recovery. The fluctuation of first quarter revenues of 2003 was usual to the seasonality of the business.

Cyclical Nature of the Business—The staffing industry has historically been considered to be cyclical, often acting as an indicator of both economic downswings and upswings. Staffing customers tend to use temporary staffing to supplement their existing workforces and generally hire permanent workers when long term demand is expected to increase. As a consequence of this, our revenues tend to increase quickly when the economy begins to grow. Conversely, our revenues also tend to decrease quickly when the economy begins to weaken as our customers reduce temporary workers before terminating their own employees. While we have longer-term managed service contracts which are not as directly dependent upon the economic cycle, these revenues are not significant enough to offset the impact of cyclical economic activity in our larger service offerings.

Forward Looking Statements—Safe Harbor

In evaluating our business, you should carefully consider the following factors in addition to the information contained elsewhere in this Annual Report on Form 10-K or incorporated by reference herein. This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of Section 21E of the Securities Act of 1934, as amended, including, in particular, statements about our plans, strategies and prospects. Although we believe that our plans, strategies and prospects reflected in or suggested by our forward-looking statements, and the assumptions on which they are based, are reasonable, we cannot assure you that our plans, strategies and prospects or our other expectations and intentions will be realized or achieved. Important factors that could cause our actual results to differ materially from our forward-looking statements include those set forth in Item 1A, Risk Factors. If any of those risks, or other risks not presently known to us or that we currently believe to not be significant, do materialize or develop into actual events, then our business, financial condition, results of operations or

35

prospects could be materially adversely affected. All forward-looking statements attributable to us or any persons acting on our behalf are expressly qualified in their entirety by the risk factors discussed in Item 1A, Risk Factors.

Item 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of January 1, 2006, approximately $27.1 million of cash and cash equivalents were invested in investment grade money market mutual funds. These financial instruments are not considered to be subject to interest rate risk due to their short duration.

Our exposure to interest rate risk related to debt has been minimized since we currently have no outstanding variable debt as of January 1, 2006. At December 31, 2004, our outstanding variable-rate debt was $40.1 million. Based on the outstanding balance as of December 31, 2004, a change of 1.0% in the interest rate would have caused a change in interest expense of approximately $0.4 million in 2004, on an annual basis.

From time to time, we participate in foreign exchange hedging activities to mitigate the impact of changes in foreign currency exchange rates. We attempt to hedge transaction exposures through natural offsets. To the extent this is not practicable, exposure areas which are considered for hedging are foreign currency denominated receivables and payables, intercompany loans and firm committed transactions and dividends related to foreign subsidiaries. We use financial instruments, principally forward exchange contracts, in our management of foreign currency exposures. We do not enter into forward contracts for trading purposes. In estimating the fair value of derivative positions, we utilize quoted market prices, if available, or quotes obtained from outside sources. As of January 1, 2006, we had two outstanding forward contracts to sell €0.2 million in January 2006 and 2007, and one outstanding forward contract to sell CAD$5.4 million in March 2006. We also had one outstanding forward contract to sell 4.8 million Australian dollars which was settled in 2005.

When foreign currency financial instruments are outstanding, exposure to market risk on these instruments results from fluctuations in currency rates during the periods in which the contracts are outstanding. The counterparties to our currency exchange contracts consist of major financial institutions, each of which is rated investment grade. We are exposed to credit risk to the extent of potential nonperformance by counterparties on financial instruments. Any potential credit exposure does not exceed the fair value. We believe the risk of incurring losses due to credit risk is remote.

The carrying amount of cash and cash equivalents, trade receivables and other current assets approximates fair value due to the short-term maturities of these instruments. Our insurance deposits earn a fixed interest rate as determined at the time of funding and are carried at fair value or $78.0 million and $92.9 million as of January 1, 2006 and December 31, 2004, respectively. Company-owned life insurance policies are carried at fair market value which approximated $12.9 million and $16.7 million as of January 1, 2006 and December 31, 2004, respectively.

The fair values of all other financial instruments, including debt, approximate their book values as the instruments are short-term in nature or contain market rates of interest.

36

Item 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

		Page
Management’s Report on Internal Control Over Financial Reporting	38
Reports of Independent Registered Public Accounting Firm	39
Consolidated Statements of Operations	42
Consolidated Balance Sheets	43
Consolidated Statements of Stockholders’ Equity	44
Consolidated Statements of Cash Flows	45
Notes to Consolidated Financial Statements	46

37

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for the fair presentation of the consolidated financial statements of Spherion Corporation. Management is also responsible for establishing and maintaining a system of internal controls over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. These internal controls are designed to provide reasonable assurance that the reported financial information is presented fairly, that disclosures are adequate and that the judgments inherent in the preparation of financial statements are reasonable. There are inherent limitations in the effectiveness of any system of internal control, including the possibility of human error and overriding of controls. Consequently, an effective internal control system can only provide reasonable, not absolute assurance, with respect to reporting financial information.

Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control-Integrated Framework, management concluded that our internal control over financial reporting was effective as of January 1, 2006. Management’s assessment of the effectiveness of our internal control over financial reporting as of January 1, 2006 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their attestation report which is included herein.

/s/ ROY G. KRAUSE	/s/ MARK W. SMITH
Roy G. Krause President and Chief Executive Officer	Mark W. Smith Senior Vice President and Chief Financial Officer

38

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
of Spherion Corporation

Fort Lauderdale, Florida

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Spherion Corporation and subsidiaries (the “Company”) maintained effective internal control over financial reporting as of January 1, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of January 1, 2006, is fairly stated, in all material respects, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 1, 2006, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

39

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended January 1, 2006 of the Company and our report dated February 24, 2006 expressed an unqualified opinion on those financial statements and financial statement schedule.

DELOITTE & TOUCHE LLP
Certified Public Accountants

Fort Lauderdale, Florida
February 24, 2006

40

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
and Stockholders of Spherion Corporation

Fort Lauderdale, Florida

We have audited the accompanying consolidated balance sheets of Spherion Corporation and subsidiaries (“Spherion”) as of January 1, 2006 and December 31, 2004, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended January 1, 2006. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of Spherion’s management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Spherion Corporation and subsidiaries as of January 1, 2006 and December 31, 2004, and the results of their operations and their cash flows for each of the three years in the period ended January 1, 2006, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Spherion’s internal control over financial reporting as of January 1, 2006, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2006 expressed an unqualified opinion on management’s assessment of the effectiveness of Spherion’s internal control over financial reporting and an unqualified opinion on the effectiveness of Spherion’s internal control over financial reporting.

DELOITTE & TOUCHE LLP
Certified Public Accountants

Fort Lauderdale, Florida
February 24, 2006

41

SPHERION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except per share amounts)

	Fiscal Years Ended
	January 1,			December 31,				December 26,
	2006			2004				2003
Revenues	$	1,971,665			$	2,032,715			$	1,733,761
Cost of services	1,537,375				1,607,104				1,345,633
Gross profit	434,290				425,611				388,128
Selling, general and administrative expenses	404,385				401,547				384,914
Interest expense	3,205				5,766				6,178
Interest income	(4,072		)		(3,815		)		(5,105		)
Restructuring and other charges	1,763				8,395				4,205
Other (gain) loss	—				841				(313		)
	405,281				412,734				389,879
Earnings (loss) from continuing operations before income taxes and discontinued operations	29,009				12,877				(1,751		)
Income tax (expense) benefit	(9,663		)		2,319				166
Earnings (loss) from continuing operations before discontinued operations	19,346				15,196				(1,585		)
Discontinued operations:
Loss from discontinued operations before income taxes	(11,629		)		(13,970		)		(16,114		)
Income tax benefit	4,312				34,603				3,786
Earnings (loss) from discontinued operations	(7,317		)		20,633				(12,328		)
Net earnings (loss)	$	12,029			$	35,829			$	(13,913	)
Earnings (loss) per share—Basic:
Earnings (loss) from continuing operations before discontinued operations	$	0.32			$	0.25			$	(0.03	)
Earnings (loss) from discontinued operations	(0.12		)		0.34				(0.21		)
	$	0.20			$	0.59			$	(0.23	)
Earnings (loss) per share—Diluted:
Earnings (loss) from continuing operations before discontinued operations	$	0.31			$	0.24			$	(0.03	)
Earnings (loss) from discontinued operations	(0.12		)		0.33				(0.21		)
	$	0.20			$	0.58			$	(0.23	)
Weighted average shares used in computation of earnings (loss) per share:
Basic	60,938				61,036				59,951
Diluted	61,430				62,313				59,951

See Notes to Consolidated Financial Statements.

42

SPHERION CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share data)

	January 1,			December 31,
	2006			2004
Assets
Current Assets:
Cash and cash equivalents	$	30,163			$	5,154
Receivables, less allowance for doubtful accounts of $4,708 and $7,077	292,742				352,606
Deferred tax asset	9,155				19,263
Income tax receivable	4,231				12,363
Insurance deposit	24,914				26,436
Other current assets	14,618				18,885
Assets of discontinued operations	1,661				4,772
Total current assets	377,484				439,479
Goodwill	48,861				48,757
Property and equipment, net of accumulated depreciation of $114,038 and $104,111	88,546				97,683
Deferred tax asset	152,084				149,436
Insurance deposit	53,115				66,482
Other assets	22,554				28,429
	$	742,644			$	830,266
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable and other accrued expenses	$	93,542			$	108,308
Accrued salaries, wages and payroll taxes	62,605				62,956
Revolving lines of credit	—				32,131
Accrued insurance reserves	27,503				34,135
Accrued income tax payable	51,792				57,765
Current portion of long-term debt and short-term borrowings	3,141				12,398
Accrued restructuring and other current liabilities	8,846				10,470
Liabilities of discontinued operations	146				1,488
Total current liabilities	247,575				319,651
Long-term debt, net of current portion	3,735				4,766
Accrued insurance reserves	28,119				28,879
Deferred compensation and other long-term liabilities	24,710				32,678
Total liabilities	304,139				385,974
Commitments and contingencies (see Notes 2 and 12)
Stockholders’ Equity:
Preferred stock, par value $.01 per share; authorized, 2,500,000 shares; none issued or outstanding	—				—
Common stock, par value $.01 per share; authorized, 200,000,000; issued 65,341,609 shares	653				653
Treasury stock, at cost, 6,510,739 and 4,238,678 shares, respectively	(56,299		)		(40,430		)
Additional paid-in capital	845,056				847,806
Accumulated deficit	(354,742		)		(366,771		)
Accumulated other comprehensive income	3,837				3,034
Total stockholders’ equity	438,505				444,292
	$	742,644			$	830,266

See Notes to Consolidated Financial Statements.

43

SPHERION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For Fiscal Years Ended January 1, 2006, December 31, 2004 and December 26, 2003

(amounts in thousands)

																Accumulated
								Additional								Other
	Common			Treasury				Paid-In				Accumulated				Comprehensive
	Stock			Stock				Capital				Deficit				Income/(Loss)				Total
Balance as of December 27, 2002		$	653		$	(66,860	)		$	859,551			$	(388,687	)		$	(644	)	$	404,013
Comprehensive income:
Net loss		—			—				—				(13,913		)		—			(13,913		)
Other comprehensive income:
Foreign currency translation adjustments arising during the period		—			—				—				—				10,508			10,508
Foreign currency translation adjustments related to the sale of The Netherlands technology subsidiary		—			—				—				—				5,904			5,904
Comprehensive income																				2,499
Proceeds from exercise of employee stock options, including tax benefit		—			4,670				(2,463		)		—				—			2,207
Proceeds from issuance of shares under Employee Stock Purchase Plan		—			3,092				(2,042		)		—				—			1,050
Treasury stock reissued and compensation earned in connection with deferred compensation		—			4,127				(2,051		)		—				—			2,076
Balance as of December 26, 2003		653			(54,971		)		852,995				(402,600		)		15,768			411,845
Comprehensive income:
Net income		—			—				—				35,829				—			35,829
Other comprehensive income:
Foreign currency translation adjustments arising during the period		—			—				—				—				1,028			1,028
Foreign currency translation adjustments related to the sale of The Netherlands, Asia/ Pacific and the United Kingdom subsidiaries		—			—				—				—				(13,762		)	(13,762		)
Comprehensive income																				23,095
Proceeds from exercise of employee stock options, including tax benefit		—			10,020				(3,241		)		—				—			6,779
Proceeds from issuance of shares under Employee Stock Purchase Plan		—			1,552				(604		)		—				—			948
Treasury stock reissued and compensation earned in connection with deferred compensation		—			2,969				(1,344		)		—				—			1,625
Balance as of December 31, 2004		653			(40,430		)		847,806				(366,771		)		3,034			444,292
Comprehensive income:
Net income		—			—				—				12,029				—			12,029
Other comprehensive income:
Foreign currency translation adjustments arising during the period		—			—				—				—				803			803
Comprehensive income																				12,832
Proceeds from exercise of employee stock options, including tax benefit		—			5,531				(1,717		)		—				—			3,814
Proceeds from issuance of shares under Employee Stock Purchase Plan		—			1,193				(511		)		—				—			682
Treasury stock reissued and compensation earned in connection with deferred compensation		—			1,426				(522		)		—				—			904
Treasury stock purchases		—			(24,019		)		—				—				—			(24,019		)
Balance as of January 1, 2006		$	653		$	(56,299	)		$	845,056			$	(354,742	)		$	3,837		$	438,505

See Notes to Consolidated Financial Statements.

44

SPHERION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

	Fiscal Years Ended
	January 1,				December 31,				December 26,
	2006				2004				2003
Cash Flows from Operating Activities:
Net earnings (loss)		$	12,029			$	35,829			$	(13,913	)
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
Discontinued operations (gain) loss on disposal, net of income tax benefit		6,665				(27,053		)		4,101
(Gain) loss on retirement of debt		—				841				(313		)
Depreciation and amortization		21,906				28,844				29,262
Deferred income tax expense (benefit)		6,313				(8,864		)		(10,154		)
Restructuring and other charges		1,763				10,508				5,213
Other non-cash charges		2,192				4				7,396
Changes in assets and liabilities, net of effects of acquisitions:
Receivables		62,767				(69,210		)		(38,687		)
Other assets		2,551				(2,158		)		3,246
Income tax receivable		8,484				17,844				96,470
Accounts payable, accrued liabilities and other liabilities		(49,016		)		24,675				(10,522		)
Accrued income taxes		—				2,078				(16,253		)
Restructuring liabilities		(3,369		)		(7,261		)		(5,806		)
Net Cash Provided by Operating Activities		72,285				6,077				50,040
Cash Flows from Investing Activities:
Proceeds from sale of discontinued operations		1,376				43,745				1,000
Acquisitions and earn-out payments, net of cash acquired		(887		)		(312		)		(17,217		)
Capital expenditures		(9,651		)		(12,050		)		(60,453		)
Insurance (deposits) reimbursements		19,054				3,855				(8,276		)
Surrender of company-owned life insurance policies, net		4,179				—				—
Note receivable proceeds from sale of Australian subsidiary		3,781				—				—
Other		888				(1,241		)		2,705
Net Cash Provided by (Used in) Investing Activities		18,740				33,997				(82,241		)
Cash Flows from Financing Activities:
Debt repayments, net		(5,642		)		(798		)		(14,037		)
Retirement of convertible notes		(8,000		)		(90,323		)		(6,602		)
Net borrowings from lines of credit		(32,085		)		29,407				—
Purchase of treasury stock		(24,020		)		—				—
Proceeds from exercise of employee stock options		3,605				5,654				2,420
Other, net		(6		)		(262		)		4,172
Net Cash Used in Financing Activities		(66,148		)		(56,322		)		(14,047		)
Effect of exchange rates on cash and cash equivalents		132				154				2,040
Increase (decrease) in cash and cash equivalents		25,009				(16,094		)		(44,208		)
Cash and cash equivalents, beginning of period		5,154				21,248				65,456
Cash and cash equivalents, end of period		$	30,163			$	5,154			$	21,248
Supplemental Cash Flow Information:
Cash (received) paid during the year for:
Income taxes		$	(5,072	)		$	(13,157	)		$	(75,667	)
Interest		$	1,935			$	4,926			$	6,174
Non-cash activities:
Deferred purchase price from the sale of discontinued operations		$	120			$	3,160			$	—
Short-term notes payable for purchase of software and related costs		$	714			$	4,042			$	9,060
Debt assumed with Canadian acquisition		$	—			$	—			$	10,889

See Notes to Consolidated Financial Statements.

45

SPHERION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business—Spherion Corporation provides temporary staffing services, managed services and permanent placement services and currently operates in two countries: Canada and the United States. Temporary staffing is a service where Spherion’s employees work at customer locations and under the supervision of customer personnel. Temporary staffing services include personnel in the following skill categories: clerical, light industrial, information technology, finance and accounting, legal, engineering, sales and marketing, human resources, and administrative. Managed services includes services where Spherion manages aspects of a customer function such as: recruiting, administrative services, data center or network operations. Permanent placement is a service where Spherion employees locate talent on behalf of its customers, screen the candidates and assist in the recruitment efforts. Spherion has two operating segments, Staffing Services and Professional Services. Founded in 1946, Spherion is headquartered in Fort Lauderdale, Florida, and operates a network of over 650 locations.

Principles of Consolidation—The accompanying consolidated financial statements include the accounts of Spherion Corporation, its wholly-owned subsidiaries and certain other entities it is required to consolidate (“Spherion”). All material intercompany transactions and balances have been eliminated.

In accordance with Statement of Financial Standards Interpretation No. 46 (“FIN 46R”), “Consolidation of Variable Interest Entities,” Spherion consolidates variable interest entities (VIE’s) for which it is the primary beneficiary. VIE’s are generally entities that lack sufficient equity to operate without additional financial support from other parties or are entities whose equity holders do not have adequate decision making authority. The primary beneficiary of a VIE is the party that absorbs the majority of the entity’s expected losses or receives the majority of the residual returns.

Spherion has evaluated the provisions of FIN 46R and determined that it applies to its two forms of franchise agreements for franchisees and licensees. Spherion has determined that these agreements by themselves do not create a VIE, but in some cases Spherion has provided financing under these agreements which does create a VIE. Spherion evaluates all VIE’s to determine if it is the primary beneficiary and consolidates VIE’s when it is the primary beneficiary.

Use of Estimates—The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be materially different from those estimates.

Fiscal Year—Effective for 2005, Spherion changed its fiscal year end by two days from 52 or 53 weeks ending on the last Friday in December to 52 or 53 weeks ending on the last Sunday in December. This change conforms Spherion’s reporting periods to its normal weekly business cycle. This change did not have a material impact on Spherion’s quarterly or annual results of operations, cash flows or financial position. The fiscal years ended in January 1, 2006 (“Fiscal year 2005” or “2005”), December 31, 2004, and December 26, 2003 had 52, 53 and 52 weeks, respectively.

Cash and Cash Equivalents—All highly liquid investments with original maturities of 90 days or less at the time of purchase are classified as cash equivalents. Cash equivalents are carried at cost, which approximates fair value due to the short-term maturities of these instruments.

Allowance for Doubtful Accounts—Accounts receivable are carried at the amount estimated to be collectible. Accordingly, allowances are provided for accounts receivable estimated to be uncollectible

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based on management’s best estimates based on historical write-off levels. Recoveries are recognized in the period they are received. The ultimate amount of accounts receivable that become uncollectible could differ from those estimated.

Investments—Investments in company-owned life insurance policies are classified as trading securities and are reported at fair value with gains and losses included in earnings during the period incurred. The specific identification method is used to determine the cost of investments sold. Investments in company-owned life insurance policies are included in “Intangibles and other assets” in the accompanying consolidated balance sheets. Spherion did not have any investments in available-for-sale securities as of January 1, 2006 or December 31, 2004.

Goodwill and Other Intangible Assets—Goodwilland other intangible assets are accounted for in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.”  This statement requires that goodwill and other intangible assets with indefinite lives should not be amortized, but should be tested for impairment on an annual basis, or more often if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Trade names and other intangible assets are amortized on a straight-line basis over a period of approximately 5 years. See Note 3, Goodwill and Other Intangible Assets, for further discussion.

Property and Equipment—Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized over the shorter of their estimated useful life or the lease term using the straight-line method. Maintenance and repairs, which do not improve or extend the life of an asset, are expensed as incurred.

Capitalized Software Costs—Software which has been developed for internal use is accounted for in accordance with Statement of Position (“SOP”) 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.” Only costs incurred during the application development stage, including design, coding, installation and testing are capitalized. These capitalized costs include external consulting fees, software license fees and internal labor costs for employees directly associated with software development. Upgrades or modifications that result in additional functionality are capitalized, while upgrades or modifications that do not result in additional functionality are expensed as incurred.

Impairment of Long-Lived Assets—As required by SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” long-lived assets should be tested for recoverability whenever events or circumstances indicate that their carrying amount may not be recoverable. Spherion evaluates the recoverability of long-lived assets at least annually to determine whether an adjustment to carrying values or a revision to estimated useful lives is appropriate if and/or when an event or circumstance arises that would require it to do so. If the estimated future cash flows are projected to be less than the carrying value, an impairment write-down would be recorded, measured by the amount of the asset’s carrying value in excess of fair value. The estimated future cash flows of an asset or asset group are calculated on an undiscounted basis.

Accrued Self-Insurance Losses—Spherion retains a portion of the risk under its workers’ compensation, general liability/professional liability, employment practices liability and health insurance benefits programs. Reserves have been recorded which reflect the discounted estimated liabilities including claims incurred but not reported. Workers’ compensation losses, general liability/professional liability and employment practices liability losses have been discounted at 4.4% and 4.2% at January 1, 2006 and December 31, 2004, respectively, and are based on actuarial estimates. While management believes that the amount recorded for the liabilities is adequate, there can be no assurance that changes to management’s estimates may not occur due to limitations inherent in the estimation process. Changes in the estimates of these accruals are charged or credited to earnings in the period determined. Spherion funds its workers’ compensation liability with an insurance deposit. This deposit was $78.0 million and

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$92.9 million at January 1, 2006 and December 31, 2004, respectively, and is included in “Insurance deposit” in the accompanying consolidated balance sheets. The deposit will be used to fund claims and cannot be used for general corporate purposes.

Foreign Currency Translation—Spherion’s Canadian operation uses the Canadian dollar as its functional currency. Assets and liabilities of this operation are translated at the exchange rates in effect on the balance sheet date. Amounts included in Spherion’s Statements of Operations are translated at the average exchange rates for the year. The impact of currency fluctuation is included in stockholders’ equity as part of accumulated other comprehensive income.

Revenue Recognition—Spherion records revenues from sales of services by its company-owned and licensed operations and from royalties earned on sales of services by its franchised operations. Staffing and managed service revenues and the related labor costs and payroll are recorded in the period in which services are performed. Permanent placement revenues are recognized upon candidate start date. Allowances are established to estimate losses due to placed candidates not remaining employed for Spherion’s guarantee period. Spherion follows Emerging Issues Task Force (“EITF”) 99-19, “Reporting Revenue Gross as a Principal versus Net as an Agent” in the presentation of revenues and expenses. This guidance requires Spherion to assess whether it acts as a principal in the transaction or as an agent acting on behalf of others. In situations where Spherion is the principal in the transaction and has the risks and rewards of ownership, the transactions are recorded gross in the consolidated statements of operations.

Spherion utilizes two forms of franchising agreements. Under the first form, Spherion records franchise royalties in accordance with SFAS No. 45, “Accounting for Franchise Fee Revenue” based upon the contractual percentage of franchise sales, in the period in which the franchisee provides the service. Franchise royalties, which are included in revenues, were $9.0 million, $8.4 million, and $7.3 million for the 2005, 2004 and 2003 fiscal years, respectively. The second form of franchising agreement is a licensee agreement where Spherion acts as the principal in customer transactions through direct contractual relationships with the customers, owning related customer receivables and being the legal employer of the temporary employee and the licensee acts as Spherion’s agent providing certain sales and recruiting services. Accordingly, sales and costs of services generated by the licensed operation are recorded gross in Spherion’s consolidated statements of operations. Spherion pays the licensee a commission for acting as Spherion’s agent and this commission is based on a percentage of gross profit from the office managed by the licensee and averaged 70%, 68% and 68% for the fiscal years ended 2005, 2004 and 2003, respectively, of the licensed offices’ gross profit. The licensee is responsible for establishing their office location and paying related administrative and operating expenses, such as rent, utilities and salaries of the licensee’s full-time office employees.

Except in the circumstance where Spherion is required to consolidate certain licensees’ operations (see Note 14, Variable Interest Entities, for further discussion), Spherion’s consolidated statements of operations reflect the licensee commission as an expense, but do not include the rent, utilities and salaries of the full-time office employees since these expenses are the responsibility of the licensee. Spherion has credit risk for sales to its customers through licensee arrangements as Spherion pays all direct costs associated with providing temporary services before related accounts receivable are collected. Spherion has partially mitigated this risk by making the licensee responsible to reimburse Spherion up to 100% of uncollected accounts receivable (bad debts are deducted from commission payments); however, Spherion bears the loss in cases where the licensee does not have sufficient financial wherewithal to reimburse uncollected amounts.

Income Taxes—Deferred taxes arise from temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated financial statements. Valuation allowances on deferred tax assets are recorded to the extent it is more likely than not that a tax benefit will not be realized. See Note 6, Income Taxes, for further discussion.

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Earnings Per Share—Basic earnings (loss) per share is computed by dividing Spherion’s earnings (loss) by the weighted average number of shares outstanding during the period. When the effects of the common stock equivalents are not anti-dilutive, diluted earnings per share is computed by dividing Spherion’s net earnings plus after-tax interest on the convertible notes, if applicable, by the weighted average number of shares outstanding and the impact of all dilutive potential common shares, primarily stock options, convertible notes, restricted stock and deferred stock units. During 2004 and 2005, Spherion paid off its convertible subordinated notes and convertible promissory notes, respectively. The dilutive impact of stock options is determined by applying the “treasury stock” method and the dilutive impact of the convertible notes is determined by applying the “if converted” method. See Note 16, Earnings (Loss) Per Share, for further discussion.

Derivative Financial Instruments—From time to time, Spherion enters into foreign exchange forward contracts as part of the management of its foreign currency exchange rate exposures. These financial instruments are not held for trading purposes and none of the instruments are leveraged. All financial instruments are put into place to hedge specific exposures. Gains and losses on foreign currency forward contracts offset gains and losses resulting from the underlying transactions. Spherion accounts for its derivatives in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended. Gains and losses on contracts that hedge foreign currency commitments are recognized in earnings. As of January 1, 2006, Spherion had two outstanding forward contracts to sell €0.2 million in January 2006 and 2007, and one outstanding forward contract to sell CAD$5.4 million in March 2006. Spherion also had one outstanding forward contract to sell 4.8 million Australian dollars which was settled in 2005. Each of these derivatives had a fair value or cost to unwind that is not material to Spherion’s consolidated results of operations. Amounts receivable or payable under the agreements are included in “Other current assets” or “Other current liabilities” in the accompanying consolidated balance sheets.

Stock-Based Compensation—Spherion accounts for stock-based compensation to employees using the intrinsic value method as prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Accordingly, compensation cost for stock options issued to employees is measured as the excess, if any, of the quoted market price of Spherion’s stock at the date of grant over the amount an employee must pay for the stock. Compensation cost related to restricted stock or deferred stock units granted is recognized in the period the compensation is earned and measured using the quoted market price on the effective grant date.

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Spherion has one primary stock option plan, the 2000 Stock Incentive Plan, which is described more fully in Note 8, Stock-Based Compensation Plans. As all options granted under this plan had exercise prices equal to the market value of the underlying common stock on the date of grant, Spherion has not historically or in the periods presented, recorded stock-based compensation cost in the determination of net earnings or loss. The following table illustrates the effect on net earnings (loss) and earnings (loss) per share if Spherion had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” to stock-based employee compensation (in thousands, except per share data):

	Fiscal Years
	2005				2004			2003
Net earnings (loss), as reported		$	12,029		$	35,829		$	(13,913	)
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(1,917		)	(2,957		)	(3,063		)
Pro forma net earnings (loss)		$	10,112		$	32,872		$	(16,976	)
Earnings (loss) per share:
Basic—as reported		$	0.20		$	0.59		$	(0.23	)
Basic—pro forma		$	0.17		$	0.54		$	(0.28	)
Diluted—as reported		$	0.20		$	0.58		$	(0.23	)
Diluted—pro forma		$	0.16		$	0.53		$	(0.28	)

The fair value of options at grant date was estimated using the Black-Scholes multiple option model where each vesting increment is treated as a separate option with its own expected life and own fair value. The following weighted average assumptions were used:

	Fiscal Years
	2005			2004			2003
Expected life (in years)	3.3			3.3			3.2
Interest rate	3.60		%	2.72		%	2.27		%
Volatility	52.00		%	55.00		%	59.00		%
Expected dividends	—			—			—
Weighted average per share fair value	$	3.14		$	3.55		$	4.11

New Accounting Pronouncements and Interpretations— In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123 (revised 2004), “Share-Based Payment” (SFAS No. 123R). SFAS No. 123R requires that the cost resulting from all share-based payment transactions be recognized in the financial statements. The standard also requires that entities apply a fair-value-based measurement method to account for share-based payment transactions with employees (excluding equity instruments held by employee share ownership plans). SFAS No. 123R is effective for Spherion for fiscal year 2006. Beginning with the first quarter of 2006, Spherion will record compensation expense related to outstanding employee stock options, in accordance with SFAS No. 123R. Based on current information, Spherion anticipates the impact of this item is approximately ($0.06) per share for the full year 2006.

