10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-20540

ON ASSIGNMENT, INC.

(Exact name of registrant as specified in its charter)

Delaware	95-4023433
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

26651 West Agoura Road

Calabasas, California 91302

(Address of Principal Executive Offices)

Registrant’s telephone number, including area code: (818) 878-7900

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

Title of each class	Name of each exchange on which registered
Common Stock, $0.01 par value	The NASDAQ Stock Market, LLC

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 of the past 90 days.  Yes xNo o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes     No 

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, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,”  “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filerx Non-accelerated filero Smaller reporting company o

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

As of June 30, 2009, the aggregate market value of our common stock held by non-affiliates of the registrant was approximately $93,459,068.

As of March 10, 2010, the registrant had outstanding 36,371,091 shares of Common Stock, $0.01 par value.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s proxy statement for the 2010 Annual Meeting of Stockholders, to be filed within 120 days of the close of the registrant’s fiscal year 2009, are incorporated by reference into Part III of this Annual Report on Form 10-K.

ON ASSIGNMENT, INC.

ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009

TABLE OF CONTENTS

PART I
Item 1.	Business	4
Item 1A.	Risk Factors	13
Item 1B.	Unresolved Staff Comments	20
Item 2.	Properties	20
Item 3.	Legal Proceedings	21
Item 4.	Removed and Reserved	21
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	22
Item 6.	Selected Financial Data	24
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 8.	Financial Statements and Supplementary Data	38
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	68
Item 9A.	Controls and Procedures	69
Item 9B.	Other Information	70
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	72
Item 11.	Executive Compensation	72
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	72
Item 13.	Certain Relationships and Related Transactions, and Director Independence	72
Item 14.	Principal Accounting Fees and Services	72
PART IV
Item 15.	Exhibits, Financial Statement Schedule	73
SIGNATURES		74

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SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based upon current expectations, as well as management’s beliefs and assumptions, and involve a high degree of risk and uncertainty. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Statements that include the words “believes,” “anticipates,” “plans,” “expects,” “intends,” and similar expressions that convey uncertainty of future events or outcomes are forward-looking statements. Forward-looking statements include statements regarding our anticipated financial and operating performance for future periods. Our actual results could differ materially from those discussed or suggested in the forward-looking statements herein. Factors that could cause or contribute to these differences or prove our forward-looking statements, by hindsight, to be overly optimistic or unachievable include, but are not limited to actual demand for our services, our ability to attract, train, and retain qualified staffing consultants (which includes our sales and recruiting staff), our ability to remain competitive in obtaining and retaining temporary staffing clients, the availability of qualified temporary nurses and other qualified contract professionals, our ability to manage our growth efficiently and effectively, continued performance of our information systems and the factors described in Item 1A of this Annual Report on Form 10-K under the Section titled ”Risk Factors.” Other factors also may contribute to the differences between our forward-looking statements and our actual results. In addition, as a result of these and other factors, our past financial performance should not be relied on as an indication of future performance. All forward-looking statements in this document are based on information available to us as of the date we file this Annual Report on Form 10-K, and we assume no obligation to update any forward-looking statement or the reasons why our actual results may differ.

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PART I

Item 1. Business

Overview and History

On Assignment, Inc. is a diversified professional staffing firm providing flexible and permanent staffing solutions in specialty skills including Laboratory/Scientific, Healthcare/Nursing, Physician, Medical Financial, Information Technology and Engineering. We provide clients in these markets with short-term or long-term assignments of contract professionals, contract-to-permanent placement and direct placement of these professionals. As of December 31, 2009, our business consists of four operating segments: Life Sciences, Healthcare, Physician and IT and Engineering.

Our Life Sciences segment includes our domestic and international life science staffing businesses. Life Sciences segment revenues for 2009 were $93.7 million and represented 22.5 percent of our total revenues. We provide locally-based contract life science professionals to clients in the biotechnology, pharmaceutical, food and beverage, medical device, personal care, chemical, automotive, educational and environmental industries. Our contract professionals include chemists, clinical research associates, clinical lab assistants, engineers, biologists, biochemists, microbiologists, molecular biologists, food scientists, regulatory affairs specialists, lab assistants and other skilled scientific professionals.

Our Healthcare segment includes our Nurse Travel and Allied Healthcare lines of business. Healthcare segment revenues for 2009 were $97.1 million and represented 23.3 percent of our total revenues. We offer our healthcare clients locally-based and traveling contract professionals, from more than ten healthcare and medical financial and allied occupations. Our contract professionals include nurses, specialty nurses, health information management professionals, dialysis technicians, surgical technicians, imaging technicians, x-ray technicians, medical technologists, phlebotomists, coders, billers, claims processors and collections staff.

Our Physician segment consists of VISTA Staffing Solutions, Inc. (VISTA), which we acquired on January 3, 2007. The Physician segment revenues for 2009 were $87.7 million and represented 21.1 percent of our total revenues. VISTA,based in Salt Lake City, Utah, is a leading provider of physician staffing, known as locum tenens, and permanent physician search services. We provide short and long-term locum tenens services and full-service physician search and consulting services, primarily in the United States, with some locum tenens placements in Australia and New Zealand. We work with physicians in a wide range of specialties, placing them in hospitals, community-based practices and federal, state and local facilities.

Our IT and Engineering segment consists of Oxford Global Resources, Inc. (Oxford) which we acquired on January 31, 2007.  IT and Engineering segment revenues for 2009 were $138.1 million and represented 33.1 percent of our total revenues. Oxford, based in Beverly, Massachusetts, delivers high-end consultants with expertise in specialized information technology, hardware and software engineering and mechanical, electrical, validation and telecommunications engineering fields. We combine international reach with local depth, serving clients through a network of Oxford International recruiting centers in the United States and Europe, and Oxford & Associates branch offices in major metropolitan markets across the United States.

We were incorporated on December 30, 1985, and thereafter commenced operation of our Lab Support line of business (now included in our Life Sciences operating segment), our first contract staffing line of business. Utilizing our experience and unique approach in servicing our clients and contract professionals, we expanded our operations into other industries requiring specialty staffing. In 1994, through our acquisition of 1st Choice Personnel, Inc. and Sklar Resource Group, Inc., we established our Healthcare Financial Staffing service line of business (now a part of our Healthcare operating segment). Originally named Finance Support, this service line of business changed its name in 1997 and shifted in its business development focus to medical billing and collections for hospitals, health management organizations and physician groups. In 1996, we acquired Enviro Staff, and began providing contract professionals to the environmental services industry. In 1998, we acquired LabStaffers, Inc. to enhance our Life Sciences business. In 1999, we expanded our Life Sciences operations into Europe. Also in 1999, we formed our Clinical Lab Staff service line of business, and in 2001, we formed our Diagnostic Imaging Staff service line of business. Both of these service lines of business provide scientific and medical professionals to hospitals, physicians’ offices, clinics, reference laboratories and HMO’s and are currently included as a part of our Healthcare segment. In 2002, we acquired Health Personnel Options Corporation, and established our Nurse Travel line of business, which provides registered nurses to hospitals and managed healthcare organizations. In 2003, we expanded the service offerings for our Life Sciences operating segment to include clinical research and engineering. Our clinical research line of business provides life science professionals in medical and clinical trial research, and our engineering line of business provides contract professionals in manufacturing, packaging, research and development and quality control positions. In 2004, we expanded our service offerings in our Healthcare operating segment to include local nursing and health information management, which provides health information professionals to healthcare clients to process insurance claims and manage patient data. On January 3, 2007, we acquired VISTA and established our Physician operating segment. On January 31, 2007, we acquired Oxford and established our IT and Engineering operating segment. On October 1, 2009, we acquired Fox Hill & Associates, a physician permanent placement business specializing in retained and contingent search, which is included in our Physician operating segment.  The company was founded in 1978 and is located in Milwaukee, Wisconsin.

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Financial information regarding our operating segments and our domestic and international revenues are included under “Financial Statements and Supplementary Data” in Part II, Item 8 of this Annual Report.

Our principal executive office is located at 26651 West Agoura Road, Calabasas, California 91302, and our telephone number is (818) 878-7900. We have approximately 73 branch offices in 23 states within the United States and in five foreign countries.

Industry and Market Dynamics

General

Though the most recent U.S. employment figures indicate a significant contraction in job growth rates, from late 2007 through the present, the U.S. Bureau of Labor Statistics estimates that total employment will grow by 15.3 million jobs, or 10 percent, between 2008 and 2018. By comparison, there were 10.4 million new jobs created in the prior ten-year period, between 1998 and 2008. The U.S. Bureau of Labor Statistics estimates that employment growth will continue to be concentrated in the service sector with healthcare and social assistance, and professional and business services providing the strongest employment growth.

The Staffing Industry Analysts: Staffing Industry Report (dated January 2010), an independent staffing industry publication, estimates that total staffing industry revenues were $93 billion in 2009 and will be $97 billion in 2010, down from $127 billion in 2008. The biggest industry segment, contract labor, is forecasted to grow at an annual rate of 7 percent in 2010 with revenues of $76 billion in 2010, while permanent placement is expected to contract by 5 percent in 2010. Within the contract help segment, professional staffing is expected to grow at an annual rate of 5 percent in 2010 to revenues of $43 billion. While the current economic climate has affected the staffing industry, we believe healthcare, life sciences and IT clients will increase their use of outsourced labor through professional staffing firms. By using outsourced labor, these end users will benefit from cost structure advantages, improved flexibility to fluctuating demand in business and access to greater expertise. Typically, life sciences and healthcare clients’ products directly influence an individual’s health, welfare and well being, which will also impact our customers’ decision to use our services.

Life Sciences

TheStaffing Industry Analysts: Staffing Industry Report (dated January 2010), states that the life sciences professional staffing market will remain flat in 2010 compared to 2009. Demand for staffing in our Life Sciences segment is driven primarily by clients with research and development projects across a wide array of industries.

Our Life Sciences segment includes our domestic and international life science staffing businesses. We provide locally-based, contract life science professionals to clients in the biotechnology, pharmaceutical, food and beverage, personal care, chemical, medical device, automotive, municipal, education and environmental industries. Our Life Sciences segment operates from local branch offices in the United States, United Kingdom, Netherlands, Belgium and Canada.

Healthcare

The Staffing Industry Analysts: Staffing Industry Report (dated January 2010), estimates that the healthcare staffing market will contract by 1 percent in 2010. Within the healthcare staffing industry, allied health and locum tenens remain the areas that are most resilient to changing economic conditions with estimated 2010 revenue growth of 2 percent and 3 percent, respectively.

In prior years, nursing employment levels were affected by cutbacks in the use of agency workers by hospitals and medical groups and their reluctance to pay market rates. Today, as a result of the economy, hospitals are seeing fewer admissions and procedures and are attempting to minimize expenses, which in turn have impacted the demand for our services. Looking forward, contract nursing employment growth could potentially be driven by various factors including a supply shortage of nurses, more favorable nurse-patient ratios and an aging population.

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The combination of healthcare clients facing shortages of operations-critical staff that limit their ability to generate revenues, increased demand for health services and advances in life science and medical technology is expected to create significant demand for workers with specialized science and medical skills. Also influencing the demand for these workers is the departure of mature professionals from the ranks of full-time employment as they retire, reduce hours worked and pursue other career opportunities.  This is evidenced by the continued increase in the average age of nurses in the workforce.

Our Healthcare segment provides locally-based and traveling contract professionals to healthcare clients, including hospitals, integrated delivery systems, imaging centers, clinics, physician offices, reference laboratories, universities, managed care organizations and third-party administrators.

Physician

The Staffing Industry Analysts: Staffing Industry Report (dated January 2010), states that the physician staffing market will increase 3 percent in 2010. This is one of the fastest growing sectors of the staffing markets. An ongoing shortage of physicians is fueling this growth.

Our Physician staffing business places physicians in a wide range of specialties throughout the United States, as well as Australia and New Zealand, under the brand VISTA. The physician staffing market requires a high degree of specialized knowledge about credentialing and qualifications, as well as unique insurance requirements that make it more difficult to replicate than certain other types of staffing markets. Our Physician segment operates out of one primary recruitment center with several branch offices.

IT and Engineering

The Staffing Industry Analysts: Staffing Industry Report (dated January 2010), estimates that the IT staffing market will increase 8 percent in 2010. Demand in our IT and Engineering business segment is driven by a shortage of highly skilled professionals with specific expertise.

Our IT and Engineering segment places only very highly qualified professionals across a wide range of disciplines. The segment operates out of several large sales and recruitment centers including one in Cork, Ireland under the brand Oxford International, and a number of domestic branch offices under the brand Oxford & Associates. Placements are highly diversified in that we average less than two contract placements per client. In late 2009, Oxford re-opened a permanent placement recruitment business.

Sales and Fulfillment

General

Our strategy is to serve the needs of our targeted industries by effectively understanding and matching client staffing needs with qualified contract professionals. In contrast to the mass market approach generally used for contract office/clerical and light industrial personnel, we believe effective assignments of contract healthcare, life science, physician and IT and engineering professionals require the people involved in making assignments to have significant knowledge of the client’s industry and the ability to assess the specific needs of the client as well as the contract professionals’ qualifications. We believe that face-to-face selling in many circumstances is significantly more effective than the telephonic solicitation of clients, a tactic favored by many of our competitors. We believe our strategy of using industry professionals to develop professional relationships provides us with a competitive advantage in our industry which is recognized by our clients.

Our corporate offices are organized to perform many functions that allow staffing consultants and recruiters to focus more effectively on business development and the assignment of contract professionals. These functions include the recruiting and hiring of staffing consultants, recruiters and support staff, as well as ongoing training, coaching and administrative support. Our corporate offices also select, open and maintain branch offices.

Life Sciences

We have developed a tailored approach to the assignment-making process that utilizes staffing consultants. Unlike traditional approaches that tend to be focused on telephonic solicitation, our Life Sciences staffing consultants are experienced professionals who work in our branch office network in the United States, United Kingdom, Netherlands, Belgium and Canada to enable face-to-face meetings with clients and contract professionals. At December 31, 2009, we had 40 Life Sciences segment branch offices. Most of our staffing consultants are either focused on sales and business development or on fulfillment. Sales and business development staffing consultants meet with clients’ managers to understand client needs, formulate position descriptions and assess workplace environments. Fulfillment staffing consultants meet with candidates to assess their qualifications and interests and place these contract professionals on quality assignments with clients.

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Contract professionals assigned to clients are generally our employees, although clients provide on-the-job supervisors for these professionals. Therefore, clients control and direct the work of contract professionals and approve hours worked, while we are responsible for many of the activities typically handled by the client’s human resources department.

Healthcare

The sales, account management, and recruiting functions of our Nurse Travel business are aligned with traditional nurse travel companies with an added emphasis on rapid response fulfillment.  We employ regional sales directors and account managers to identify and sell a variety of nurse staffing solutions to health care clients nationally.  Our recruiters seek the most experienced, highly skilled nurses and place them on assignments as contract professionals with healthcare providers for periods ranging from four to twenty-six weeks and longer.  We service a diverse collection of healthcare clients, including acute care hospitals, rehabilitation facilities, long-term care facilities and integrated delivery systems. We seek to address occupations that represent “high demand and highly-skilled” staff such as emergency room, pediatrics, intensive care and operating room nurses, which are essential to maintaining the hospital’s ability to care for patients and maintain business and revenues. The critical nature of these occupations to drive revenue motivates clients to respond to our ability to rapidly fill open positions with experienced nurses. The recruitment and placement of nurse travel assignments are primarily managed at our locations in Cincinnati, Ohio, Tupelo, Mississippi and San Diego, California.

The nurses we assign to our clients are our employees, although clients provide on-the-job supervisors for the nurses. Therefore, clients control and direct the work of nurses and approve hours worked, while we are responsible for many of the activities typically handled by the client’s human resources department.

At December 31, 2009, we had 24 Allied Healthcare branch offices in the United States, of which 12 share office space with the Life Sciences segment. We have developed a tailored approach to the assignment-making process that utilizes staffing consultants. Staffing consultants are experienced professionals who work in our branch offices and personally meet with clients and contract professionals. Our staffing consultants are typically either focused primarily on sales and business development or on fulfillment. Sales and business development staffing consultants meet with clients to understand their staffing needs, formulate position descriptions and assess workplace environments. Fulfillment staffing consultants meet with candidates to assess their qualifications and interests and place these contract professionals on quality assignments with clients.

The contract professionals assigned to our Allied Healthcare clients are usually our employees, although clients provide on-the-job supervisors for these professionals. Therefore, clients control and direct the work of contract professionals and approve hours worked, while we are responsible for many of the activities typically handled by the client’s human resources department.

Physician

The sales and fulfillment functions at our Physician segment are similar to those of our competitors. Our client sales specialists are organized by geographic territories so that a single individual can handle a client’s physician staffing needs for all disciplines. Our recruiters and schedulers are organized by physician specialty and identify physician candidates with the skills, experience and availability to meet our clients’ needs. Our Physician business is headquartered in Salt Lake City, Utah, where the majority of our recruiters and all back-office functions are located. In addition, we have four branch locations that also carry out recruiting functions. We supply doctors in a wide range of specialties throughout the United States, Australia and New Zealand. Assignments are typically booked up to three months in advance and last six weeks.

The physicians we place at clients are independent contractors. Clients assign shifts and approve hours worked, while we are responsible for issuing payments to the physicians for services rendered to our clients.

IT and Engineering

Our IT and Engineering segment is headquartered outside of Boston, Massachusetts, where all of the back-office activities are located. The segment operates in two separate formats. The first operating format consists of 10 sales and recruiting hubs that manage client orders submitted from anywhere in the country and fulfill those orders with appropriate candidates identified from a nationwide database of skilled IT and engineering professionals. The right candidates for these assignments often reside in locations that are remote from the client worksite and will travel away from their homes to perform the assignments. The second operating format consists of 10 branch offices that typically receive orders from clients in their local market and fulfill those orders with professionals from the local market. In each of these formats, we employ both client-oriented sales people and recruiters. Because our IT and Engineering segment addresses a wide range of disciplines within the IT and engineering markets, our sales people and recruiters generally specialize in a given discipline. We have a sales and recruiting hub in Cork, Ireland to service the European market. Our competitive advantage in this segment comes from our effort to respond very quickly with high quality candidates to a client’s request.

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Contract professionals assigned to clients are generally our employees.  Clients provide on-the-job supervisors for these professionals, control and direct their work and approve all hours worked.  We are responsible for many of the activities typically handled by the client’s human resources department.

Clients

General

During the year ended December 31, 2009, we provided contract professionals to approximately 4,864 clients. In 2009, we had no customers that represented 10 percent or more of our revenues.

All contract assignments, regardless of their planned length, may be terminated with limited notice by the client or the contract professional.

Life Sciences

Our clients in the Life Sciences segment include biotechnology and pharmaceutical companies, along with a broad range of clients in food and beverage, medical device, personal care, chemical, material sciences, energy, education and environmental industries. Our primary contacts with our clients are a mix of end users and process facilitators. End users consist of lab directors, managers and department heads. Facilitators consist of human resource managers, procurement departments and administrators. Facilitators are more price sensitive than end users who typically are more focused on technical capabilities. Assignments in our Life Sciences segment typically have a term of three to six months.

Healthcare

In our Healthcare segment, we serve a diverse collection of healthcare clients, including hospitals, integrated delivery systems, imaging centers, clinics, physician offices, reference laboratories, universities, managed care organizations and third-party administrators. In doing so, we address occupations that require “high demand and highly-skilled” staff, such as operating room nurses and health information professionals who are essential to the hospital’s ability to care for patients and maintain business and revenues. Assignments in our Healthcare segment typically have a term of three to thirteen weeks.

Physician

Clients in our Physician segment include hospitals, doctors’ practice groups, large healthcare systems and government agencies. We are called on to supply temporary and permanent doctors because of the difficulty that healthcare providers have finding qualified practitioners. Assignments in our Physician segment typically have a term of six weeks.

IT and Engineering

In our IT and Engineering segment, we supply services to a wide range of clients. Our clients range from very large companies that may, for example, be installing new enterprise-wide computer systems and have a need for a project manager with a certain type of experience to a system integrator who is looking for a similar person. We can also provide contract professionals with a specific type of embedded software expertise to a smaller company finishing up the development of a new product. The disciplines in our IT and Engineering segment are quite varied in the information technology, hardware/software, engineering and telecom markets. Assignments in our IT and Engineering segment typically have a term of approximately five months.

The Contract Professional

 General

Contract professionals often work with a number of staffing companies and develop relationships or loyalty based on a variety of factors, including competitive salaries and benefits, availability and diversity of assignments, quality and duration of assignments and responsiveness to requests for placement. Contract professionals seeking traveling positions are also interested in the quality of travel and housing accommodations as well as the quality of the clinical experience while on assignment.

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Hourly wage or contract rates for our contract professionals are established based on their specific skills and whether or not the assignment involves travel away from the professional’s primary residence.   Our staffing consultants are our employees or are subcontracted from other affiliated corporate entities.  For our consultant employees we pay the related costs of employment including social security taxes, federal and state unemployment taxes, workers’ compensation insurance and other similar costs. After achieving minimum service periods and hours worked, we also provide our contract professional employees with paid holidays, and allow participation in our 401(k) Retirement Savings Plan.

Life Sciences

Our Life Sciences segment’s professionals include chemists, clinical research associates, clinical lab assistants, engineers, biologists, biochemists, microbiologists, molecular biologists, food scientists, regulatory affairs specialists, lab assistants and other skilled scientific professionals. These contract professionals range from individuals with bachelor’s and/or master’s degrees and considerable experience, to technicians with limited chemistry or biology backgrounds and lab experience.

Healthcare

Our Healthcare segment’s contract professionals include nurses, specialty nurses, health information management professionals, pharmacists, pharmacy technicians, dentists, respiratory therapists, rehabilitation professionals, surgical technicians, imaging technicians,  medical technologists, phlebotomists, coders, billers, medical assistants, dental assistants, hygienists, claims processors and collections staff.

Physician

The physicians in our Physician segment, come from 33 different specialties including emergency medicine, psychiatry, anesthesiology, radiology, family practice, surgical specialties, internal medicine, pediatrics, obstetrics and gynecology. All of these professionals are independent contractors.

IT and Engineering

Our IT and Engineering segment’s professionals come from various information technology, hardware/software, telecom and engineering disciplines. Typically, they have a great deal of knowledge and experience in a fairly narrow field which makes them uniquely qualified to fill a given assignment.

Strategy

We remain committed to growing our operations in the life science, healthcare, physician and IT and engineering markets that we currently serve, primarily through supporting our core service offerings and growing our newer service lines of business.

In 2009, we continued to focus on increasing market share in each of our segments, increasing our gross margins, and controlling our operating costs.  We have increased interaction between our segments so that each can learn best practices from the others.  In the fourth quarter of 2008, we began to feel the impact of the weakening worldwide economy.  Given this change in market demand, we shifted our focus to the areas that we can control, which not only includes the management of margins and operating costs, but also the generation of cash.

In January 2007, we completed the acquisitions of VISTA and Oxford. Throughout the balance of 2007, our strategy was in great part focused on assisting the newly acquired Physician and IT and Engineering segments to continue to perform while integrating with and operating as a part of On Assignment. In doing this, we focused on increasing the number of staffing consultants in each segment. We also focused on diversifying our client mix in the Healthcare segment through the expansion of our client base. In addition, during 2007, we were successful maintaining our pricing in all of our segments while controlling operating costs.

As part of our initiative to improve our sales capabilities, we completed Phases I, II and III of the implementation of Vurv Technology (formerly known as RecruitMax), a front office system, for our domestic Life Sciences and certain Allied Healthcare service lines of business in 2006 and 2007. Phase IV of the implementation for our Nurse Travel line of business was completed in the fourth quarter of 2008. The application interfaces with the existing enterprise-wide information system, PeopleSoft, used in our Life Sciences, IT and Engineering, Nurse Travel and Allied Healthcare lines of business and provides additional functionality, including applicant tracking and search tools, customer and candidate contact management and sales management tools. Phase V of the implementation, which will support our IT and Engineering segment, is expected to be completed within the next eighteen months. We believe these improvements should continue to increase the productivity of our staffing consultants and streamline corporate operations.

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In 2010, we anticipate that the markets we serve will improve with the economy. We have made small investments in enhancing our permanent placement capabilities and we will continue to invest in our existing businesses to support growth. In addition, we will continue to review acquisition opportunities that may enable us to leverage our current infrastructure and capabilities, increase our service offerings and expand our geographic reach.

Competition

General

Many of our competitors are larger than us and have substantially greater financial and marketing resources than we do. We also compete with privately-owned temporary staffing companies on a regional and local basis. Frequently, the strongest competition in a particular market is a privately-held local company with established relationships. These companies oftentimes are extremely competitive on pricing. While their pricing strategies are not necessarily sustainable, they can be problematic for us in the short-term.

The principal competitive factors in attracting qualified candidates for temporary employment or engagements are salaries, contract rates and benefits, availability and variety of assignments, quality and duration of assignments and responsiveness to requests for placement. We believe that many people seeking temporary employment or engagements through us are also pursuing employment through other means, including other temporary staffing. Therefore, the speed at which we place prospective contract professionals and the availability of appropriate assignments are important factors in our ability to complete assignments of qualified candidates. In addition to having high quality contract professionals to assign in a timely manner, the principal competitive factors in obtaining and retaining clients in the temporary staffing industry are properly assessing the clients’ specific job requirements, the appropriateness of the contract professional assigned to the client, the price of services and the monitoring of client satisfaction. Although we believe we compete favorably with respect to these factors, we expect competition to continue to increase.

Life Sciences

Our Life Sciences segment competes in the biotechnology, pharmaceutical, food and beverage, medical device, personal care, chemical, material sciences, energy, education and environmental markets. We believe our Life Sciences segment is one of the few nationwide temporary staffing providers specializing exclusively in the placement of life science professionals. Although other nationwide temporary staffing companies compete with us with respect to scientific, clinical laboratory, medical billing and collection personnel, many of these companies focus on office/clerical and light and heavy industrial personnel, which account for a significant portion of the overall contract staffing market. These competitors include Manpower, Inc., Kelly Services, Inc., Adecco SA, Yoh Company and the Allegis Group.

Healthcare

Our Healthcare segment competes in the healthcare market, serving hospitals, integrated delivery systems, imaging centers, clinics, physician offices, reference laboratories, universities, managed care organizations and third-party administrators. In the Nurse Travel line of business, our competitors include AMN Healthcare Services, Inc., Cross Country, Inc. and several privately-held companies. In the Allied Healthcare line of business, our competitors include Cross Country, Inc., AMN Healthcare Services, Inc., Kforce Inc. and the Allegis Group.

Physician

Our Physician segment also competes in the healthcare market, serving hospitals, doctors’ practice groups and private healthcare systems and government administrated healthcare agencies. VISTA’s competitors include CHG Healthcare Services, TeamHealth, Inc., Cross Country, Inc. and AMN Healthcare Services, Inc., along with several other privately-held companies providing locum tenens.

IT and Engineering

Our IT and Engineering segment competes in the higher-end of the market for information technology and engineering consultants.  Our IT specialties include enterprise resource planning, business intelligence, customer relationship management, supply chain management and database administration.  Our engineering specialties include hardware, software, mechanical, electrical, validation, network, and telecommunications. Oxford’s competition ranges from local and regional specialty staffing companies to large IT consulting firms like Accenture, Inc., International Business Machines Corporation (IBM) and the Yoh Company, and international staffing firms such as Aerotek and Robert Half International, Inc.

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Seasonality

Demand for our staffing services historically has been lower during the first and fourth quarters due to fewer business days resulting from client shutdowns, adverse weather conditions and a decline in the number of contract professionals willing to work during the holidays.  As is common in the staffing industry, we run special incentive programs to keep our contract professionals, particularly nurses, working through the holidays. Demand for our staffing services usually increases in the second and third quarters of the year. In addition, our cost of services typically increases in the first quarter primarily due to the reset of payroll taxes.

Employees

At December 31, 2009, we employed approximately 932 full-time regular employees, including staffing consultants, regional sales directors, account managers, recruiters and corporate office employees. During 2009, we employed approximately 11,867 contract professionals and 1,016 locum tenens physicians.

Government Regulation

The healthcare industry is subject to extensive and complex federal and state laws and regulations related to professional licensure, certification, conduct of operations, payment for services, payment for referrals and insurance. Our operations are subject to additional state and local regulations that require temporary staffing companies placing healthcare personnel to be licensed or separately registered to an extent beyond that required by temporary staffing companies that only place non-healthcare personnel. To date, we have not experienced any material difficulties in complying with such regulations and obtaining required licensure.

Some states require state licensure with associated fees for businesses that employ and/or assign certain healthcare personnel at hospitals and other healthcare facilities. We are currently licensed in all the states that require such licenses. In addition, most of the contract healthcare professionals that we employ are required to be individually licensed and/or certified under applicable state laws. We take reasonable steps to ensure that our contract professionals possess all current licenses and certifications required for each placement. We provide state mandated workers’ compensation insurance, unemployment insurance and professional liability insurance for our contract professionals who are employees and our regular employees. We provide medical malpractice insurance coverage under VISTA’s group medical malpractice insurance policy for our locum tenens physicians.  These expenses have a direct effect on our cost of services, margins and likelihood of achieving or maintaining profitability.

For a further discussion of government regulation associated with our business, see “Risk Factors” within Item 1A of Part I of this Annual Report.

Executive Officers of the Company

The executive officers of On Assignment, Inc. are as follows:

Name	Age	Position
Peter T. Dameris	50	Chief Executive Officer and President
James L. Brill	58	Senior Vice President, Finance and Chief Financial Officer
Emmett B. McGrath	48	President, Life Sciences and Allied Divisions
Mark S. Brouse	56	President, VISTA Staffing Solutions, Inc.
Michael J. McGowan	56	President, Oxford Global Resources, Inc.

Peter T. Dameris joined the Company in November 2003 as Executive Vice President, Chief Operating Officer and was promoted to President and Chief Executive Officer in September 2004. He was appointed to the Board of Directors of the Company in February 2005. From February 2001 through October 2002, Mr. Dameris served as Executive Vice President and Chief Operating Officer of Quanta Services, Inc. (NYSE: PWR), a leading provider of specialized contracting services for the electric and gas utility, cable and telecommunications industries. From December 1994 through September 2000, Mr. Dameris served in a number of different positions at Metamor Worldwide, Inc., an international, publicly-traded IT consulting/staffing company, including Chairman of the Board, President and Chief Executive Officer, Executive Vice President, General Counsel, Senior Vice President and Secretary. In June 2000, Mr. Dameris successfully negotiated the sale of Metamor for $1.9 billion. From November 2002 to January 2006, Mr. Dameris was a member of the Board of Directors of BindView Corporation (acquired by Symatec Corporation in January 2006).  Mr. Dameris is a member of the Board of Directors of Seismic Micro-Technology.  Mr. Dameris holds a Juris Doctorate from the University of Texas Law School and a Bachelor’s in Business Administration from Southern Methodist University.