2.   DISCONTINUED OPERATIONS

During 2004, Spherion assessed the profitability of its operations and made decisions to exit five of its business units. Spherion sold its court reporting business and its staffing operations in the United Kingdom, the Asia/Pacific region and The Netherlands during 2004. The remaining business unit, the call

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center outsourcing business, is comprised of four call centers, of which three were sold in 2005 and the fourth one is undergoing due diligence with a potential purchaser. If that sale cannot be completed we will report this unit in continuing operations. The sale of these subsidiaries required Spherion to provide customary representations and warranties to the purchasers and in some cases, required adjustments to the purchase price based upon working capital audits. These business units’ operating results are included in discontinued operations in the accompanying consolidated statements of operations through the dates of their disposition.

During the first quarter of 2004, Spherion sold its operations in The Netherlands for cash proceeds of approximately $2.0 million (net of cash sold of $0.5 million) resulting in a pre-tax loss on the sale of $1.7 million. As part of the sale of Spherion’s operations in The Netherlands, Spherion indemnified the purchaser for an employment related liability to The Netherlands’ government. In August 2005, Spherion settled and paid $0.6 million for the employment liability, and has remaining reserves of $0.2 million as of January 1, 2006 for the payment of related social security taxes for this matter.

Spherion sold its operations in the Asia/Pacific region in two separate transactions to two different purchasers. Total cash proceeds was from both sales aggregated $13.7 million (net of cash sold of $0.2 million) and a deferred purchase price of $3.8 million due and paid to Spherion in 2005. Spherion incurred a total loss on the sale of these businesses of $3.4 million in 2004. The first transaction involved the sale of the information technology education business in the Asia/Pacific region and was completed in May 2004. The second transaction involved the remainder of Spherion’s staffing operations in the Asia/Pacific region and was completed in June 2004. Both transactions required working capital audits which were settled in 2004 and 2005 for a total payment of $1.4 million to the purchasers. Both purchasers have made claims under the warranty provisions of the respective sale agreements. One of these claims in the second transaction relates to research and development syndicates formed in Australia during the early 1990s and entered into by the business prior to its original acquisition by Spherion. These syndicates were formed to create new technologies, typically software, and allowed the third party investment member of the syndicates to obtain accelerated tax deductions and credits. Spherion’s former Asia/Pacific business provided the investment member with certain tax indemnifications. In November 2004 and December 2004, Spherion was notified that the Australian Tax office was examining two of these syndicates and seeking repayment of some or all of the tax benefits received by the investment members. Spherion has engaged counsel in Australia to review the issues raised by the Australian Tax office, and the discussions with the Australian Tax office are ongoing. The total amount of the tax benefits taken by the investment members is approximately $9.2 million Australian dollars ($6.7 million at current exchange rates). The total accrued liability at January 1, 2006 related to all of the warranty matters for both transactions was $4.1 million.

During the third quarter of 2004, Spherion completed the disposition of its staffing operation in the United Kingdom. The operations in the United Kingdom were sold for cash proceeds of $25.4 million (net of cash sold of $3.1 million), resulting in a pre-tax gain on the sale of $9.5 million, (net of a $2.6 million reserve for estimated adjustments to the net proceeds). Spherion resolved the final working capital audit and paid approximately $1.1 million to the purchaser in January 2006. The purchaser has made claims under the warranty provisions of the agreements and Spherion is attempting to resolve these claims. The total accrued liability at January 1, 2006 related to this transaction was $3.7 million, which included amounts for the final working capital adjustment paid in January 2006 as well as estimated liabilities for warranty matters. Spherion remains obligated for a facility lease of one former operating location of one of the subsidiaries of its staffing operation in the United Kingdom; a charge of $0.8 million for the expected remaining liability under this lease (net of estimated sublease income) was included in discontinued operations in 2004.

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During the fourth quarter of 2004, Spherion sold its court reporting business for cash proceeds of $2.6 million, which resulted in a pre-tax gain on the sale of $1.2 million. In February 2006, Spherion received $1.0 million in final proceeds as the purchaser achieved revenue growth targets.

In connection with Spherion’s decision to sell its call center outsourcing business, a $6.2 million estimated loss on sale, net of tax, was recorded during the third quarter of 2004. As of January 1, 2006, Spherion recorded an additional loss of approximately $0.5 million, net of tax, as the sales agreements for the three call centers sold in 2005 were finalized. Gross cash proceeds, during the fiscal year ended January 1, 2006, from the sales of the three facilities were $1.9 million.

The major classes of assets and liabilities for the one remaining call center outsourcing business as of January 1, 2006 are as follows (in thousands):

Receivables, net	$	1,589
Prepaid and other assets	72
Total assets of discontinued operations	$	1,661
Account payable, other accrued expenses and liabilities	$	146

Revenues and pre-tax earnings (loss) of these subsidiaries included within earnings (loss) from discontinued operations in the accompanying consolidated statements of operations are as follows (in thousands):

	2005											2004											2003
	Professional				Staffing							Professional				Staffing							Professional				Staffing
	Services(1)				Services(2)				Total			Services(1)				Services(2)				Total			Services(1)				Services(2)				Total
Revenues		$	—			$	20,443		$	20,443			$	185,922			$	40,792		$	226,714			$	306,903			$	33,822		$	340,725
Pre-tax loss from operations		$	(1,008	)		$	(4,942	)	$	(5,950	)		$	(5,172	)		$	(4,446	)	$	(9,618	)		$	(7,343	)		$	(7,543	)	$	(14,886	)
Pre-tax gain (loss) on disposal		(6,178		)		499			(5,679		)		5,656				(10,008		)	(4,352		)		(1,651		)		423			(1,228		)
Income tax benefit		3,824				488			4,312				28,875				5,728			34,603				1,132				2,654			3,786
Net earnings (loss) from discontinued operations		$	(3,362	)		$	(3,955	)	$	(7,317	)		$	29,359			$	(8,726	)	$	20,633			$	(7,862	)		$	(4,466	)	$	(12,328	)

(1)Results from discontinued operations previously reported within the Professional Services operating segment include the court reporting business, the staffing operations in the United Kingdom, the Asia/Pacific region and The Netherlands, and the technology consulting subsidiaries in the United Kingdom and The Netherlands through the period of each respective business’s disposition.

(2)Results from discontinued operations previously reported within the Staffing Services operating segment include the call center outsourcing business and Saratoga, a human capital measurement business, through the date of its disposition.

Net loss for the fiscal year ended January 1, 2006 included (i) after-tax restructuring and other charges of $(1.1) million, or $(0.02) per basic and diluted share, (ii) estimated charges of $5.7 million, or $(0.09) per basic and diluted share, to increase or set-up reserves for working capital settlement and indemnification or other matters related to the 2004 disposal of Spherion’s operations in the Asia/Pacific region and the United Kingdom, and (iii) a tax benefit from operating activities of $3.8 million, or $0.06 per basic and diluted share.

Net earnings for the fiscal year ended December 31, 2004 included the recognition of a previously deferred tax benefit of $25.3 million that resulted from a higher tax basis than book basis on the sale of the international operations. Net earnings for the fiscal year ended December 31, 2004 also included a tax benefit of $3.9 million for the estimated loss on sale of the call centers. As a result of the finalization of the sale of the three call centers, the tax benefit was adjusted by $0.8 million during the fiscal year ended January 1, 2006.

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3.   GOODWILL AND OTHER INTANGIBLE ASSETS

SFAS No. 142 provides that goodwill and other intangible assets with indefinite lives should not be amortized, but rather tested for impairment on an annual basis, or more often if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Spherion has six reporting units with goodwill and performs its annual impairment test of goodwill as of its November month-end. The test for potential impairment is at the reporting unit level which is one level below an operating segment. Reporting units are aggregated for purposes of the impairment test only when the aggregation rules under SFAS No. 142, paragraph 30 are met. These rules permit reporting units with similar economic characteristics to be combined for purposes of measuring impairment. The 2005, 2004 and 2003 test results indicated no impairment.

The changes in the carrying amount of goodwill by segment are as follows (in thousands):

	Staffing Services			Professional Services				Total
Balance at December 26, 2003	$	38,436			$	11,541		$	49,977
Foreign currency changes	1,508				—			1,508
Goodwill written off in conjunction with the sale of the court reporting business	—				(403		)	(403		)
Goodwill written off in conjunction with the sale of the Asia/Pacific operations	—				(2,325		)	(2,325		)
Balance at December 31, 2004	39,944				8,813			48,757
Foreign currency changes and other	645				(96		)	549
Goodwill additions during the period	960				—			960
Net operating loss tax benefit realization	(1,405		)		—			(1,405		)
Balance at January 1, 2006	$	40,144			$	8,717		$	48,861

Goodwill additions, during the fiscal year ended January 1, 2006 relate primarily to the repurchase of Spherion licensed operations during the first and second quarters of 2005. The net operating loss tax benefit realization related to the utilization of net operating losses carry-forwards of Spherion’s Canadian franchise operation prior to the franchise’s acquisition.

Other intangible assets, which are amortized and are included in other long-term assets, are primarily comprised of trade names, trademarks, non-compete and employment agreements and amounted to $1.2 million and $2.0 million, less accumulated amortization of $1.0 million and $1.4 million as of January 1, 2006 and December 31, 2004, respectively. Amortization of trade names and other intangible assets for the fiscal years 2005, 2004 and 2003 amounted to $0.4 million, $0.5 million and $0.4 million, respectively. Annual amortization expense of other intangible assets is expected to be less than $0.2 million for fiscal year 2006 and immaterial amounts in the years thereafter. The remaining weighted average life of other intangible assets is approximately two years.

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4.PROPERTY AND EQUIPMENT

A summary of property and equipment follows (dollar amounts in thousands):

	Life (in years)		2005			2004
Land		—	$	4,167		$	4,167
Buildings		10-40	21,478			21,187
Equipment		3-8	78,911			84,792
Enterprise-wide information system		7	58,912			57,069
Software, primarily third party purchased software		5	28,613			25,324
Leasehold improvements and other		3-7	10,503			9,255
			202,584			201,794
Less: Accumulated depreciation and amortization			(114,038		)	(104,111		)
			$	88,546		$	97,683

The enterprise-wide information system consists of capitalized consulting fees, labor and license costs.

Equipment includes capital lease assets of $4.6 million and $6.4 million as of January 1, 2006 and December 31, 2004, respectively.

Depreciation and amortization expense of property and equipment including leased assets for the fiscal years 2005, 2004 and 2003 amounted to $21.4 million, $23.3 million and $19.6 million, respectively.

5.SHORT-TERM AND LONG-TERM DEBT OBLIGATIONS

A summary of short-term and long-term debt obligations is as follows (in thousands):

	2005			2004
Short-term debt obligations:
Other debt, due 2006 and 2005, respectively	$	1,338		$	1,460
U.S. dollar revolving line of credit, secured by accounts receivables, due 2010	—			25,000
Canadian dollar revolving line of credit, secured by accounts receivables, due 2007	—			7,131
U.S. dollar convertible promissory notes, due 2005	—			8,000
Software license note payable, due 2005	—			1,526
Current portion of long-term debt	1,803			1,412
Total short-term debt obligations	$	3,141		$	44,529
Long-term debt obligations:
Capital lease, due through 2011	$	4,639		$	5,858
Other debt, due 2006 through 2008 and 2005 through 2008, respectively	899			320
Total long-term debt obligations	5,538			6,178
Less current portion of long-term debt	(1,803		)	(1,412		)
Long-term debt, net of current portion	$	3,735		$	4,766

Spherion has a U.S. dollar revolving line of credit in the amount of $250.0 million that is secured by substantially all of its domestic accounts receivable. At Spherion’s option, the amount available can be increased to $300.0 million. As of January 1, 2006, there were no amounts outstanding under this facility, and as of December 31, 2004, there was $25.0 million outstanding. Total availability under this facility was $189.2 million for the year ending January 1, 2006 and is calculated as eligible receivables of $221.0 million,

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less: amounts outstanding, letters of credit of $4.1 million and a one week payroll reserve of $27.7 million. Interest on this line of credit is based upon the duration of the loan, availability under the line and other conditions and would have been approximately 5.96% (LIBOR plus a spread) or approximately 7.00% (prime plus a spread) as of January 1, 2006. Spherion pays an unused line fee in the range of 0.25% to 0.38% per annum that is determined by the unused portion of the revolving line of credit as well as a letter of credit fee of 0.25% per annum. This line of credit expires in 2010.

Spherion also has a Canadian dollar revolving line of credit (secured by Canadian accounts receivable) that matures July 2007. This facility provides up to CAD$13.0 million of on-balance sheet financing (approximately $11.2 million at current exchange rates). As of January 1, 2006, there were no borrowings outstanding under this facility, and as of December 31, 2004, there was $7.1 million outstanding. As of January 1, 2006, the interest rate for amounts borrowed on this facility would have approximated 6.0% (Canadian prime plus a spread). A commitment fee of 0.5% per annum is payable based on the unused portion of the revolving line of credit. Spherion guarantees the Canadian dollar revolving line of credit.

Spherion’s lines of credit provide for certain affirmative and negative covenants which may limit the total availability under these facilities based upon Spherion’s ability to meet these covenants. These covenants include, but are not limited to: a fixed charge coverage ratio; limitations on capital expenditures; additional debt incurred; mergers, consolidations or sales; and transactions with subsidiaries and related parties. At January 1, 2006, Spherion was in compliance with the requirements of these covenants.

During 2004, Spherion retired its remaining U.S. dollar convertible subordinated notes (the “Notes”) and paid a premium of $0.6 million to retire the Notes and wrote-off the remaining bond issuance costs of $0.2 million, both of which are included in “Other gain (loss)” in the accompanying consolidated statements of operations. During 2003, Spherion had retired an aggregate face value of $7.0 million of the Notes for a purchase price of $6.6 million. Spherion recorded a gain, net of bond issuance cost write-offs of $0.3 million for the fiscal year ending December 26, 2003, which is included in “Other gain (loss)” in the accompanying consolidated statements of operations.

Spherion entered into a seven-year contract with a third party information technology company to outsource its technology infrastructure operations effective as of July 26, 2004. The contract includes the sale at book value (which approximates fair market value) of certain computer hardware to be operated by the outsource provider. Spherion accounted for this portion of the outsourced transaction as a sale-leaseback pursuant to SFAS No. 13, “Accounting for Leases.” Spherion recorded an asset and a capital lease obligation of $6.4 million at the start of the contract. The capital lease obligation remaining at January 1, 2006 was $4.6 million.

In October 2000, Spherion issued $8.0 million of interest-bearing convertible promissory notes due October 1, 2005 in conjunction with the purchase of 80% of the membership interests of JobOptions, LLC. These notes were paid off in full at the end of the third quarter in 2005.

Aggregate future maturities of long-term debt as of January 1, 2006 are $1.8 million in 2006, $1.4 million in 2007, $0.8 million in 2008, $0.6 million in 2009, $0.6 million in 2010 and $0.4 million due thereafter.

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6.   INCOME TAXES

Earnings (loss) from continuing operations before income taxes and the components of the income tax expense (benefit) are as follows (in thousands):

	2005		2004			2003
Earnings (loss) from continuing operations before income taxes:
United States	$	27,455	$	12,643		$	(1,782	)
Foreign	1,554		234			31
	$	29,009	$	12,877		$	(1,751	)
Current tax expense:
Federal	$	426	$	1,724		$	5,580
State and local	1,386		968			806
Foreign	47		44			1
	1,859		2,736			6,387
Deferred tax expense (benefit):
Federal	7,218		579			(7,149		)
State and local	3		(5,634		)	596
Foreign	583		—			—
	7,804		(5,055		)	(6,553		)
Total expense (benefit) for income taxes	$	9,663	$	(2,319	)	$	(166	)

The following table reconciles the United States Federal income tax rate to Spherion’s effective tax rate (benefit):

	2005		2004		2003
Statutory rate	35.0	%	35.0	%	(35.0	)%
Increase (decrease) in rate resulting from:
State and local income taxes, net of Federal tax benefit	1.7		(40.7	)	62.1
Wages to work credits	(6.0	)	(17.2	)	(118.8	)
Foreign income and withholding taxes	0.9		1.3		71.2
Nondeductible meals and entertainment	1.5		4.2		35.2
Company-owned life insurance	(0.4	)	(3.2	)	(22.6	)
Other, net	0.6		2.6		(1.6	)
Effective tax rate (benefit)	33.3	%	(18.0	)%	(9.5	)%

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Significant components of Spherion’s deferred tax assets and liabilities are as follows (in thousands):

	2005			2004
Current deferred tax asset (liabilities):
Employee benefits, primarily deferred compensation	$	2,912		$	2,424
Self-insurance and accrued compensation	3,288			3,098
Sale of Interim Health Care business	—			938
Accrued expenses, including restructuring	2,846			10,062
Receivables allowances	1,824			2,741
	10,870			19,263
Valuation allowance	(1,715		)	—
	9,155			19,263
Non-current deferred tax asset (liabilities):
Employee benefits, primarily deferred compensation	9,925			12,944
Self-insurance	18,335			20,956
Fixed assets	(11,260		)	(6,992		)
Intangible assets	69,120			81,707
Accrued expenses	3,957			—
General business credit carryforward	12,960			6,428
Foreign tax credit carryforward	19,625			207
Capital loss carryforward	7,199			—
Federal net operating losses	41,455			29,957
State net operating loss	10,410			8,229
Canada net operating loss	1,303			2,128
	183,029			155,564
Valuation allowance	(30,945		)	(6,128		)
	152,084			149,436
Net deferred tax asset	161,239			168,699
Less current deferred tax asset	9,155			19,263
Long-term deferred tax asset	$	152,084		$	149,436

At January 1, 2006, Spherion had a net deferred tax asset of $161.2 million. This deferred tax asset was evaluated under the guidelines of SFAS No. 109 “Accounting for Income Taxes,” and a determination on the basis of objective factors was made that the asset will be realized through future years’ taxable earnings. These objective factors include historical taxable income, normalized for non-recurring income and expense items. Using an average of this income projected to future years, if the asset can be recovered within the statutory carryforward periods, there is no impairment.

Spherion has a U.S. federal net operating loss carryforward in the amount of $118.4 million expiring in 2023 and thereafter. Spherion has $253.9 million of state net operating loss carryforwards which expire over the next one to twenty years. Canada net operating loss carryforwards are available in the amount of $3.7 million, and expire between 2007 and 2012.

Spherion’s valuation allowance increased by $26.5 million during 2005. The valuation allowance reduces our deferred tax asset to an amount that is more likely than not to be realized, and is based on the uncertainty of the realization of two principal items. As a result of federal tax return filings in 2005, foreign tax credits and capital losses were released for carry forward from the 2001 tax year. The exit from most of our foreign operations makes it unlikely that we will utilize these foreign tax credits in the future. A valuation allowance has been recorded against the full amount of foreign tax credit carryforward of $19.6 million. In addition, we have recorded a valuation allowance against the full amount of the $7.2 million

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benefit on capital loss carry forward of $20.6 million. The benefits on foreign tax credits and capital loss carryforwards expire between 2006 and 2009, and general business credits carried forward will expire between 2021 and 2025. Valuation allowances for state net operating loss carryforwards and other items account for remainder of the total $32.7 million. At January 1, 2006 and December 31, 2004, there were no unremitted earnings from our foreign subsidiaries.

7.   EMPLOYEE SAVINGS AND INVESTMENT PLANS

Spherion has a voluntary employee savings plan (the 401(k) Benefit Plan) covering substantially all eligible United States employees. This plan has a basic match for those employees eligible to receive the match, which is based on employee contributions. Employer contributions by Spherion under the plan amounted to $0.7 million, $0.6 million and $0.5 million for fiscal years 2005, 2004 and 2003, respectively. There were approximately 1,500 participating employees in this plan as of January 1, 2006.

Spherion also has a voluntary non-qualified deferred compensation plan for highly compensated employees who are not eligible to participate in Spherion’s 401(k) Benefit Plan. The plan allows eligible employees to defer receipt of a portion of their compensation. Employee deferrals earn a return based on each employee’s elected hypothetical plan investments including amounts represented by deferred stock units of Spherion’s common stock. The plan is not funded, however Spherion maintained investments which are included in “Intangibles and other assets” in the accompanying consolidated balance sheets. These assets had values of $12.9 million and $16.7 million as of January 1, 2006 and December 31, 2004, respectively. The earnings from these investments partially offset Spherion’s cost of providing the benefit. In May 2005, we surrendered some of the company-owned life insurance policies for a total of $4.2 million, net of a $1.6 million policy loan, and transferred the funds to a money market account. In January 2006, we surrendered the remaining company-owned life insurance policies of $12.9 million and invested these funds and an additional $10.7 million in a portfolio of mutual funds to fully match the deferred compensation liability of this plan. The deferred compensation and accumulated investment earnings or losses, are accrued. Such accrual amounted to $24.3 million and $27.4 million at January 1, 2006 and December 31, 2004, respectively, the long-term portion of which was included in “Deferred compensation and other long-term liabilities” and the short-term portion in “Accrued restructuring and other current liabilities” in the accompanying consolidated balance sheets. Employee deferrals within this plan represented as deferred stock units of Spherion are included in additional paid-in capital within the stockholders’ equity section of the accompanying consolidated balance sheets (rather than in “Deferred compensation and other long-term liabilities”) as employees may only be paid out in shares of Spherion stock. There were approximately 140 employees participating in this plan as of January 1, 2006.

Spherion has an Employee Stock Purchase Plan that provides substantially all employees who have been employed for at least six months an opportunity to purchase shares of its common stock at a discount of 15%. The aggregate amount an employee may purchase each calendar year is limited to a maximum of 15% of an employee’s compensation or $25,000 in the value of the stock. There were approximately 107,000 and 113,000 shares issued in 2005 and 2004, respectively, under this plan. A total of approximately 942,000 shares are available as of January 1, 2006 for purchase under the plan, which expires on July 1, 2015.

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8.STOCK-BASED COMPENSATION PLANS

Spherion has one primary stock option plan, the 2000 Stock Incentive Plan. Under the plan, options to purchase Spherion’s common stock may be granted to employees and outside directors of Spherion and its subsidiaries for periods not to exceed ten years at a price that is not less than 100% of fair market value on the date of grant. At January 1, 2006 and December 31, 2004, Spherion had 3,168,277 and 3,418,626 shares, respectively, reserved for future grants under the plan.

Changes under these stock option plans for 2005, 2004 and 2003 were as follows:

	2005					2004					2003
	Shares		Weighted Average Exercise Price			Shares		Weighted Average Exercise Price			Shares		Weighted Average Exercise Price
Outstanding at beginning of fiscal year	4,582,969			$	10.16	6,538,323			$	10.02	7,545,644			$	10.20
Granted	1,240,060			7.92		82,353			8.72		1,511,780			9.72
Exercised	(516,758	)		6.88		(804,492	)		6.86		(396,990	)		6.59
Forfeited	(1,035,597	)		9.97		(1,233,215	)		11.47		(2,122,111	)		11.08
Outstanding at end of fiscal year	4,270,674			$	9.98	4,582,969			$	10.16	6,538,323			$	10.02
Options exercisable at end of fiscal year	2,840,369			$	10.78	3,422,654			$	10.57	3,472,343			$	11.57

The following table summarizes information about fixed stock options outstanding at January 1, 2006:

	Options Outstanding							Options Exercisable
Range of Exercise Prices	Number Outstanding at January 1, 2006		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price			Number Exercisable at January 1, 2006		Weighted Average Exercise Price
$  0.00-$  7.49		1,052,417		6.35		$	6.58		1,003,446		$	6.56
$  7.50-$  9.99		2,304,563		8.32		8.77			940,163		9.32
$10.00-$19.99		659,617		4.00		13.90			645,383		13.98
$20.00-$31.00		254,077		2.17		24.84			251,377		24.87
		4,270,674		6.80		$	9.98		2,840,369		$	10.78

As discussed in Note 1, Summary of Significant Accounting Policies, Spherion accounts for stock-based compensation using the intrinsic value method of accounting as prescribed by APB Opinion No. 25. The table in Note 1 summarizes the impact had Spherion adopted the fair value based method prescribed by SFAS No. 123, “Accounting for Stock-Based Compensation” for the fiscal years 2005, 2004 and 2003.

Spherion employees and outside directors are also eligible to receive grants of deferred stock units. Deferred stock units entitle the individual to receive shares of Spherion common stock at a future date after meeting service requirements or Spherion has met financial targets. Approximately 417,204 and 52,500 deferred stock units were granted during 2005 and 2004, respectively. These deferred stock units were granted to key management employees and outside directors and ranged in market values from $6.60 to $10.00. Deferred stock units vest based on either employee service with the Company over a period of one to seven years or solely based on the Company’s attainment of financial performance criteria over a three-year period. The value of these deferred stock units is amortized to compensation expense ratably over the vesting period and totaled $0.9 million, $1.0 million and $2.5 million, for the years ended 2005,

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2004 and 2003, respectively. The provisions of SFAS No. 123R do not change the accounting for deferred stock units.

9.STOCKHOLDER RIGHTS PLAN

On February 17, 1994, Spherion’s Board of Directors adopted a rights plan to protect stockholders in the event of an unsolicited attempt to acquire Spherion which is not believed by the Board of Directors to be in the best interest of stockholders. Under the plan, a dividend of one right (a “Right”) per share was declared and paid on each share of Spherion’s common stock outstanding on April 1, 1994. As to shares issued after such date, Rights will automatically attach to them after their issuance.

The Rights become exercisable when a person or group of persons acquires 15% or more of the outstanding shares of Spherion’s common stock without the prior written approval of Spherion’s Board of Directors (an “Unapproved Stock Acquisition”), and after ten business days following the public announcement of the intent to commence a tender offer that would result in an Unapproved Stock Acquisition.

If a person or group of persons makes an Unapproved Stock Acquisition, the registered holder of each Right has the right to purchase, for the exercise price of the Right (currently set at $55), either one-hundredth of a share of a new class of Spherion’s preferred stock or share of Spherion’s common stock having a market value equal to two times the exercise price of the Right. Following an Unapproved Stock Acquisition, if Spherion is involved in a merger, or 50% or more of Spherion’s assets or earning power are sold, the registered holder of each Right has the right to purchase, for the exercise price of the Right, a number of shares of the common stock of the acquiring company having a market value equal to two times the exercise price of the Right.

After an Unapproved Stock Acquisition, but before any person or group of persons acquires 50% or more of the outstanding shares of Spherion’s common stock, the Board of Directors may exchange all or part of the then outstanding and exercisable Rights for Spherion common stock at an exchange ratio of one share of common stock per Right. Upon any such exchange, the right of any holder to exercise a Right terminates.

Spherion may redeem the Rights at a price of $0.01 per Right at any time prior to an Unapproved Stock Acquisition. The Rights expire on April 1, 2014, unless extended by the Board of Directors. Until a Right is exercised, the holder thereof, as such, has no rights as a stockholder of Spherion, including the right to vote or to receive dividends. The issuance of the Rights alone has no dilutive effect and does not affect reported earnings per share. A committee comprised of Spherion’s independent board members shall review the Rights plan at least once in every three-year period to determine whether the maintenance of the plan continues to be in the best interest of Spherion and its stockholders. The committee will review the plan in 2006.

10.STOCKHOLDERS’ EQUITY

On May 24, 2005, the Board of Directors authorized the repurchase of up to six million shares or approximately 10% of the Company’s outstanding common stock. Share repurchases are being made from time to time in open-market transactions or in privately negotiated transactions. The repurchase program does not require Spherion to acquire any specific number of shares and may be terminated at any time.

During the fiscal year ended January 1, 2006, Spherion purchased 3.0 million shares for approximately $24.0 million at an average price per share of $7.87.

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11.FINANCIAL INSTRUMENTS AND FAIR VALUES

The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time, based upon relevant market information about the financial instrument.

The carrying amount of cash and cash equivalents, trade receivables and other current assets approximates fair value due to the short-term maturities of these instruments. Spherion’s insurance deposits earn a fixed interest rate as determined at the time of funding and are carried at fair value or $78.0 million and $92.9 million as of January 1, 2006 and December 31, 2004, respectively. Company-owned life insurance policies are carried at fair market value, which approximated $12.9 million and $16.7 million as of January 1, 2006 and December 31, 2004, respectively.

In estimating the fair value of derivative positions, Spherion utilizes quoted market prices, if available, or quotes obtained from outside sources. As of January 1, 2006, Spherion had two outstanding forward contracts to sell €0.2 million in January 2006 and 2007, and one outstanding forward contract to sell CAD$5.4 million in March 2006. Each of these derivatives had a fair value or cost to unwind that is not material to Spherion’s consolidated results of operations.

The fair values of all other financial instruments, including debt, approximate their book values as the instruments are short-term in nature or contain market rates of interest.

12.COMMITMENTS AND CONTINGENCIES

Substantially all of Spherion’s operations are conducted in leased premises. Spherion also leases computers and other equipment. Total lease expense for the fiscal years ended 2005, 2004 and 2003 was $22.1 million, $22.1 million and $23.2 million, respectively. Future minimum lease payments under non-cancelable leases as of January 1, 2006 are $24.2 million, $18.2 million, $11.6 million, $7.6 million and $4.0 million in the years 2006 through 2010 and $2.3 million thereafter which are partially offset by $11.8 million under future non-cancelable subleases. Of these future minimum lease payments, $8.0 million has been accrued as of January 1, 2006, related to facility closures, in amounts of $1.0 million, $1.6 million and $5.4 million which are included as part of “Accrued restructuring,” “Accounts payable and other accrued expenses” and “Deferred compensation and other long-term liabilities” in the accompanying consolidated balance sheets, respectively.

In connection with the disposition of certain subsidiaries, Spherion, from time to time provides routine indemnifications with respect to equipment and real estate leases and in certain cases the performance of services. The disposition of these businesses also usually requires that we indemnify the purchaser for liabilities that arose prior to the disposition date. These liabilities are typically related to audits of tax liabilities by local authorities and other pre-existing liabilities. Additionally, in the contracts we make a number of representations and warranties and from time to time claims are made against us related to these items. The fair value of these indemnifications are recorded at the time of the sale. Subsequently if any liabilities become known and are both probable and reasonably estimable, they are recorded as an expense. For some of the dispositions, we have or may have future claims which are not yet probable and reasonably estimable and have not been recorded as an expense. See Note 2, Discontinued Operations, for further discussion.

On April 4, 2003, in connection with Spherion’s acquisition of 85% of its Canadian franchise operation, Spherion also entered into a put/call agreement with the minority interest holder, whereby the minority interest holder can put the remaining 15% interest in the Canadian operations back to Spherion any time after December 31, 2005, or, as amended, Spherion can call the remaining 15% interest any time after January 1, 2008. If the put or the call were exercised, the purchase price would be primarily determined

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based upon the net assets and gross profits from this operation. Based upon these factors, the estimated purchase price using 2005 operating results and net assets as of the end of the year would approximate $3.0 million, however, this amount is not determinable or certain to be paid at this point in time.

Spherion had outstanding irrevocable letters of credit of approximately $0.7 million and surety bonds outstanding of approximately $0.4 million as of January 1, 2006. These instruments primarily collateralize Spherion’s recorded obligations under workers’ compensation insurance programs. The level of collateral required is determined by the insurance carrier based on claims experience of the programs and may vary from year to year. Additionally, Spherion has a bank guarantee of €3.4 million ($4.0 million at current exchange rates) relating to an indemnification on the sale of its Netherlands operations.

Spherion, in the ordinary course of its business, is or may be threatened with or named as a defendant in various lawsuits. Spherion maintains insurance in such amounts and with such coverages and deductibles as management believes are reasonable and prudent. The principal risks that Spherion insures against are workers’ compensation, personal injury, bodily injury, property damage, professional malpractice, errors and omissions, employment practices and fidelity losses. Spherion’s management does not expect that the outcome of any pending lawsuits relating to such matters, individually or collectively, will have a material adverse effect on Spherion’s financial condition, results of operations or cash flows.

Interim HealthCare Inc., Catamaran Acquisition Corp. and Cornerstone Equity Investors IV, L.P. filed an action against Spherion in the Delaware Court of Chancery in 2001 related to the divestiture of Interim HealthCare (the “Healthcare Divestiture”). They sought damages of approximately $10.0 million for breach of contract, reformation of the purchase agreement to reduce the purchase price by approximately $24.0 million, or rescission of the contract. The same parties also sought damages against Spherion in an action in Delaware Superior Court alleging multiple breach of contract claims arising out of the Healthcare Divestiture. Spherion’s motion for summary judgment was granted for the reformation claim. The cases went to trial in December 2003 and the court issued its opinion in February 2005. The opinion provided that Spherion did not have to pay damages on any of the claims, except for one breach of contract claim for which the damages awarded to the plaintiffs total approximately $1.1 million plus pre- and post-judgment interest and attorneys’ fees. After the parties stipulated to the amount of pre-judgment interest and attorneys’ fees, the judge entered an order of judgment in June 2005 directing Spherion to pay a total of approximately $1.7 million, and in August 2005 this amount was paid by Spherion to the plaintiffs. In June 2005, the plaintiffs filed a notice of appeal and oral argument was heard in the Delaware Supreme Court in October 2005. On October 31, 2005, the Delaware Supreme Court issued its opinion affirming the trial court’s ruling in all respects.

On December 13, 2004, and as amended on January 13, 2005 and October 31, 2005, Glidepath Holding B.V. and Jeimon Holdings N.V. filed an action against Spherion Corporation in the U.S. District Court of the Southern District of New York. Glidepath and Jeimon Holdings, investors in the entity that acquired the Cyber Center business of Spherion Technology (UK) Limited, a subsidiary of Spherion Corporation, in 2002, sued Spherion for fraud, negligent misrepresentation, aiding and abetting breach of fiduciary duty and unjust enrichment and seek $32.0 million in damages, and treble for punitive damages, plus attorneys’ fees, expert fees and costs. Glidepath and Jeimon Holdings allege that an individual who was an officer of Spherion Technology (UK) fraudulently induced them to invest in a corporation formed to purchase the Cyber Center business, while he remained in the employ of Spherion Technology (UK) and was to be paid an incentive bonus for the sale by Spherion. They allege that he misled them as to his employment status at the time, as to the prospects for the Cyber Center, and as to whether the newly formed corporation was assuming the indebtedness of Spherion Technology (UK) associated with the Cyber Center business. They allege that in doing so, he was acting as an agent of Spherion. Spherion intends to vigorously defend this matter. Although this claim is in the preliminary stages, Spherion has a reserve of $0.1 million related to this matter. Spherion does not have insurance coverage for this claim.

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In 2002, Spherion engaged in transactions that generally had the effect of accelerating certain future projected tax deductions and losses, resulting in an increase in the amount of net operating losses and capital losses available for carry back into prior tax years. As a result of these transactions, Spherion’s tax refund for its 2002 filing year was increased by approximately $60.0 million. Spherion believes that it has appropriately reported these transactions in its tax returns, and that it has established adequate reserves as of January 1, 2006 in the amount of $51.8 million, with respect to any tax liabilities that may arise in relation to these transactions or any other potential tax liabilities should its position be successfully challenged by tax authorities. An unfavorable settlement or adverse resolution could result in the repayment of a portion of the refund received plus interest.

Several states are examining Spherion’s prior year unemployment tax rates. Revisions of these rates by any state would result in additional payments related to the prior year’s unemployment taxes in that state. In the states where the rate is currently being examined and challenged, the claims raised by the states approximate $3.6 million plus potential interest and penalties. As of January 1, 2006, Spherion had $2.1 million accrued as its best estimate of losses it expects to incur as a result of these challenges. It is possible that Spherion could face additional challenges in these or other states to its rates in prior years, but Spherion will vigorously defend against these challenges.

13.RESTRUCTURING AND OTHER CHARGES

A summary of the charges is as follows (in thousands):

	Fiscal Years
	2005			2004			2003
Staffing Services	$	1,840		$	543		$	2,826
Professional Services	49			1,537			1,261
Corporate	341			1,351			724
Restructuring	2,230			3,431			4,811
Restructuring reversal of over accrual	(175		)	(672		)	(606		)
Other charges	(292		)	5,636			—
	$	1,763		$	8,395		$	4,205

Restructuring Charges

Restructuring charges for the year ended January 1, 2006 totaled $2.2 million for severance related costs for the elimination of 112 positions. The restructuring charges were primarily the result of an announced termination of a customer contract and other changes within the managed services portion of the Staffing Services operating segment.

During the second half of 2003, Spherion identified certain cost reduction opportunities primarily related to the realignment of its operating segments and the implementation of its enterprise-wide information system and adopted a restructuring plan (the “2003 Plan”) to eliminate redundancies, reduce excess capacity and centralize business support functions. Restructuring charges relating to this plan totaled $3.4 million and $4.8 million for the years ended December 31, 2004 and December 26, 2003, respectively. For the fiscal years 2004 and 2003, the charges consisted of severance charges of $2.1 million and $3.9 million and facility closure expenses and charges for asset write-offs for property previously vacated of $1.3 million and $0.9 million, respectively.

These charges were offset by reversals of accruals of $0.2 million, $0.7 million and $0.6 million for the years ended January 1, 2006, December 31, 2004 and December 26, 2003, respectively, that were unnecessary primarily as the result of the resolution of uncertainties related to facility closures, sublease income exposure, lower broker fees, lower fixed asset write-offs and lower severance costs than initially anticipated, in which these amounts were reversed to income in the period they were identified.

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As discussed in Note 2, Discontinued Operations, Spherion remains obligated for a facility lease of one former operating location for its operations in the United Kingdom disposition. This lease obligation of $0.8 million was recorded as a restructuring charge within discontinued operations during the second quarter of 2004 and is included in the table below as a facility closure liability.

Other Charges

During the second quarter of 2005, Spherion identified $0.3 million of other charges recorded in the prior year for facility closures that were unnecessary and reversed these charges to income.

During 2004, Spherion incurred other charges of $5.6 million to terminate the employment contract of its former chief executive officer.

An analysis of the restructuring plans, along with amounts remaining to be distributed under prior years’ restructuring plans, are as follows (in thousands):

	Facility Closures and Asset Write-offs				Severance				Total
Balance at December 27, 2002		$	5,722			$	216		$	5,938
2003 Plan Charges		949				3,862			4,811
2003 Plan Charges, discontinued operations(1)		224				785			1,009
Utilized during fiscal 2003		(2,900		)		(2,721		)	(5,621		)
Reversal of over accrual		(606		)		—			(606		)
Balance at December 26, 2003		3,389				2,142			5,531
2003 Plan Charges		1,285				2,146			3,431
2003 Plan Charges, discontinued operations(1)		791				—			791
Utilized during fiscal 2004		(2,669		)		(4,104		)	(6,773		)
Foreign currency changes and other		123				(11		)	112
Reversal of over accrual		(590		)		(82		)	(672		)
Balance at December 31, 2004		2,329				91			2,420
Other Plan Charges		8				2,222			2,230
Utilized during fiscal 2005		(1,173		)		(2,193		)	(3,366		)
Foreign currency changes and other		(99		)		—			(99		)
Reversal of over accrual		(81		)		(94		)	(175		)
Balance at January 1, 2006		$	984			$	26		$	1,010

(1)   Charges incurred in current and prior year to discontinued operations.

As of January 1, 2006, the remaining accruals for facility closures of $1.0 million relate to lease payments on five closed locations that will be paid out through 2013 (net of applicable sublease income). Severance for employees with retention periods that extend past 60 days are accrued ratably over the retention period.

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14.VARIABLE INTEREST ENTITIES

A summary of Spherion’s variable interest entities (VIE’s) follows:

	2005		2004
Number of VIE’s:
Consolidated	7		6
Not consolidated	2		2
Total VIE’s	9		8
Revenues (in thousands):
Consolidated	$	57,343	$	39,594
Not consolidated	$	7,177	$	7,776

Spherion’s consolidated VIE’s (all of which are licensees) provide light industrial and clerical staffing. Spherion’s consolidated net assets were $0.7 million and $0.8 million at January 1, 2006 and December 31, 2004. Each licensee’s loan is collateralized by their respective business and in the event of default on the loan, Spherion retains the right to take over their operations. General creditors of Spherion’s licensees do not have any recourse against Spherion.

Spherion’s VIE’s that are not consolidated are franchisees and provide light industrial and clerical staffing. Spherion’s maximum exposure to loss from these VIE’s is limited to its loan and royalty receivable balances of $0.5 million as of January 1, 2006 and December 31, 2004. All loan and royalty receivables are included in “Other current assets” and “Other assets” in the accompanying consolidated balance sheets.

15.   SEGMENT INFORMATION

Spherion is organized and managed around two operating segments—Staffing Services and Professional Services. Each segment has separate and distinct leadership teams, each with a business unit president that reports directly to Spherion’s Chief Executive Officer. Each segment provides services to customers in different types of skill-sets. The Staffing Services operating segment is concentrated around clerical and light industrial staffing, while the Professional Services operating segment is concentrated around higher level skill-sets, such as information technology, finance and accounting, engineering and administrative. Spherion evaluates the performance of its operating segments and allocates resources based on revenues, gross profit and segment operating profit. Segment operating profit is defined as earnings (loss) from continuing operations before unallocated corporate costs, amortization expense, interest expense, interest income, income taxes and special items (restructuring, other charges and gain (loss) on retirement of debt). All material intercompany revenues and expenses have been eliminated. Operating results related to discontinued operations have been eliminated from the segment information below.

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Information on operating segments and a reconciliation to earnings (loss) from continuing operations before income taxes and discontinued operations for the periods indicated are as follows (in thousands):

	Fiscal Years
	2005			2004			2003
Revenues:*
Staffing Services	$	1,521,486		$	1,623,133		$	1,382,964
Professional Services	450,179			409,582			350,797
Total	$	1,971,665		$	2,032,715		$	1,733,761
Gross Profit:
Staffing Services	$	291,147		$	297,147		$	275,243
Professional Services	143,143			128,464			112,885
Total	$	434,290		$	425,611		$	388,128
Segment Operating Profit (Loss):
Staffing Services	$	24,917		$	25,475		$	29,746
Professional Services	19,236			19,769			4,717
Total	44,153			45,244			34,463
Unallocated corporate costs	(13,832		)	(20,637		)	(30,801		)
Amortization expense	(416		)	(543		)	(448		)
Interest expense	(3,205		)	(5,766		)	(6,178		)
Interest income	4,072			3,815			5,105
Restructuring and other charges	(1,763		)	(8,395		)	(4,205		)
Gain (loss) on retirement of debt	—			(841		)	313
Earnings (loss) from continuing operations before income taxes and discontinued operations	$	29,009		$	12,877		$	(1,751	)

*Revenue for 2004 and 2003 have not been adjusted for the movement of certain managed services contracts within Staffing Services during the second quarter of 2005 to Professional Services. The amount moved for the fiscal year ended January 1, 2006 was $14.1 million.

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Geographic, services, depreciation expense, and assets’ information on operating segments for the periods indicated are as follows (in thousands):

	Fiscal Years
	2005		2004		2003
Services Information:
Revenues:
Temporary Staffing	$	1,714,801	$	1,679,543	$	1,374,215
Managed Services	191,232		297,627		316,355
Permanent Placement	65,632		55,545		43,191
Total	$	1,971,665	$	2,032,715	$	1,733,761
Depreciation Expense:
Staffing Services	$	15,295	$	17,312	$	13,685
Professional Services	6,057		5,959		5,937
Total	$	21,352	$	23,271	$	19,622
Total Assets:
Staffing Services	$	253,266	$	323,911	$	286,298
Professional Services	97,863		102,104		162,704
Corporate	391,515		404,251		415,832
Total	$	742,644	$	830,266	$	864,834
Property and Equipment, Net:
North America	$	88,546	$	97,683	$	123,965
Europe	—		—		7,113
Asia/Pacific	—		—		2,370
Total	$	88,546	$	97,683	$	133,448

Spherion has no single customer representing greater than 10% of revenues. All revenues are earned in North America.

16.   EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share are computed by dividing Spherion’s earnings (loss) from continuing operations before discontinued operations by the weighted average number of shares outstanding during the period.

When inclusion of common stock equivalents are not anti-dilutive, diluted earnings per share are computed by dividing Spherion’s earnings from continuing operations plus after-tax interest on the convertible notes, by the weighted average number of shares outstanding and the impact of all dilutive potential common shares, primarily stock options, convertible notes, restricted stock and deferred stock units. The dilutive impact of stock options is determined by applying the “treasury stock” method and the dilutive impact of the convertible notes is determined by applying the “if converted” method. The convertible promissory notes and convertible subordinated notes were paid-off in 2005 and 2004, respectively.

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The following table reconciles the numerator (earnings (loss) from continuing operations) and denominator (shares) of the basic and diluted earnings (loss) per share computations (amounts in thousands, except per share amounts):

	Fiscal Years
	2005							2004							2003
	Earnings From Continuing Operations			Shares	Per Share Amount			Earnings From Continuing Operations			Shares	Per Share Amount			Loss From Continuing Operations				Shares	Per Share Amount
Basic EPS		$	19,346	60,938		$	0.32		$	15,196	61,036		$	0.25		$	(1,585	)	59,951		$	(0.03	)
Effect of Dilutive Securities:
Stock options and otherdilutive securities		—		492					—		877					—			—
Convertible notes		—		—					67		400					—			—
Diluted EPS		$	19,346	61,430		$	0.31		$	15,263	62,313		$	0.24		$	(1,585	)	59,951		$	(0.03	)

For the fiscal years 2005, 2004 and 2003, outstanding employee stock options of 3.4 million, 3.0 million and 7.0 million, respectively, have been excluded from the computation of diluted earnings (loss) per share since they are anti-dilutive. Additionally, 0.3 million, 2.4 million and 3.9 million of convertible securities are excluded as they would also be anti-dilutive for the fiscal years 2005, 2004 and 2003, respectively.

17.   QUARTERLY FINANCIAL DATA (unaudited—amounts in thousands, except per share data and share price)

The following is an analysis of certain quarterly results of operations and other data for the 2005 and 2004 fiscal years:

	2005
	First Quarter			Second Quarter		Third Quarter		Fourth  Quarter(1)
Revenues	$	505,541		$	476,818	$	492,405		$	496,901
Gross profit	105,125			104,839		110,257			114,069
Net earnings (loss)	(1,228		)	1,755		5,160			6,342
Basic earnings (loss) per share	(0.02		)	0.03		0.08			0.11
Diluted earnings (loss) per share	(0.02		)	0.03		0.08			0.10

	2004
	First Quarter			Second Quarter		Third Quarter		Fourth Quarter(1)
Revenues	$	467,212		$	485,937	$	507,728		$	571,838
Gross profit	98,887			104,960		105,851			115,913
Net earnings (loss)	(8,132		)	2,804		29,743			11,414
Basic earnings (loss) per share	(0.13		)	0.05		0.49			0.19
Diluted earnings (loss) per share	(0.13		)	0.05		0.48			0.18

(1)The fourth quarter of 2005 contains 13 weeks and the fourth quarter of 2004 contains 14 weeks.

In the first quarter of 2005 after-tax restructuring and other charges of $(1.1) million were incurred, or $(0.02) per basic and diluted share. In the fourth quarter of 2005, the net loss from discontinued operations includes estimated charges of $5.7 million, or $(0.09) per basic and diluted share, for working capital and warranty matters related to the 2004 disposal of Spherion’s operations in the United Kingdom and Asia/Pacific region. The net loss from discontinued operations also includes a tax benefit from operating activities of $3.8 million, or $0.07 per basic and diluted share.

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In the first quarter of 2004 after-tax restructuring and other charges of $(5.4) million were incurred, or $(0.09) per basic and diluted share. The third quarter of 2004 includes an after-tax loss on the retirement of the remaining convertible subordinated notes of $(0.5) million or $(0.01) per basic and diluted share. Net earnings from discontinued operations for the third quarter of 2004 includes a $30.4 million tax benefit, or $0.50 per basic share and $0.49 per diluted share as a result of the recognition of a previously deferred tax benefit of $26.0 million that resulted from the sale of the international operations, a tax benefit of $3.8 million for the estimated loss on sale of the call centers and a tax benefit from operations of $0.5 million. Fourth quarter 2004 continuing operations includes a $6.3 million tax benefit for increased state deferred income tax assets resulting from an increase in the actual state income tax rate, or $0.10 per basic and diluted share.

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Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There has been no change in our principal accountants during the two most recent fiscal years or any subsequent interim period.

Item 9A.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report in alerting them in a timely manner as to material information relating to our Company (including our consolidated subsidiaries) required to be included in this Annual Report.

There has been no change in our internal control over financial reporting during the quarter ended January 1, 2006, identified in connection with the evaluation referred to above, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Management’s Report on Internal Control Over Financial Reporting and the corresponding Report of Independent Registered Public Accounting Firm are included in Item 8., Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Item 9B.OTHER ITEMS

On February 21, 2006, we entered into an Employment Agreement with each of William J. Grubbs and William G. Halnon.  In addition, on the same date, we entered into a Change in Control Agreement with William J. Grubbs. The forms of Employment Agreement and Change in Control Agreement have been previously filed as Exhibits 10.62 and 10.58 to our Form 10-K for the year ended December 31, 2004.  We have amended the form of Employment Agreement solely to include Messrs. Grubbs and Halnon as employees that are subject to the Employment Agreement. We have amended the form of Change in Control Agreement solely to include Mr. Grubbs as a person subject to the Change in Control Agreement.  Copies of the revised forms of Employment Agreement and Change in Control Agreement are attached as Exhibits 10.62 and 10.58, both of which are incorporated herein by reference.

On February 21, 2006, the Compensation Committee of the Board of Directors approved amendments to the performance targets contained in the 2005 incentive award plans for executive officers, copies of which were filed as exhibits 10.72 and 10.73 to Spherion’s Form 10-K for fiscal year 2004, to make those targets consistent with the performance targets established for the rest of Spherion’s bonus-eligible personnel. At the same time, the following cash incentive payments were approved in accordance with the amended plan terms, augmented in some cases at the discretion of the Compensation Committee, for the following executive officers: $300,000 to Roy G. Krause, $135,137 to Eric Archer, $96,000 to William G. Halnon, $90,000 to Lisa G. Iglesias, $100,000 to Richard A. Lamond, $170,000 to Byrne K. Mulrooney, and $125,000 to Mark W. Smith. In addition, on the same date the Compensation Committee approved a one-time cash payment of $50,000 to William J. Grubbs, in accordance with the terms of his original offer of employment.

On February 21, 2006, the Compensation Committee of the Board of Directors approved the 2006 incentive award plans for executive officers, copies of which are attached as Exhibits 10.3 and 10.4 and are

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incorporated herein by reference. Under these plans, the annual incentive awards for all executive officers, with the exception of Byrne K. Mulrooney, are based 100% on EPS targets. Byrne K. Mulrooney’s annual incentive award is based 75% on EPS targets and 25% on a performance measure related to gross profit growth and expense control. 

The 2006 annual incentive award targets for each executive officer is as follows: 100% for Roy G. Krause, 75% of base salary for Byrne K. Mulrooney, 60% of base salary for William J. Grubbs, William G. Halnon, Lisa G. Iglesias, Richard A. Lamond and Mark W. Smith.

On February 9, 2006, Spherion announced the departure of Eric Archer, president of the Company’s Professional Services division. The terms of his separation have been finalized and a copy of his Separation Agreement, which became effective February 24, 2006, is attached hereto as Exhibit 10.5. The terms of the Separation Agreement are consistent with Mr. Archer’s employment agreement, which was filed as Exhibit 10.57 to the Form 10-K for the fiscal year ended January 1, 2006, except that Mr. Archer is receiving $138,961 additional severance and has agreed to an extended no-hire provision for certain of our employees. Mr. Archer will receive a lump sum total payment of $531,393 (which includes the additional amount described above) in consideration for his agreement to abide by certain non-compete, non-disparagement and confidentiality provisions in his Separation Agreement.

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PART III

Items 10, 11, 12, 13 and 14.

Certain information regarding our executive officers is contained in Part I and certain information regarding our stock plans is contained in Part III, Item 12 below. The remaining information required by Items 10 and 12 and the information required by Items 11, 13 and 14 of this Part III is omitted because, no later than 120 days from January 1, 2006, we will file and distribute our definitive proxy statement for our 2006 annual meeting of stockholders containing the information required by such Items. Such omitted information is incorporated herein by this reference.

Item 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table summarizes our stock options and deferred stock units to be issued upon exercise and the number of securities available for future issuances as of January 1, 2006:

Equity Compensation Plan Information

	(a)		(b)			(c)
						Number of securities
			Weighted-average			remaining available for
	Number of securities to		exercise price of			future issuance under equity
	be issued upon exercise		outstanding			compensation plans
	of outstanding options		options and deferred			(excluding securities
Plan Category	and deferred stock units		stock units			reflected in column (a))
Equity compensation plans approved by security holders		4,270,674		$	9.98		3,168,277
Equity compensation plans not approved by security holders		885,529		—			209,164
Total		5,156,203		$	8.27		3,377,441

The equity compensation plan not approved by security holders is a deferred stock plan which allows grants of deferred stock units to employees and outside directors. Deferred stock units entitle the individual to receive shares of our common stock at a future date after meeting service requirements or financial targets. The deferred stock units vest between one and seven years or a shorter period based upon certain performance criteria.

The information required by Item 403 of Regulation S-K is omitted because, no later than 120 days from January 1, 2006, we will file and distribute our definitive proxy statement for our 2006 annual meeting of stockholders containing the information required by such Item.

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PART IV

Item 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1)FINANCIAL STATEMENTS

The following consolidated financial statements of Spherion Corporation and subsidiaries are filed under Item 8 of Part II of this Report:

	Page
Management’s Report on Internal Control Over Financial Reporting	38
Reports of Independent Registered Public Accounting Firm	39
Consolidated Statements of Operations	42
Consolidated Balance Sheets	43
Consolidated Statements of Stockholders’ Equity	44
Consolidated Statements of Cash Flows	45
Notes to Consolidated Financial Statements	46

(2)FINANCIAL STATEMENT SCHEDULES

The following financial statement schedule is filed as part of this Report:

Schedule II—Valuation and Qualifying Accounts

Schedules not filed herewith are either not applicable, the information is not material or the information is set forth in the consolidated financial statements or notes thereto.

(3)EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K

Exhibit Number	Exhibit Name
3.1	Restated Certificate of Incorporation of Spherion, as last amended on May 19, 2004, filed as Exhibit 3.1 to Spherion’s Form 10-Q for the quarter ended June 25, 2004, is incorporated herein by reference.
3.2	Restated By-Laws of Spherion, as amended through November 11, 2003, filed as Exhibit 3.2 to Spherion’s Form 10-K for the fiscal year ended December 26, 2003, is incorporated herein by reference.
4.1	Form of Stock Certificate, filed as Exhibit 4.1 to Spherion’s Form 10-K for the fiscal year ended December 29, 2000, is incorporated herein by reference.
4.2	Rights Agreement dated as of March 17, 1994 between Spherion and Boatmen’s Trust Company, filed as Exhibit 1.1 to Spherion’s Form 8-A filed April 11, 1994, is incorporated herein by reference.
4.3	Restated Certificate of Designation, Preferences and Rights of Participating Preferred Stock of Spherion as filed with the Secretary of State of the State of Delaware, filed as Exhibit 4.3 to Spherion’s Report on Form 8-K filed July 7, 2000, is incorporated herein by reference.
4.4	Amendment No. 1, dated as of June 26, 1996, to Rights Agreement dated March 17, 1994, between Spherion, Boatmen’s Trust Company and ChaseMellon Shareholder Services L.L.C., filed as Exhibit 4.1(A) to Spherion’s Form 10-Q for the quarter ended September 27, 1996, is incorporated herein by reference.