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James L. Brill joined the Company in January 2007 as Senior Vice President, Finance and Chief Financial Officer. Mr. Brill was Vice President, Finance and Chief Financial Officer of Diagnostic Products Corporation, a manufacturer of immuno-diagnostic kits, from July 1999 until it was acquired by Siemens in July 2006. From August 1998 to June 1999, Mr. Brill served as Chief Financial Officer of Jafra Cosmetics International, a marketing and direct-selling company in the skin care and beauty industry, and as Vice President of Finance and Administration and Chief Financial Officer of Vertel Corporation, a provider of middleware for the telecommunications industry, from 1996 to 1998. Mr. Brill also served as Senior Vice President, Finance and Chief Financial Officer of Merisel, Inc., a computer hardware and software distributor, from 1988 to 1996. Mr. Brill has been a member of the Board of Directors of Onvia Inc. since March 2004. He holds a Bachelor’s of Science degree from the United States Naval Academy and a Master’s of Business Administration degree from the University of California Los Angeles.

Emmett B. McGrath joined the Company in September 2004 as President, Life Sciences U.S., and in August 2005, Mr. McGrath was appointed as President of Life Sciences Europe. Mr. McGrath was appointed as President of Allied Healthcare in November 2007. From February 1985 through August 2004, Mr. McGrath worked at Yoh Company, a privately-held IT staffing firm. During his tenure at Yoh, Mr. McGrath held various staffing positions, including Technical Recruiter, Account Manager, Branch and District Management, Vice President and Regional President. As Regional President, Mr. McGrath was responsible for core lines of businesses, including Scientific, Information Technology, Engineering, Healthcare, Telecommunications and Vendor on Premise (VOP) programs. In addition, Mr. McGrath served on Yoh’s Executive Committee and the Chairman’s Board of the Day & Zimmermann Group, Yoh’s parent company. Mr. McGrath received a Bachelor’s of Science degree in Business Administration, with an emphasis in Human Resources, from California State University, Northridge in 1991.

Mark S. Brouse is President of VISTA Staffing Solutions, Inc., On Assignment’s Physician segment. Mr. Brouse joined On Assignment as a result of On Assignment’s January 2007 acquisition of VISTA, a company he co-founded in 1990. Mr. Brouse began his career in pharmaceutical sales in 1980, and in 1986 joined CompHealth, a locum tenens staffing company, where he led specialty teams serving psychiatry and internal medicine clients before founding VISTA. Mr. Brouse holds a Bachelor’s of Arts degree in Chemistry from California State, Dominguez Hills, and is a member of the Boards of Directors of the YMCA of Greater Salt Lake and PEHR Technologies, an electronic medical records company.

Michael J. McGowan is President of Oxford Global Resources, Inc., On Assignment’s IT and Engineering segment. He has held this position since 1998. He joined Oxford in May of 1997 as Chief Operating Officer. Formerly, Mr. McGowan was Senior Vice President and General Manager for Kelly Services’ Middle Markets Division, a provider of staffing solutions. Prior to that time he was Vice President & General Manager for The MEDSTAT Group, a healthcare information firm, and held increasingly senior positions for Automatic Data Processing (ADP), a provider of human resources, payroll and tax and benefits administration solutions, during a sixteen year tenure. Mr. McGowan holds a Bachelor’s of Science degree in Electrical Engineering from Michigan State University and a Master’s of Business Administration degree from the Eli Broad Graduate School of Management, also at Michigan State University. Mr. McGowan joined On Assignment as a result of the Company’s acquisition of Oxford in January 2007.

Available Information and Access to Reports

We electronically file our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports with the Securities and Exchange Commission (SEC). You may read and copy any of our reports that are filed with the SEC in the following manner:

·   At the SEC’s Public Reference Room at 100 F Street NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at (800) SEC-0330;

·   At the SEC’s website, http://www.sec.gov;

·   At our website, http://www.onassignment.com; or

·   By contacting our Investor Relations Department at (818) 878-7900.

Our reports are available through any of the foregoing means and are available free of charge on our website as soon as practicable after such material is electronically filed with or furnished to the SEC. Also available on our website (http://www.onassignment.com), free of charge, are copies of our Code of Ethics for the Principle Executive Officer and Senior Financial Officers, Code of Business Conduct and Ethics and the charters for the committees of our Board of Directors. We intend to disclose any amendment to, or waiver from, a provision of our Code of Ethics for Principal Executive Officer and Senior Financial Officers on our website within five business days following the date of the amendment or waiver .

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Item 1A. Risk Factors

Our business is subject to a number of risks, including the following:

Recent U.S. economic conditions have been uncertain and challenging, which adversely affects our business and results of operations.

Global market and economic conditions have been unprecedented and challenging with tighter credit conditions and recession in most major economies continuing into 2010.  Continued concerns about the systemic impact of potential long-term and wide-spread recession, energy costs, geopolitical issues, the availability and cost of credit, and the global housing and mortgage markets have contributed to market volatility and diminished expectations for western and emerging economies. In 2009, added concerns fueled by the subprime mortgage crisis, higher interest rates and inflation, federal government stimulus spending, continued government conservatorship, government financial assistance and other federal government interventionslead to increased market uncertainty and instability in both U.S. and international capital and credit markets.  These conditions, combined with volatile oil prices, lowered business and consumer confidence and high unemployment, have contributed to economic slowdown and volatility of unprecedented levels.  Further regulation of the healthcare industry also has a significant effect on spending in this area.

As a result of these market conditions, the cost and availability of credit has been and may continue to be adversely affected by illiquid credit markets and wider credit spreads.  Concern about the stability of the markets generally and the strength of counterparties specifically has led many lenders and institutional investors to reduce, and in some cases, cease to provide credit to businesses and consumers.  These factors have lead to a decrease in spending by businesses and consumers alike, and a corresponding decrease in demand for business services.  Continued turbulence in the U.S. and international markets and economies and prolonged declines in business consumer spending may adversely affect our liquidity and financial condition, including our ability to refinance maturing liabilities and access the capital markets to meet liquidity needs.

Our liquidity and our ability to obtain financing may be adversely impacted if any of the lenders under our credit facilities suffers liquidity issues.  In such an event, we may not be able to draw on all, or a substantial portion, of our credit facilities.

Temporary staffing companies are negatively impacted by high unemployment rates which have accompanied this period of economic turbulence.  We experienced, and may continue to experience, a decline in demand for our staffing services as the U.S. suffers high levels of unemployment.

The market condition has also affected the liquidity and financial condition of many of our clients.  The problems our clients are experiencing, including with regard to their access to financing, liquidity issues, funding issues, creditworthiness and their budgetary constraints may expose us to risks in collections of our accounts receivable.

Our results of operations may vary from quarter to quarter as a result of a number of factors, which may make it difficult to evaluate our business and could cause instability in the trading price of our common stock.

Factors that may cause our quarterly results to fluctuate include:

·   the level of demand for our temporary staffing services and the efficiency with which we source and assign our contract professionals and support our staffing consultants in the execution of their duties;

·   changes in our pricing policies or those of our competitors; and

·   our ability to control costs and manage our accounts receivable balances.

In addition, most temporary staffing companies experience seasonal declines in demand during the first and fourth quarters as a result of fewer business days and the reduced number of contract professionals willing to work during the holidays. Historically, we have experienced variability in the duration and depth of these seasonal declines, which in turn have materially affected our quarterly results of operations and made period-to-period comparisons of our financial and operating performance difficult.

If our operating results are below the expectations of public market analysts or investors in a given quarter, the trading price of our common stock could decline.

Failure to comply with restrictive covenants under our debt instruments could trigger prepayment obligations or additional costs.

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 Our failure to comply with restrictive covenants under our credit facilities and other debt instruments could result in an event of default, which, if not cured or waived, could result in us being required to repay these borrowings before their due date.  Some of these covenants are tied to our operating results and thus may be breached if we do not perform as expected.  The lenders may require fees and expenses to be paid or other changes to terms in connection with waivers or amendments.  If we are forced to refinance these borrowings on less favorable terms, our results of operations and financial condition could be adversely affected by increased costs and rates.

Failure of internal controls may leave us susceptible to errors and fraud.

Our management, including our CEO and CFO, does not expect that our disclosure controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the control system are met.  Furthermore, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, would be detected.

Significant legal actions could subject us to substantial uninsured liabilities.

In recent years, we have been subject to an increasing number of legal actions alleging malpractice, vicarious liability, intentional torts, negligent hiring, discrimination or related legal theories. We may be subject to liability in such cases even if the contribution to the alleged injury was minimal. Many of these actions involve large claims and significant defense costs. In addition, we may be subject to claims related to torts or crimes committed by our corporate employees or contract professionals. In most instances, we are required to indemnify clients against some or all of these risks. A failure of any of our corporate employees or contract professionals to observe our policies and guidelines intended to reduce these risks; relevant client policies and guidelines or applicable federal, state or local laws, rules and regulations could result in negative publicity, payment of fines or other damages.

To protect ourselves from the cost of these types of claims, we maintain workers’ compensation and professional malpractice liability insurance and general liability insurance coverage in amounts and with deductibles that we believe are appropriate for our operations. Our coverage is, in part, self-insured and our insurance coverage may not cover all claims against us or continue to be available to us at a reasonable cost. If we are unable to maintain adequate insurance coverage, we may be exposed to substantial liabilities.

If we are unable to attract and retain qualified contract professionals for our Life Sciences, Healthcare, Physician and IT and Engineering segments, our business could be negatively impacted.

Our business is substantially dependent upon our ability to attract and retain contract professionals who possess the skills, experience and, as required, licenses to meet the specified requirements of our clients. We compete for such contract professionals with other temporary staffing companies and with our clients and potential clients. There can be no assurance that qualified healthcare, nursing, life sciences, physician, IT and engineering professionals will be available to us in adequate numbers to staff our operating segments. Moreover, our contract professionals are often hired to become regular employees of our clients. Attracting and retaining contract professionals depends on several factors, including our ability to provide contract professionals with desirable assignments and competitive benefits and wages. The cost of attracting and retaining contract professionals may be higher than we anticipate and, as a result, if we are unable to pass these costs on to our clients, our likelihood of achieving or maintaining profitability could decline. In periods of high unemployment, contract professionals frequently opt for full-time employment directly with clients and, due to a large pool of available candidates, clients are able to directly hire and recruit qualified candidates without the involvement of staffing agencies.  If we are unable to attract and retain a sufficient number of contract professionals to meet client demand, we may be required to forgo staffing and revenue opportunities, which may hurt the growth of our business.

We may not successfully make or integrate acquisitions, which could harm our business and growth.

As part of our growth strategy, we intend to opportunistically pursue selected acquisitions. We compete with other companies in the professional staffing and consulting industries for acquisition opportunities, and we cannot assure you that we will be able to effect future acquisitions on commercially reasonable terms or at all. To the extent we enter into acquisition transactions in the future, we may experience:

·   delays in realizing or a failure to realize the benefits, cost savings and synergies that we anticipate;

·   difficulties or higher-than-anticipated costs associated with integrating any acquired companies into our businesses;

·   attrition of key personnel from acquired businesses;

·   diversion of management’s attention from other business concerns;

·   inability to maintain the business relationships and reputation of the acquired companies;

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·   difficulties in integrating the acquired companies into our information systems, controls, policies and procedures;

·   additional risks relating to the businesses or industry of the acquired companies that are different from ours;

·   unexpected costs or charges; and

·   unforeseen operating difficulties that require significant financial and managerial resources that would otherwise be available for the ongoing development or expansion of our existing operations.

To undertake more transactions, we may incur additional debt in the future. We may face unexpected contingent liabilities arising from these or future acquisitions that could harm our business. We may also issue additional equity in connection with future transactions, which would dilute our existing shareholders.

If we cannot attract, develop and retain qualified and skilled sales and recruiting staff, our business growth will suffer.

A key component of our ability to grow our lines of business is our ability to attract, develop and retain qualified and skilled sales and recruiting staff, particularly persons with industry experience. The available pool of qualified staffing consultant candidates is limited, and further constrained by the industry practice of entering into non-compete agreements with these employees, which may restrict their ability to accept employment with other staffing firms, including us. We cannot assure that we will be able to recruit, develop and retain qualified sales and recruiting staff in sufficient numbers or that our staffing consultants will achieve productivity levels sufficient to enable growth of our business. Failure to attract and retain productive sales and recruiting staff could adversely affect our business, financial condition and results of operations.

Reclassification of our independent contractors by tax authorities could materially and adversely affect our business model and could require us to pay significant retroactive wages, taxes and penalties.

We consider our locum tenens physicians to be independent contractors rather than employees. As such, we do not withhold or pay income or other employment related taxes or provide workers’ compensation insurance for them. Our classification of locum tenens physicians as independent contractors is consistent with general industry standard, but can nonetheless be challenged by the contractors themselves as well as the relevant taxing authorities. If federal or state taxing authorities determine that locums tenens physicians engaged as independent contractors are employees, our business model for that segment would be materially and adversely affected. Although we believe we would qualify for safe harbor under the provisions of Section 530 of the Revenue Act of 1978, Pub. L. No. 95−600 (“Section 530”), and any similar applicable state laws, we could incur significant liability for past wages, taxes, penalties and other employment benefits if we could not so qualify. In addition, many states have laws that prohibit non−physician owned companies from employing physicians. If our independent contractor physicians are classified as employees, we could be found in violation of such state laws, which could subject us to liability in those states and thereby negatively impact on our profitability.

If our information systems do not function in a cost effective manner, our business will be harmed.

The operation of our business is dependent on the proper functioning of our information systems. In 2009, we continued to upgrade our information technology systems, including our PeopleSoft and Vurv Technology enterprise-wide information systems used in daily operations to identify and match staffing resources and client assignments, track regulatory credentialing, manage scheduling and also perform billing and accounts receivable functions. If the systems fail to perform reliably or otherwise do not meet our expectations, or if we fail to successfully complete the implementation of other modules of the systems, we could experience business interruptions that could result in deferred or lost sales. Our information systems are vulnerable to fire, storm, flood, power loss, telecommunications failures, physical or software break-ins and similar events. Our network infrastructure is currently located at our facility in Salt Lake City, Utah. As a result, any system failure or service outage at this primary facility could result in a loss of service for the duration of the failure of the outage. Our location in Southern California is susceptible to earthquakes and has, in the past, experienced power shortages and outages, any of which could result in system failures or outages. If our information systems fail or are otherwise unavailable, these functions would have to be accomplished manually, which could impact our ability to respond to business opportunities quickly, to pay our staff in a timely fashion and to bill for services efficiently.

If we are not able to remain competitive in obtaining and retaining temporary staffing clients, our future growth will suffer.