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4.5	Amendment No. 2, dated as of February 25, 1997, to Rights Agreement dated March 17, 1994, between Spherion and ChaseMellon Shareholder Services L.L.C., filed as Exhibit 4.1(B) to Spherion’s Form 10-Q for the quarter ended March 28, 1997, is incorporated herein by reference.
4.6	Articles Fourth, Fifth, Seventh, Eighth and Tenth of the Restated Certificate of Incorporation of Spherion, as last amended May 19, 2004, filed as Exhibit 4.6 to Spherion’s Form 10-Q for the quarter ended June 25, 2004, are incorporated herein by reference.
4.7	Article I and Article V of the Restated By-Laws of Spherion, as amended through November 11, 2003, filed as Exhibit 4.7 to Spherion’s Form 10-Q for the quarter ended June 28, 2002, are incorporated herein by reference.
4.8	Certificate of Increase of Shares Designated as Participating Preferred Stock, filed as Exhibit 2.2 to Spherion’s Form 8-A/A2, dated November 3, 1997, is incorporated herein by reference.
4.10	Amendment No. 3, dated as of January 20, 1998, to Rights Agreement dated as of March 17, 1994, between Spherion and ChaseMellon Shareholder Services L.L.C., filed as Exhibit 4.10 to Spherion’s Form 10-K for the fiscal year ended December 25, 1998, is incorporated herein by reference.
4.11	Amendment No. 4, dated as of November 21, 2000, to Rights Agreement dated March 17, 1994, between Spherion, ChaseMellon Shareholder Services L.L.C. and the Bank of New York, filed as Exhibit 4.11 to Spherion’s Form 10-K for the fiscal year ended December 29, 2000, is incorporated herein by reference.
4.12	Amendment No. 5, dated as of March 23, 2001, to Rights Agreement dated March 17, 1994, by and between Spherion and the Bank of New York, filed as Exhibit 4.12 to Spherion’s Form 10-Q for the quarter ended March 30, 2001, is incorporated herein by reference.
4.13	Spherion is a party to other agreements for unregistered long-term debt securities, which do not exceed 10% of Spherion’s total assets. Spherion agrees to furnish a copy of such agreements to the Commission upon request.
4.14	Amendment No. 6, dated as of December 1, 2003, to Rights Agreement dated March 17, 1994, by and between Spherion and the Bank of New York, filed as Exhibit 4.14 to Spherion’s Form 10-K for the fiscal year ended December 26, 2003, is incorporated herein by reference.
10.1*	Spherion’s 1994 Stock Option Plan for Franchisees, Licensees and Agents, as amended through and restated as of August 10, 1999, filed as Exhibit 10.1 to Spherion’s Form 10-Q for the quarter ended September 24, 1999, is incorporated herein by reference.
10.2	Form of Indemnification Agreement between Spherion and each director of Spherion, dated August 10, 1999 for all directors except James J. Forese, David R. Parker and Anne Szostak, filed as Exhibit 10.2 to Spherion’s Form 10-Q for the quarter ended September 24, 1999, is incorporated herein by reference. The Indemnification Agreements for Messrs. Forese and Parker are dated February 25, 2003 and Ms. Szostak’s Indemnification Agreement is dated March 21, 2005.
10.3*†	Spherion Corporation Corporate Executives Management 2006 Variable Pay Plan for the individuals listed on Schedule A attached thereto, filed as Exhibit 10.3 attached hereto.
10.4*†	Spherion Corporation Line of Business Executive Management 2006 Variable Pay Plan for the individuals listed on Schedule A attached thereto, filed as Exhibit 10.4 attached hereto.
10.5*†	Separation Agreement dated February 9, 2006, by and between Spherion and Eric Archer, filed as Exhibit 10.5 attached hereto.

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10.11*	Norrell Corporation 1994 Stock Incentive Plan, filed as Exhibit 10.27 to Norrell Corporation’s Registration Statement on Form S-1, as filed with the Securities and Exchange Commission on June 10, 1994, is incorporated herein by reference.
10.17	Restated Stock Purchase Agreement, dated September 26, 1997 among Interim Services Inc., Catamaran Acquisition Corp. and Cornerstone Equity Investors IV, L.P., filed as Exhibit 2.1 to Spherion’s Form 8-K dated September 26, 1997 and filed October 13, 1997, is incorporated herein by reference.
10.18*	Spherion Corporation Deferred Compensation Plan amended and restated as of January 1, 2005, filed as Exhibit 99.1 to Spherion’s Form 8-K filed January 5, 2006, is incorporated herein by reference.
10.19*	Spherion Corporation Outside Directors’ Compensation Plan, effective July 1, 2005, filed as Exhibit 10.19 to Spherion’s Form 10-Q for the quarter ended July 3, 2005, is incorporated herein by reference.
10.22*	Spherion Corporation 2000 Stock Incentive Plan, filed as Exhibit 10.22 to Spherion’s Form 10-K for the fiscal year ended December 29, 2000, is incorporated herein by reference.
10.39*	Spherion Corporation Amended and Restated 2000 Employee Stock Purchase Plan, as last amended May 19, 2004, filed as Exhibit 10.39 to Spherion’s Form 10-Q for the quarter ended June 25, 2004, is incorporated herein by reference.
10.51*	Separation Agreement dated March 9, 2004, by and between Spherion and Cinda A. Hallman, filed as Exhibit 10.51 to Spherion’s Form 10-Q for the quarter ended March 26, 2004, is incorporated herein by reference.
10.55*	Restated Employment Agreement by and between Spherion and Roy G. Krause, amended through March 9, 2005, filed as Exhibit 10.55 to Spherion’s Form 10-K for the fiscal year ended December 31, 2004, is incorporated herein by reference.
10.56*	Restated Change in Control Agreement by and between Spherion and Roy G. Krause, amended through March 9, 2005, filed as Exhibit 10.56 to Spherion’s Form 10-K for the fiscal year ended December 31, 2004, is incorporated herein by reference.
10.57*	Form of Restated Employment Agreement by and between Spherion and the individuals listed on Schedule A attached thereto, filed as Exhibit 10.57 attached hereto.
10.58*	Form of Restated Change in Control Agreement by and between Spherion and the individuals listed on Schedule A attached thereto, filed as Exhibit 10.58 attached hereto.
10.59*	Spherion Corporation Deferred Stock Plan (as amended and restated December 20, 2002) filed as Exhibit 10.59 to Spherion’s Form 10-K for the year ended December 27, 2002, is incorporated herein by reference.
10.60	Credit Agreement, dated as of July 24, 2003, made by and among the financial institutions from time to time parties thereto (such financial institutions, together with their respective successors and assigns, are referred to thereinafter each individually as a “Lender” and collectively as the “Lenders”), Bank of America, N.A., as Administrative Agent and Collateral Agent for the Lenders and Spherion, filed as Exhibit 10.60 to Spherion’s Form 10-Q for the quarter ended September 26, 2003, is incorporated herein by reference.

75

10.61	First Amendment to Credit Agreement, Security Agreement, Pledge Agreement and Guaranty Agreement dated August 25, 2003 by and among Spherion, as borrower, each subsidiary of Borrower party to the Security Agreement, the Pledge Agreement and the Guaranty Agreement, each of the Lenders signatory hereto and Bank of America, N.A., as agent to the Lenders, filed as Exhibit 10.61 to Spherion’s Form 10-Q for the quarter ended September 26, 2003, is incorporated herein by reference.
10.62*	Form of Restated Employment Agreement by and between Spherion and the individuals listed on Schedule A attached thereto, filed as Exhibit 10.62 attached hereto.
10.63	Second Amendment to Credit Agreement dated as of March 30, 2004, made by and among Spherion, as borrower, each subsidiary of Borrower party to the Guaranty Agreement, each of the Lenders signatory hereto and Bank of America, N.A., as agent for the Lenders, filed as Exhibit 10.63 to Spherion’s Form 10-Q for the quarter ended September 24, 2004, is incorporated herein by reference.
10.64	Third Amendment to Credit Agreement dated as of July 12, 2004, made by and among Spherion, as borrower, each subsidiary of Borrower party to the Guaranty Agreement, each of the Lenders signatory hereto and Bank of America, N.A., as agent for the Lenders, filed as Exhibit 10.64 to Spherion’s Form 10-Q for the quarter ended September 24, 2004, is incorporated herein by reference.
10.65*	Spherion Corporation form of 2000 Stock Incentive Plan Stock Option Agreement, filed as Exhibit 10.65 to Spherion’s Form 10-K for the fiscal year ended December 31, 2004, is incorporated herein by reference.
10.66*	Spherion Corporation form of standard Deferred Stock Agreement, filed as Exhibit 10.66 to Spherion’s Form 10-K for the fiscal year ended December 31, 2004, is incorporated herein by reference.
10.67*†	Spherion Corporation form of Deferred Stock Agreement with vesting criteria related to implementation of enterprise resource planning system, filed as Exhibit 10.67 to Spherion’s Form 10-K for the fiscal year ended December 31, 2004, is incorporated herein by reference.
10.68*†	Spherion Corporation form of Deferred Stock Agreement with performance based vesting criteria, filed as Exhibit 10.68 attached hereto.
10.69	Fourth Amendment to Credit Agreement dated as of July 29, 2005, made by and among Spherion, as borrower, each subsidiary of Borrower party to the Guaranty Agreement, each of the Lenders signatory hereto and Bank of America, N.A., as agent for the Lenders, filed as Exhibit 99.1 to Spherion’s Form 8-K filed August 3, 2005, is incorporated herein by reference.
10.70*†	Spherion Corporation Corporate Executives Management 2004 Variable Pay Plan for the individuals listed on Schedule A attached thereto, filed as Exhibit 10.70 to Spherion’s Form 10-K for the fiscal year ended December 31, 2004, is incorporated herein by reference.
10.71*†	Spherion Corporation Line of Business Executive Management 2004 Variable Pay Plan for the individuals listed on Schedule A attached thereto, filed as Exhibit 10.71 to Spherion’s Form 10-K for the fiscal year ended December 31, 2004, is incorporated herein by reference.
10.72*†	Spherion Corporation Corporate Executives Management 2005 Variable Pay Plan for the individuals listed on Schedule A attached thereto, filed as Exhibit 10.72 to Spherion’s Form 10-K for the fiscal year ended December 31, 2004, is incorporated herein by reference.

76

10.73*†	Spherion Corporation Line of Business Executive Management 2005 Variable Pay Plan for the individuals listed on Schedule A attached thereto, filed as Exhibit 10.73 to Spherion’s Form 10-K for the fiscal year ended December 31, 2004, is incorporated herein by reference.
10.74*†	Spherion Corporation form of Deferred Stock Agreement with vesting criteria related to EPS targets filed as Exhibit 10.74 to Spherion’s Form 10-K for the fiscal year ended December 31, 2004, is incorporated herein by reference.
11	See “Earnings (Loss) Per Share” in Note 16 of the Notes to Consolidated Financial Statements included at page 67 herein.
21	Subsidiaries of Spherion, filed as Exhibit 21 attached hereto.
23.1	Consent of Deloitte & Touche LLP, filed as Exhibit 23.1 attached hereto.
31.1	Rule 13a-14(a) Certification in Accordance with Section 302 of the Sarbanes-Oxley Act of 2002, filed as Exhibit 31.1 attached hereto.
31.2	Rule 13a-14(a) Certification in Accordance with Section 302 of the Sarbanes-Oxley Act of 2002, filed as Exhibit 31.2 attached hereto.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished as Exhibit 32.1 attached hereto.
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished as Exhibit 32.2 attached hereto.

*This Exhibit is a management contract or compensatory plan or arrangement.

†Portions of this Exhibit have been omitted and filed separately with the Commission pursuant to a request for confidential treatment.

(b)EXHIBITS FILED WITH THIS FORM

Exhibit Number	Exhibit Name
10.3*†	Spherion Corporation Corporate Executives Management 2006 Variable Pay Plan for the individuals listed on Schedule A attached thereto.
10.4*†	Spherion Corporation Line of Business Executive Management 2006 Variable Pay Plan for the individuals listed on Schedule A attached thereto.
10.5*†	Separation Agreement dated February 9, 2006, by and between Spherion and Eric Archer.
10.57*	Form of Restated Employment Agreement by and between Spherion and the individuals listed on Schedule A attached thereto.
10.58*	Form of Restated Change in Control Agreement by and between Spherion and the individuals listed on Schedule A attached thereto.
10.62*	Form of Restated Employment Agreement by and between Spherion and the individuals listed on Schedule A attached thereto.
10.68*†	Spherion Corporation form of Deferred Stock Agreement with performance based vesting criteria.
21	Subsidiaries of Spherion.
23.1	Consent of Deloitte & Touche LLP.
31.1	Rule 13a-14(a) Certification in Accordance with Section 302 of the Sarbanes-Oxley Act of 2002.

77

31.2	Rule 13a-14(a) Certification in Accordance with Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*This Exhibit is a management contract or compensatory plan or arrangement.

†Portions of this Exhibit have been omitted and filed separately with the Commission pursuant to a request for confidential treatment.

(c)OTHER FINANCIAL STATEMENTS

There were no other financial statements of the type described in subparagraph (d) of Item 15 of Part IV required to be filed herein.

78

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Spherion has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SPHERION CORPORATION
February 27, 2006	By	/s/ ROY G. KRAUSE
		Roy G. Krause President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Spherion and in the capacities and on the date indicated.

	Signature		Title
/s/ STEVEN S. ELBAUM		Chairman and Director
Steven S. Elbaum
/s/ WILLIAM F. EVANS		Director
William F. Evans
/s/ JAMES J. FORESE		Director
James J. Forese
/s/ ROY G. KRAUSE		Director
Roy G. Krause
/s/ J. IAN MORRISON		Director
J. Ian Morrison
/s/ DAVID R. PARKER		Director
David R. Parker
/s/ M. ANNE SZOSTAK		Director
M. Anne Szostak
/s/ A. MICHAEL VICTORY		Director
A. Michael Victory

(Signed as to each on February 27, 2006)

	Signature		Title
/s/ ROY G. KRAUSE		President and Chief Executive Officer
Roy G. Krause
/s/ MARK W. SMITH		Senior Vice President and Chief Financial Officer
Mark W. Smith
		(principal financial and accounting officer)

(Signed as to each on February 27, 2006)

SPHERION CORPORATION AND SUBSIDIARIES
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
(amounts in thousands)

		Column A	Column B				Column C Additions								Column D			Column E
			Balance at				Charged to				Charged to							Balance at
			Beginning of				Costs and				Other							End of
	Description		Period				Expenses				Accounts				Deductions			Period
Fiscal Year Ended December 26, 2003
Allowance for Doubtful Accounts				$	(6,760	)		$	(3,298	)		$	—			$	3,387		$	(6,671	)
Accumulated Amortization:
Trade names				$	(364	)		$	(203	)		$	—			$	18		$	(549	)
Other				(84		)		(245		)		(4		)		—			(333		)
				$	(448	)		$	(448	)		$	(4	)		$	18		$	(882	)
Fiscal Year Ended December 31, 2004
Allowance for Doubtful Accounts				$	(6,671	)		$	(7,238	)		$	—			$	6,832		$	(7,077	)
Accumulated Amortization:
Trade names				$	(549	)		$	(208	)		$	—			$	77		$	(680	)
Other				(333		)		(335		)		(23		)		—			(691		)
				$	(882	)		$	(543	)		$	(23	)		$	77		$	(1,371	)
Fiscal Year Ended January 1, 2006
Allowance for Doubtful Accounts				$	(7,077	)		$	(4,902	)		$	—			$	7,271		$	(4,708	)
Accumulated Amortization:
Trade names				$	(680	)		$	(193	)		$	—			$	317		$	(556	)
Other				(691		)		(222		)		46				437			(430		)
				$	(1,371	)		$	(415	)		$	46			$	754		$	(986	)

EX-10.3

EXHIBIT 10.3

Spherion Corporation

Corporate Executives
Management Variable Pay Plan

2006 Variable Pay Plan

For Plan Year: Fiscal 2006

Introduction

The following Variable Pay Plan (the “Plan”) is designed to reward Plan Eligible Associates for achievement of specific goals as well as to provide an incentive to retain talent and encourage future performance with Spherion.  This Plan has been established to align your individual success with that of Spherion.

Your dedication and commitment to the Company is greatly appreciated.  Thank you for your continued support now and in the future.

Effective Date/Plan Year

This Plan is in effect for Fiscal Year 2006 (January 2, 2006 through December 31, 2006) (the “Plan Year”).  This Plan supersedes any prior plans as of the date it becomes effective.This Plan may be extended beyond the Plan Year at the sole discretion of Spherion.

Eligibility

Eligibility to participate in this Plan is within Spherion’s sole discretion, but in general is based on an Associate’s position.  For purposes of this Plan, the term Plan Eligible Associate means an Associate who Spherion determines is eligible to participate in this Plan.

Eligibility begins on the first day of the accounting month after an Associate begins employment as a Plan Eligible Associate and terminates immediately when an Associate’s employment as a Plan Eligible Associate ends.

Change of Positions/Leave of Absence/ Other types of Pro-rated Compensation

In order to be eligible for or earn any compensation under this Plan, a Plan Eligible Associate must remain employed by Spherion in some capacity through the last date of the Variable Pay Period.  If the Plan Eligible Associate does not meet this condition, he/she will not earn any compensation under this Plan.  (See the Variable Pay Period/Payment Section below)   If a Plan Eligible Associate meets this condition, but was actively employed as a Plan Eligible Associate for only a part of the Variable Pay Period, his/her compensation under this Plan will be pro-rated based on the number of weeks he/she was actively employed as a Plan Eligible Associate.  Some examples include:

1.New Hires

2.Leave of Absence - LOA

3.Change in Work Classification Status (full-time vs. part-time)

4.Position Changes resulting in Incentive Plan &/or Salary Changes

5.P&L Roll Up Structure Changes (with no position change)

For a detailed explanation of the administrative policies on how these and other types of Personnel Changes affect the Plan Eligible Associate’s compensation, please refer to the Pro-Ration Guidelines found on Explore under Business Process Map/Associate HR/Incentive Compensation Pro-Ration Guidelines.

Components

A Plan Eligible Associate has a Variable Pay Opportunity which is determined as a percentage (%) of his/her base salary.

The Variable Pay Opportunity is made up of one component, Company EPS.

To the extent permitted by the law, Spherion shall have the right to withhold, deduct, and/or set off any and all amounts for bad debts (including write-off’s), re-bills, credits, or other adjustments from the payment calculations.

1.Company Earnings Per Share (EPS).   100% of the Variable Pay Opportunity is based on the Company attaining EPS from continuing operations * (adjusted for stock option accounting) for fiscal year 2006.   In order for a Plan Eligible Associate to earn any compensation under this EPS component, the Company must attain a minimum Threshold EPS of  *  from continuing operations.  No EPS component will be earned if 2006 EPS from continuing operations is less than the Threshold.  If the EPS Threshold is reached, the component payout will increase and be precisely interpolated between Goal Levels as reflected in the chart below:

Spherion EPS

(100% of Variable Pay Opportunity)

Goal Level	EPS from continuing operations		% of EPS Component Awarded
Achievement		*	200	%
Target		*	100	%
Threshold		*	5.88	%
Below Threshold		*	0	%

The EPS goal levels are set at the beginning of the year, but are subject to change at the sole discretion of the Company.  Any change to the EPS goal levels will be communicated to the Plan Eligible Associates.

Payout of this component will be capped at 200% of the EPS Component Awarded; provided however, in the event that Company EPS exceeds a 200% payout, the Compensation Committee, in its sole discretion, upon recommendation by the CEO may create and distribute a pool of additional payout dollars as it deems appropriate.

Please see the example provided at the end of this Plan.

Variable Pay Period/ Payment

The “Variable Pay Period” is the Plan Year.  Compensation under this Plan is based on annual results and is therefore earned on an annual basis.  A Plan Eligible Associate must be employed by Spherion through the last date of the Variable Pay Period to be eligible for or earn any compensation under this Plan.  (See Termination of Employment Section Below)  Any compensation earned under this Plan will be paid within 45 business days after the close of the accounting year.

* Confidential portions omitted and filed separately with the Commission.

Termination of Employment

Eligibility to participate in and ability to earn any, or receive any compensation under this Plan ceases immediately upon termination of employment with Spherion regardless of whether such termination of employment is due to resignation, termination without cause, termination for cause, or otherwise.

A Plan Eligible Associate, whose employment with Spherion terminates prior to the end of the Variable Pay Period, will not be eligible for or be considered to have earned compensation under this Plan in whole or in part.

In addition, any Plan Eligible Associate who resigns his/her employment or who is terminated for cause after the end of the Variable Pay Period but before Spherion pays the actual compensation earned under this Plan will not be eligible for or be considered to have earned any compensation under this Plan.   If a Plan Eligible Associate is terminated by Spherion without cause after the Variable Pay Period but before Spherion pays the compensation, the Plan Eligible Associate will be considered to have earned compensation under this Plan through the end of the Variable Pay Period.

Retention Bonus

If variable pay that exceeds 200% of the Plan Eligible Associate’s opportunity is calculated, this retention bonus will be distributed along with the regularly scheduled variable pay compensation for Fiscal Year 2007 (within 45 business days after the close of the 2007 accounting year).  In order to earn the retention bonus, the Plan Eligible Associate must still be employed with Spherion on the date the payment is made; provided, that if a Plan Eligible Associate is terminated by Spherion without cause during the period between the end of the Variable Pay Period and the date the retention bonus is paid, the Plan Eligible Associate will still be eligible to receive the retention bonus.

Disputes

If there is a dispute related to this Plan, including, but not limited to, a dispute over eligibility or award, it will be resolved by the Compensation Committee or its designee, whose decision shall be final.

At-Will Employment

The only matter this Plan is intended to address is variable pay compensation.  Nothing in this Plan shall alter or be construed as to alter the at-will employment status of any Plan Eligible Associate.  The Plan Eligible Associate’s employment is at-will and may be terminated by either party at any time, with or without cause.

Amendments, Exceptions, or Termination of the Plan

The Compensation Committee or its designee will administer this Plan and have the power to implement, operate, and interpret this Plan and to take such action as it deems equitable and consistent with the purpose of this Plan in particular circumstances.   No exception or modification to this Plan will be valid unless it has been approved in writing by the Compensation Committee or its designee.

The Company reserves the right to change, modify, alter, amend, or cancel this Plan at any time, with or without notice and with or without consideration.

Acknowledgement

Plan Eligible Associate acknowledges that he/she has reviewed the Plan and will address any of his/her questions to the Spherion Compensation Department.  Plan Eligible Associate hereby reaffirms his/her Acknowledgement of the Plan.

EXAMPLE (This example is not intended to imply any actual percentages, payout, or targets under this Variable Pay Plan.  It is merely for illustrative purposes to show how the Variable Pay Plan components may be calculated in a hypothetical situation)

Corporate Executive Management

2006 Variable Pay Plan Example

Assumptions:
Base Salary (January 1, 2006)		$	150,000
Variable Pay Opportunity (% of base)		50		%
Variable Pay Opportunity ($)	$150,000 x 50%	$	75,000
Spherion EPS target				*

Year End Results

Example #1
Spherion EPS	Target			*
Variable Pay Calculation:
EPS	$75,000 x 100%	$	75,000
Total Annual Variable Pay		$	75,000

* Confidential portions omitted and filed separately with the Commission.

EXHIBIT A

Executive Name	Title	Annual Incentive Award Target
Roy G. Krause	President and Chief Executive Officer	100% of annual base salary
William J. Grubbs	Chief Marketing and Corporate Development Officer	60% of annual base salary
William G. Halnon	Senior Vice President and Chief Information Officer	60% of annual base salary
Lisa G. Iglesias	Senior Vice President, General Counsel and Secretary	60% of annual base salary
Richard A. Lamond	Senior Vice President and Chief Human Resources Officer	60% of annual base salary
Mark W. Smith	Senior Vice President and Chief Financial Officer	60% of annual base salary

EX-10.4

EXHIBIT 10.4

Spherion Corporation

Line of Business
Executive Management

2006 Variable Pay Plan

For Plan Year: Fiscal 2006

Introduction

The following Variable Pay Plan (the “Plan”) is designed to reward Plan Eligible Associates for achievement of specific goals as well as to provide an incentive to retain talent and encourage future performance with Spherion.  This Plan has been established to align your individual success with that of Spherion and your business unit.

Your dedication and commitment to the Company is greatly appreciated.  Thank you for your continued support now and in the future.

Effective Date/Plan Year

This Plan is in effect for Fiscal Year 2006 (January 2, 2006 through December 31, 2006) (the “Plan Year”).  This Plan supersedes any prior plans as of the date it becomes effective.This Plan may be extended beyond the Plan Year at the sole discretion of Spherion.

Eligibility

Eligibility to participate in this Plan is within Spherion’s sole discretion, but in general is based on an Associate’s position.  For purposes of this Plan, the term Plan Eligible Associate means an Associate who Spherion determines is eligible to participate in this Plan.

Eligibility begins on the first day of the accounting month after an Associate begins employment as a Plan Eligible Associate and terminates immediately when an Associate’s employment as a Plan Eligible Associate ends.

Change of Positions/Leave of Absence/ Other types of Pro-rated Compensation

In order to be eligible for or earn any compensation under this Plan, a Plan Eligible Associate must remain employed by Spherion in some capacity through the last date of the Variable Pay Period.  If the Plan Eligible Associate does not meet this condition, he/she will not earn any compensation under this Plan.  (See the Variable Pay Period/Payment Section below)   If a Plan Eligible Associate meets this condition, but was actively employed as a Plan Eligible Associate for only a part of the Variable Pay Period, his/her compensation under this Plan will be pro-rated based on the number of weeks he/she was actively employed as a Plan Eligible Associate.  Some examples include:

1.New Hires

2.Leave of Absence - LOA

3.Change in Work Classification Status (full-time vs. part-time)

4.Position Changes resulting in Incentive Plan &/or Salary Changes

5.P&L Roll Up Structure Changes (with no position change)

For a detailed explanation of the administrative policies on how these and other types of Personnel Changes affect the Plan Eligible Associate’s compensation, please refer to the Pro-Ration Guidelines found on Explore under Business Process Map/Associate HR/Incentive Compensation Pro-Ration Guidelines.

Components

A Plan Eligible Associate has a Variable Pay Opportunity which is determined as a percentage (%) of his/her base salary.

To the extent permitted by the law, Spherion shall have the right to withhold, deduct, and/or set off any and all amounts for bad debts (including write-off’s), re-bills, credits, or other adjustments from the payment calculations.

The Variable Pay Opportunity is made up of two components: (1) Company EPS; and (2) Line of Business (LOB) Performance Zone (PZ) targets.  The specifics of these components are described in more detail below.

The targets have been established on the basis of anticipated growth rates, financial analysis, market analysis, Company objectives, and other considerations.      The targets have been set at the beginning of the year, but are subject to change at the sole discretion of the Company.  Any change to the targets will be communicated to the impacted Plan Eligible Associate.

1.Company Earnings Per Share (EPS).   75% of the Variable Pay Opportunity is based on the Company attaining EPS from continuing operations  *   (adjusted for stock option accounting) for fiscal year 2006.   In order for a Plan Eligible Associate to earn any compensation under this EPS component, the Company must attain a minimum Threshold EPS of   *  from continuing operations.  No EPS component will be earned if 2006 EPS from continuing operations is less than the Threshold.  If the EPS Threshold is reached, the component payout will increase and be precisely interpolated between Goal Levels as reflected in the chart below:

Spherion EPS
(75% of Variable Pay Opportunity)

Goal Level	EPS from continuing operations		% of EPS Component Awarded
Achievement		*	200	%
Target		*	100	%
Threshold		*	5.88	%
Below Threshold		*	0	%

The EPS goal levels are set at the beginning of the year, but are subject to change at the sole discretion of the Company.  Any change to the EPS goal levels will be communicated to the Plan Eligible Associates.

Payout of this component will be capped at 200% of the EPS Component Awarded; provided however, in the event that Company EPS exceeds a 200% payout, the Compensation Committee, in its sole discretion, upon recommendation by the CEO may create and distribute a pool of additional payout dollars as it deems appropriate.

2.LOB Performance Zone (LOB-PZ) Target.  25% of the Variable Pay Opportunity is based on the 2006 Performance Zone target established for the Plan Eligible Associate’s LOB.   In order for a Plan Eligible Associate to earn any compensation under this LOB-PZ component, LOB-PZ must attain a minimum Threshold of the Target PZ as reflected in the chart below.   Performance Zone theory of management advocates monitoring the activity of expense dollars and Gross Profit dollars to ensure

* Confidential portions omitted and filed separately with the Commission.

that Gross Profit dollars increase faster than expense dollars. Performance Zone is  specifically defined as the following equation:

1)*

2)*

3)*

4)*

5)*

Operating Expenses will include interest allocation

LOB PZ
(25% of Variable Pay Opportunity)

Goal Level (Expressed as a % of Target)	Target PZ		% of PZ Component Payout
Above Target > (100%)		*	100	%
Target (100%)		*	100	%
Below Target < (100%)		*	0	%

Please see the example provided at the end of this Plan.