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The contract staffing industry is highly competitive and fragmented with limited barriers to entry. We compete in national, regional and local markets with full-service agencies and in regional and local markets with specialized contract staffing agencies. Some of our competitors in the Nurse Travel line of business include AMN Healthcare Services, Inc., Cross Country, Inc. and several privately-held companies. Some of our competitors in the Life Sciences segment and Allied Healthcare line of business include Kelly Services, Inc., Kforce Inc., Manpower, Inc., Adecco, SA, Yoh Company, and Allegis Group. Competitors for the Physician segment include CHG Healthcare Services, Cross Country, TeamHealth, Inc. and AMN Healthcare Services, Inc., along with several other privately-held companies specializing in locum tenens services. Competitors of our IT and Engineering segment include Robert Half International, Accenture, Yoh Company and Aerotek. Several of these companies have significantly greater marketing and financial resources than we do. Our ability to attract and retain clients is based on the value of the service we deliver, which in turn depends principally on the speed with which we fill assignments and the appropriateness of the match based on clients’ requirements and the skills and experience of our contract professionals. Our ability to attract and retain skilled, experienced contract professionals is based on our ability to pay competitive wages or contract rates, to provide competitive benefits and provide multiple, continuous assignments. To the extent that competitors seek to gain or retain market share by reducing prices or increasing marketing expenditures, we could lose revenues and our gross and operating margins could decline, which could seriously harm our operating results and cause the trading price of our stock to decline. As we expand into new geographic markets, our success will depend in part on our ability to gain market share from competitors. We expect competition for clients to increase in the future, and the success and growth of our business depend on our ability to remain competitive.

Agreements may be terminated by clients and contract professionals at will and the termination of a significant number of such agreements would adversely affect our revenues and results of operations.

Each contract professional’s employment or independent contractor’s relationship with us is terminable at will. A locum tenens physician may generally terminate his or her contract with VISTA for non-emergency reasons upon 60 days notice. The duration of agreements with clients are generally dictated by the contract. Usually, contracts with clients may be terminated with 30 days notice by us or by the clients and, oftentimes, assignments may be terminated with less than one week’s notice. We cannot assure that existing clients will continue to use our services at historical levels, if at all.   In addition, we continue to participate in an increasing number of third party contracts as a subcontractor and that require us to participate in vendor management contracts, which may subject us to a greater risks or lower margins.  If clients terminate a significant number of our staffing agreements or assignments and we are unable to generate new contract staffing orders to replace lost revenues or a significant number of our contract professionals terminate their employment with us and we are unable to find suitable replacements, our revenues and results of operations could be harmed.

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

As of December 31, 2009, we had international sales in the United Kingdom, Netherlands, Belgium, Canada, Ireland, Virgin Islands, New Zealand and Australia. Our international operations comprised approximately 5% of total sales for each of the three years ended December 31, 2009. We have limited experience in marketing, selling and, particularly, supporting our services outside of North America.

Operations in certain markets are subject to risks inherent in international business activities, including:

·   fluctuations in currency exchange rates;

·   complicated work permit requirements;

·   varying economic and political conditions;

·   seasonal reductions in business activity during the summer months in Europe and Asia;

·   overlapping or differing tax structures;

·   difficulties collecting accounts receivable; and

·   regulations concerning pay rates, benefits, vacation, union membership, redundancy payments and the termination of employment.

Our inability to effectively manage our international operations could result in increased costs and adversely affect our results of operations.

Improper activities of our contract professionals could result in damage to our business reputation, discontinuation of our client relationships and exposure to liability.

We may be subject to possible claims by our clients related to errors and omissions, misuse of proprietary information, discrimination and harassment, theft and other criminal activity, malpractice and other claims stemming from the improper activities or alleged activities of our contract professionals. We cannot assure that our current liability insurance coverage will be adequate or will continue to be available in sufficient amounts to cover damages or other costs associated with such claims. Claims raised by clients stemming from the improper actions of our contract professionals, even if without merit, could cause us to incur significant expense associated with the costs or damages related to such claims. Further, such claims by clients could damage our business reputation and result in the discontinuation of client relationships.

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Claims against us by our contract professionals for damages resulting from the negligence or mistreatment by our clients could result in significant costs and adversely affect our recruitment and retention efforts.

We may be subject to possible claims by our contract professionals alleging discrimination, sexual harassment, negligence and other similar activities. Our physicians, nurses and healthcare professionals may also be subject to medical malpractice claims. We cannot assure that our current liability insurance coverage will be adequate or will continue to be available in sufficient amounts to cover damages or other costs associated with such claims. Claims raised by our contract professionals, even if without merit, could cause us to incur significant expense associated with the costs or damages related to such claims. Further, any associated negative publicity could adversely affect our ability to attract and retain qualified contract professionals in the future.

If we are required to further write down goodwill or identifiable intangible assets, the related charge could materially impact our reported net income or loss for the period in which it occurs.

We have approximately $202.8 million in goodwill on our balance sheet at December 31, 2009, as well as $25.5 million in identifiable intangible assets. As part of the analysis of goodwill impairment, Accounting Standards Codification Topic 350, Intangibles - Goodwill and Other, requires the Company’s management to estimate the fair value of the reporting units on at least an annual basis and more frequently if events or changes in circumstances indicate that the carrying amount may not be recoverable. At December 31, 2009, we performed our annual goodwill and indefinite lived intangible assets impairment test and concluded that there was no further impairment of goodwill and intangible assets. In addition, at December 31, 2009, we determined that there were no events or changes in circumstances that indicated that the carrying values of other identifiable intangible assets subject to amortization may not be recoverable. While we believe that our goodwill was not impaired at December 31, 2009, our market capitalization experienced significant declines during 2009.  Declines in our market capitalization or any other impairment indicators subsequent to the balance sheet date could be an early indication that goodwill may become impaired in the future.  Although a future impairment of goodwill and identifiable intangible assets would not affect our cash flow, it would negatively impact our operating results.

If we are subject to material uninsured liabilities under our partially self-insured workers’ compensation program and medical malpractice coverage, our financial results could be adversely affected.

We maintain a partially self-insured workers’ compensation program and medical malpractice coverage. In connection with these programs, we pay a base premium plus actual losses incurred up to certain levels. We are insured for losses greater than certain levels, both per occurrence and in the aggregate. There can be no assurance that our loss reserves and insurance coverage will be adequate in amount to cover all workers’ compensation or medical malpractice claims. If we become subject to substantial uninsured workers’ compensation or medical malpractice liabilities or there is a significant change in the circumstances related to claims, our results of operations and financial condition could be adversely affected.

Our costs of providing travel and housing for traveling contract professionals may be higher than we anticipate and, as a result, our margins could decline.

If our travel and housing costs, including the costs of airline tickets, rental cars, apartments and rental furniture for our traveling contract professionals exceed the levels we anticipate, and we are unable to pass such increases on to our clients, our margins may decline. To the extent the length of our apartment leases exceed the terms of our staffing contracts, we bear the risk that we will be obligated to pay rent for housing we do not use. If we cannot source a sufficient number of appropriate short-term leases in regional markets, or if, for any reason, we are unable to efficiently utilize the apartments we do lease, we may be required to pay rent for unutilized or underutilized housing.  Effective management of travel costs will be necessary to prevent a decrease in gross profit and gross and operating margins.

Demand for our services is significantly impacted by changes in the general level of economic activity and continued periods of reduced economic activity could negatively impact our business and results of operations.

Demand for the contract staffing services that we provide is significantly impacted by changes in the general level of economic activity, particularly any negative effect on healthcare, research and development and quality control and capital spending. As economic activity slows, many clients or potential clients for our services reduce their usage of and reliance upon contract professionals before laying off their regular, full-time employees. During periods of reduced economic activity, we may also be subject to increased competition for market share and pricing pressure. As a result, continued periods of reduced economic activity could harm our business and results of operations.

We do not have long-term or exclusive agreements with our temporary staffing clients and growth of our business depends upon our ability to continually secure and fill new orders.

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We do not have long-term agreements or exclusive guaranteed order contracts with our temporary staffing clients. Assignments for our Life Sciences segment typically have a term of three to six months. Assignments for our Healthcare segment typically have a term of two to thirteen weeks. Assignments for our Physician segment typically have a term of six weeks. Assignments for our IT and Engineering segment typically have a term of approximately five months. The success of our business depends upon our ability to continually secure new orders from clients and to fill those orders with our contract professionals. Our agreements do not provide for exclusive use of our services, and clients are free to place orders with our competitors. As a result, it is imperative to our business that we maintain positive relationships with our clients. If we fail to maintain positive relationships with these clients, we may be unable to generate new contract staffing orders, and the growth of our business could be adversely affected.

Fluctuation in patient occupancy rates at client facilities could adversely affect demand for services of our Healthcare and Physician segments and our results of operations.

Client demand for our Healthcare and Physician segment services is significantly impacted by changes in patient occupancy rates at our hospital and healthcare clients’ facilities. Increases in occupancy often result in increased client need for contract professionals before full-time employees can be hired. During periods of decreased occupancy, however, hospitals and other healthcare facilities typically reduce their use of contract professionals before laying off their regular, full-time employees. During periods of decreased occupancy, we may experience increased competition to service clients, including pricing pressure. Occupancy at certain healthcare clients’ facilities also fluctuates due to the seasonality of some elective procedures and patients declining elective procedures. Periods of decreased occupancy at client healthcare facilities could materially adversely affect our results of operations.

The loss of key members of our senior management team could adversely affect the execution of our business strategy and our financial results.

We believe that the successful execution of our business strategy and our ability to build upon the significant recent investments in our business and acquisitions of new businesses depends on the continued employment of key members of our senior management team. If any members of our senior management team become unable or unwilling to continue in their present positions, our financial results and our business could be materially adversely affected.

Future changes in reimbursement trends could hamper our Healthcare and Physician segments clients’ ability to pay us, which would harm our financial results.

Many of our Healthcare and Physician segments’ clients are reimbursed under the federal Medicare program and state Medicaid programs for the services they provide. In recent years, federal and state governments have made significant changes in these programs that have reduced reimbursement rates. In addition, insurance companies and managed care organizations seek to control costs by requiring that healthcare providers, such as hospitals, discount their services in exchange for exclusive or preferred participation in their benefit plans. Future federal and state legislation or evolving commercial reimbursement trends may further reduce, or change conditions for, our clients’ reimbursement. Limitations on reimbursement could reduce our clients’ cash flows, thereby hampering their ability to pay us.

If our insurance costs increase significantly, these incremental costs could negatively affect our financial results.

The costs related to obtaining and maintaining workers’ compensation insurance, medical malpractice insurance, professional and general liability insurance and health insurance for our contract professionals have been increasing. If the cost of carrying this insurance continues to increase significantly, this may reduce our gross and operating margins and affect our financial results.

Healthcare reform could negatively impact our business opportunities, revenues and gross and operating margins.

The U.S. government has undertaken efforts to reform the healthcare system through legislation and regulation.  Healthcare reform proposals are generally intended to expand healthcare coverage for the uninsured and reduce the growth of total healthcare expenditures. While the U.S. Congress has not adopted any comprehensive reform proposals, Congress continues to consider such proposals. If any of these proposals are approved, hospitals and other healthcare facilities may react by spending less on healthcare staffing, including nurses and physicians. If this were to occur, we would have fewer business opportunities, which could seriously harm our business.  In addition, healthcare reform proposals, if approved, may require employers to provide healthcare insurance coverage to its employees.  If we are required to provide healthcare insurance coverage to our contract employees, we may not be able to increase client bill rates to cover the additional expense and this may reduce our gross and operating margins and affect our financial results.

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Furthermore, third-party payers, such as health maintenance organizations, increasingly challenge the prices charged for medical care. Failure by hospitals and other healthcare facilities to obtain full reimbursement from those third-party payers could reduce the demand or the price paid for our staffing services.

We operate in a regulated industry and changes in regulations or violations of regulations may result in increased costs or sanctions that could reduce our revenues and profitability.

Our organization is subject to extensive and complex federal and state laws and regulations including but not limited to laws and regulations related to professional licensure, payroll tax, conduct of operations, payment for services and payment for referrals. If we fail to comply with the laws and regulations that are directly applicable to our business, we could suffer civil and/or criminal penalties or be subject to injunctions or cease and desist orders.

Extensive and complex laws that apply to our hospital and healthcare facility clients, including laws related to Medicare, Medicaid and other federal and state healthcare programs, could indirectly affect the demand or the prices paid for our services. For example, our hospital and healthcare facility clients could suffer civil and/or criminal penalties and/or be excluded from participating in Medicare, Medicaid and other healthcare programs if they fail to comply with the laws and regulations applicable to their businesses. In addition, our hospital and healthcare facility clients could receive reduced reimbursements or be excluded from coverage because of a change in the rates or conditions set by federal or state governments. In turn, violations of or changes to these laws and regulations that adversely affect our hospital and healthcare facility clients could also adversely affect the prices that these clients are willing or able to pay for our services.

We may be subject to increases in payroll-related costs and state unemployment insurance taxes which, as a result, our margins could decline.

We currently pay federal, state and local payroll costs and taxes for our corporate employees and contract professional employees.  If we are subject to significant increases in costs associated with payroll and state unemployment taxes, we may not be able to increase client bill rates to cover the additional expense and this may reduce our gross and operating margins and affect our financial results.

The trading price of our common stock has experienced significant fluctuations, which could make it difficult for us to access the public markets for financing or use our common stock as consideration in a strategic transaction.

In 2009, the trading price of our common stock experienced significant fluctuations, from a high of $7.52 to a low of $1.28. The closing price of our common stock on The NASDAQ Global Select Market was $7.06 on March 10, 2010. Our common stock may continue to fluctuate widely as a result of a large number of factors, many of which are beyond our control, including:

·   period to period fluctuations in our financial results or those of our competitors;

·   failure to meet previously announced guidance or analysts’ expectations of our quarterly results;

·   announcements by us or our competitors of acquisitions, significant contracts, commercial relationships or capital commitments;

·   commencement of, or involvement in, litigation;

·   any major change in our board or management;

·   changes in government regulations, including those related to Medicare and Medicaid reimbursement policies;

·   recommendations by securities analysts or changes in earnings estimates;

·   announcements about our earnings that are not in line with analyst expectations;

·   the volume of shares of common stock available for public sale;

·   announcements by our competitors of their earnings that are not in line with analyst expectations;

·   sales of stock by us or by our shareholders;

·   short sales, hedging and other derivative transactions in shares of our common stock; and

·   general economic conditions, slow or negative growth of unrelated markets and other external factors.

The stock market has experienced extreme price and volume fluctuations that have affected the trading prices of the common stock of many companies involved in the temporary staffing industry. As a result of these fluctuations, we may encounter difficulty should we determine to access the public markets for financing or use our common stock as consideration in a strategic transaction.

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Future sales of our common stock and the future exercise of options may cause the market price of our common stock to decline and may result in substantial dilution.

We cannot predict what effect, if any, future sales of our common stock, or the availability of our common stock for sale will have on the market price of our common stock. Sales of substantial amounts of our common stock in the public market by management or us, or the perception that such sales could occur, could adversely affect the market price of our common stock and may make it more difficult for you to sell your common stock at a time and price which you may deem appropriate.

We have adopted anti-takeover measures that could prevent a change in our control.

In June 2003, we adopted a shareholder rights plan that has certain anti-takeover effects and will cause substantial dilution to a person or group that attempts to acquire us in a manner or on terms that have not been approved by our board of directors. This plan could delay or impede the removal of incumbent directors and could make more difficult a merger, tender offer or proxy contest involving us, even if such events could be beneficial, in the short-term, to the interests of our shareholders. In addition, such provisions could limit the price that some investors might be wiling to pay in the future for shares of our common stock. Our certificate of incorporation and bylaws contain provisions that limit liability and provide for indemnification of our directors and officers, and provide that our stockholders can take action only at a duly called meeting of stockholders. These provisions and others also may have the affect of deterring hostile takeovers or delaying changes in control or management.

Provisions in our corporate documents and Delaware law may delay or prevent a change in control that our stockholders consider favorable.

Provisions in our certificate of incorporation and bylaws could have the effect of delaying or preventing a change of control or changes in our management. These provisions include the following:

·   Our board of directors has the right to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors.

·   Our stockholders may not act by written consent. In addition, a holder or holders controlling a majority of our capital stock would not be able to take certain actions without holding a stockholder’s meeting, and only stockholders owning at least 50 percent of our entire voting stock must request in writing in order to call a special meeting of stockholders (which is in addition to the authority held by our board of directors to call a special stockholder meeting).

·   Stockholders must provide advance notice to nominate individuals for election to the board of directors or to propose matters that can be acted upon at a stockholders’ meeting. These provisions may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.

·   Our board of directors may issue, without stockholder approval, up to 1 million shares of undesignated or “blank check” preferred stock. The ability to issue undesignated or “blank check” preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt or make it more difficult for a third party to acquire us.

 As a Delaware corporation, we are also subject to certain Delaware anti-takeover provisions, including Section 203 of the Delaware General Corporation Law. Under these provisions, a corporation may not engage in a business combination with any large stockholders who hold 15 percent or more of our outstanding voting capital stock in a merger or business combination unless the holder has held the stock for 3 years, the board of directors has expressly approved the merger or business transaction or at least two-thirds of the outstanding voting capital stock not owned by such large stockholder approve the merger or the transaction. These provisions of Delaware law may have the effect of delaying, deferring or preventing a change of control, and may discourage bids for our common stock at a premium over its market price. In addition, our board of directors could rely on these provisions of Delaware law to discourage, prevent or delay an acquisition of us.

Item 1B. Unresolved Staff Comments

Not applicable .

Item 2. Properties

As of December 31, 2009, we leased approximately 30,500 square feet of office space through March 2011 for our field support and corporate headquarters in Calabasas, California.  Additionally, we leased 16,600 square feet of office space for our field support offices in Blue Ash, Ohio.  As of December 31, 2009, we leased approximately 56,000 square feet of office space through December 2016 at our VISTA headquarters in Salt Lake City, Utah, and 48,300 square feet of office space through December 2015 at our Oxford headquarters in Beverly, Massachusetts.

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In addition, we lease approximately 369,000 square feet of office space in approximately 73 branch office locations in the United States, United Kingdom, Netherlands, Belgium, Ireland and Canada. A branch office typically occupies space ranging from approximately 1,000 to 3,000 square feet with lease terms that typically range from six months to five years.

Item 3. Legal Proceedings

We are involved in various legal proceedings, claims and litigation arising in the ordinary course of business. However, based on the facts currently available, we do not believe that the disposition of matters that are pending or asserted will have a material adverse effect on our financial position,results of operations or cash flows.

Item 4.  Removed and Reserved

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PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters

Our common stock trades on The NASDAQ Global Select Market under the symbol ASGN. The following table sets forth the range of high and low sales prices as reported on The NASDAQ Global Select Market for each quarterly period within the two most recent fiscal years. At March 10, 2010, we had approximately 41 holders of record, approximately 3,400 beneficial owners of our common stock and 36,371,091 shares outstanding.

	Price Range of Common Stock
	High		Low
Year Ended December 31, 2009
First Quarter	$	5.79	$	1.28
Second Quarter	$	4.41	$	2.40
Third Quarter	$	6.29	$	3.53
Fourth Quarter	$	7.52	$	5.15
Year Ended December 31, 2008
First Quarter	$	6.98	$	4.32
Second Quarter	$	8.82	$	6.26
Third Quarter	$	9.70	$	7.26
Fourth Quarter	$	7.92	$	4.05

Since inception, we have not declared or paid any cash dividends on our common stock, and we currently plan to retain all earnings to support the development and expansion of our business and we have no present intention of paying any dividends on our common stock in the foreseeable future. However, the board of directors periodically reviews our dividend policy to determine whether the declaration of dividends is appropriate. Terms of our senior credit facility restrict our ability to pay dividends of more than $2.0 million per year.

 On June 15, 2001, the Company’s Board of Directors authorized the repurchase of up to 2,940,939 shares of common stock. As of December 31, 2003, the Company had repurchased 2,662,500 shares of its common stock at a total cost of $23.0 million. The Company did not repurchase any shares during 2004, 2005 and 2006.  In  2007, the Company repurchased the remaining 278,439 shares of its common stock for $2.0 million. At December 31, 2009, the Company has no remaining authorization to repurchase shares. Effective December 31, 2009, the Company retired all of its treasury stock.

Stock Performance Graph

The following graph compares the performance of On Assignment’s common stock price during the period from December 31, 2004 to December 31, 2009 with the composite prices of companies listed on the NASDAQ Stock Market and of companies included in the SIC Code No. 736—Personnel Supply Services Companies Index. The companies listed in the SIC Code No. 736 include peer companies in the same industry or line of business as On Assignment.

The graph depicts the results of investing $100 in On Assignment’s common stock, the NASDAQ Stock Market composite index and an index of the companies listed in the SIC Code No. 736 on December 31, 2004 and assumes that dividends were reinvested during the period.

The comparisons shown in the graph below are based upon historical data, and we caution stockholders that the stock price performance shown in the graph below is not indicative of, nor intended to forecast, potential future performance.

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	Year Ended December 31,
	2009		2008		2007		2006		2005		2004
On Assignment, Inc.	$	137.76	$	109.25	$	135.07	$	226.40	$	210.21	$	100.00
SIC Code No. 736 Index—Personnel Supply Services Company Index	$	90.49	$	62.89	$	96.37	$	130.20	$	103.47	$	100.00
NASDAQ Stock Market Index	$	108.56	$	74.71	$	124.57	$	112.68	$	102.20	$	100.00

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Item 6. Selected Financial Data

The following table presents selected financial data of On Assignment. This selected financial data should be read in conjunction with the consolidated financial statements and notes thereto included under “Financial Statements and Supplementary Data” in Part II, Item 8 of this report.

	Year Ended December 31,
	2009			2008			2007(1)			2006			2005
	(in thousands, except per share data)
Income Statement Data:
Revenues	$	416,613		$	618,058		$	567,180		$	287,566		$	237,856
Cost of services		280,245			418,602			387,643			209,725			174,627
Gross profit		136,368			199,456			179,537			77,841			63,229
Selling, general and administrative expenses		121,141			155,942			151,942			67,900			64,135
Operating income (loss)		15,227			43,514			27,595			9,941			(906	)
Interest expense		(6,612	)		(9,998	)		(12,174	)		(54	)		—
Interest income		170			715			1,394			1,698			681
Income (loss) before income taxes		8,785			34,231			16,815			11,585			(225	)
Provision (benefit) for income taxes		4,078			15,261			7,493			541	(2)		(129	)
Net income (loss)	$	4,707		$	18,970		$	9,322		$	11,044		$	(96	)
Earnings (loss) per share:
Basic	$	0.13		$	0.53		$	0.27		$	0.41		$	(0.00	)
Diluted	$	0.13		$	0.53		$	0.26		$	0.39		$	(0.00	)
Number of shares and share equivalents used to calculate earnings (loss) per share:
Basic		36,011			35,487			35,138			27,155			25,464
Diluted		36,335			35,858			35,771			28,052			25,464
Balance Sheet Data (at end of period):
Cash, cash equivalents, restricted cash and current portion of marketable securities	$	25,974		$	46,271		$	37,764		$	110,161		$	25,365
Working capital		62,238			91,192			79,009			135,501			47,629
Total assets		343,462			401,850			384,680			186,995			93,705
Long-term liabilities		84,847			129,805			140,803			627			70
Stockholders’ equity		226,661			218,514			193,034			165,944			76,637

(1) On January 3, 2007, we acquired VISTA Staffing Solutions, Inc., and on January 31, 2007, we acquired Oxford Global Resources, Inc.

(2)  In 2006, there was a reversal of the valuation allowance of $4.9 million that was recorded against our net deferred income tax assets in 2004 and 2005.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, the words “believes,” “anticipates,” “plans,” “expects,” “intends” and similar expressions that convey uncertainty of future events or outcomes are forward-looking statements. Forward-looking statements include statements regarding our anticipated financial and operating performance for future periods. Our actual results could differ materially from those discussed or suggested in the forward-looking statements herein. Factors that could cause or contribute to such differences or prove our forward-looking statements, by hindsight, to be overly optimistic or unachievable include, but are not limited to, the following:

·   actual demand for our services;

·   our ability to attract, train, and retain qualified staffing consultants;

·   our ability to remain competitive in obtaining and retaining temporary staffing clients;

·   the availability of qualified temporary nurses and other qualified contract professionals;

·   our ability to manage our growth efficiently and effectively; and

·   continued performance of our information systems.

For a discussion of these and other factors that may impact our realization of our forward-looking statements, see “Risk Factors” within Item 1A of Part I of this Annual Report on Form 10-K. Other factors may also contribute to the differences between our forward-looking statements and our actual results. In addition, as a result of these and other factors, our past financial performance should not be relied on as an indication of future performance. All forward-looking statements in this document are based on information available to us as of the date we file this Annual Report on Form 10-K, and we assume no obligation to update any forward-looking statement or the reasons why our actual results may differ.

Overview

On Assignment, Inc. is a diversified professional staffing firm providing flexible and permanent staffing solutions in specialty skills including Laboratory/Scientific, Healthcare/Nursing, Physicians, Medical Financial, Information Technology and Engineering. We provide clients in these markets with short-term or long-term assignments of contract professionals, contract-to-permanent placement and direct placement of these professionals. Our business currently consists of four operating segments: Life Sciences, Healthcare, Physician, and IT and Engineering.

Economic conditions in 2009 were challenging with tight credit markets, volatile financial markets, low consumer confidence and high unemployment rates.

Our consolidated revenues and gross profit decreased in 2009 compared to 2008 as demand for temporary staffing services weakened as a result of the economic environment.  Despite the decrease in revenues, we remained disciplined in maintaining margins and positioning our Company for future growth and profitability.  In 2009, we generated higher operating cash flows than in 2008 and decreased our long-term debt.

 Many strategic factors helped sustain our business during 2009, including our business model that includes professional diversification, expanded product lines and a commitment to excellent service to better serve our end markets.  Our four operating segments, Life Sciences, Healthcare, Physician and IT and Engineering segments provide a mutually supportive infrastructure where we share best practices and maximize cross selling opportunities.

We are confident that as conditions in the U.S. and global economy improve in 2010, we will be in a position of great opportunity as companies with a need to create new jobs, yet with uncertainty about sustainable growth, will turn to professional staffing firms for their contract needs.

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Results of Operations

The following table summarizes selected income statement data expressed as a percentage of revenues:

	Year Ended December 31,
	2009			2008			2007
Revenues		100.0	%		100.0	%		100.0	%
Cost of services		67.3			67.7			68.3
Gross profit		32.7			32.3			31.7
Selling, general and administrative expenses		29.1			25.2			26.8
Operating income		3.6			7.1			4.9
Interest income		0.0			0.1			0.2
Interest expense		(1.5	)		(1.6	)		(2.1	)
Income before income taxes		2.1			5.6			3.0
Provision for income taxes		1.0			2.5			1.4
Net income		1.1	%		3.1	%		1.6	%

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2009

COMPARED WITH THE YEAR ENDED DECEMBER 31, 2008

Revenues.

	Year Ended December 31,				Change
	2009		2008		$			%
Revenues by segment (in thousands):
Life Sciences	$	93,664	$	129,483	$	(35,819	)	(27.7	%)
Healthcare		97,137		180,671		(83,534	)	(46.2	%)
Physician		87,719		89,217		(1,498	)	(1.7	%)
IT and Engineering		138,093		218,687		(80,594	)	(36.9	%)
Total Revenues	$	416,613	$	618,058	$	(201,445	)	(32.6	%)

Revenues decreased $201.4 million, or 32.6 percent, as a result of weakened demand for our services in all segments.

Life Sciences segment revenues decreased $35.8 million, or 27.7 percent. The decrease in revenues was primarily attributable to a 24.8 percent decrease in the average number of contract professionals on assignment, as well as a $3.4 million, or 54.8 percent decrease in direct hire and conversion fees. Based on our research and client feedback, we believe this was a direct result of our clients’ decisions to focus more on cost containment than on completing projects and developing new products or enhancing existing product lines during this challenging economic period, decreased venture capital funding in the life sciences sector, softness in the clinical trials arena, which is closely tied to the struggling pharmaceutical industry, decreased demand for recent graduates and lower level scientific skill disciplines.

Healthcare segment revenues (comprised of our Nurse Travel and Allied Healthcare lines of business) decreased $83.5 million, or 46.2 percent. Nurse Travel revenues decreased $69.4 million, or 55.5 percent, to $55.6 million primarily as a result of a 51.1 percent decrease in the average number of nurses on assignment and a 3.4 percent decrease in the average bill rate. Allied Healthcare revenues decreased $14.1 million, or 25.3 percent, to $41.5 million due to a 21.1 percent decrease in the average number of contract professionals on assignment, partially offset by a 6.5 percent increase in the average bill rate. Based on our research and client feedback, we believe the decrease in revenues was attributable to less demand from hospitals and other healthcare facilities as they reduced their usage of contract professionals in response to declining patient admissions, endowment balances, reduced charitable contributions and the inability to access the credit markets during this challenging economic period.

Physician segment revenues decreased $1.5 million, or 1.7 percent. The decrease in revenue was primarily attributable to a 13.2 percent decrease in the average number of physicians on assignment and a $0.9 million decrease in reimbursable revenue for billable expenses, partially offset by a 2.3 percent increase in the average bill rate.  Based on industry research and client feedback, we believe the decrease in revenues reflects the uncertainty surrounding health care reform and the decline in patient admissions which has slowed down our clients’ hiring decisions.

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IT and Engineering segment revenues decreased $80.6 million, or 36.9 percent.  The decrease in revenues was primarily due to a 31.8 percent decrease in the average number of contract professionals on assignment, an 8.8 percent decrease in the average bill rate and a $3.7 million decrease in reimbursable revenue for billable expenses.  Based on client feedback, the decrease in revenues was mainly the result of the current economic environment and the lack of capital available to clients for projects and programs.

Gross Profit and Gross Margins.

	Year Ended December 31,
	2009					2008
	Gross Profit		Gross Margin			Gross Profit		Gross Margin
Gross Profit by segment (in thousands):
Life Sciences	$	30,470		32.5	%	$	43,502		33.6	%
Healthcare		27,329		28.1	%		46,265		25.6	%
Physician		28,545		32.5	%		27,369		30.7	%
IT and Engineering		50,024		36.2	%		82,320		37.6	%
Total Gross Profit	$	136,368		32.7	%	$	199,456		32.3	%

The year-over-year gross profit decrease was primarily due to the decline in revenues in all four segments, partially offset by a 46 basis point expansion in consolidated gross margin. The increase in gross margin was primarily attributable to margin expansion in the Healthcare and Physician segments and a shift in mix from our Nurse Travel line of business which has the lowest gross margin.

Life Sciences segment gross profit decreased $13.0 million, or 30.0 percent. The decrease in gross profit was primarily due to a 27.7 percent decrease in the segment revenues and a 107 basis point contraction in gross margin mainly due to a $3.4 million decrease in direct hire and conversion fee revenues. The contraction in gross margin was partially offset by a $0.5 million decrease in workers’ compensation expense as a result of both lower claim frequency and favorable settlements.