Variable Pay Period/ Payment

The “Variable Pay Period” is the Plan Year.  Compensation under this Plan is based on annual results and is therefore earned on an annual basis.  A Plan Eligible Associate must be employed by Spherion through the last date of the Variable Pay Period to be eligible for or earn any compensation under this Plan.  (See Termination of Employment Section Below)  Any compensation earned under this Plan will be paid within 45 business days after the close of the accounting year.

Termination of Employment

Eligibility to participate in and ability to earn any, or receive any compensation under this Plan ceases immediately upon termination of employment with Spherion regardless of whether such termination of employment is due to resignation, termination without cause, termination for cause, or otherwise.

A Plan Eligible Associate, whose employment with Spherion terminates prior to the end of the Variable Pay Period, will not be eligible for or be considered to have earned compensation under this Plan in whole or in part.

In addition, any Plan Eligible Associate who resigns his/her employment or who is terminated for cause after the end of the Variable Pay Period but before Spherion pays the actual compensation earned under this Plan will not be eligible for or be considered to have earned any compensation under this Plan.   If a Plan Eligible Associate is terminated by Spherion without cause after the Variable Pay Period but before Spherion pays the compensation, the

* Confidential portions omitted and filed separately with the Commission.

Plan Eligible Associate will be considered to have earned compensation under this Plan through the end of the Variable Pay Period.

Retention Bonus

If variable pay that exceeds 200% of the Plan Eligible Associate’s opportunity is calculated, this retention bonus will be distributed along with the regularly scheduled variable pay compensation for Fiscal Year 2007 (within 45 business days after the close of the 2007 accounting year).  In order to earn the retention bonus, the Plan Eligible Associate must still be employed with Spherion on the date the payment is made; provided, that if a Plan Eligible Associate is terminated by Spherion without cause during the period between the end of the Variable Pay Period and the date the retention bonus is paid, the Plan Eligible Associate will still be eligible to receive the retention bonus.

Disputes

If there is a dispute related to this Plan, including, but not limited to, a dispute over eligibility or award, it will be resolved by the Principal Executive Officer or his/her designee, whose decision shall be final.

At-Will Employment

The only matter this Plan is intended to address is variable pay compensation.  Nothing in this Plan shall alter or be construed as to alter the at-will employment status of any Plan Eligible Associate.  The Plan Eligible Associate’s employment is at-will and may be terminated by either party at any time, with or without cause.

Amendments, Exceptions, or Termination of the Plan

The Principal Executive Officer or his/her designee will administer this Plan and have the power to implement, operate, and interpret this Plan and to take such action as he/she deems equitable and consistent with the purpose of this Plan in particular circumstances.   No exception or modification to this Plan will be valid unless it has been approved in writing by a Principal Executive Officer or his/her designee.

The Company reserves the right to change, modify, alter, amend, or cancel this Plan at any time, with or without notice and with or without consideration.

Acknowledgement

Plan Eligible Associate acknowledges that he/she has reviewed the Plan and will address any of his/her questions to the Spherion Compensation Department.  Plan Eligible Associate hereby reaffirms his/her Acknowledgement of the Plan.

EXAMPLE (This example is not intended to imply any actual percentages, payout, or targets under this Variable Pay Plan.  It is merely for illustrative purposes to show how the Variable Pay Plan components may be calculated in a hypothetical situation)

Executive Management Variable Pay Plan
Line of Business Employees

2006 Variable Pay Plan Example

Assumptions:
Base Salary		$225,000
Variable Pay Opportunity (% of base)		50	%
Variable Pay Opportunity ($)	$225,000 x 50%	$112,500
Spherion EPS target			*
LOB PZ target			*

Year End Results

1. Spherion EPS	Target			*
2. LOB PZ	Target			*
Variable Pay Calculation:
EPS	($112,500 x 75%) x 100%	$	84,375
LOB PZ	($112,500 x 25%) x 100%	$	28,125
Total Variable Pay	$84,375 + $28,125	$	112,500

* Confidential portions omitted and filed separately with the Commission.

EXHIBIT A

Executive Name	Title	Annual Incentive Award Target
Byrne K. Mulrooney	President, Staffing Services	75% of annual base salary

EX-10.5

EXHIBIT 10.5

February 9, 2006

VIA HAND DELIVERY
PERSONAL AND CONFIDENTIAL

Eric Archer
80 Dexterdale Drive
Warwick, Rhode Island 02886

Dear Eric:

The purpose of this letter agreement and general release (the “Agreement”) is to acknowledge, and set forth the terms of, our agreement with regard to your resignation of employment with Spherion Corporation, its subsidiaries, affiliates, successors, and assigns (the “Company”).

1.     Resignation.  a)  You hereby confirm your voluntary resignation from employment with the Company effective as of February 28, 2006 (the “Resignation Date”) and, effective as of the Resignation Date, you hereby confirm your resignation from your position as a Senior Vice President and President, Professional Services Group and that you will not be eligible for any benefits or compensation after the Resignation Date, other than as specifically provided herein.  In addition, effective as of the Resignation Date, you are hereby terminated from all offices, trusteeships, committee memberships and fiduciary capacities held with, or on behalf of, the Company or any benefit plans of the Company.  These resignations will become irrevocable on the Effective Date of this Agreement, as defined in Section 15 below.  You further acknowledge and agree that, after the Resignation Date, you will not represent yourself as being a director, employee, officer, trustee, agent or representative of the Company for any purpose and will not make any public statements relating to the Company without the Company’s prior written consent, other than general statements relating to your position, title or experience with the Company, subject to the confidentiality provision under Section 5 of this Agreement and the non-disparagement provision under Section 7 of this Agreement and in no event shall you make any statements as an agent or representative of the Company.

b)    You acknowledge and agree that the Company will not have an obligation to rehire you or to consider you for reemployment after the Resignation Date and that your employment with the Company is permanently and irrevocably severed.

c)     You acknowledge and agree that the effective date of your resignation will be announced on February 9, 2006 (“Resignation Announcement Date”).  Following the Resignation Announcement Date, you will be expected to make yourself reasonably available to

Spherion and to transition your projects, accounts, candidates, or other responsibilities to individuals identified by the Company; introduce key account contacts to individuals identified by the Company through personal introductions; answer questions and provide guidance and information as requested by the Company; use your best efforts to facilitate and effect a smooth transition of all of your accounts, candidates, and duties to the Company.  After the Resignation Announcement Date and prior to the Resignation Date, the extent to which you will still be expected to come into Spherion’s offices will be determined by Roy Krause.

2.     Severance Payments and Benefits; Other Deliveries.  a)  Subject to the remainder of this Section 2 and Sections 3, 5, 6, 7, 8, 9, 10 and 11 and your compliance with the terms of this Agreement, you will be entitled to receive:

i)      Your regular salary and unused accrued and earned vacation through the Resignation Date.

ii)     Cash severance pay totaling five hundred thirty-one thousand three hundred ninety-three dollars and no cents ($531,393.00), reduced by any applicable payroll or other taxes required to be withheld, payable in a lump sum within thirty (30) days after the Resignation Date.

iii)    Payment of an amount, if any, to be determined in the sole discretion of the Compensation Committee of the Company’s Board of Directors and reduced by any applicable payroll or other taxes required to be withheld, payable March 3, 2006, as payment under your 2005 incentive plan.

iv)   The employee stock options and deferred stock units granted to you shall terminate and expire in accordance with the terms of their respective grant documents, are only exercisable to the extent provided therein, and shall not be subject to accelerated vesting.  All stock options vested on or prior to the Resignation Date will terminate and expire at 12:01 a.m. on May 31, 2006 and will only be exercisable prior to such date.

v)    Reimbursement for expenses incurred by you in accordance with the Company’s policy but not reimbursed prior to the Resignation Date.

b)    The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as are required to be withheld (with respect to amounts payable hereunder or under any benefit plan or arrangement maintained by the Company) pursuant to any applicable law or regulation.

c)     These payments will be issued in accordance with applicable law and are subject to all applicable deductions.  Future payments, if any, will also be paid by check, mailed to the address shown above, or by direct deposit if you have authorized direct deposit of pay.    Accordingly, other than the compensation identified above, you are not eligible, nor entitled to receive any other bonuses or compensation from the Company.  The amount specified in this Section describes all compensation, or other amounts to be paid to you pursuant to any contract, understanding or term or condition of your employment, including any agreements or representations made by or between you and the Company.

d)    Notwithstanding anything contained herein to the contrary, to the extent you are deemed a “key employee” for purposes of Section 409A of the Internal Revenue Code of 1986, as amended, and notwithstanding any contrary provision which exists in any of the Company’s deferred compensation plans, any distribution of deferred compensation to you will be delayed for a period of 6 months after the Resignation Date as required by Section 409A of the Internal Revenue Code of 1986, as amended.

3.     Transition Services.  On and after the Resignation Date, you shall make yourself reasonably available to the Company: a) to facilitate the Company’s transition of any of your duties, projects, or other responsibilities and to answer questions and provide guidance as reasonably requested by the Company from time to time; and b) to cooperate with the Company and provide information as to matters which you were personally involved, or have information on, while you were an officer or employee of the Company and which become the subject of an action, investigation, proceeding, litigation or otherwise, upon reasonable notice, including, that you will testify as a witness in connection with such matters if requested by the Company to do so.  All reasonable expenses associated with such transition services shall be paid in accordance with the guidelines set forth in the Company’s business expense reimbursement policy.

4.     Full Discharge.  You agree and acknowledge that the payments and benefits provided in Section 2 above and the other entitlements hereunder:  a) are in full discharge of any and all liabilities and obligations of the Company to you, monetarily or with respect to employee benefits or otherwise, including, without limitation, any and all obligations arising under any alleged written or oral employment agreement, change in control agreement, policy, plan or procedure of the Company and/or any alleged understanding or arrangement between you and the Company or any of its officers; and b) exceed any payment, benefit, or other thing of value to which you might otherwise be entitled but for this Agreement under any policy, plan or procedure of the Company or any prior agreement between you and the Company.

5.     Confidentiality.  (a)  You will not at any time (whether during or after your employment with the Company) disclose or use for your own benefit or purposes, or for the benefit or purpose of any other person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise, any trade secrets, information, data, or other confidential information relating to customers, employees, job applicants, services, development programs, prices, costs, marketing, trading, investment, sales activities, promotion, processes, systems, credit and financial data, financing methods, plans, proprietary computer software, request for proposal documents, or the business and affairs of the Company generally, or of any affiliate of the Company; provided, however, that the foregoing shall not apply to information which is generally known to the industry or the public other than as a result of your breach of this covenant.  You expressly warrant that you have returned to the Company all memoranda, books, papers, plans, information, letters and other data, and all copies thereof or therefrom (whether in written, printed, electronic or other form), in any way relating to the business of the Company and its affiliates.  In the event that you learn of any property of the Company to be in your custody, you will promptly return such property to the Company.

6.     Covenant Not To Compete.  (a) In General.  You agree that for a period of one (1) year after the Resignation Date (the “Non-Compete Period”), you shall not, anywhere in the United States:

i)              act as an employee, director, consultant, partner, principal, agent, representative, owner or stockholder (other than as a stockholder of less than a one percent (1%) equity interest) for (1) any public company that derives any revenue from any business line in which the Company derives $25 million or more in annualized revenues as of the Resignation Date or from the principal business line in which you were directly involved immediately prior to the Resignation Date (collectively, the “Business Lines”) or (2) any private company that derives $25 million or more in annualized revenues from any combination of one or more of the Business Lines;

ii)             solicit business from, or perform services for, or induce others to perform services for, any company or other business entity which at any time during the one (1) year period immediately preceding the Resignation Date was a client of the Company or its affiliates; or

iii)            offer, or cause to be offered, employment with any business, whether in corporate, proprietorship, or partnership form or otherwise, either on a full-time, part-time or consulting basis, to any person who was employed by the Company or its affiliates or for whom the Company or its affiliates performed outplacement services, in either case at any time during the one (1) year period immediately preceding the Resignation Date.

iv)           For purposes of this Agreement, affiliates of the Company include subsidiaries 50% or more owned by the Company and the Company’s franchisees and licensees.

b)  Extended No-Hire provision.  In addition to the restrictions provided above, you represent and agree that you have not, and will not for a period of two (2) years following the Resignation Date (i.e, March 1, 2006 through February 29, 2008), either directly or indirectly, on your own behalf or in the service of or on behalf of others, without prior written consent of the General Counsel of the Company, solicit the employment of, interview, induce or attempt to induce to leave the employ of the Company, offer or cause to be offered employment with any business, or hire for any business (whether as an employee, independent contractor, consultant or in any other capacity), any of the persons listed on Exhibit “A” attached hereto.

7.     Non-Disparagement.  a)  You shall not act to damage the Company or the Company’s reputation or disparage the Company or its past or present officers, directors or employees (collectively, the “Protected Group”), provided that the foregoing shall not apply to truthful statements made in compliance with legal process or governmental inquiry.

b)  Neither the Company nor any then senior-level executive of the Company shall act to damage you or your reputation or disparage you, provided that the foregoing shall not apply to truthful statements made in compliance with legal process or governmental inquiry, or protected by privilege or as required by legal filing or disclosure requirements.

8.     Equitable Relief and Other Remedies; Reformation; Consideration.  a) You acknowledge and agree that the Company’s remedies at law for a breach or threatened breach of any of the provisions of Sections 5, 6, and 7 would be inadequate and, in recognition of this fact, you agree that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, after the posting of a reasonable bond under Florida law, shall be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available.

b)    If the provisions of Sections 5, 6 and 7 would otherwise be determined invalid or unenforceable by a court of competent jurisdiction, such court shall exercise its discretion in reforming the provisions of such Sections to the end that you be subject to such restrictive covenant, reasonable under the circumstances, enforceable by the Company.

c)     The consideration for this Agreement, including without limitation the release and the covenants contained in Sections 5, 6 and 7, the sufficiency of which is hereby acknowledged, was the Company’s agreement to employ you, provide compensation and benefits, and the Company’s agreement herein to provide you with the consideration provided by this Agreement.

9.     Executive’s Release.  a)  For and in consideration of the payments to be made and the promises set forth in this Agreement, you, for yourself and for your heirs, dependents, executors, administrators, trustees, legal representatives and assigns (collectively referred to as “Releasors”), hereby forever release, waive and discharge the Company, employee benefit and/or pension plans or funds, insurers, successors and assigns, and all of its or their past, present and/or future officers, trustees, agents, attorneys, employees, fiduciaries, trustees, administrators and assigns, whether acting as agents for the Company or in their individual capacities (collectively referred to as “Releasees”), from any and all claims, demands, causes of action, fees and liabilities of any kind whatsoever, whether known or unknown, which Releasors ever had, now have, or hereafter may have against Releasees by reason of any actual or alleged act, omission, transaction, practice, policy, procedure, conduct, occurrence, or other matter up to and including the date of your execution of this Agreement, including without limitation, those in connection with, or in any way related to or arising out of, your employment, service as a director, service as a trustee, service as a fiduciary or termination of any of the foregoing with the Company or any other agreement, understanding, relationship, arrangement, act, omission or occurrence, with the Company or other claims.

b)    Without limiting the generality of the foregoing, this Agreement is intended and shall release the Releasees from any and all claims, whether known or unknown, which Releasors ever had, now have, or may hereafter have against the Releasees including, but not limited to,  (i) any claim of discrimination or retaliation under the Age Discrimination in Employment Act (“ADEA”) 29 U.S.C. Section 621 et seq., Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Employee Retirement Income Security Act of 1974, as amended (excluding claims for accrued, vested benefits under any employee benefit plan of the Company in accordance with the terms and conditions of such plan and applicable law) or the Family and Medical Leave Act; (ii) any claim under the Florida Civil Rights Act of 1992 (formerly known as the Human Rights Act of 1977), the Florida Equal Pay Law, the Florida Aids Act, the Florida Whistle Blower Law and waivable rights under the Florida Constitution; (iii) any other claim (whether based on federal, state or local law or ordinance statutory or decisional)

relating to or arising out of your employment, the terms and conditions of such employment, the termination of such employment and/or any of the events relating directly or indirectly to or surrounding the termination of such employment, and/or any of the events relating directly or indirectly to or surrounding the termination of that employment, including, but not limited, breach of contract (express or implied), tort, wrongful discharge, detrimental reliance, defamation, emotional distress or compensatory or punitive damages; and (iv) any claim for attorney’s fees, costs, disbursements and the like.

c)     You agree that you will not, from any source or proceeding, seek or accept any award or settlement with respect to any claim or right covered by Section 9(a) or (b) above, including, without limitation, any source or proceeding involving any person or entity, the United States Equal Employment Opportunity Commission or other similar federal or state agency.  Except as otherwise required by law, you further agree that you will not, at any time hereafter, commence, maintain, prosecute, participate in as a party, permit to be filed by any other person on your behalf (to the extent it is within your control or permitted by law), or assist in the commencement or prosecution of as an advisor, witness (unless compelled by legal process or court order) or otherwise, any action or proceeding of any kind, judicial or administrative (on your own behalf, on behalf of any other person and/or on behalf of or as a member of any alleged class of persons) in any court, agency, investigative or administrative body against any Releasee with respect to any actual or alleged act, omission, transaction, practice, conduct, occurrence or any other matter up to and including the date of your execution of this Agreement which you released pursuant to Section 9(a) or (b) above.  You further represent that, as of the date you sign this Agreement, you have not taken any action encompassed by this Section 9(c).  If, notwithstanding the foregoing promises, you violate this Section 9(c), you will indemnify and hold harmless Releasees from and against any and all demands, assessments, judgments, costs, damages, losses and liabilities and attorneys’ fees and other expenses which result from, or are incidents to, such violation.  Notwithstanding anything herein to the contrary, this Section 9(c) shall not apply to any claims that you may have under the ADEA and shall not apply to the portion of the release provided for in Section 9(a) or (b) relating to the ADEA.

(d)   The sole matters to which the release and covenants in this Section 9 do not apply are:  (i) your rights of indemnification to which you were entitled immediately prior to the Resignation Date under the Company’s By-laws, the Company’s Certificate of Incorporation or otherwise with regard to your service as an officer of the Company; (ii) rights under any tax-qualified pension plan maintained by the Company or under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”); (iii) rights under this Agreement; or (iv) your general rights as a common stockholder of the Company.

10.   Company Policies, Plans and Programs.  Whenever any rights under this Agreement depend on the terms of a policy, plan or program established or maintained by the Company, any determination of these rights shall be made on the basis of the policy, plan or program in effect at the time as of which the determination is made.  No reference in this Agreement to any policy, plan or program established or maintained by the Company shall preclude the Company from prospectively or retroactively changing or amending or terminating that policy, plan or program or adopting a new policy, plan or program in lieu of the then-existing policy, plan or program.

11.   Confidentiality of Agreement.  a)  The existence, terms, and conditions of this Agreement are and will be deemed to be fully confidential and will not be disclosed by you to any other person or entity, except: (i) as may be required by law; (ii) to your accountant to the extent necessary to prepare your tax returns; (iii) to your spouse and attorney, provided that, to the maximum extent permitted by law, you give to each such person to whom disclosure is made notice of the confidentiality provisions of this Agreement and each agrees to keep the existence, terms and conditions of this Agreement fully confidential.  You, your accountant, attorney and spouse further agree not to solicit or initiate any demand by others not party to this Agreement for any disclosure of the existence, terms or conditions of this Agreement.

b)    You agree that this Agreement may be used by you or the Company only as evidence in a subsequent proceeding in which either you or the Company alleges a breach of this Agreement.  You further agree that this Agreement otherwise will not be filed with a court or used for any other purpose.  Notwithstanding anything herein to the contrary, you acknowledge that the existence, terms and conditions of this Agreement may be disclosed by the Company to the extent required by law, including, without limitation, as required by legal filing or disclosure requirements, or as otherwise advised by the Company’s legal counsel.

12.   Resolution of Disputes.

a)     Except as set forth in Section 12(b), the parties shall submit any claim, demand, dispute, charge or cause of action (in any such case, a “Claim”) arising out of, in connection with, or relating to this Agreement to binding arbitration in conformance with the J*A*M*S/ENDISPUTE Streamlined Arbitration Rules and Procedures or the J*A*M*S/ENDISPUTE Comprehensive Arbitration Rules and Procedures, as applicable, but expressly excluding Rule 28 of the J*A*M*S/ ENDISPUTE Streamlined Rules and Rule 33 of the J*A*M*S/ENDISPUTE Comprehensive Rules, as the case may be.  All arbitration procedures shall be held in Fort Lauderdale, Florida and shall be subject to the choice of law provisions set forth in Section 13 of this Agreement.

b)    In the event of any dispute arising out of or relating to this Agreement for which any party is seeking injunctive relief, specific performance or other equitable relief, such matter may be resolved by litigation.  Accordingly, the parties shall submit such matter to the exclusive jurisdiction of the United States District Court for the Southern District of Florida or, if jurisdiction is not available therein, any other court located in Broward County, Florida, and hereby waive any and all objections to such jurisdiction or venue that they may have.  Each party agrees that process may be served upon such party in any manner authorized under the laws of the United States or Florida, and waives any objections that such party may otherwise have to such process.

13.   Miscellaneous.  a)  This Agreement represents the complete understanding between you and the Company and supersedes any and all other agreements between the parties, including without limitation, the Employment Agreement and the Change in Control Agreement, each between you and the Company and each dated November 30, 2003, as all such have been amended to date, as well as any memorandums, letters or other agreements regarding your employment or separation from the Company.    No other promises or agreements will be binding unless in writing and signed by you and the Company.

b)    Except as it may be preempted by ERISA, this Agreement will be construed and enforced in accordance with the laws of the State of Florida without regard to that state’s principles of conflicts of law.

c)     If, at any time after the execution of this Agreement, any provision of this Agreement will be held to be illegal or unenforceable by a court of competent jurisdiction, solely such provision will be of no force or effect.  Except with respect to claims under the ADEA, if you seek to challenge the validity of or otherwise vitiate this Agreement, you will, as a precondition, be required to repay the Company all amounts paid to you by the Company pursuant to this Agreement and, if applicable, the Company will not be required to make any additional payments.

d)    This Agreement is binding upon, and will inure to the benefit of, you and the Company and your and its respective heirs, executors, administrators, successors and assigns.  In addition, without limiting the generality of the foregoing, the restrictive covenants contained in Sections 5 and 6, as well as the provisions in Sections 7 and 8 are intended for the benefit of any Successor of Spherion, and such Successor shall be entitled to enforce such Sections on the terms and conditions as the Company.

e)     This Agreement may be executed in one or more counterparts, including by facsimile signatures, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

14.   Acknowledgement.  You are hereby advised by the Company, and acknowledge that you have been so advised in writing, to consult independent legal counsel of your choice before signing this Agreement.  You further acknowledge that you have had the opportunity to consult independent legal counsel and to consider the terms of this Agreement for a period of at least 21 days.  You further acknowledge that you have carefully read this Agreement in its entirety; that you have had an adequate opportunity to consider it and to consult with any advisors of your choice about it; that you have had the opportunity to consult independent legal counsel of your choice who has answered to your satisfaction all questions you had regarding this Agreement; that you understand all the terms of this Agreement and their significance; that you knowingly and voluntarily assent to all the terms and conditions contained herein; and that you are signing this Agreement voluntarily and of your own free will.

15.   Effective Date.  This Agreement will not become effective until the date (the “Effective Date”) that is the eighth day following your signing of this Agreement, as evidenced by the date you have indicated next to your signature below.  You may at any time prior to the Effective Date revoke this Agreement by delivering written notice of revocation to: the Company at 2050 Spectrum Boulevard, Fort Lauderdale, Florida 33309, to the attention of the General Counsel.  In the event you do not accept this Agreement or, in the event that you revoke this Agreement prior to the eighth day after its execution, this Agreement, and the promises contained in it, will automatically be null and void.  If the last day of the revocation period falls on a Saturday, Sunday or holiday, the last day of the revocation period will be deemed to be the next business day.

If this Agreement is acceptable to you, please sign the enclosed duplicate original and return the signed Agreement to me.  Again, we thank you for all of your contributions to the Company and wish you the best of luck in all of your future endeavors.

					SPHERION CORPORATION
					By:		/s/ Lisa G. Iglesias
						Lisa G. Iglesias, Senior Vice President
Accepted and Agreed to:
By:		/s/ Eric Archer
	Eric Archer
Dated:			2/16	, 2006

EXHIBIT A

Section 6(b): Extended No-Hire Provision Applicable persons:

*

Acknowledged and Agreed:

/s/ Eric Archer

Eric Archer

* Confidential portions omitted and filed separately with the Commission.

EX-10.57

Exhibit 10.57

RESTATED EMPLOYMENT AGREEMENT*

(as amended through March 9, 2005)

THIS AGREEMENT, dated as of [SEE ATTACHED SCHEDULE A], is by and between SPHERION CORPORATION, a Delaware corporation (hereinafter referred to as the “Company”), and [SEE ATTACHED SCHEDULE A] (hereinafter the “Executive”).

RECITALS

A.The Executive currently serves as the Company’s [SEE ATTACHED SCHEDULE A], and [her/his] services and knowledge are valuable to the Company in connection with the management of its business.

B.The Company and the Executive are parties to that certain Employment Agreement dated [SEE ATTACHED SCHEDULE A] (the “Prior Employment Agreement”).

C.The Company and the Executive desire to terminate the Prior Employment Agreement (and any predecessor employment agreements) and to enter into this Agreement upon the terms and subject to the conditions hereinafter set forth.

D.The Company desires to continue to employ the Executive and to enter into this new agreement embodying the terms of such employment which supercedes the Prior Employment Agreement.

E.The Executive desires to continue the Executive’s employment and to enter into a new agreement embodying the terms of such employment.

AGREEMENTS

NOW, THEREFORE, to induce the Executive to remain in the employ of the Company and its subsidiaries, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive agree as follows:

1.Employment.

During the Term of Employment (as defined in Section 2 hereof), the Executive shall serve as [SEE ATTACHED SCHEDULE A].  The Executive shall perform and assume all duties and responsibilities customary to such position and shall devote all of [her/his] business time and energies thereto.  In carrying out such duties and responsibilities, the Executive shall report to, and be subject to the direction of, the [SEE ATTACHED SCHEDULE A] and the Board of Directors of the Company (the “Board”).

2.Term.

The Term of Employment under this Agreement shall commence as of the date of this Agreement and shall continue at the will of the Company and the Executive (the “Term of

Employment”).  Either party may terminate the Executive’s employment at any time and for any reason.

3.Base Salary.

The Company shall pay the Executive, in accordance with the Company’s regular payroll practices applicable to salaried employees, an annualized base salary at the rate in effect on the date of this Agreement, as the same may from time to time be increased or decreased at the sole discretion of the Compensation Committee of the Board (the “Compensation Committee”).

4.Incentive Awards.

a)The Executive shall participate in the Company’s annual incentive plan for senior-level executives as in effect from time to time, subject to the performance standards set by the Compensation Committee.  Payment of any annual incentive award shall be made at the same time that such awards are paid to other senior-level executives of the Company.  The Executive’s annual incentive award target shall be set by the Compensation Committee.

b)The Executive shall be eligible to receive grants under the Company’s long-term incentive plans as in effect from time to time; provided, however, that the size, type and other terms and conditions of any such grant to the Executive shall be determined by the Compensation Committee.

5.Benefits, Fringes and Perquisites.

The Executive shall be entitled to participate in all employee pension and welfare benefit, fringe benefit and perquisite plans and programs made available to the Company’s senior-level executives as in effect from time to time.

6.Vacation.

The Executive shall be entitled to vacation in accordance with the Company’s vacation policy applicable to its senior-level executives.  Vacations shall be arranged in order that they not materially interfere with the normal functioning of the Company’s business activities or the performance of the Executive’s duties hereunder.

7.Business Expenses.

The Company shall reimburse the Executive for any ordinary, necessary and reasonable business expenses that the Executive incurs in connection with the performance of [her/his] duties under this Agreement, in accordance with the Company’s policy regarding the reimbursement of business expenses.