Healthcare segment gross profit decreased $18.9 million, or 40.9 percent. The decrease in gross profit was due to a 46.2 percent decrease in the segment revenues, partially offset by a 252 basis point expansion in gross margin. The expansion in gross margin was primarily due to a 117 basis point decrease in travel related expenses, an 88 basis point reduction in other employee-related expenses and a 38 basis point decrease in workers’ compensation expense as a result of our loss control efforts. The expansion in gross margin was partially offset by an 8.5 percent decrease in the bill/pay spread. Within this segment Allied Healthcare gross profit decreased 22.4 percent while gross margin expanded 123 basis points and Nurse Travel gross profit decreased 52.4 percent while gross margin increased 160 basis points.

Physician segment gross profit increased $1.2 million, or 4.3 percent. The increase in gross profit was attributable to a 186 basis point expansion in gross margin, partially offset by a $1.5 million decrease in revenue. The expansion in gross margin was primarily due to a 6.9 percent increase in the bill/pay spread as well as a 0.9 million increase in direct hire and conversion fee revenues. The expansion in gross margin was partially offset by an increase of $0.5 million in medical malpractice expense, which included a $0.6 million non-cash expense related to the Company’s adjustment of the discount rate applied to our medical malpractice liability because of the decrease in interest rates.

IT and Engineering segment gross profit decreased $32.3 million, or 39.2 percent, primarily due to a 36.9 percent decrease in revenues and a contraction in gross margin of 142 basis points.  The contraction in gross margin was primarily due to an 11.3 percent decrease in the bill/pay spread and a $1.0 million decrease in direct hire and conversion fee revenues.

Selling, General and Administrative Expenses.  Selling, general and administrative (SG&A) expenses include field operating expenses, such as costs associated with our network of staffing consultants and branch offices for each of our four segments, including staffing consultant compensation, rent, other office expenses, marketing and recruiting expenses for our contract professionals. SG&A expenses also include our corporate and branch office support expenses, such as the salaries of corporate operations and support personnel, recruiting and training expenses for field staff, marketing staff expenses, expenses related to being a publicly-traded company and other general and administrative expenses.

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SG&A expenses decreased $34.8 million, or 22.3 percent, to $121.1 million from $155.9 million. The decrease in SG&A expenses was primarily due to a $23.9 million decrease in compensation and benefits as a result of lower headcount as compared with the prior year.  The decrease in SG&A expenses was also due to a $3.4 million decrease in amortization expense as certain intangible assets became fully amortized beginning in late 2008, as well as a $2.2 million decrease in travel related expense and a $1.4 million decrease in marketing expense. Total SG&A expenses as a percentage of revenues increased to 29.1 percent in the 2009 period from 25.2 percent in the same period in 2008, primarily due to revenue decreasing faster than SG&A expenses in 2009.

Interest expense and interest income.  Interest expense was $6.6 million in 2009 compared with $10.0 million in 2008.  This decrease was primarily due to a $1.3 million gain in 2009 compared with a $0.1 million loss in 2008 for the mark-to-market adjustment on our interest rate swap, which expired on June 30, 2009 and lower average debt balances, partially offset by higher interest rates as a result of the debt amendment completed in the first quarter of 2009.

Interest income was $0.2 million and $0.7 million for the years ended 2009 and 2008, respectively. Interest income in the current period decreased compared to 2008 due to lower account balances invested in interest-bearing accounts and lower average interest rates.

Provision for Income Taxes. The provision for income taxes was $4.1 million for the year ended December 31, 2009 compared with $15.3 million for 2008. The annual effective tax rate for 2009 was 46.4 percent compared with 44.6 percent for 2008. The increase in the annual effective tax rate was attributable to a decline in the income before income taxes for the year while our level of permanent differences was comparable with 2008.

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2008

COMPARED WITH THE YEAR ENDED DECEMBER 31, 2007

Revenues.

	Year Ended December 31,				Change
	2008		2007		$			%
Revenues by segment (in thousands):
Life Sciences	$	129,483	$	134,622	$	(5,139	)	(3.8	%)
Healthcare		180,671		175,079		5,592		3.2	%
Physician		89,217		74,599		14,618		19.6	%
IT and Engineering		218,687		182,880		35,807		19.6	%
Total Revenues	$	618,058	$	567,180	$	50,878		9.0	%

Revenues increased $50.9 million, or 9.0 percent as a result of growth in our Healthcare, Physician, IT and Engineering segments. The growth was due to both demand in our end markets, as well as an expanded and more experienced sales and fulfillment team.In the latter half of 2007, we made management changes and realigned certain geographic markets in our Healthcare segment in order to generate higher revenue growth. The 2008 period included twelve months of activity from the IT and Engineering segment, as opposed to only eleven months in the 2007 period.

Life Sciences segment revenues decreased $5.1 million, or 3.8 percent. The decrease in revenues was primarily attributable to a 9.8 percent decrease in the average number of contract professionals on assignment, a $0.6 million, or 28.3 percent, decrease in conversion fee revenues and the deteriorating foreign exchange rate for the British Pound and the Euro combined with a deepening recession in the United Kingdom and the United States.  These decreases were partially offset by a 5.4 percent increase in the average bill rate and a $0.2 million increase in permanent placement fees. The year-over-year decrease in revenues was a direct result of our clients’ decisions to focus more on cost containment than on completing projects, developing new products or enhancing existing product lines during this challenging economic period.

The overall increase in Healthcare segment revenues, which include our Nurse Travel and Allied Healthcare lines of business, consisted of an increase in both the Nurse Travel and Allied Healthcare lines of business revenues.Nurse Travel revenues increased $5.3 million, or 4.4 percent, to $125.1 million. The increase in revenues was primarily attributable to a 4.0 percent increase in the average number of nurses on assignment, as well as a 2.9 percent increase in the average bill rate. The Nurse Travel revenues in 2008 also included $2.4 million related to supporting a long standing customer that experienced a labor disruption. The Nurse Travel results include a decrease in revenues derived from hospitals that experienced labor disruptions, which for the year ended December 31, 2007 were $2.8 million.  Allied Healthcare revenues increased $0.3 million, or 0.6 percent due to a 4.8 percent increase in the average bill rate and an increase in billable expenses, partially offset by a 6.7 percent decrease in the average number of contract professionals on assignment. In addition, direct hire revenues in the Allied Healthcare line of business decreased $0.2 million, or 13.5 percent.

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Physician segment revenues increased $14.6 million, or 19.6 percent. The increase in revenues in 2008 was primarily due to an 11.2 percent increase in the average number of contract professionals on assignment as well as a 7.3 percent increase in the average bill rate as a result of a strong demand environment as a result of a shortage of physicians.

The IT and Engineering segment revenues increased $35.8 million, or 19.6 percent. The increase in revenue was primarily due to a 7.3 percent increase in the average number of contract professionals on assignment, a 3.5 percent increase in the average bill rate as well as an increase in conversion and direct hire fee revenue and billable expenses. In addition, revenues for 2007 only included eleven months of results because the Company completed its acquisition of Oxford on January 31, 2007.

Gross Profit and Gross Margins.

	Year Ended December 31,
	2008					2007
	Gross Profit		Gross Margin			Gross Profit		Gross Margin
Gross Profit by segment (in thousands):
Life Sciences	$	43,502		33.6	%	$	45,024		33.4	%
Healthcare		46,265		25.6	%		44,269		25.3	%
Physician		27,369		30.7	%		21,808		29.2	%
IT and Engineering		82,320		37.6	%		68,436		37.4	%
Total Gross Profit	$	199,456		32.3	%	$	179,537		31.7	%

The year-over-year gross profit increase was due to growth in revenues in the IT and Engineering, Physician and Healthcare segments and a 62 basis point expansion in consolidated gross margin. The expansion in gross margin was primarily attributable to increases in margins in the Physician and Healthcare segments and to a higher proportion of revenues from the IT and Engineering segment, which has higher gross margins than the other segments.  The 2008 period included twelve months of reportable activity from the IT and Engineering segment as compared with only eleven months in the 2007 period.

Life Sciences segment gross profit decreased $1.5 million, or 3.4 percent. The decrease in gross profit was primarily due to a 3.8 percent decrease in the segment revenues partially offset by an increase of 16 basis points in gross margin. The increase in gross margin was predominantly due to a 7.1 percent increase in bill/pay spread as a result of our continued focus on pricing policies and increased direct hire revenues.

Healthcare segment gross profit increased $2.0 million, or 4.5 percent. The increase in gross profit was due to a 3.2 percent increase in the segment revenues and an increase in gross margin. Gross margin for the segment increased 32 basis points due to an increase in the bill/pay spread, partially offset by an increase in other contract employee expenses. This segment includes gross profit from the Nurse Travel and Allied Healthcare lines of business. Allied Healthcare gross profit increased 0.7 percent and gross margin increased 2 basis points while Nurse Travel gross profit increased 7.0 percent and gross margin increased 57 basis points. Gross margins in the first quarter of a year tend to be lower than the fourth quarter of the preceding year due to the reset of certain payroll taxes.

Physician segment gross profit increased $5.6 million, or 25.5 percent. The increase in gross profit was primarily attributable to a 19.6 percent increase in revenues as well as an increase in gross margin. Gross margin for the segment increased 145 basis points primarily due to an increase in bill/pay spread, partially offset by increased medical malpractice expense. The segment began adjusting bill rates simultaneously with adjustments in the pay rates when possible which positively impacted the bill/pay spread in 2008.

IT and Engineering segment gross profit increased $13.9 million, or 20.3 percent, primarily due to a 19.6 percent increase in revenues, as the 2008 period included twelve months of reportable activity versus eleven months in 2007, as well as an increase in gross margin for the segment. Gross margin for the segment increased 22 basis points, primarily due to an increase in bill/pay spread and a $0.8 million, or 83.7 percent increase in conversion fee revenue, partially offset by a $3.2 million, or 31.0 percent increase in other contract employment expenses.

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Selling, General and Administrative Expenses.  SG&A expenses include field operating expenses, such as costs associated with our network of staffing consultants and branch offices for our Life Sciences segment and our Allied Healthcare lines of business, including staffing consultant compensation, rent and other office expenses, as well as marketing and recruiting for our contract professionals. Nurse Travel SG&A expenses include compensation for regional sales directors, account managers and recruiters, as well as rent and other office expenses and marketing for traveling nurses. SG&A expenses from our Physician and IT and Engineering segments include compensation for sales personnel, as well as rent and other office expenses and marketing for these segments. SG&A expenses also include our corporate and branch office support expenses, such as the salaries of corporate operations and support personnel, recruiting and training expenses for field staff, marketing staff expenses, rent, expenses related to being a publicly-traded company and other general and administrative expenses.

SG&A expenses increased $4.0 million, or 2.6 percent, to $155.9 million from $151.9 million. The increase in SG&A was primarily due to a $10.2 million increase in compensation and benefits as a result of increased revenues, and SG&A expenses of the IT and Engineering segment being included for twelve months in 2008 compared to only eleven months in 2007.The increase in SG&A expense was partially offset by a $7.0 million decrease in depreciation and amortization expenses, primarily related to a reduction of the amortization amount for other intangibles in 2008. Total SG&A as a percentage of revenues decreased to 25.2 percent in the 2008 period from 26.8 percent in the 2007 period, primarily due to decreased depreciation and amortization expense.

Interest expense and interest income.  Interest expense was $10.0 million and $12.2 million for the years ended December 31, 2008 and 2007, respectively.The decrease in interest expense was primarily due to lower average debt balances in 2008 due to $9.7 million principal payments in 2007, and a decrease in average interest rates during 2008. On December 31, 2008 and 2007, the value of our interest rate swap was marked-to-market, and we recorded a loss of $0.1 million and $1.2 million, respectively, for the years then ended, which is shown in interest expense, and the related liability of $1.3 million and $1.2 million, respectively, was included in the Consolidated  Balance Sheets in other current liabilities.

Interest income was $0.7 million and $1.4 million for the years ended December 31, 2008 and 2007, respectively. Interest income in the current period was also lower due to lower average interest rates in 2008.

Provision for Income Taxes. The provision for income taxes was $15.3 million for the year ended December 31, 2008 compared to $7.5 million for the same period in the prior year. The annual effective tax rate was 44.6 percent for 2008 and 2007.

Liquidity and Capital Resources

Our working capital at December 31, 2009 was $62.2 million and our cash and cash equivalents were $26.0 million. Our operating cash flows have been our primary source of liquidity and historically have been sufficient to fund our working capital and capital expenditure needs. Our working capital requirements consist primarily of the financing of accounts receivable, payroll expenses and the periodic payments of principal and interest on our term loan.

Net cash provided by operating activities was $42.0 million for 2009 compared with $35.4 million for 2008.  This increase was due to cash generated from the reduction in net operating assets and liabilities during 2009, mainly from lower accounts receivable. The decrease in accounts receivable reflects the decline in revenues during the year and improved days sales outstanding.

Net cash used in investing activities was $13.8 million during 2009 compared with $17.7 million during 2008, primarily due to lower capital expenditures.  Net cash from investing activities included proceeds of $0.5 million from insurance settlements in the third quarter of 2009. Capital expenditures related to information technology projects, leasehold improvements and various property and equipment purchases during 2009 totaled $4.7 million, compared with $8.2 million during 2008. We estimate capital expenditures to be approximately $4.8 million for 2010.

Net cash used in financing activities was $49.0 million for 2009, compared with net cash used in financing activities of $8.4 million for 2008.  During 2009, we paid down our term loan facility by $48.0 million compared with $10.0 million paid down during 2008.

Under terms of our credit facility, we are required to maintain certain financial covenants, including a minimum total leverage ratio, a minimum interest coverage ratio and a limitation on capital expenditures. The facility also restricts our ability to pay dividends of more than $2.0 million per year. On March 27, 2009, we entered into an amendment to our credit facility that modified certain financial covenants.  Under the terms of the amended facility, the maximum total leverage ratio (total debt to EBITDA, as defined by the credit agreement for the preceding 12 months) is as follows:

January 1, 2009 – December 31, 2009	3.25 to 1.00
January 1, 2010 – September 30, 2010	3.00 to 1.00
October 1, 2010 – December 31, 2011	2.75 to 1.00
January 1, 2012 and thereafter	2.50 to 1.00

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Additionally, the minimum interest coverage ratio (EBITDA to interest expense, as defined by the credit agreement for the preceding 12 months) is 4.00 to 1.00 until maturity.  The amendment also modified the definition of the LIBOR rate to include a 3.0 percent floor and increased the spread on revolving and term loans by 150 basis points to 3.75 percent. As a condition to the effectiveness of the amendment, we paid down the principal balance on the term loan by $15.0 million.  In 2009, we paid down an additional $33.0 million on the principal balance of our term loan.  The payments were sufficient to cover the excess cash flow payment required by the bank, as well as all minimum quarterly payments until maturity on January 31, 2013.  Based on our current operating plan, we believe we will maintain compliance with the covenants contained in our credit facility for the next 12 months.  

The VISTA earn-out related to the 2008 operating performance of VISTA was paid in April 2009.  We notified the selling shareholders of VISTA of certain claims for indemnification, totaling $1.4 million, which was recorded as a decrease to goodwill and an increase in other current assets as of December 31, 2008.  We anticipate that the remaining balance of $0.5 million of the indemnification payments will be settled by the agreement of all applicable parties to the terms and provisions related to such payment in 2010. In October 2009, we paid $4.8 million of the earn-out related to the 2008 operating performance of Oxford. The Company has no additional earn-out payment obligations.