8.Termination of Employment.

a)Death or Disability.  The Executive’s employment shall terminate upon the Executive’s Death, and Company may terminate the Executive’s employment due to Disability

(as defined herein).  If, during the Term of Employment, the Executive’s employment is terminated due to Death or Disability, the Executive (or Executive’s estate or legal representative, as the case may be) shall be entitled to receive:

i)Executive’s base salary through the date of such termination of employment (the “Termination Date”) at the rate in effect at the time thereof;

ii)an amount, payable at the same time that annual incentive awards for the year in which the Executive’s employment so terminates are paid to senior-level executives of the Company, equal to the product of the Executive’s annual incentive award target for such year and a fraction, the numerator of which is the number of days in such year through the date of such termination of employment, and the denominator of which is 365; provided, however, that no such amount shall be paid to the Executive (or to Executive’s estate or legal representative, as the case may be) if annual incentive awards for such year are not paid to senior-level executives of the Company generally;

iii)reimbursement for expenses incurred by the Executive in accordance with the Company’s policy but not reimbursed prior to the date of such termination of employment;

iv)any vested deferred base salary and vested annual incentive awards (including, without limitation, interest or other credits on such vested deferred amounts); and

v)any other compensation or benefits that may be owed or provided to the Executive in accordance with the terms and conditions of any applicable plans and programs of the Company.

For purposes of this Agreement, “Disability” shall mean the Executive’s inability, by reason of illness or other physical or mental disability, to perform the principal duties required by the position held by the Executive at the inception of such illness or disability, for any consecutive 180-day period.  A determination of Disability shall be subject to the certification of a qualified medical doctor agreed to by the Company and the Executive or, in the Executive’s incapacity to designate a doctor, the Executive’s legal representative.  If the Company and the Executive cannot agree on the designation of a doctor, then each party shall nominate a qualified medical doctor and the two doctors shall select a third doctor, and the third doctor shall make the determination as to Disability.

b)For Cause.  The Company may terminate the Executive’s employment for Cause (as defined herein) if the Board determines that Cause exists and serves written notice of such termination to the Executive.  If, during the Term of Employment, the Company terminates the Executive’s employment for Cause, all of the Executive’s annual incentive awards, long-term incentive awards, stock options and other stock or long-term incentive grants which are not then vested or not then exercisable shall be canceled as of the date of the Board’s written notice of termination, and the Executive shall be entitled to receive:

i)Executive’s base salary through the date of such termination of employment at the rate in effect at the time thereof;

ii)reimbursement for expenses incurred by the Executive in accordance with the Company’s policy but not reimbursed prior to the date of such termination of employment;

iii)any vested deferred base salary and vested deferred annual incentive awards (including, without limitation, interest or other credits on such vested deferred amounts but not including unvested annual incentive awards or amounts payable for the year in which the Board’s written notice of termination for Cause is made, or unvested annual incentive awards or amounts payable after the Board’s written notice of termination for Cause is made); and

iv)any other compensation or benefits that may be owed or provided to the Executive in accordance with the terms and conditions of any applicable plans and programs of the Company.

The Executive shall be entitled to receive no other compensation or benefits, whether pursuant to this Agreement or otherwise, except as and to the extent required by law.

For purposes of this Agreement, “Cause” shall mean one or more of the following:

(I)the material violation of any of the terms and conditions of this Agreement or any written agreements the Executive may from time to time have with the Company (after 30 days following written notice from the Board specifying such material violation and Executive’s failure to cure or remedy such material violation within such 30-day period);

(II)inattention to or failure to perform Executive’s assigned duties and responsibilities competently for any reason other than due to Disability (after 30 days following written notice from the Board specifying such inattention or failure, and Executive’s failure to cure or remedy such inattention or failure within such 30-day period);

(III)engaging in activities or conduct injurious to the reputation of the Company or its affiliates including, without limitation, engaging in immoral acts which become public information or repeatedly conveying to one person, or conveying to an assembled public group, negative information concerning the Company or its affiliates;

(IV)commission of an act of dishonesty, including, but not limited to, misappropriation of funds or any property of the Company;

(V)commission by the Executive of an act which constitutes a misdemeanor (involving an act of moral turpitude) or a felony;

(VI)the material violation of any of the Policies referred to in Section 9 hereof (after 30 days following written notice from the Board specifying such failure, and the Executive’s failure to cure or remedy such inattention or failure within such 30-day period);

(VII)refusal to perform the Executive’s assigned duties and responsibilities or other insubordination (after 30 days following written notice from the Board specifying such refusal or insubordination, and the Executive’s failure to cure or remedy such refusal or insubordination within such 30-day period); or

(VIII)unsatisfactory performance of duties by the Executive as a result of alcohol or drug use by the Executive.

c)Without Cause.  The Company may terminate the Executive’s employment without Cause. If, during the Term of Employment, the Company terminates the Executive’s employment without Cause, other than due to Death or Disability, then in lieu of any amount otherwise payable under this Agreement, or as damages for termination of Executive’s employment without Cause, the Executive shall be entitled to receive:

i)(Amended March 9, 2005) If the termination of Executive’s employment without Cause occurs prior to January 1, 2006, a cash severance payment (reduced by any applicable payroll or other taxes required to be withheld) equal to one and one-half (1.5) times the sum of the Executive’s annual salary for the current year plus [her/his] annual incentive award target for the current year.  If the termination of Executive’s employment without Cause occurs on or after January 1, 2006, a cash severance payment (reduced by any applicable payroll or other taxes required to be withheld) equal to the sum of the Executive’s annual salary for the current year plus the Prorated Bonus Payment (as defined hereafter).  The Prorated Bonus Payment shall equal the product of (x) the Executive’s annual incentive award target for the current year and (y) a fraction, the numerator of which is the number of days in such year through the date of such termination of employment, and the denominator of which is 365.  In either case, the severance payment shall be payable in a lump sum amount beginning within thirty (30) days of the date of the Board’s written notice of termination without Cause.  If the notice of termination is given prior to the determination of the Executive’s salary or annual incentive award target for the year in which the notice of termination is given, then the amounts shall be based on the annual salary for the prior year and the greater of the annual incentive award target for the prior year or the actual annual incentive award earned by the Executive for the prior year.  The current year shall be (A) for purposes of determining the Executive’s annual salary, the year then generally used by the Company for setting salaries for senior-level executives (currently April 1 through the following March 31), and (B) for purposes of determining annual incentive award targets, the fiscal year then generally used by the Company for setting annual incentive award targets for senior-level executives, in which the Board gives the Executive written notice of termination, and the prior year shall be the twelve-month period immediately preceding the current year;

ii)Reimbursement for expenses incurred by the Executive in accordance with the Company’s policy but not reimbursed prior to the date of such termination of employment;

iii)Any vested deferred base salary and vested deferred annual incentive awards (including, without limitation, interest or other credits on such vested deferred amounts);

iv)Any other compensation or benefits that may be owed or provided to the Executive in accordance with the terms and conditions of any applicable plans and programs of the Company; and

v)For grants made to Executive prior to September 1, 2003, the immediate and full satisfaction of any vesting or service requirements with respect to any employee stock options, restricted stock and deferred stock units (and other stock awards) previously granted to the Executive and then outstanding; [provided, however, that Executive has not previously agreed in writing to exclude any such grants from the vesting provisions of this Agreement.] –[NOTE: THIS IS NEEDED FOR CERTAIN EXECUTIVES WHO HAVE PERFORMANCE-BASED GRANTS ALREADY EXCEPTED OUT OF THE VESTING PROVISIONS]  Employee stock options, restricted stock and deferred stock units (and other stock awards) granted to the Executive on or after September 1, 2003, [as well as those grants which Executive has previously agreed in writing to exclude from the vesting provisions of this Agreement,] are governed by the terms of the grant documents and will terminate in accordance therewith and are only exercisable to the extent provided therein.

(Amended March 9, 2005) The payment of the severance payment (calculated in Section 8.c.i.) as well as all other payments and benefits provided by the Company to the Executive under this Agreement shall be conditioned on the following: (i) Executive’s continued compliance with the non-competition and confidentiality provisions provided herein; (ii) the Executive’s execution of a full release and settlement of any and all claims against the Company; and (iii) the Executive’s execution of a non-disparagement agreement and continued compliance therewith.

d)Voluntary Termination.  If, during the Term of Employment, the Executive terminates [her/his] employment other than due to Retirement, the Executive shall be entitled to receive:

i)Executive’s base salary through the date of such termination of employment at the rate in effect at the time thereof;

ii)reimbursement for expenses incurred by the Executive in accordance with the Company’s policy but not reimbursed prior to the date of such termination of employment;

iii)any vested deferred base salary and vested deferred annual incentive awards (including, without limitation, interest or other credits on such vested deferred amounts); and

iv)no other compensation or benefits except as and to the extent required by law.

e)Ineligibility for Severance Plan Payments.  Anything in this Agreement to the contrary notwithstanding, Executive shall not be entitled to any payment under any of the Company’s severance plans, programs or arrangements.

f)Payment of Deferred Compensation.  (Added March 9, 2005) Notwithstanding anything contained herein to the contrary, to the extent the Executive is deemed a “key employee” for purposes of Section 409A of the Internal Revenue Code of 1986, as amended, and notwithstanding any contrary provision which exists in any of the Company’s deferred compensation plans, any distribution of deferred compensation to the Executive will be delayed for a period of 6 months after the Termination Date as required by Section 409A of the Internal Revenue Code of 1986, as amended.

9.Company Policies.

The Executive shall strictly follow and adhere to all written policies of the Company which are not inconsistent with this Agreement or applicable law including, without limitation, securities laws compliance (including, without limitation, use or disclosure of material nonpublic information, restrictions on purchases and sales of Company stock, and reporting requirements), conflicts of interest (including, without limitation, doing business with the Company or its affiliates without the prior approval of the Board), and employee harassment.

10.Confidentiality.

The Executive will not at any time (whether during or after Executive’s employment with the Company) disclose or use for Executive’s own benefit or purposes, or for the benefit or purpose of any other person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise, any trade secrets, information, data, or other confidential information relating to customers, employees, job applicants, services, development programs, prices, costs, marketing, trading, investment, sales activities, promotion, processes, systems, credit and financial data, financing methods, plans, proprietary computer software, request for proposal documents, or the business and affairs of the Company generally, or of any affiliate of the Company; provided, however, that the foregoing shall not apply to information which is generally known to the industry or the public other than as a result of the Executive’s breach of this covenant.  The Executive agrees that upon termination of [her/his] employment with the Company for any reason, [she/he] will return to the Company immediately all memoranda, books, papers, plans, information, letters and other data, and all copies thereof or therefrom (whether in written, printed or electronic form), in any way relating to the business of the Company and its affiliates.

The Executive acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of this Section would be inadequate and, in recognition of this fact, the Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to obtain equitable relief in the form of specific performance, a temporary restraining

order, a temporary or permanent injunction or any other equitable remedy which may then be available.

11.Covenant Not to Compete.

a)In General.  The Executive agrees that during Executive’s employment with the Company and for a period of one (1) year after the termination of such employment for whatever reason (the “Non-Compete Period”), [she/he] shall not, anywhere in the United States:

i)act as an employee, director, consultant, partner, principal, agent, representative, owner or stockholder (other than as a stockholder of less than a one percent (1%) equity interest) for (1) any public company that derives any revenue from any business line in which the Company derives $25 million or more in annualized revenues as of the Termination Date or from the principal business line in which the Executive was directly involved immediately prior to the Termination Date (collectively, the “Business Lines”) or (2) any private company that derives $25 million or more in annualized revenues from any combination of one or more of the Business Lines;

ii)solicit business from, or perform services for, or induce others to perform services for, any company or other business entity which at any time during the one (1) year period immediately preceding the Termination Date was a client of the Company or its affiliates; or

iii)offer, or cause to be offered, employment with any business, whether in corporate, proprietorship, or partnership form or otherwise, either on a full-time, part-time or consulting basis, to any person who was employed by the Company or its affiliates or for whom the Company or its affiliates performed outplacement services, in either case at any time during the one (1) year period immediately preceding the Termination Date.

iv)For purposes of this Agreement, affiliates of the Company include subsidiaries 50% or more owned by the Company and the Company’s franchisees and licensees.

b)Consideration.  The consideration for the foregoing covenant not to compete, the sufficiency of which is hereby acknowledged, is the Company’s agreement to employ the Executive and provide compensation and benefits pursuant to this Agreement.

c)Equitable Relief and Other Remedies.  The Executive acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of this Section would be inadequate and, in recognition of this fact, the Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available.

d)Reformation.  If the foregoing covenant not to compete would otherwise be determined invalid or unenforceable by a court of competent jurisdiction, such court shall exercise its discretion in reforming the provisions of this Section to the end that the Executive be subject to a covenant not to compete, reasonable under the circumstances, enforceable by the Company.

12.Company Policies, Plans and Programs.

Whenever any rights under this Agreement depend on the terms of a policy, plan or program established or maintained by the Company, any determination of these rights shall be made on the basis of the policy, plan or program in effect at the time as of which the determination is made.  No reference in this Agreement to any policy, plan or program established or maintained by the Company shall preclude the Company from prospectively or retroactively changing or amending or terminating that policy, plan or program or adopting a new policy, plan or program in lieu of the then-existing policy, plan or program.

13.Binding Agreement; Successors.

a)This Agreement shall be binding upon and shall inure to the benefit of the Company and its successors and assigns.  The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  For purposes of this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid.

b)This Agreement shall be binding up and shall inure to the benefit of the Executive and the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, beneficiaries, devises and legatees.  If the Executive should die while any amounts are payable to [him/her] hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee, beneficiary or other designee or, if there be no such designee, to the Executive’s estate.

14.Change In Control Agreements.

Simultaneously with the execution and delivery of this Agreement, the Company and the Executive have executed and delivered a Change In Control Agreement (“C-I-C Agreement”), which applies under the circumstances and during the period described therein.  If circumstances arise which cause both the C-I-C Agreement and this Agreement to apply to the Company and the Executive, then, to the extent of any inconsistency between the provisions of this Agreement and the C-I-C Agreement, the terms of the C-I-C Agreement alone shall apply.  However, if the C-I-C Agreement does not apply (as, for example, if there is no Change in Control as described therein, or the C-I-C Agreement has expired, or the C-I-C Agreement simply does not apply), then the provisions of this Agreement shall control and be unaffected by the C-I-C Agreement.

15.Notices.

For the purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given (i) on the date of delivery if delivered by hand, (ii) on the date of transmission, if delivered by confirmed facsimile, (iii) on the first business day following the date of deposit if delivered by guaranteed overnight delivery service, or (iv) on the third business day following the date delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive:

If to the Company:

Spherion Corporation

2050 Spectrum Boulevard

Fort Lauderdale, Florida 33309

Attention:  General Counsel

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

16.Governing Law.

The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Florida, without regard to principles of conflicts of laws.

17.Entire Agreement; Amendment.

This Agreement and the C-I-C Agreement contain the entire agreement between the parties concerning the subject matter hereof and supersede all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between the parties with respect to the subject matter hereof.  No provisions of this Agreement may be amended, modified, waived or discharged unless such amendment, waiver, modification or discharge is agreed to in writing signed by the Executive and the Company.  No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement.

18.Counterparts.

This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which will constitute one and the same instrument.

19.Non-Assignability.

This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, or transfer this Agreement or any rights or obligations hereunder, except as provided in Section 13.  Without limiting the foregoing, the Executive’s right to receive payments hereunder shall not be assignable or transferable, whether by pledge, creation of a security interest or otherwise, other than a transfer by [her/his] will or trust or by the laws of descent or distribution, and in the event of any attempted assignment or transfer contrary to this paragraph the Company shall have no liability to pay any amount so attempted to be assigned or transferred.

20.Resolution of Disputes.

a)The parties shall submit any claim, demand, dispute, charge or cause of action (in any such case, a “Claim”) arising out of, in connection with, or relating to this Agreement to binding arbitration in conformance with the J*A*M*S/ENDISPUTE Streamlined Arbitration Rules and Procedures or the J*A*M*S/ENDISPUTE Comprehensive Arbitration Rules and Procedures, as applicable, but expressly excluding Rule 28 of the J*A*M*S/ ENDISPUTE Streamlined Rules and Rule 33 of the J*A*M*S/ENDISPUTE Comprehensive Rules, as the case may be.  All arbitration procedures shall be held in Fort Lauderdale, Florida and shall be subject to the choice of law provisions set forth in Section 16 of this Agreement.

b)In the event of any dispute arising out of or relating to this Agreement for which any party is seeking injunctive relief, specific performance or other equitable relief, such matter may be resolved by litigation.  Accordingly, the parties shall submit such matter to the exclusive jurisdiction of the United States District Court for the Southern District of Florida or, if jurisdiction is not available therein, any other court located in Broward County, Florida, and hereby waive any and all objections to such jurisdiction or venue that they may have.  Each party agrees that process may be served upon such party in any manner authorized under the laws of the United States or Florida, and waives any objections that such party may otherwise have to such process.

21.No Setoff.

The Company shall have no right of setoff or counterclaim in respect of any claim, debt or obligation against any payment provided for in this Agreement.

22.Non-Exclusivity of Rights.

Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any of its subsidiaries or successors and for which the Executive may qualify, nor shall anything herein limit or reduce such rights as the Executive may have under any other agreements with the Company or any of its subsidiaries or successors.  Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company or any of its subsidiaries shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement.

23.Withholding.

The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as are required to be withheld (with respect to amounts payable hereunder or under any benefit plan or arrangement maintained by the Company) pursuant to any applicable law or regulation.

24.Invalidity of Provisions.

In the event that any provision of this Agreement is adjudicated to be invalid or unenforceable under applicable law in any jurisdiction, the validity or enforceability of the remaining provisions thereof shall be unaffected as to such jurisdiction and such adjudication shall not affect the validity or enforceability of such provision in any other jurisdiction.  To the extent that any provision of this Agreement is adjudicated to be invalid or unenforceable because it is overbroad, that provision shall not be void but rather shall be limited to the extent required by applicable law and enforced as so limited.  The parties expressly acknowledge and agree that Sections 11 and 24 are reasonable in view of the parties’ respective interests.

25.Non-Waiver of Rights.

The failure by the Company or the Executive to enforce at any time any of the provisions of this Agreement or to require at any time performance by the other party of any of the provisions hereof shall in no way be construed to be a waiver of such provisions or to affect either the validity of this Agreement, or any part hereof, or the right of the Company or the Executive thereafter to enforce each and every provision in accordance with the terms of this Agreement.

PLEASE NOTE:  BY SIGNING THIS AGREEMENT, THE EXECUTIVE IS HEREBY CERTIFYING THAT THE EXECUTIVE (A) HAS RECEIVED A COPY OF THIS AGREEMENT FOR REVIEW AND STUDY BEFORE EXECUTING IT; (B) HAS READ THIS AGREEMENT CAREFULLY BEFORE SIGNING IT; (C) HAS HAD SUFFICIENT OPPORTUNITY BEFORE SIGNING THE AGREEMENT TO ASK ANY QUESTIONS THE EXECUTIVE HAS ABOUT THE AGREEMENT AND HAS RECEIVED SATISFACTORY ANSWERS TO ALL SUCH QUESTIONS; AND (D) UNDERSTANDS THE EXECUTIVE’S RIGHTS AND OBLIGATIONS UNDER THE AGREEMENT.

THIS AGREEMENT IN SECTION 20 CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.

[signatures appear on the following page]

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered as of the day and year first above set forth.

SPHERION CORPORATION

By:

Name:

Title:

EXECUTIVE

By:

Name:

*This document is a compilation of the original employment as well as amendments thereto.  It is being presented in this format in order to assist the reader.

SCHEDULE A

Executive’s Name	Date of Executive’s Employment Agreement	Executive’s Position	Executive Reports to:	Date of Executive’s Prior Employment Agreement
Lisa G. Iglesias	November 30, 2003, as amended through March 9, 2005	Senior Vice President, General Counsel and Secretary	President and Chief Executive Officer	May 7, 2001, as amended through May 21, 2002
Mark W. Smith	November 30, 2003, as amended through March 9, 2005	Senior Vice President and Chief Financial Officer	President and Chief Executive Officer	May 7, 2001, as amended through May 21, 2002

EX-10.58

Exhibit 10.58

RESTATED CHANGE IN CONTROL AGREEMENT*

(as amended through March 9, 2005)

THIS AGREEMENT, dated as of the [SEE ATTACHED SCHEDULE A], is by and between SPHERION CORPORATION, a Delaware corporation (hereinafter referred to as the “Company”), and [SEE ATTACHED SCHEDULE A] (hereinafter the “Executive”).

RECITALS

A.The Board of Directors of the Company (the “Board”) considers it essential to the best interests of the Company and its stockholders that its key management personnel be encouraged to remain with the Company and its subsidiaries and to continue to devote full attention to the Company’s business in the event that any third person expresses its intention to complete a possible business combination with the Company, or in taking any other action which could result in a “Change in Control” (as defined herein) of the Company.  In this connection, the Board recognizes that the possibility of a Change in Control and the uncertainty and questions which it may raise among management may result in the departure or distraction of key management personnel to the detriment of the Company and its stockholders.  The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of key members of the Company’s management to their assigned duties without distraction in the face of the potentially disturbing circumstances arising from the possibility of a Change in Control of the Company.

B.The Executive currently serves as the Company’s [SEE ATTACHED SCHEDULE A], and [her/his] services and knowledge are valuable to the Company in connection with the management of its business.

C.The Board believes the Executive has made and is expected to continue to make valuable contributions to the productivity and profitability of the Company and its subsidiaries.  Should the Company receive a proposal from a third person concerning a possible business combination or any other action which could result in a Change in Control, in addition to the Executive’s regular duties, the Executive may be called upon to assist in the assessment of such proposal, advise management and the Board as to whether such proposal would be in the best interests of the Company and its stockholders, and to take such other actions as the Board might determine to be necessary or appropriate.

D.Should the Company receive any proposal from a third person concerning a possible business combination or any other action which could result in a change in control of the Company, the Board believes it imperative that the Company and the Board be able to rely upon the Executive to continue in [her/his] position, and that the Company and the Board be able to receive and rely upon [her/his] advice, if so requested, as to the best interests of the Company and its stockholders without concern that [she/he] might be distracted by the personal uncertainties and risks created by such a proposal, and to encourage Executive’s full attention and dedication to the Company.

E.The Company and the Executive are parties to that certain Change in

Control Agreement dated [SEE ATTACHED SCHEDULE A] (the “Prior CIC Agreement”).

F.The Company and the Executive desire to terminate the Prior CIC Agreement (and any predecessor change in control agreements) and to enter into this Agreement, which supercedes the Prior CIC Agreement, upon the terms and subject to the conditions hereinafter set forth.]

TERMS AND CONDITIONS

NOW, THEREFORE, to assure the Company and its subsidiaries that it will have the continued, undivided attention, dedication and services of the Executive and the availability of the Executive’s advice and counsel notwithstanding the possibility, threat or occurrence of a Change in Control of the Company, and to induce the Executive to remain in the employ of the Company and its subsidiaries, and for other good and valuable consideration, the adequacy and sufficiency of which are hereby acknowledged, the Company and the Executive agree as follows.

1.Change in Control.  (Amended March 9, 2005) For purposes of this Agreement, a “Change in Control” of the Company shall be deemed to have occurred upon any of the following events as such are defined in Section 409A of the Internal Revenue Code of 1986, as amended: (i) a change in the ownership of the Company; (ii) a change in effective control of the Company; or (iii) a change in the ownership of a substantial portion of the assets of the Company.”

2.Adjustment of Benefits upon Change in Control

(a)The Company agrees that the Compensation Committee of the Board, or such other committee succeeding to such committee’s responsibilities with respect to executive compensation (collectively, the “Compensation Committee”) may make such equitable adjustments to any performance targets contained in any awards under the Company’s current incentive compensation plans, or any additional or successor plan in which the Executive is a participant (collectively, the “Incentive Plans”), as the Compensation Committee determines may be appropriate to eliminate any negative effects from any transactions relating to a Change in Control (such as costs or expenses associated with the transaction or any related transaction, including, without limitation, any reorganizations, divestitures, recapitalizations or borrowings, or changes in targets or measures to reflect the disruption of the business, etc.), in order to preserve reward opportunities and performance objectives.

(b)In the case of a Change in Control, all restrictions and conditions applicable to any awards of restricted stock or the vesting of stock options or other awards granted to the Executive under the Company’s 2000 Stock Incentive Plan, Deferred Stock Plan, any similar, predecessor or successor plan, or otherwise shall be deemed to have been satisfied as of the date the Change in Control occurs, and this Agreement shall be deemed to amend any agreements evidencing such awards to reflect this provision.

3.Termination Following Change in Control

(a)The Executive’s employment may be terminated for any reason by the Company following a Change in Control of the Company.  If the Executive’s employment is terminated by the Company for any reason other than for the reasons set forth in subparagraphs (i), (ii), (iii), (iv) or (v) below within two years following a Change in Control, then the Executive shall be entitled to the benefits set forth in this Agreement in lieu of any termination, separation, severance or similar benefits under the Executive’s Employment Agreement, if any, or under the Company’s termination, separation, severance or similar plans or policies, if any.  If the Executive’s employment is terminated for any of the reasons set forth in subparagraphs (i), (ii), (iii), (iv) or (v) below, then the Executive shall not be entitled to any termination, separation, severance or similar benefits under this Agreement, and the Executive shall be entitled to benefits under the Executive’s Employment Agreement, if any, or under the Company’s termination, separation, severance or similar plans or policies, if any, only in accordance with the terms of such Employment Agreement, or such plans or policies.

(i)termination by reason of the Executive’s death, provided the Executive has not previously given a “Notice of Termination” pursuant to Section 4;

(ii)termination by reason of the Executive’s “Disability,” provided the Executive has not previously given a “Notice of Termination” pursuant to Section 4;

(iii)termination by reason of “retirement” at or after age 65, provided the Executive has not previously given “Notice of Termination” pursuant to Section 4;

(iv)termination by the Company for “Cause;” or

(v)voluntary termination by the Executive (other than for “Good Reason” as provided in section 3(b) below).

For the purposes of this Agreement, “Disability” shall be defined as the Executive’s inability by reason of illness or other physical or mental disability to perform the principal duties required by the position held by the Executive at the inception of such illness or disability for any consecutive 180-day period.  A determination of disability shall be subject to the certification of a qualified medical doctor agreed to by the Company and the Executive or, in the Executive’s incapacity to designate a doctor, the Executive’s legal representative.  If the Company and the Executive cannot agree on the designation of a doctor, each party shall nominate a qualified medical doctor and the two doctors shall select a third doctor and the third doctor shall make the determination as to disability.

For purposes of this Agreement, “retirement” shall mean the Company’s termination of the Executive’s employment at or after the date on which the Executive attains age 65.

For purposes of this Agreement, “Cause” shall mean one or more of the following:

(I)the material violation of any of the terms and conditions of this Agreement or any written agreements the Executive may from time to time have with the Company (after 30 days following written notice from the Board specifying such material violation and Executive’s failure to cure or remedy such material violation within such 30-day period);

(II)inattention to or failure to perform Executive’s assigned duties and responsibilities competently for any reason other than due to Disability (after 30 days following written notice from the Board specifying such inattention or failure, and Executive’s failure to cure or remedy such inattention or failure within such 30-day period);

(III)engaging in activities or conduct injurious to the reputation of the Company or its affiliates including, without limitation, engaging in immoral acts which become public information or repeatedly conveying to one person, or conveying to an assembled public group, negative information concerning the Company or its affiliates;

(IV)commission of an act of dishonesty, including, but not limited to, misappropriation of funds or any property of the Company;

(V)commission by the Executive of an act which constitutes a misdemeanor (involving an act of moral turpitude) or a felony;

(VI)the material violation of any of the written Policies of the Company which are not inconsistent with this Agreement or applicable law (after 30 days following written notice from the Board specifying such failure, and the Executive’s failure to cure or remedy such inattention or failure within such 30-day period);

(VII)refusal to perform the Executive’s assigned duties and responsibilities or other insubordination (after 30 days following written notice from the Board specifying such refusal or insubordination, and the Executive’s failure to cure or remedy such refusal or insubordination within such 30-day period); or

(VIII)unsatisfactory performance of duties by the Executive as a result of alcohol or drug use by the Executive.

(b)The Executive may terminate [her/his] employment with the Company following a Change in Control of the Company for “Good Reason” by giving Notice of Termination at any time within two years after the Change in Control.  Any failure by the Executive to give such immediate notice of termination for Good Reason shall not be deemed to constitute a waiver or otherwise to affect adversely the rights of the Executive hereunder, provided the Executive gives notice to receive such benefits prior to the expiration of such two year period.  If the Executive terminates [her/his] employment as provided in this Section 3(b), then the Executive shall be entitled to the benefits set forth in this Agreement in lieu of any termination, separation, severance or similar benefits under the Executive’s Employment Agreement, if any, or under the Company’s termination, separation, severance or similar plans or policies, if any.

For purposes of this Agreement, “Good Reason” shall mean the occurrence of any one or more of the following events:

(I)The assignment to the Executive of any duties inconsistent in any material adverse respect with [her/his] position, authority or responsibilities with the Company and its subsidiaries immediately prior to the Change in Control, or any other material adverse change in such position, including titles, authority, or responsibilities, as compared with the Executive’s position immediately prior to the Change in Control;

(II)A reduction by the Company in the amount of the Executive’s base salary or annual or long term incentive compensation paid or payable as compared to that which was paid or made available to Executive immediately prior to the Change in Control; or the failure of the Company to increase Executive’s compensation each year by an amount which is substantially the same, on a percentage basis, as the average annual percentage increase in the base salaries of other executives of comparable status with the Company;

(III)The failure by the Company to continue to provide the Executive with substantially similar perquisites or benefits the Executive in the aggregate enjoyed under the Company’s benefit programs, such as any of the Company’s pension, savings, vacation, life insurance, medical, health and accident, or disability plans in which [she/he] was participating at the time of the Change in Control (or, alternatively, if such plans are amended, modified or discontinued, substantially similar equivalent benefits thereto, when considered in the aggregate), or the taking of any action by the Company which would directly or indirectly cause such benefits to be no longer substantially equivalent, when considered in the aggregate, to the benefits in effect at the time of the Change in Control;

(IV)The Company’s requiring the Executive to be based at any office or location more than 50 miles from that location at which [she/he] performed [her/his] services immediately prior to the Change in Control, except for a relocation consented to in writing by the Executive, or travel reasonably required in the performance of the Executive’s responsibilities to the extent substantially consistent with the Executive’s business travel obligations prior to the Change in Control;

(V)Any failure of the Company to obtain the assumption of the obligation to perform this Agreement by any successor as contemplated in Section 11 herein; or

(VI)Any breach by the Company of any of the material provisions of this Agreement or any failure by the Company to carry out any of its obligations hereunder, in either case, for a period of thirty business days after receipt of written notice from the Executive and the failure by the Company to cure such breach or failure during such thirty business day period.

4.Notice of Termination

Any termination of the Executive’s employment following a Change in Control, other than a termination as contemplated by Sections 3(a)(i) or 3(a)(iii) shall be communicated by written “Notice of Termination” by the party affecting the termination to

the other party hereto.  Any “Notice of Termination” shall set forth (a) the effective date of termination, which shall not be less than 15 or more than 30 days after the date the Notice of Termination is delivered (the “Termination Date”); (b) the specific provision in this Agreement relied upon; and (c) in reasonable detail the facts and circumstances claimed to provide a basis for such termination and the entitlement, or lack of entitlement, to the benefits set forth in this Agreement.  Notwithstanding the foregoing, if within fifteen (15) days after any Notice of Termination is given, the party receiving such Notice of Termination notifies the other party that a good faith dispute exists concerning the termination, the actual Termination Date shall be the date on which the dispute is finally determined in accordance with the provisions of Section 18 hereof.  In the case of any good faith dispute as to the Executive’s entitlement to benefits under this Agreement resulting from any termination by the Company for which the Company does not deliver a Notice of Termination, the actual Termination Date shall be the date on which the dispute is finally determined in accordance with the provisions of Section 18 hereof.  Notwithstanding the pendency of any such dispute referred to in the two preceding sentences, the Company shall continue to pay the Executive [her/his] full compensation then in effect and continue the Executive as a participant in all compensation, benefits and perquisites in which [she/he] was then participating, until the dispute is finally resolved, provided the Executive is willing to continue to provide full time services to the Company and its subsidiaries in substantially the same position, if so requested by the Company.  Amounts paid under this Section 4 shall be in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement.  If a final determination is made, pursuant to Section 18, that Good Reason did not exist in the case of a Notice of Termination by the Executive, the Executive shall have the sole right to nullify and void [her/his] Notice of Termination by delivering written notice of same to the Company within three (3) business days of the date of such final determination.  If the parties do not dispute the Executive’s entitlement to benefits hereunder, the Termination Date shall be as set forth in the Notice of Termination.

5.Termination Benefits

(a)Severance Payment.  Subject to the conditions set forth in this Agreement, on the Termination Date the Company shall pay the Executive (reduced by any applicable payroll or other taxes required to be withheld) a lump sum severance payment, in cash, equal to two (2) times the sum of Executive’s annual salary for the current year plus [her/his] annual incentive award target for the current year (provided that if the Notice of Termination is given prior to the determination of the Executive’s salary or annual incentive award target for the year in which the Termination Date occurs, the amounts shall be based on the annual salary for the prior year and the greater of the annual incentive award target for the prior year or the actual incentive award earned by the Executive for the prior year).  The current year shall be (A) for the purposes of determining annual salary, the year then generally used by the Company for setting salaries for senior-level executives (currently April 1 through the following March 31), and (B) for purposes of determining annual incentive award target, the fiscal year then generally used by the Company for setting annual incentive award targets for senior-level executives, in which the Termination Date occurs, and the prior year shall be the twelve-month period immediately preceding the current year;

(b)Expenses.  Reimbursement for expenses incurred by the Executive in accordance with the Company’s policy but not reimbursed prior to the date of such termination of employment;

(c)Payment of Deferred Compensation.  Any compensation that has been earned by the Executive but is unpaid as of the Termination Date, including any compensation that has been earned but deferred pursuant to the Company’s Deferred Compensation Plan or otherwise, shall be paid in full to the Executive on the Termination Date.

(d)Key Employee Exception.  (Added March 9, 2005) Notwithstanding anything contained herein to the contrary, to the extent the Executive is deemed a “key employee” for purposes of Section 409A of the Internal Revenue Code of 1986, as amended, and notwithstanding any contrary provision which exists in any of the Company’s deferred compensation plans, any distribution of deferred compensation to the Executive will be delayed for a period of 6 months after the Termination Date as required by Section 409A of the Internal Revenue Code of 1986, as amended.

6.Other Benefits

Subject to the conditions set forth in this Agreement hereof, the following benefits (subject to any applicable payroll or other taxes required to be withheld) shall be paid or provided to the Executive:

(a)Health/Welfare Benefits

(i)During the twenty-four (24) months following the Termination Date (the “Continuation Period”), the Company shall continue to keep in full force and effect all programs of medical, dental, vision, accident, disability, life insurance, including optional term life insurance, and other similar health or welfare programs with respect to the Executive and [her/his] dependents with the same level of coverage, upon the same terms and otherwise to the same extent as such programs shall have been in effect immediately prior to the Termination Date (or, if more favorable to the Executive, immediately prior to the Change in Control), and the Company and the Executive shall share the costs of the continuation of such insurance coverage in the same proportion as such costs were shared immediately prior to the Termination Date (or, if more favorable to the Executive, immediately prior to the Change in Control) or, if the terms of such programs do not permit continued participation by the Executive (or if the Company otherwise determines it advisable to amend, modify or discontinue such programs for employees generally), the Company shall otherwise provide benefits substantially similar to and no less favorable to the Executive in terms of cost or benefits (“Equivalent Benefits”) than [she/he] was entitled to receive at the end of the period of coverage, for the duration of the Continuation Period.

(ii)All benefits which the Company is required by this Section 6(a) to provide, which will not be provided by the Company’s programs described herein, shall be

provided through the purchase of insurance unless the Executive is uninsurable.  If the Executive is uninsurable, the Company will provide the benefits out of its general assets.

(iii)If the Executive obtains other employment during the Continuation Period which provides health or welfare benefits of the type described in Section 6(a)(i) hereof (“Other Coverage”), then Executive shall notify the Company promptly of such other employment and Other Coverage and the Company shall thereafter not provide the Executive and [her/his] dependents the benefits described in Section 6(a)(i) hereof to the extent that such benefits are provided under the Other Coverage.  Under such circumstances, the Executive shall make all claims first under the Other Coverage and then, only to the extent not paid or reimbursed by the Other Coverage, under the plans and programs described in Section 6(a)(i) hereof.

(b)Retirement Benefits

(i)For purposes of this Agreement, “Retirement” shall mean the Company’s termination of the Executive’s employment within two years following a Change in Control of the Company and at or after the date on which the Executive attains age 65; provided, however, that any termination for Cause or due to Death or Disability shall not constitute Retirement.

(ii)Subject to Section 6(b)(ii), the Executive shall be deemed to be completely vested under the Company’s 401(k) Plan, Deferred Compensation Plan or other similar or successor plans which are in effect as of the date of the Change in Control (collectively, the “Plans”), regardless of the Executive’s actual vesting service credit thereunder.

(iii)Any part of the foregoing retirement benefits which are otherwise required to be paid by a tax-qualified Plan but which cannot be paid through such Plan by reason of the laws and regulations applicable to such Plan, shall be paid by one or more supplemental non-qualified Plans or by the Company.

(iv)The payments calculated hereunder which are not actually paid by a Plan shall be paid thirty (30) days following the Date of Termination in a single lump sum cash payment (of equivalent actuarial value to the payment calculated hereunder using the same actuarial assumptions as are used in calculating benefits under the Plan but using the discount rate that would be used by the Company on the Date of Termination to determine the actuarial present value of projected benefit obligations).

(c)Executive Outplacement Counseling.  During the Continuation Period, unless the Executive shall reach normal retirement age during the Continuation Period, the Executive may request in writing and the Company shall at its expense engage within a reasonable time following such written request an outplacement counseling service to assist the Executive in obtaining employment.

7.Payment of Certain Costs

Except as otherwise provided in Section 18, if a dispute arises regarding a termination of the Executive or the interpretation or enforcement of this Agreement, subsequent to a Change in Control, all of the reasonable legal fees and expenses incurred by the Executive and all Arbitration Costs (as hereafter defined) in contesting any such termination or obtaining or enforcing all or part of any right or benefit provided for in this Agreement or in otherwise pursuing all or part of [her/his] claim will be paid by the Company, unless prohibited by law.  The Company further agrees to pay pre-judgment interest on any money judgment obtained by the Executive calculated at the prime interest rate reported in The Wall Street Journal in effect from time to time from the date that payment to [her/his] should have been made under this Agreement.

8.This section intentionally left blank.

9.Mitigation

The Executive is not required to seek other employment or otherwise mitigate the amount of any payments to be made by the Company pursuant to this Agreement, and employment by the Executive will not reduce or otherwise affect any amounts or benefits due the Executive pursuant to this Agreement, except as otherwise provided in Section 6(a)(iii).

10.Continuing Obligations Regarding Confidential Information

(a)Acknowledgments by the Executive.  The Executive hereby recognizes and acknowledges the following:

(i)In connection with the Business, the Company has expended a great deal of time, money and effort to develop and maintain the secrecy and confidentiality of substantial proprietary trade secret information and other confidential business information which, if misused or disclosed, could be very harmful to the Company’s business.

(ii)The Executive desires to become entitled to receive the benefits contemplated by this Agreement but which the Company would not make available to the Executive but for the Executive’s signing and agreeing to abide by the terms of this Section 10.

(iii)The Executive’s position with the Company provides the Executive with access to certain of the Company’s confidential and proprietary trade secret information and other confidential business information.

(iv)The Company compensates its employees to, among other things, develop and preserve business information for the Company’s ownership and use.

(v)If the Executive were to leave the Company, the Company in all fairness would need certain protection in order to ensure that the Executive does not appropriate and misuse any confidential information entrusted to the Executive during the course of the Executive’s employment with the Company.

(b)Confidential Information

(i)The Executive agrees to keep secret and confidential, and not to use or disclose to any third parties, except as directly required for the Executive to perform the Executive’s employment responsibilities for the Company, or except as required by law, any of the Company’s confidential and proprietary trade secret information or other confidential business information concerning the Company’s business acquired by the Executive during the course of, or in connection with, the Executive’s employment with the Company (and which was not known by the Executive prior to the Executive’s being hired by the Company).  Confidential information means information which would constitute material, nonpublic information under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, regardless of whether the Executive’s use or disclosure of such information is in connection with or related to a securities transaction.

(ii)The Executive acknowledges that any and all notes, records, reports, written information or documents of any kind, computer files and diskettes and other documents obtained by or provided to the Executive, or otherwise made, produced or compiled during the course of the Executive’s employment with the Company, regardless of the type of medium in which it is preserved, are the sole and exclusive property of the Company and shall be surrendered to the Company upon the Executive’s termination of employment and on demand at any time by the Company.

(c)Acknowledgment Regarding Restrictions.  The Executive recognizes and agrees that the provisions of this Section 10 are reasonable and enforceable because, among other things, (i) the Executive is receiving compensation under this Agreement and (ii)  this Section 10 therefore does not impose any undue hardship on the Executive.  The Executive further recognizes and agrees that the provisions of this Section 10 are reasonable and enforceable in view of the Company’s legitimate interests in protecting its confidential information.

(d)Breach.  In the event of a breach of Section 10(b), the Company’s sole remedy shall be the discontinuation of the payment, allocation, accrual or provision of any amounts or benefits as provided in Sections 5 or 6.  The Executive recognizes and agrees, however, that it is the intent of the parties that neither this Agreement nor any of its provisions shall be construed to adversely affect any rights or remedies that Company would have had, including, without limitation, the amount of any damages for which it could have sought recovery, had this Agreement not been entered into.  Accordingly, the parties hereby agree that nothing stated in this Section 10 shall limit or otherwise affect the Company’s right to seek legal or equitable remedies it may otherwise have, or the amount of damages for which it may seek recovery, in connection with matters covered by this Section 10 but which are not based on breach or violation of this Section 10 (including, without limitation, claims based on the breach of fiduciary or other duties of the Executive or any obligations of the Executive arising under any other contracts, agreements or understandings).  Without limiting the generality of the foregoing, nothing in this Section 10 or any other provision of this Agreement shall limit or otherwise affect the Company’s right to seek legal or equitable remedies it may otherwise have, or the amount of damages for which it may seek recovery, resulting from or arising out of statutory or common law or any

Company policies relating to fiduciary duties, confidential information or trade secrets.  Further, the Executive acknowledges and agrees that the fact that Section 10(c) is limited to the Continuation Period, and that the sole remedy of the Company hereunder is the discontinuation of benefits, shall not reduce or otherwise alter any other contractual or other legal obligations of the Executive during any period or circumstance, and shall not be construed as establishing a maximum limit on damages for which the Company may seek recovery.

11.Binding Agreement; Successors

(a)This Agreement shall be binding upon and shall inure to the benefit of the Company and its successors and assigns.  The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  For purposes of this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid.

(b)This Agreement shall be binding upon and shall inure to the benefit of the Executive and the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, beneficiaries, devises and legatees.  If the Executive should die while any amounts are payable to [her/his] hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee, beneficiary or other designee or, if there be no such designee, to the Executive’s estate.

12.Notices

For the purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given (i) on the date of delivery if delivered by hand, (ii) on the date of transmission, if delivered by confirmed facsimile, (iii) on the first business day following the date of deposit if delivered by guaranteed overnight delivery service, or (iv) on the third business day following the date delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive:

If to the Company:

Spherion Corporation

2050 Spectrum Boulevard

Fort Lauderdale, Florida 33309

Attention:  General Counsel

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

13.Governing Law

The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Florida, without regard to principles of conflicts of laws.

14.Miscellaneous

No provisions of this Agreement may be amended, modified, waived or discharged unless such amendment, waiver, modification or discharge is agreed to in writing signed by the Executive and the Company.  No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement.  Section headings contained herein are for convenience of reference only and shall not affect the interpretation of this Agreement.

15.Counterparts

This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which will constitute one and the same instrument.

16.Non-Assignability

This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, or transfer this Agreement or any rights or obligations hereunder, except as provided in Section 11.  Without limiting the foregoing, the Executive’s right to receive payments hereunder shall not be assignable or transferable, whether by pledge, creation of a security interest or otherwise, other than a transfer by his will or trust or by the laws of descent or distribution, and in the event of any attempted assignment or transfer contrary to this paragraph the Company shall have no liability to pay any amount so attempted to be assigned or transferred.

17.Term of Agreement

The term of this Agreement (the “Term”) shall commence on the date hereof and shall continue in effect for a period of three (3) years, unless further extended or sooner terminated as hereinafter provided.  At the end of this three year period and on the first day of each one-year anniversary thereafter, the Term shall automatically be extended for one additional year unless either party shall have given notice to the other party, at least six months prior to such anniversary that it does not wish to extend the Term.  However, if a Change in Control of the Company shall

have occurred during the original or any extended term of this Agreement, this Agreement shall continue in effect for a period of twenty-four (24) months beyond the month in which such Change in Control occurred; and, provided further, that if the Company shall become obligated to make any payments or provide any benefits pursuant to Section 5 or 6 hereof, this Agreement shall continue for the period necessary to make such payments or provide such benefits.

18.Resolution of Disputes

(a)The parties hereby agree to submit any claim, demand, dispute, charge or cause of action (in any such case, a “Claim”) arising out of, in connection with, or relating to this Change in Control Agreement to binding arbitration in conformance with the J*A*M*S/ENDISPUTE Streamlined Arbitration Rules and Procedures or the J*A*M*S/ ENDISPUTE Comprehensive Arbitration Rules and Procedures, as applicable, but expressly excluding Rule 28 of the J*A*M*S/ENDISPUTE Streamlined Rules and Rule 33 of the J*A*M*S/ENDISPUTE Comprehensive Rules, as the case may be.  All arbitration procedures shall be held in Fort Lauderdale, Florida and shall be subject to the choice of law provisions set forth in Section 13 of this Agreement.

(b)In the event of any dispute arising out of or relating to this Agreement for which any party is seeking injunctive relief, specific performance or other equitable relief, such matter may be resolved by litigation.  Accordingly, the parties shall submit such matter to the exclusive jurisdiction of the United States District Court for the Southern District of Florida or, if jurisdiction is not available therein, any other court located in Broward County, Florida, and hereby waive any and all objections to such jurisdiction or venue that they may have.  Each party agrees that process may be served upon such party in any manner authorized under the laws of the United States or Florida, and waives any objections that such party may otherwise have to such process.

19.Release and Conditions

Any and all payments and benefits provided by the Company to the Executive under this Agreement shall be conditioned on the following: (i) Executive’s continued compliance with the confidentiality provisions contained herein; (ii) the Executive’s execution of a full release and settlement of any and all claims against the Company; and (iii) the Executive’s execution of a non-disparagement agreement and continued compliance therewith.

20.No Setoff

The Company shall have no right of setoff or counterclaim in respect of any claim, debt or obligation against any payment provided for in this Agreement.

21.Non-Exclusivity of Rights

Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any of its subsidiaries or successors and for which the Executive may qualify, nor shall anything herein limit or reduce such rights as the Executive may have under any other agreements with the Company or any of its subsidiaries or successors, except to the extent payments are made

pursuant to Section 5, they shall be in lieu of any termination, separation, severance or similar payments pursuant to the Executive’s Employment Agreement, if any, and the Company’s then existing termination, separation, severance or similar plans or policies, if any.  Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company or any of its subsidiaries shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement.

22.No Guaranteed Employment

The Executive and the Company acknowledge that this Agreement shall not confer upon the Executive any right to continued employment and shall not interfere with the right of the Company to terminate the employment of the Executive at any time.

23.Invalidity of Provisions

In the event that any provision of this Agreement is adjudicated to be invalid or unenforceable under applicable law in any jurisdiction, the validity or enforceability of the remaining provisions thereof shall be unaffected as to such jurisdiction and such adjudication shall not affect the validity or enforceability of such provision in any other jurisdiction.  To the extent that any provision of this Agreement, including, without limitation, Section 10 hereof, is adjudicated to be invalid or unenforceable because it is overbroad, that provision shall not be void but rather shall be limited to the extent required by applicable law and enforced as so limited.  The parties expressly acknowledge and agree that this Section 23 is reasonable in view of the parties’ respective interests.

24.Non-Waiver of Rights

The failure by the Company or the Executive to enforce at any time any of the provisions of this Agreement or to require at any time performance by the other party of any of the provisions hereof shall in no way be construed to be a waiver of such provisions or to affect either the validity of this Agreement, or any part hereof, or the right of the Company or the Executive thereafter to enforce each and every provision in accordance with the terms of this Agreement.

25.Employment Agreement.

If the Executive has an Employment Agreement with the Company, and if circumstances arise which cause both the Employment Agreement and this Agreement to apply to the Company and the Executive, then, to the extent of any inconsistency between the provisions of this Agreement and the Employment Agreement, the terms of this Agreement alone shall apply.  However, if this Agreement does not apply, then the provisions of the Employment Agreement shall control and be unaffected by this Agreement.

26.Unfunded Plan.

The Company’s obligations under this Agreement shall be entirely unfunded until payments are made hereunder from the general assets of the Company, and no provision shall be made to segregate assets of the Company for payments to be made under this Agreement.  The Executive shall have no interest in any particular assets of the Company but rather shall have only the rights of a general unsecured creditor of the Company.

PLEASE NOTE: BY SIGNING THIS AGREEMENT, THE EXECUTIVE IS HEREBY CERTIFYING THAT THE EXECUTIVE (A) HAS RECEIVED A COPY OF THIS AGREEMENT FOR REVIEW AND STUDY BEFORE EXECUTING IT; (B) HAS READ THIS AGREEMENT CAREFULLY BEFORE SIGNING IT; (C) HAS HAD SUFFICIENT OPPORTUNITY BEFORE SIGNING THE AGREEMENT TO ASK ANY QUESTIONS THE EXECUTIVE HAS ABOUT THE AGREEMENT AND HAS RECEIVED SATISFACTORY ANSWERS TO ALL SUCH QUESTIONS; AND (D) UNDERSTANDS THE EXECUTIVE’S RIGHTS AND OBLIGATIONS UNDER THE AGREEMENT.

THIS AGREEMENT IN SECTION 18 CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.

[signatures appear on the following page]

IN WITNESS WHEREOF, the parties have caused this Change in Control Agreement to be executed and delivered as of the day and year first above set forth.

SPHERION CORPORATION

By:

Name:

Title:

EXECUTIVE

By:

Name:

*This document is a compilation of the original change in control agreement as well as amendments thereto.  It is being presented in this format in order to assist the reader.

SCHEDULE A

Executive’s Name	Date of Executive’s Change in Control Agreement	Executive’s Position	Date of Executive’s Prior Change In Control
William J. Grubbs	February 21, 2006	Chief Marketing and Corporate Development Officer	Not applicable
William G. Halnon	March 9, 2005	Senior Vice President and Chief Information Officer	Not applicable
Lisa G. Iglesias	November 30, 2003, as amended through March 9, 2005	Senior Vice President, General Counsel and Secretary	May 7, 2001, as amended through May 21, 2002
Richard A. Lamond	November 30, 2003, as amended through March 9, 2005	Senior Vice President and Chief Human Resources Officer	Not applicable
Byrne K. Mulrooney	November 30, 2003, as amended through March 9, 2005	President, Staffing Services	Not applicable
Mark W. Smith	November 30, 2003, as amended through March 9, 2005	Senior Vice President and Chief Financial Officer	May 7, 2001, as amended through May 21, 2002

EX-10.62

Exhibit 10.62

RESTATED EMPLOYMENT AGREEMENT*

(as amended through March 9, 2005)

THIS AGREEMENT, dated as of [SEE ATTACHED SCHEDULE A], is by and between SPHERION CORPORATION, a Delaware corporation (hereinafter referred to as the “Company”), and [SEE ATTACHED SCHEDULE A] (hereinafter the “Executive”).

RECITALS

A.The Executive currently serves as the Company’s [SEE ATTACHED SCHEDULE A], and [her/his] services and knowledge are valuable to the Company in connection with the management of its business.

B.The Company and the Executive are parties to that certain Employment Agreement dated [SEE ATTACHED SCHEDULE A] (the “Prior Employment Agreement”).

C.The Company and the Executive desire to terminate the Prior Employment Agreement (and any predecessor employment agreements) and to enter into this Agreement upon the terms and subject to the conditions hereinafter set forth.

D.The Company desires to continue to employ the Executive and to enter into this new agreement embodying the terms of such employment which supercedes the Prior Employment Agreement.

E.The Executive desires to continue the Executive’s employment and to enter into a new agreement embodying the terms of such employment.

AGREEMENTS

NOW, THEREFORE, to induce the Executive to remain in the employ of the Company and its subsidiaries, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive agree as follows:

1.Employment.

During the Term of Employment (as defined in Section 2 hereof), the Executive shall serve as [SEE ATTACHED SCHEDULE A].  The Executive shall perform and assume all duties and responsibilities customary to such position and shall devote all of [her/his] business time and energies thereto.  In carrying out such duties and responsibilities, the Executive shall report to, and be subject to the direction of, the [SEE ATTACHED SCHEDULE A] and the Board of Directors of the Company (the “Board”).

2.Term.

The Term of Employment under this Agreement shall commence as of the date of this Agreement and shall continue at the will of the Company and the Executive (the “Term of

Employment”).  Either party may terminate the Executive’s employment at any time and for any reason.

3.Base Salary.

The Company shall pay the Executive, in accordance with the Company’s regular payroll practices applicable to salaried employees, an annualized base salary at the rate in effect on the date of this Agreement, as the same may from time to time be increased or decreased at the sole discretion of the Compensation Committee of the Board (the “Compensation Committee”).

4.Incentive Awards.

a)The Executive shall participate in the Company’s annual incentive plan for senior-level executives as in effect from time to time, subject to the performance standards set by the Compensation Committee.  Payment of any annual incentive award shall be made at the same time that such awards are paid to other senior-level executives of the Company.  The Executive’s annual incentive award target shall be set by the Compensation Committee.

b)The Executive shall be eligible to receive grants under the Company’s long-term incentive plans as in effect from time to time; provided, however, that the size, type and other terms and conditions of any such grant to the Executive shall be determined by the Compensation Committee.

5.Benefits, Fringes and Perquisites.

The Executive shall be entitled to participate in all employee pension and welfare benefit, fringe benefit and perquisite plans and programs made available to the Company’s senior-level executives as in effect from time to time.

6.Vacation.

The Executive shall be entitled to vacation in accordance with the Company’s vacation policy applicable to its senior-level executives.  Vacations shall be arranged in order that they not materially interfere with the normal functioning of the Company’s business activities or the performance of the Executive’s duties hereunder.

7.Business Expenses.

The Company shall reimburse the Executive for any ordinary, necessary and reasonable business expenses that the Executive incurs in connection with the performance of [her/his] duties under this Agreement, in accordance with the Company’s policy regarding the reimbursement of business expenses.

8.Termination of Employment.

a)Death or Disability.  The Executive’s employment shall terminate upon the Executive’s Death, and Company may terminate the Executive’s employment due to Disability

(as defined herein).  If, during the Term of Employment, the Executive’s employment is terminated due to Death or Disability, the Executive (or Executive’s estate or legal representative, as the case may be) shall be entitled to receive:

i)Executive’s base salary through the date of such termination of employment (the “Termination Date”) at the rate in effect at the time thereof;

ii)an amount, payable at the same time that annual incentive awards for the year in which the Executive’s employment so terminates are paid to senior-level executives of the Company, equal to the product of the Executive’s annual incentive award target for such year and a fraction, the numerator of which is the number of days in such year through the date of such termination of employment, and the denominator of which is 365; provided, however, that no such amount shall be paid to the Executive (or to Executive’s estate or legal representative, as the case may be) if annual incentive awards for such year are not paid to senior-level executives of the Company generally;

iii)reimbursement for expenses incurred by the Executive in accordance with the Company’s policy but not reimbursed prior to the date of such termination of employment;

iv)any vested deferred base salary and vested annual incentive awards (including, without limitation, interest or other credits on such vested deferred amounts); and

v)any other compensation or benefits that may be owed or provided to the Executive in accordance with the terms and conditions of any applicable plans and programs of the Company.

For purposes of this Agreement, “Disability” shall mean the Executive’s inability, by reason of illness or other physical or mental disability, to perform the principal duties required by the position held by the Executive at the inception of such illness or disability, for any consecutive 180-day period.  A determination of Disability shall be subject to the certification of a qualified medical doctor agreed to by the Company and the Executive or, in the Executive’s incapacity to designate a doctor, the Executive’s legal representative.  If the Company and the Executive cannot agree on the designation of a doctor, then each party shall nominate a qualified medical doctor and the two doctors shall select a third doctor, and the third doctor shall make the determination as to Disability.

b)For Cause.  The Company may terminate the Executive’s employment for Cause (as defined herein) if the Board determines that Cause exists and serves written notice of such termination to the Executive.  If, during the Term of Employment, the Company terminates the Executive’s employment for Cause, all of the Executive’s annual incentive awards, long-term incentive awards, stock options and other stock or long-term incentive grants which are not then vested or not then exercisable shall be canceled as of the date of the Board’s written notice of termination, and the Executive shall be entitled to receive:

i)Executive’s base salary through the date of such termination of employment at the rate in effect at the time thereof;

ii)reimbursement for expenses incurred by the Executive in accordance with the Company’s policy but not reimbursed prior to the date of such termination of employment;

iii)any vested deferred base salary and vested deferred annual incentive awards (including, without limitation, interest or other credits on such vested deferred amounts but not including unvested annual incentive awards or amounts payable for the year in which the Board’s written notice of termination for Cause is made, or unvested annual incentive awards or amounts payable after the Board’s written notice of termination for Cause is made); and

iv)any other compensation or benefits that may be owed or provided to the Executive in accordance with the terms and conditions of any applicable plans and programs of the Company.