We continue to make progress on enhancements to our front-office and back-office information systems.  These enhancements include the consolidation of back-office systems across all corporate functions, as well as enhancements to and broader application of our front-office software across all lines of business. The timing of the full integration of information systems used by VISTA and Oxford will remain a consideration of management.

We believe that our working capital as of December 31, 2009, our credit facility and positive operating cash flows expected from future activities will be sufficient to fund future requirements of our debt obligations, accounts payable and related payroll expenses as well as capital expenditure initiatives for the next twelve months.

Commitments and Contingencies

 We lease space for our corporate and branch offices. Rent expense was $8.2 million in 2009, $9.5 million in 2008 and $8.8 million in 2007.

 The following table sets forth, on an aggregate basis, at December 31, 2009, the amounts of specified contractual cash obligations required to be paid in the periods shown (in thousands):

Contractual Obligations	2010		2011		2012		2013		2014		Thereafter		Total
Long-term debt obligations	$	―	$	―	$	―	$	77,913	$	―	$	―	$	77,913
Operating lease obligations		6,196		3,939		2,492		1,936		1,733		2,317		18,613
Total	$	6,196	$	3,939	$	2,492	$	79,849	$	1,733	$	2,317	$	96,526

 For additional information about these contractual cash obligations, see Note 7 to our Consolidated Financial Statements appearing in Part II, Item 8 of this report. Interest payments related to our bank debt are not set forth in the table above.

 As of December 31, 2009, included in other current assets is a balance of $0.5 million for claims indemnifiable by the selling shareholders of VISTA, which we anticipate will be settled by the agreement of all applicable parties to the terms and provisions related to such payment in 2010. See Note 3 to our Consolidated Financial Statements appearing in Part II, Item 8 of this report.

We are partially self-insured for our workers' compensation liability related to the Life Sciences, Healthcare and IT and Engineering segments as well as its medical malpractice liability in relation to the Physician segment. In connection with this program, we pay a base premium plus actual losses incurred up to certain levels and are insured for losses greater than certain levels per occurrence and in the aggregate. The self-insurance claim liability is determined based on claims filed and claims incurred but not yet reported. We account for claims incurred but not yet reported based on estimates derived from historical claims experience and current trends of industry data. Changes in estimates, differences in estimates and actual payments for claims are recognized in the period that the estimates changed or payments were made. The self-insurance claim liability was approximately $10.3 million and $9.8 million at December 31, 2009 and 2008, respectively.  Additionally, we have letters of credit outstanding to secure obligations for workers’ compensation claims with various insurance carriers.  The letters of credit outstanding at December 31, 2009 and 2008 were $3.8 million and $3.5 million, respectively.         

 As of December 31, 2009 and 2008, we have an income tax reserve in other long-term liabilities related to our uncertain tax positions of $0.3 million.

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 We are involved in various other legal proceedings, claims and litigation arising in the ordinary course of business. However, based on the facts currently available, we do not believe that the disposition of matters that are pending or asserted will have a material adverse effect on our consolidated financial statements.

Off-Balance Sheet Arrangements

 As of December 31, 2009, the Company had no significant off-balance sheet arrangements other than operating leases and letters of credit outstanding.

Accounting Standards Updates

 The Company adopted the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) in the quarter ended September 30, 2009. The ASC does not alter current accounting principles generally accepted in the Unites States of America (GAAP), but rather integrated existing accounting standards with other authoritative guidance. The ASC provides a single source of authoritative GAAP for nongovernmental entities and supersedes all other previously issued non-SEC accounting and reporting guidance. The adoption of the ASC did not have any effect on the Company’s consolidated financial statements.

In January 2010, the FASB issued an update to ASC Topic 820, Fair Value Measurements and Disclosures (ASC 820), which requires new disclosures for fair value measurements and provides clarification for existing disclosures requirements. More specifically, this update will require (a) an entity to disclose separately the amounts of significant transfers in and out of Levels 1 and 2 fair value measurements and to describe the reasons for the transfers; and (b) information about purchases, sales, issuances and settlements to be presented separately (i.e. present the activity on a gross basis rather than net) in the reconciliation for fair value measurements using significant unobservable inputs (Level 3 inputs). This guidance clarifies existing disclosure requirements for the level of disaggregation used for classes of assets and liabilities measured at fair value and requires disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements using Level 2 and Level 3 inputs. The new disclosures and clarifications of existing disclosure are effective for fiscal years beginning after December 15, 2009, except for the disclosure requirements related to the purchases, sales, issuances and settlements in the rollforward activity of Level 3 fair value measurements, which are effective for fiscal years ending after December 31, 2010. The Company is in the process of evaluating the impact of this guidance on the Company’s consolidated financial statements, which will be effective in the quarter ended March 31, 2010.

In September 2009, the FASB issued an update to ASC Topic 605, Revenue Recognition, which establishes the criteria for separating consideration in multiple-element arrangements.  The updated guidance requires companies allocating the overall consideration to each deliverable to use an estimated selling price of individual deliverables in the arrangement in the absence of vendor-specific evidence or other third-party evidence of the selling price for the deliverables and it also provides additional factors that should be considered when determining whether software in a tangible product is essential to its functionality. The Company is in the process of evaluating the impact of this guidance on the Company’s consolidated financial statements, which will be effective January 1, 2011.

In August 2009, the FASB issued an update to ASC 820on measuring liabilities at fair value. The guidance provides clarification that in circumstances in which a quoted market price in an active market for an identical liability is not available, an entity is required to measure fair value using a valuation technique that uses the quoted price of an identical liability when traded as an asset or, if unavailable, quoted prices for similar liabilities or similar assets when traded as assets. If none of this information is available, an entity should use a valuation technique in accordance with existing fair valuation principles.  The Company adopted the measurement requirements of this guidance in the quarter ended December 31, 2009 with no impact on the consolidated financial statements.

In May 2009, the FASB issued an update to ASC Topic 855, Subsequent Events, on accounting and disclosure.  The Company adopted this guidance in the quarter ended June 30, 2009 with no impact on the consolidated financial statements. See Note 1 to our Consolidated Financial Statements appearing in Part II, Item 8 of this report under Subsequent Events for the related disclosure required by this standard.

      In April 2009, the FASB issued an update to ASC 820 on determining fair value when the volume and level of activity for an asset or liability has significantly decreased, and in identifying transactions that are not orderly.  The Company adopted this guidance in the quarter ended June 30, 2009 with no impact to the consolidated financial statements.

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 In April 2009, the FASB issued an update to ASC Topic 805, Business Combinations, to include additional requirements regarding accounting for assets acquired and liabilities assumed in a business combination. The Company implemented these requirements with no impact on the consolidated financial statements.

In April 2009, the FASB issued an update to ASC Topic 825, Financial Instruments, to include additional requirements regarding interim disclosures about the fair value of financial instruments which were previously only disclosed on an annual basis. The Company adopted these requirements in the quarter ended June 30, 2009. See Note 12 to our Consolidated Financial Statements appearing in Part II, Item 8 of this report for the disclosures required by this standard.

On January 1, 2009, the Company implemented the deferred provisions under ASC 820 related to non-financial assets and liabilities measured on a non-recurring basis.  See Note 12 to our Consolidated Financial Statements appearing in Part II, Item 8 of this report for the disclosures required by this standard.

On January 1, 2009, the Company adopted the guidance in ASC Topic 815, Derivative Instruments and Hedging Activities. See Note 13 to our Consolidated Financial Statements appearing in Part II, Item 8 of this report for the disclosures required by this standard.

Critical Accounting Policies

Our accounting policies are described in Note 1 of the Notes to Consolidated Financial Statements in Part II, Item 8 of this report. We prepare our financial statements in conformity with accounting principles generally accepted in the United States, which require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates. We consider the following policies to be most critical in understanding the judgments that are involved in preparing our financial statements and the uncertainties that could impact our results of operations, financial condition and cash flows.

Allowance for Doubtful Accounts and Billing Adjustments. We estimate an allowance for doubtful accounts as well as an allowance for billing adjustments related to trade receivables based on our analysis of historical collection and adjustment experience. We apply actual collection and adjustment percentages to the outstanding accounts receivable balances at the end of the period. If we experience a significant change in collections or billing adjustment experience, our estimates of the recoverability of accounts receivable could change by a material amount.

Workers’ Compensation and Medical Malpractice Loss Reserves. We are partially self-insured for our workers’ compensation liability related to the Life Sciences, Healthcare and IT and Engineering segments as well as our medical malpractice liability in relation to the Physician segment. In connection with these programs, we pay a base premium plus actual losses incurred, not to exceed certain stop-loss limits. We are insured for losses above these limits, both per occurrence and in the aggregate. The self-insurance claim liability is determined based on claims filed and claims incurred but not reported. We account for claims incurred but not yet reported based on estimates derived from historical claims experience and current trends of industry data. Changes in estimates and differences in estimates and actual payments for claims are recognized in the period that the estimates changed or the payments were made.

Contingencies. We record an estimated loss from a loss contingency when information available prior to issuance of our financial statements indicates it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements, and the amount of the loss can be reasonably estimated. Accounting for contingencies, such as legal settlements, workers’ compensation matters and medical malpractice insurance matters, requires us to use our judgment. While we believe that our accruals for these matters are adequate, if the actual loss from a loss contingency is significantly different than the estimated loss, results of operations may be over or understated.

Income taxes. We account for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  Deferred tax assets are reduced by a valuation allowance if it is more likely than not that a portion of the deferred tax asset will not be realized.

We make a comprehensive review of our portfolio of uncertain tax positions regularly.  In this regard, an uncertain tax position represents our expected treatment of a tax position taken in a filed tax return, or planned to be taken in a future tax return or claim, that has not been reflected in measuring income tax expense for financial reporting purposes.  Until these positions are sustained by the taxing authorities, we have not recognized the tax benefits resulting from such positions and report the tax effects as a liability for uncertain tax positions in our consolidated balance sheets.

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Goodwill and Identifiable Intangible Assets. Goodwill and other intangible assets having an indefinite useful life are not amortized for financial statement purposes. Goodwill and intangible assets with indefinite lives are reviewed for impairment on an annual basis as of December 31, and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Intangible assets with indefinite lives consist of trademarks.  In order to test the trademarks for impairment, we determine the fair value of the trademarks and compare such amount to its carrying value. We determine the fair value of the trademarks using a projected discounted cash flow analysis based on the relief-from-royalty approach. The principal factors used in the discounted cash flow analysis requiring judgment are projected net sales, discount rate, royalty rate and terminal value assumption. The royalty rate used in the analysis is based on transactions that have occurred in our industry.  Intangible assets having finite lives are amortized over their useful lives and are reviewed to ensure that no conditions exist indicating the recorded amount is not recoverable from future undiscounted cash flows.

Goodwill is tested for impairment using a two-step process that begins with an estimation of the fair value of a reporting unit.  This first step is a screen for impairment and compares the fair value of a reporting unit to its carrying value.  The second step, if necessary, measures the amount of impairment, if any. We determine the fair value based upon discounted cash flows prepared for each reporting unit. Cash flows are developed for each reporting unit based on assumptions including revenue growth expectations, gross margins, operating expense projections, working capital, capital expense requirements and tax rates. The multi-year financial forecasts for each reporting unit used in the cash flow models considered several key business drivers such as new product lines, historical performance and industry and economic trends, among other considerations.

The principal factors used in the discounted cash flow analysis requiring judgment are the projected results of operations, discount rate, and terminal value assumptions. The discount rate is determined using the weighted average cost of capital (WACC).  The WACC takes into account the relative weights of each component of our consolidated capital structure (equity and debt) and represents the expected cost of new capital adjusted as appropriate to consider lower risk profiles associated with such things as longer term contracts and barriers to market entry.  It also considers our risk-free rate of return, equity market risk premium, beta and size premium adjustment. A single discount rate is utilized across each reporting unit since we do not believe that there would be significant differences by reporting unit.  Additionally, the selection of the discount rate accounts for any uncertainties in the forecasts.  The terminal value assumptions are applied subsequent to the tenth year of the discounted cash flow model.

For purposes of establishing inputs for the estimated fair value calculations described above, we applied annual revenue growth rates based on the then current economic and market conditions and a terminal growth rate of 4.0 percent.  These growth factors were applied to each reporting unit for the purpose of projecting future cash flows.  The cash flows as of December 31, 2008 were discounted at a rate of approximately 12.0 percent.  No impairment of goodwill or intangible assets with indefinite lives was determined to exist as of December 31, 2008.

We determined that there had been a triggering event as of March 31, 2009 due to the fact that the market capitalization was below book value, and there was a significant decline in forecasted cash flows for 2009.   We revised the assumptions used to determine the fair value of each reporting unit as of March 31, 2009 from those assumptions used at December 31, 2008 to reflect estimated reductions in future expected cash flows for 2009 and 2010 and to increase forecasts for 2011 and later years based on our review of the historical revenue growth rates. The discount rate used was approximately 13.5 percent.  The interim analysis performed at March 31, 2009 did not indicate impairment.

We determined that there continued to be a triggering event as of June 30, 2009 due to the fact that our market capitalization continued to be below book value, and due to additional reductions in forecasted cash flows for 2009 based on actual results through June 30, 2009.  We performed step one of the impairment analysis as of June 30, 2009.  The assumptions used to determine the fair value of each reporting unit as of June 30, 2009 were revised from the assumptions used at March 31, 2009 to reflect further reductions in future expected cash flows for 2009 and 2010, offset by future expected increases in cash flows from cost savings measures taken in 2009 and revised cash flow forecasts for later years to incorporate future cost savings resulting from initiatives which contemplate further synergies from system and operational improvements in infrastructure and field support. Given the current economic environment, we evaluated historical revenue growth rates experienced during a recovery from a recession in establishing inputs.  Despite the significant decline in revenue in 2009 as a result of the economic downturn, large annual increases were forecasted over the next four to five years anticipating an economic recovery. Revenue was forecasted to stabilize in the second half of 2009.  Revenue growth rates in the years beginning in 2010 reflect a recovery from the recession, but were within the range of historical growth rates we have experienced during similar economic recoveries.   The discount rate used was approximately 16.0 percent as of June 30, 2009 due primarily to increases in the cost of debt, the small company risk premium based on current market capitalization and the risk-free interest rate in the second quarter.  The interim analysis performed at June 30, 2009 did not indicate impairment.

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     Given that our market capitalization as of June 30, 2009 was significantly below book value, we performed a review of market-based data to perform the step one analysis. The market data review included a comparable trading multiple analysis based on public company competitors in the staffing industry.  We also performed a selected transaction premiums paid analysis using 2009 transactions with characteristics similar to ours.   Both market analyses were performed on a consolidated basis to assess the reasonableness of the results of the discounted cash flow analysis.  We performed the market analyses on a consolidated basis because we did not believe that there were direct competitors with publicly available financial data that were comparable to each of our reporting units.

 Based on these analyses, the fair value determination based on the discounted cash flow model was determined to be reasonable in comparison to the fair values derived from these other valuation methods.

During the quarter ended September 30, 2009, overall operating results for our reporting units, with the exception of the Nurse Travel reporting unit, were consistent with our forecasts.  Additionally, our stock price increased during the third quarter and the excess of book value over our market capitalization declined significantly.  As a result, with the exception of the Nurse Travel reporting unit, we determined that none of our other reporting units had triggering events as of September 30, 2009.  We evaluated the Nurse Travel reporting unit and noted no impairment as of September 30, 2009.