The Executive shall be entitled to receive no other compensation or benefits, whether pursuant to this Agreement or otherwise, except as and to the extent required by law.

For purposes of this Agreement, “Cause” shall mean one or more of the following:

(I)the material violation of any of the terms and conditions of this Agreement or any written agreements the Executive may from time to time have with the Company (after 30 days following written notice from the Board specifying such material violation and Executive’s failure to cure or remedy such material violation within such 30-day period);

(II)inattention to or failure to perform Executive’s assigned duties and responsibilities competently for any reason other than due to Disability (after 30 days following written notice from the Board specifying such inattention or failure, and Executive’s failure to cure or remedy such inattention or failure within such 30-day period);

(III)engaging in activities or conduct injurious to the reputation of the Company or its affiliates including, without limitation, engaging in immoral acts which become public information or repeatedly conveying to one person, or conveying to an assembled public group, negative information concerning the Company or its affiliates;

(IV)commission of an act of dishonesty, including, but not limited to, misappropriation of funds or any property of the Company;

(V)commission by the Executive of an act which constitutes a misdemeanor (involving an act of moral turpitude) or a felony;

(VI)the material violation of any of the Policies referred to in Section 9 hereof (after 30 days following written notice from the Board specifying such failure, and the Executive’s failure to cure or remedy such inattention or failure within such 30-day period);

(VII)refusal to perform the Executive’s assigned duties and responsibilities or other insubordination (after 30 days following written notice from the Board specifying such refusal or insubordination, and the Executive’s failure to cure or remedy such refusal or insubordination within such 30-day period); or

(VIII)unsatisfactory performance of duties by the Executive as a result of alcohol or drug use by the Executive.

c)Without Cause.  The Company may terminate the Executive’s employment without Cause. If, during the Term of Employment, the Company terminates the Executive’s employment without Cause, other than due to Death or Disability, then in lieu of any amount otherwise payable under this Agreement, or as damages for termination of Executive’s employment without Cause, the Executive shall be entitled to receive:

i)(Amended March 9, 2005) A cash severance payment (reduced by any applicable payroll or other taxes required to be withheld) equal to the sum of the Executive’s annual salary for the current year plus the Prorated Bonus Payment (as defined hereafter).  The Prorated Bonus Payment shall equal the product of (x) the Executive’s annual incentive award target for the current year and (y) a fraction, the numerator of which is the number of days in such year through the date of such termination of employment, and the denominator of which is 365.  The severance payment shall be payable in a lump sum amount beginning within thirty (30) days of the date of the Board’s written notice of termination without Cause.  If the notice of termination is given prior to the determination of the Executive’s salary or annual incentive award target for the year in which the notice of termination is given, then the amounts shall be based on the annual salary for the prior year and the greater of the annual incentive award target for the prior year or the actual annual incentive award earned by the Executive for the prior year.  The current year shall be (A) for purposes of determining the Executive’s annual salary, the year then generally used by the Company for setting salaries for senior-level executives (currently April 1 through the following March 31), and (B) for purposes of determining annual incentive award targets , the fiscal year then generally used by the Company for setting annual incentive award targets for senior-level executives, in which the Board gives the Executive written notice of termination, and the prior year shall be the twelve-month period immediately preceding the current year;

ii)Reimbursement for expenses incurred by the Executive in accordance with the Company’s policy but not reimbursed prior to the date of such termination of employment;

iii)Any vested deferred base salary and vested deferred annual incentive awards (including, without limitation, interest or other credits on such vested deferred amounts); and

iv)Any other compensation or benefits that may be owed or provided to the Executive in accordance with the terms and conditions of any applicable plans and programs of the Company.

(Amended March 9, 2005) Employee stock options, restricted stock and deferred stock units (and other stock awards) are governed by the terms of the grant documents and will terminate in accordance therewith and are only exercisable to the extent provided therein.  The payment of the severance payment (calculated in Section 8.c.i.) as well as all other payments and benefits provided by the Company to the Executive under this Agreement shall be conditioned on the following: (i) Executive’s continued compliance with the non-competition and confidentiality provisions provided herein; (ii) the Executive’s execution of a full release and settlement of any and all claims against the Company; and (iii) the Executive’s execution of a non-disparagement agreement and continued compliance therewith.

d)Voluntary Termination.  If, during the Term of Employment, the Executive terminates [her/his] employment other than due to Retirement, the Executive shall be entitled to receive:

i)Executive’s base salary through the date of such termination of employment at the rate in effect at the time thereof;

ii)reimbursement for expenses incurred by the Executive in accordance with the Company’s policy but not reimbursed prior to the date of such termination of employment;

iii)any vested deferred base salary and vested deferred annual incentive awards (including, without limitation, interest or other credits on such vested deferred amounts); and

iv)no other compensation or benefits except as and to the extent required by law.

e)Ineligibility for Severance Plan Payments.  Anything in this Agreement to the contrary notwithstanding, Executive shall not be entitled to any payment under any of the Company’s severance plans, programs or arrangements.

f) (Added March 9, 2005) Payment of Deferred Compensation.  Notwithstanding anything contained herein to the contrary, to the extent the Executive is deemed a “key employee” for purposes of Section 409A of the Internal Revenue Code of 1986, as amended, and notwithstanding any contrary provision which exists in any of the Company’s deferred compensation plans, any distribution of deferred compensation to the

Executive will be delayed for a period of 6 months after the Termination Date as required by Section 409A of the Internal Revenue Code of 1986, as amended.

9.Company Policies.

The Executive shall strictly follow and adhere to all written policies of the Company which are not inconsistent with this Agreement or applicable law including, without limitation, securities laws compliance (including, without limitation, use or disclosure of material nonpublic information, restrictions on purchases and sales of Company stock, and reporting requirements), conflicts of interest (including, without limitation, doing business with the Company or its affiliates without the prior approval of the Board), and employee harassment.

10.Confidentiality.

The Executive will not at any time (whether during or after Executive’s employment with the Company) disclose or use for Executive’s own benefit or purposes, or for the benefit or purpose of any other person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise, any trade secrets, information, data, or other confidential information relating to customers, employees, job applicants, services, development programs, prices, costs, marketing, trading, investment, sales activities, promotion, processes, systems, credit and financial data, financing methods, plans, proprietary computer software, request for proposal documents, or the business and affairs of the Company generally, or of any affiliate of the Company; provided, however, that the foregoing shall not apply to information which is generally known to the industry or the public other than as a result of the Executive’s breach of this covenant.  The Executive agrees that upon termination of [her/his] employment with the Company for any reason, [she/he] will return to the Company immediately all memoranda, books, papers, plans, information, letters and other data, and all copies thereof or therefrom (whether in written, printed or electronic form), in any way relating to the business of the Company and its affiliates.

The Executive acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of this Section would be inadequate and, in recognition of this fact, the Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to obtain equitable relief in the form of specific performance, a temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available.

11.Covenant Not to Compete.

a)In General.  The Executive agrees that during Executive’s employment with the Company and for a period of one (1) year after the termination of such employment for whatever reason (the “Non-Compete Period”), [she/he] shall not, anywhere in the United States:

i)act as an employee, director, consultant, partner, principal, agent, representative, owner or stockholder (other than as a stockholder of less than a one

percent (1%) equity interest) for (1) any public company that derives any revenue from any business line in which the Company derives $25 million or more in annualized revenues as of the Termination Date or from the principal business line in which the Executive was directly involved immediately prior to the Termination Date (collectively, the “Business Lines”) or (2) any private company that derives $25 million or more in annualized revenues from any combination of one or more of the Business Lines;

ii)solicit business from, or perform services for, or induce others to perform services for, any company or other business entity which at any time during the one (1) year period immediately preceding the Termination Date was a client of the Company or its affiliates; or

iii)offer, or cause to be offered, employment with any business, whether in corporate, proprietorship, or partnership form or otherwise, either on a full-time, part-time or consulting basis, to any person who was employed by the Company or its affiliates or for whom the Company or its affiliates performed outplacement services, in either case at any time during the one (1) year period immediately preceding the Termination Date.

iv)For purposes of this Agreement, affiliates of the Company include subsidiaries 50% or more owned by the Company and the Company’s franchisees and licensees.

b)Consideration.  The consideration for the foregoing covenant not to compete, the sufficiency of which is hereby acknowledged, is the Company’s agreement to employ the Executive and provide compensation and benefits pursuant to this Agreement.

c)Equitable Relief and Other Remedies.  The Executive acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of this Section would be inadequate and, in recognition of this fact, the Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available.

d)Reformation.  If the foregoing covenant not to compete would otherwise be determined invalid or unenforceable by a court of competent jurisdiction, such court shall exercise its discretion in reforming the provisions of this Section to the end that the Executive be subject to a covenant not to compete, reasonable under the circumstances, enforceable by the Company.

12.Company Policies, Plans and Programs.

Whenever any rights under this Agreement depend on the terms of a policy, plan or program established or maintained by the Company, any determination of these rights shall be made on the basis of the policy, plan or program in effect at the time as of which the determination is made.  No reference in this Agreement to any policy, plan or program

established or maintained by the Company shall preclude the Company from prospectively or retroactively changing or amending or terminating that policy, plan or program or adopting a new policy, plan or program in lieu of the then-existing policy, plan or program.

13.Binding Agreement; Successors.

a)This Agreement shall be binding upon and shall inure to the benefit of the Company and its successors and assigns.  The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  For purposes of this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid.

b)This Agreement shall be binding up and shall inure to the benefit of the Executive and the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, beneficiaries, devises and legatees.  If the Executive should die while any amounts are payable to [him/her] hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee, beneficiary or other designee or, if there be no such designee, to the Executive’s estate.

14.Change In Control Agreements.

Simultaneously with the execution and delivery of this Agreement, the Company and the Executive have executed and delivered a Change In Control Agreement (“C-I-C Agreement”), which applies under the circumstances and during the period described therein.  If circumstances arise which cause both the C-I-C Agreement and this Agreement to apply to the Company and the Executive, then, to the extent of any inconsistency between the provisions of this Agreement and the C-I-C Agreement, the terms of the C-I-C Agreement alone shall apply.  However, if the C-I-C Agreement does not apply (as, for example, if there is no Change in Control as described therein, or the C-I-C Agreement has expired, or the C-I-C Agreement simply does not apply), then the provisions of this Agreement shall control and be unaffected by the C-I-C Agreement.

15.Notices.

For the purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given (i) on the date of delivery if delivered by hand, (ii) on the date of transmission, if delivered by confirmed facsimile, (iii) on the first business day following the date of deposit if delivered by guaranteed overnight delivery service, or (iv) on the third business day following the date delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive:

If to the Company:

Spherion Corporation

2050 Spectrum Boulevard

Fort Lauderdale, Florida 33309

Attention:  General Counsel

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

16.Governing Law.

The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Florida, without regard to principles of conflicts of laws.

17.Entire Agreement; Amendment.

This Agreement and the C-I-C Agreement contain the entire agreement between the parties concerning the subject matter hereof and supersede all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between the parties with respect to the subject matter hereof.  No provisions of this Agreement may be amended, modified, waived or discharged unless such amendment, waiver, modification or discharge is agreed to in writing signed by the Executive and the Company.  No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement.

18.Counterparts.

This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which will constitute one and the same instrument.

19.Non-Assignability.

This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, or transfer this Agreement or any rights or obligations hereunder, except as provided in Section 13.  Without limiting the foregoing, the Executive’s right to receive payments hereunder shall not be assignable or transferable, whether by pledge, creation of a security interest or otherwise, other than a transfer by [her/his] will or trust or by the laws of descent or distribution, and in the event of any attempted assignment or transfer contrary to this paragraph the Company shall have no liability to pay any amount so attempted to be assigned or transferred.

20.Resolution of Disputes.

a)The parties shall submit any claim, demand, dispute, charge or cause of action (in any such case, a “Claim”) arising out of, in connection with, or relating to this Agreement to binding arbitration in conformance with the J*A*M*S/ENDISPUTE Streamlined Arbitration Rules and Procedures or the J*A*M*S/ENDISPUTE Comprehensive Arbitration Rules and Procedures, as applicable, but expressly excluding Rule 28 of the J*A*M*S/ ENDISPUTE Streamlined Rules and Rule 33 of the J*A*M*S/ENDISPUTE Comprehensive Rules, as the case may be.  All arbitration procedures shall be held in Fort Lauderdale, Florida and shall be subject to the choice of law provisions set forth in Section 16 of this Agreement.

b)In the event of any dispute arising out of or relating to this Agreement for which any party is seeking injunctive relief, specific performance or other equitable relief, such matter may be resolved by litigation.  Accordingly, the parties shall submit such matter to the exclusive jurisdiction of the United States District Court for the Southern District of Florida or, if jurisdiction is not available therein, any other court located in Broward County, Florida, and hereby waive any and all objections to such jurisdiction or venue that they may have.  Each party agrees that process may be served upon such party in any manner authorized under the laws of the United States or Florida, and waives any objections that such party may otherwise have to such process.

21.No Setoff.

The Company shall have no right of setoff or counterclaim in respect of any claim, debt or obligation against any payment provided for in this Agreement.

22.Non-Exclusivity of Rights.

Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any of its subsidiaries or successors and for which the Executive may qualify, nor shall anything herein limit or reduce such rights as the Executive may have under any other agreements with the Company or any of its subsidiaries or successors.  Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company or any of its subsidiaries shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement.

23.Withholding.

The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as are required to be withheld (with respect to amounts payable hereunder or under any benefit plan or arrangement maintained by the Company) pursuant to any applicable law or regulation.

24.Invalidity of Provisions.

In the event that any provision of this Agreement is adjudicated to be invalid or unenforceable under applicable law in any jurisdiction, the validity or enforceability of the remaining provisions thereof shall be unaffected as to such jurisdiction and such adjudication shall not affect the validity or enforceability of such provision in any other jurisdiction.  To the extent that any provision of this Agreement is adjudicated to be invalid or unenforceable because it is overbroad, that provision shall not be void but rather shall be limited to the extent required by applicable law and enforced as so limited.  The parties expressly acknowledge and agree that Sections 11 and 24 are reasonable in view of the parties’ respective interests.

25.Non-Waiver of Rights.

The failure by the Company or the Executive to enforce at any time any of the provisions of this Agreement or to require at any time performance by the other party of any of the provisions hereof shall in no way be construed to be a waiver of such provisions or to affect either the validity of this Agreement, or any part hereof, or the right of the Company or the Executive thereafter to enforce each and every provision in accordance with the terms of this Agreement.

PLEASE NOTE:  BY SIGNING THIS AGREEMENT, THE EXECUTIVE IS HEREBY CERTIFYING THAT THE EXECUTIVE (A) HAS RECEIVED A COPY OF THIS AGREEMENT FOR REVIEW AND STUDY BEFORE EXECUTING IT; (B) HAS READ THIS AGREEMENT CAREFULLY BEFORE SIGNING IT; (C) HAS HAD SUFFICIENT OPPORTUNITY BEFORE SIGNING THE AGREEMENT TO ASK ANY QUESTIONS THE EXECUTIVE HAS ABOUT THE AGREEMENT AND HAS RECEIVED SATISFACTORY ANSWERS TO ALL SUCH QUESTIONS; AND (D) UNDERSTANDS THE EXECUTIVE’S RIGHTS AND OBLIGATIONS UNDER THE AGREEMENT.

THIS AGREEMENT IN SECTION 20 CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.

[signatures appear on the following page]

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered as of the day and year first above set forth.

SPHERION CORPORATION

By:

Name:

Title:

EXECUTIVE

By:

Name:

*This document is a compilation of the original employment agreement as well as several amendments thereto.  It is being presented in this format in order to assist the reader.

SCHEDULE A

Executive’s Name	Date of Executive’s Employment Agreement	Executive’s Position	Executive Reports to:	Date of Executive’s Prior Employment Agreement
William J. Grubbs	February 21, 2006	Chief Marketing and Corporate Development Officer	President and Chief Executive Officer	Not applicable
William G. Halnon	February 21, 2006	Senior Vice President and Chief Information Officer	President and Chief Executive Officer	Not applicable
Richard A. Lamond	November 30, 2003, as amended through March 9, 2005	Senior Vice President and Chief Human Resources Officer	President and Chief Executive Officer	Not applicable
Byrne K. Mulrooney	November 30, 2003, as amended through March 9, 2005	President, Staffing Services	President and Chief Executive Officer	Not applicable

EX-10.68

Exhibit 10.68

SPHERION CORPORATION

DEFERRED STOCK AGREEMENT

This Deferred Stock Agreement (the “Agreement”) is entered into as of the        day of                    , by and between SPHERION CORPORATION (the “Company”) and                    (“Recipient”).

W I T N E S S E T H:

WHEREAS, the Company has adopted the Spherion Corporation Deferred Stock Plan (the “Plan”) which is administered by a Committee appointed by the Company’s Board of Directors (the “Committee”); and

WHEREAS, the Committee has granted to Recipient an award of deferred stock under the terms of the Plan to encourage Recipient’s continued loyalty and diligence (the “Award”); and

WHEREAS,to comply with the terms of the Plan and to further the interests of the Company and Recipient, the parties hereto have set forth the terms of such award in writing in the Agreement;

NOW, THEREFORE, for and in consideration of the mutual promises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.             Stock Award.

(a)General. Subject to the restrictions and other conditions set forth herein, the Company hereby grants to Recipient an award of                 shares of the Common Stock $.01 par value, of the Company. Such shares are hereinafter referred to as the “Deferred Shares.”

(b)Background. The Deferred Shares were awarded to Recipient on                          (the “Grant Date”).

2.             Vesting Restrictions.

The Deferred Shares shall vest in accordance with Exhibit “A” attached hereto on                         , provided that (a) the Recipient remains employed by the Company or its subsidiaries on such date, and (b) the Company successfully and timely achieves the objectives set forth on Exhibit “A” attached hereto, as determined in the sole discretion of the Company’s Compensation Committee of its Board of Directors (the “Committee”).

3.             Forfeiture Upon Termination of Employment or Failure to Meet Objectives.

If Recipient is no longer employed by the Company or any of its subsidiaries for any reason, any Deferred Shares that are not then vested under Section 2 shall be immediately forfeited, and Recipient shall have no rights in such Deferred Shares. Any Deferred Shares that do not vest on                          due to the requirements of Section 2 not being met, shall expire and be immediately forfeited on such date, and Recipient shall have no rights in such Deferred Shares.

4.             Delivery of Deferred Shares.

(a)General. Except as provided in subsection (b) below, the Company shall instruct its transfer agent to issue a stock certificate representing such vested Deferred Shares in the name of Recipient (or issue shares in book form) within a reasonable time after any of the Deferred Shares become vested.

(b)Deferred Delivery. Recipient may elect to defer the receipt of Deferred Shares beyond the vesting date upon such terms as may be established by the Committee. Any such election must be made at such time and in accordance with such procedures as are established by the Committee, but in no event shall such an election be made after the beginning of the calendar year in which such Deferred Shares become vested.

5.             Agreement of Recipient.

Recipient acknowledges that certain restrictions under state or federal securities laws may apply with respect to the Deferred Shares granted to Recipient pursuant to the Award. Specifically, Recipient acknowledges that, to the extent Recipient is an “affiliate” of the Company (as that term is defined by the Securities Act of 1933), the Deferred Shares granted to Recipient as a result of the Award are subject to certain trading restrictions under applicable securities laws (including particularly the Securities and Exchange Commission’s Rule 144). Recipient hereby agrees to execute such documents and take such actions as the Company may reasonably require with respect to state and federal securities laws and any restrictions on the resale of such shares which may pertain under such laws.

6.             Withholding.

Recipient shall pay an amount equal to the amount of all applicable federal, state and local or foreign taxes which the Company is required to withhold at any time. Such payment may be made in cash, by withholding from Recipients’ normal pay, or by delivery of shares of the Company’s common stock (including shares issuable under this Agreement).

7.             Plan Provisions.

In addition to the terms and conditions set forth herein, the Award is subject to and governed by the terms and conditions set forth in the Plan, which is hereby incorporated by reference. Any terms used herein with an initial capital letter shall have the same meaning as provided in the Plan, unless otherwise specified herein. In the event of any conflict between the provisions of the Agreement and the Plan, the Plan shall control.

8.             Miscellaneous.

(a)Limitation of Rights. The granting of the Award and the execution of the Agreement shall not give Recipient any rights to similar grants in future years or any right to be retained in the employ or service of the Company or any of its subsidiaries or to interfere in any way with the right of the Company or any such Subsidiary to terminate Recipient’s employment or services at any time or the right of Recipient to terminate Recipient’s employment at any time.

(b)Shareholder Rights. Recipient shall have none of the rights of a shareholder with respect to the Deferred Shares until such shares have been delivered and issued to Recipient pursuant to Section 4.

(c)Severability. If any term, provision, covenant or restriction contained in the Agreement is held by a court or a federal regulatory agency of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions contained in the Agreement shall remain in full force and effect, and shall in no way be affected, impaired or invalidated.

(d)Controlling Law. The Agreement is being made in Florida and shall be construed and enforced in accordance with the laws of that state.

(e)Construction. The Agreement contains the entire understanding between the parties and supersedes any prior understanding and agreements between them representing the subject matter hereof. There are no representations, agreements, arrangements or understandings, oral or written, between and among the parties hereto relating to the subject matter hereof which are not fully expressed herein.

 (f)Headings. Section and other headings contained in the Agreement are for reference purposes only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of the Agreement or any provision hereof.

IN WITNESS WHEREOF, the parties hereto have executed the Agreement as of day and year first set forth above.

SPHERION CORPORATION

By:

Name:

Title:

RECIPIENT

Exhibit A

The Committee reserves the right, in its sole discretion, to determine if the objectives below have been met. In addition the Committee may make adjustments that it deems reasonable, in its sole discretion, to adjust or amend the objectives below to account for items including, but not limited to, mergers, acquisitions or divestitures involving the Company or members of the peer group, other changes within the peer group, etc.

The Company’s objectives for vesting the Deferred Shares pursuant to the terms of the Agreement are the achievement of the following at or above the minimal thresholds as described below:

•COMPONENT 1

50% of the Deferred Shares will vest based on Spherion’s average annual revenue growth rate relative to that of a pre-defined peer group of companies measured over a three year period beginning              and ending                         . This peer group includes:

•     *	•     *
•      *	•      *
•      *	•      *
•      *	•      *
•      *	•      *
•      *	•      *
•      *	•      *
•      *

•If Spherion’s performance achieves First Quartile relative achievement levels within this peer group, 100% of the Deferred Shares apportioned to this component will vest.

•If Spherion’s performance achieves Second Quartile relative achievement levels within this peer group, 66²/₃% of the Deferred Shares apportioned to this component will vest.

•If Spherion’s performance achieves Third Quartile relative achievement levels within this peer group, 33¹/₃% of the Deferred Shares apportioned to this component will vest.

•If Spherion’s performance is below Third Quartile relative achievement levels within this peer group, none of the Deferred Shares apportioned to this component will vest.

•COMPONENT 2

50% of the Deferred Shares will vest based on Spherion’s achievement of a pre-defined earnings target for the three year period beginning              and ending                          on a cumulative basis:

•If Spherion’s earnings provide a return on capital employed that meets or exceeds the Weighted Average Cost of Capital (WACC) + *, 100% of the Deferred Shares apportioned to this component will vest.

•If Spherion’s earnings provide a return on capital employed that meets or exceeds the WACC + * (but is less than WACC + *, 66²/₃ % of the Deferred Shares apportioned to this component will vest.

•If Spherion’s earnings provide a return on capital employed that meets or exceeds the WACC + * (but is less than WACC + *, 33¹/₃% of the Deferred Shares apportioned to this component will vest.

•If Spherion’s earnings provide a return on capital employed that is less than the WACC + *, none of the Deferred Shares apportioned to this component will vest.

•For this time period, WACC shall equal *. The terms “earnings” and “return on capital employed” shall be as defined and calculated in the sole discretion of the Committee.

*  Confidential portions omitted and filed separately with the Commission.

EX-21.1

Exhibit 21

SUBSIDIARIES OF SPHERION CORPORATION

Following is a list of the direct and indirect subsidiaries of Spherion Corporation, a Delaware corporation. Certain inactive subsidiaries have been excluded from the list below as such subsidiaries, when considered in the aggregate as one subsidiary, would not constitute a “significant subsidiary.” All active subsidiaries do business under their corporate name listed below, or close derivatives thereof, except where indicated otherwise:

3736008 Canada Inc.	Canada
6063721 Canada Inc.	Canada
Comtex Information Systems, Inc.	Delaware
Human Resource Capital Group Inc.	Canada
NorCross Holdings LLC	Delaware
NorCross Teleservices L.P.	Delaware
Norrell Corporation	Delaware
Norrell Resources Corporation	Delaware
Norrell Services, Ltd	Canada
Norrell Temporary Services, Inc.	Georgia
RTO Insurance Limited	Bermuda
Spherion Assessment Inc.	North Carolina
Spherion Atlantic Enterprises LLC*	Delaware
Spherion Atlantic Operations LLC*	Delaware
Spherion Atlantic Resources LLC*	Delaware
Spherion Atlantic Workforce LLC*	Delaware
Spherion (Europe) Inc.	Delaware
Spherion Financial Corporation	Delaware
Spherion Operations Inc.	Delaware
Spherion Pacific Enterprises LLC*	Delaware
Spherion Pacific Operations LLC*	Delaware
Spherion Pacific Resources LLC*	Delaware
Spherion Pacific Workforce LLC*	Delaware
Spherion Technology (UK) Limited	United Kingdom
Spherion U.S. Inc.	Florida
Spherion Worldwide Holding B.V.	Netherlands

*Also do business as:

Spherion—Staffing Services

Spherion—Outsourcing

Spherion—Technology

Spherion—Professional Recruiting

Spherion—Professional Services

Spherion—Human Capital Consulting

Spherion—Legal

Spherion—HR Consulting

Norrell

Bossler Hix

Enthusian

Personnel Pool

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement No’s. 333-05873, 033-76120, 333-05959, 033-76122, 333-05957, 333-18935, 333-18883, 333-18885, 333-30841, 333-30211, 333-31901, 333-31895, 333-43757, 333-60365, 333-91995, 333-84751, 333-40914, 333-48116, 333–60862, 333-116421 and 333-116423 on Forms S-8 and Registration Statement No’s. 033-94532, 333-09109, 333-50775, 333-50777 and 333-53351 on Forms S-3 of our reports dated February 24, 2006, relating to the financial statements and financial statement schedule of Spherion Corporation, and management’s report on the effectiveness of internal control over financial reporting appearing in this Annual Report on Form 10-K of Spherion Corporation for the year ended January 1, 2006.

DELOITTE & TOUCHE LLP

Fort Lauderdale, Florida

February 24, 2006

EX-31.1

Exhibit 31.1

RULE 13a-14(a) CERTIFICATION IN ACCORDANCE
WITH SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Roy G. Krause, certify that:

1.     I have reviewed this Annual Report on Form 10-K of Spherion Corporation;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 27, 2006

/s/ ROY G. KRAUSE

Roy G. Krause

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

RULE 13a-14(a) CERTIFICATION IN ACCORDANCE
WITH SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Mark W. Smith, certify that:

1.     I have reviewed this Annual Report on Form 10-K of Spherion Corporation;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 27, 2006

s/ MARK W. SMITH

Mark W. Smith

Senior Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Spherion Corporation (the “Company”) on Form 10-K for the period ending January 1, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Roy G. Krause, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)   The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ ROY G. KRAUSE

Roy G. Krause

President and Chief Executive Officer

February 27, 2006

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Spherion Corporation (the “Company”) on Form 10-K for the period ending January 1, 2006 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark W. Smith, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)   The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ MARK W. SMITH

Mark W. Smith

Senior Vice President and Chief Financial Officer

February 27, 2006