During the quarter ended December 31, 2009, overall operating results for our reporting units, with the exception of the Physician reporting unit, were consistent with our forecasts.  Additionally, our stock price continued to increase during the fourth quarter and the excess of book value over our market capitalization continued to decline and was within a reasonable range.  We performed the step one analyses for each reporting unit because December 31 is our annual impairment test date.  We noted no impairment for any of the reporting units as of December 31, 2009. The discount rate that was used was 16.9 percent.  The Company performed a review of market-based data to perform the step one analysis as part of its annual impairment test.  The market data review included a comparable trading multiple analysis based on public company competitors in the staffing industry.  The market analysis was performed on a consolidated basis to assess the reasonableness of the results of the discounted cash flow analysis.  The market analysis was performed on a consolidated basis because the Company did not believe that there were direct competitors with publicly available financial data that were comparable to each of our reporting units.  Based on this analysis, the fair value determination based on the discounted cash flow model was determined to be reasonable in comparison to the fair values derived from these other valuation methods.

While the Nurse Travel reporting unit’s revenues declined to an amount which was below our forecasted amount in the third quarter, it met the forecasted amounts in the fourth quarter of 2009.  Our forecasted revenues for each of the five years beginning in 2011 are less than 2008 actual revenues.  As of December 31, 2009, the Nurse Travel reporting unit represented 7.6 percent of our $202.8 million goodwill balance and the estimated fair value of the reporting unit as determined by the discounted cash flow analysis exceeded the carrying value by 53.5 percent.

The current economic environment significantly impacted the results of the IT and Engineering reporting unit and as a result, the assumptions related to its forecasts require a higher degree of management estimate and judgment.  The forecasted results, particularly as it relates to revenue, are dependent on our assumptions about the timing and degree of recovery for this reporting unit.  This is also the case for the Nurse Travel reporting unit and the related assumptions described above.  The IT and Engineering reporting unit represented 73.2 percent of our $202.8 million goodwill balance and the percentage by which the estimated fair value of the reporting unit as determined by the discounted cash flow analysis exceeded its carrying value at December 31, 2009 was 7.7 percent.  We reviewed the reporting unit’s historical revenue growth over the past ten years noting that the assumptions used for the revenue growth rates in the discounted cash flow analysis lead to a result 0.5 percent higher than what the reporting unit had achieved historically.  Our second quarter forecasts projected IT and Engineering revenues to begin to stabilize in the second half of 2009 and to increase beginning in 2010.  Our third quarter results showed the stabilization that we anticipated and they achieved growth in the fourth quarter.  Given that our forecasts assume recovery and revenue growth from the recession beginning in 2010, we have disclosed below the five-year compounded annual revenue growth rates for periods after the 2009 decline that were used in the discounted cash flow analysis to show the level of expected revenue growth after the economic downturn.  We have also provided a comparison below of these revenue growth rates reflected in the discounted cash flow analysis to the historical five-year compounded annual growth rates. This comparison demonstrates that the revenue growth rates reflected in the discounted cash flow analysis were reasonable based on the reporting unit’s historical financial performance. 

The IT and Engineering reporting unit was heavily impacted by the economic environment because this business is concentrated in highly specialized projects which decline significantly when companies are not investing in capital expenditures.  However, historically the reverse has occurred during a period of economic recovery since the work that the reporting unit performs is necessary to develop systems or product enhancements.   The ten-year compounded annual revenue growth rate between 2008 and 2018 for the reporting unit forecasted in the December 31, 2009 analysis was 5.1 percent and its historical ten-year compounded annual revenue growth rate between 1998 and 2008 was 4.6 percent. Both of these

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periods include the impact of an economic decline and a subsequent recovery. Had we used a ten-year compounded annual revenue growth rate of 4.6 percent in our discounted cash flow analysis, the percentage by which the estimated fair value would have exceeded its carrying value at December 31, 2009 was 3.6 percent. The reporting unit experienced an economic downturn between 2002 and 2003 and as a result, revenues declined by 38.7 percent.  When the economy recovered over the next several years through 2008, the five-year compounded annual revenue growth rate was 16.3 percent.  In the discounted cash flow analysis, we used a five-year compounded annual revenue growth rate between 2009 and 2014 of 15.9 percent reflecting the expected stabilization of revenues in the second half of 2009 and the economic recovery at the beginning of 2010, which we believe is reasonable based on the historical growth rates recovering from an economic downturn.

The Physician segment’s revenues were growing the first half of 2009, which was offset by a recent decline which resulted in a small year-over-year decline of 1.7 percent.  We believe that the decline in the Physician reporting unit is not sustainable and will not significantly impact the forecasts for the future years. As such, the five-year compounded annual growth rate for VISTA between 2008 and 2013 has remained consistent around 6.6 to 6.7 percent between the third and fourth quarter discounted cash flow analyses. This is based on various factors such as the growth of the permanent placement business in the third and fourth quarter which are high margin and the increase in the gross margins throughout 2009.   The Physician reporting unit represented 18.3 percent of our $202.8 million goodwill balance and the percentage by which the estimated fair value of the reporting unit as determined by the discounted cash flow analysis exceeded its carrying value at December 31, 2009 was 5.2 percent.

In addition to the sensitivity to changes in assumptions related to revenue growth and timing described above, the discounted cash flows and the resulting fair value estimates of our reporting units are highly sensitive to changes in other assumptions which include an increase of less than 100 basis points in the discount rate and/or a less than five percent decline in the cash flow projections of a reporting unit could cause the fair value of certain significant reporting units to be below their carrying value.  Additionally, we have assumed that there will be an economic recovery at the beginning of 2010 for all of the reporting units. Changes in the timing of the recovery and the impact on our operations and costs may also affect the sensitivity of the projections including achieving future cost savings resulting from initiatives which contemplate further synergies from system and operational improvements in infrastructure and field support which were included in our forecasts.  Ultimately, future changes in these assumptions may impact the estimated fair value of a reporting unit and cause the fair value of the reporting unit to be below their carrying value, which would require a step two analysis and may result in impairment of goodwill.

Due to the many variables inherent in the estimation of a business’s fair value and the relative size of recorded goodwill, changes in assumptions may have a material effect on the results of our impairment analysis. Downward revisions of our forecasts, extended delays in the economic recovery, or a sustained decline of our stock price resulting in market capitalization significantly below book value could lead to an impairment of goodwill or intangible assets with indefinite lives in future periods.

Impairment or Disposal of Long-Lived Assets.  We evaluate long-lived assets, other than goodwill and identifiable intangible assets with indefinite lives, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss is recognized when the sum of the undiscounted future cash flows is less than the carrying amount of the asset, in which case a write-down is recorded to reduce the related asset to its estimated fair value. There was no impairment of long-lived assets in 2009, 2008 or 2007.

Business Combinations.  We record acquisition transactions in accordance with the purchase method of accounting, and therefore this requires us to use judgment and estimates related to the allocation of the purchase price to the intangibles assets of the acquisition and the remaining amount, net of assets and liabilities assumed, to goodwill.  On January 1, 2009, we adopted new accounting guidance for business combinations as issued by FASB which establishes principles and requirements for how an acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, liabilities assumed, and any noncontrolling interests in the acquiree, as well as the goodwill acquired. Significant changes from previous guidance resulting from this new guidance include the expansion of the definitions of a “business” and a “business combination.” For all business combinations (whether partial, full or step acquisitions), the acquirer will record 100% of all assets and liabilities of the acquired business, including goodwill, generally at their fair values; contingent consideration will be recognized at its fair value on the acquisition date and; for certain arrangements, changes in fair value will be recognized in earnings until settlement, Acquisition-related transaction and restructuring costs will be expensed rather than treated as part of the cost of the acquisition. The new accounting guidance also establishes disclosure requirements to enable users to evaluate the nature and financial effects of the business combination.

Stock-Based Compensation.  We account for restricted stock awards and stock units based upon the fair market value of our common stock at the date of grant.   Market-based awards are valued using a Monte Carlo simulation model.  Compensation expense for performance-based awards is measured based on the amount of shares ultimately expected to vest, estimated at each reporting date based on management’s expectations regarding the relevant performance criteria.  We account for stock options granted and ESPP shares based on an estimated fair market value using a Black-Scholes option valuation model.  This methodology requires the use of subjective assumptions, including expected stock price volatility and the estimated life of each award.  The fair value of equity-based compensation awards less the estimated forfeitures is amortized over the service period of the award.

36

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to certain market risks arising from transactions in the normal course of business, principally risks associated with foreign currency fluctuations and interest rates. We are exposed to foreign currency risk from the translation of foreign operations into U.S. dollars. Based on the relative size and nature of our foreign operations, we do not believe that a ten percent change in the value of foreign currencies relative to the U.S. dollar would have a material impact on our financial statements. Our primary exposure to market risk is interest rate risk associated with our debt instruments. See “Item 6.  Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further description of our debt instruments.  The interest rate swap that we entered into with a financial institution on May 2, 2007 expired as of June 30, 2009 in accordance with the terms of the agreement. Prior to the expiration of the interest rate swap on June 30, 2009, the Company entered into an interest rate cap contract effective July 1, 2009, in order to mitigate the interest rate risk as required by the amended credit agreement.  The interest rate cap contract is for a notional amount of $51.0 million with a one-month LIBOR cap of 3.0 percent for a term of one year.  See Note 13 to Consolidated Financial Statements in Part II, Item 8 of this report for additional information on the interest rate swap agreement and interest rate cap contract entered into by the Company. Excluding the effect of our interest rate swap agreement and interest rate cap contract, a 1 percent change in interest rates on variable rate debt would have resulted in interest expense fluctuating approximately $1.0 million and $1.4 million, respectively, during the year ended December 31, 2009 and 2008, respectively. Including the effect of our interest rate swap agreement and interest rate cap contract, a 1 percent change in interest rates on variable debt would have resulted in interest expense fluctuating approximately $0.7 million and $0.6 million during the year ended December 31, 2009 and 2008, respectively.  However, given that our loan agreement has an interest rate floor (3.0 percent in the case of LIBOR), short-term rates would have to increase by approximately 250 basis points before it would impact us. We have not entered into any market risk sensitive instruments for trading purposes.

37

Item 8. Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of On Assignment, Inc.

Calabasas, California

We have audited the accompanying consolidated balance sheets of On Assignment, Inc. and subsidiaries (the "Company") as of December 31, 2009 and 2008, and the related consolidated statements of operations and comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2009. 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 the Company's management. Our responsibility is to express an opinion on these 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 On Assignment, Inc. and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, 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, present 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 Company's internal control over financial reporting as of December 31, 2009, 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 March 16, 2010 expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/ Deloitte & Touche LLP

Los Angeles, California

March 16, 2010

38

ON ASSIGNMENT, INC. AND SUBSIDIARIES

 CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	December 31,
	2009		2008
ASSETS
Current Assets:
Cash and cash equivalents	$	25,974	$	46,271
Accounts receivable, net of allowance for doubtful accounts and billing adjustments of  $1,949 and $2,443, respectively		50,173		78,370
Advances and deposits		163		311
Prepaid expenses		3,445		4,503
Prepaid income taxes		4,717		3,759
Deferred income tax assets		7,507		9,347
Other		2,213		2,162
Total current assets		94,192		144,723
Property and equipment, net		15,618		17,495
Goodwill		202,814		202,777
Identifiable intangible assets, net		25,523		31,428
Other assets		5,315		5,427
Total Assets	$	343,462	$	401,850
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	4,164	$	5,204
Accrued payroll and contract professional pay		11,625		19,836
Deferred compensation		2,070		1,610
Workers’ compensation and medical malpractice loss reserves		10,349		9,754
Accrued earn-out payments		—		10,168
Other		3,746		6,959
Total current liabilities		31,954		53,531
Deferred income taxes		5,697		1,997
Long-term debt		77,913		125,913
Other long-term liabilities		1,237		1,895
Total liabilities		116,801		183,336
Commitments and Contingencies (Note 7)
Stockholders’ Equity:
Preferred stock, $0.01 par value, 1,000,000 shares authorized, no shares issued or outstanding		—		—
Common stock, $0.01 par value, 75,000,000 shares authorized, 36,262,810 and 38,816,844 issued, respectively		363		388
Paid-in capital		220,082		227,522
Retained earnings		5,090		16,215
Accumulated other comprehensive income		1,126		800
		226,661		244,925
Less: Treasury stock at cost, 3,097,364 shares in 2008		—		26,411
Total stockholders’ equity		226,661		218,514
Total Liabilities and Stockholders’ Equity	$	343,462	$	401,850

See notes to consolidated financial statements.

39

ON ASSIGNMENT, INC. AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands, except per share data)

	Year Ended December 31,
	2009			2008			2007
Revenues	$	416,613		$	618,058		$	567,180
Cost of services		280,245			418,602			387,643
Gross profit		136,368			199,456			179,537
Selling, general and administrative expenses		121,141			155,942			151,942
Operating income		15,227			43,514			27,595
Interest expense		(6,612	)		(9,998	)		(12,174	)
Interest income		170			715			1,394
Income before income taxes		8,785			34,231			16,815
Provision for income taxes		4,078			15,261			7,493
Net income	$	4,707		$	18,970		$	9,322
Earnings per share:
Basic	$	0.13		$	0.53		$	0.27
Diluted	$	0.13		$	0.53		$	0.26
Number of shares and share equivalents used to calculate earnings per share:
Basic		36,011			35,487			35,138
Diluted		36,335			35,858			35,771

Reconciliation of net income to comprehensive income:
Net income	$	4,707	$	18,970		$	9,322
Foreign currency translation adjustment		326		(1,390	)		628
Comprehensive income	$	5,033	$	17,580		$	9,950

See notes to consolidated financial statements.

40

ON ASSIGNMENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

	Common Stock						Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income			Treasury Stock						Total
	Shares			Amount												Shares			Amount
Balance at January 1, 2007		36,769,713		$	367		$	199,355		$	(11,860	)	$	1,562			(2,711,566	)	$	(23,480	)	$	165,944
Exercise of common stock options		362,394			4			2,012			—			—			—			—			2,016
Employee Stock Purchase Plan		126,484			1			1,105			—			—			—			—			1,106
Stock issued for acquisition		795,292			8			9,992			—			—			—			—			10,000
Stock repurchase		—			—			—			—			—			(278,439	)		(1,997	)		(1,997	)
Stock-based compensation expense		—			—			6,092			—			—			—			—			6,092
Vesting of restricted stock units and restricted stock awards		162,538			2			(2	)		—			—			(48,933	)		(523	)		(523	)
Adjustment for adoption of accounting pronouncement for uncertain tax positions		—			—			—			(217	)		—			—			—			(217	)
Excess tax benefits from stock-based compensation		—			—			663			—			—			—			—			663
Translation adjustments		—			—			—			—			628			—			—			628
Net income		—			—			—			9,322			—			—			—			9,322
Balance at December 31, 2007		38,216,421			382			219,217			(2,755	)		2,190			(3,038,938	)		(26,000	)		193,034
Exercise of common stock options		98,187			1			482			—			—			—			—			483
Employee Stock Purchase Plan		315,827			3			1,576			—			—			—			—			1,579
Stock-based compensation expense		—			—			6,288			—			—			—			—			6,288
Vesting of restricted stock units and restricted stock awards		186,409			2			(2	)		—			—			(58,426	)		(411	)		(411	)
Tax deficiency from stock-based compensation		—			—			(39	)		—			—			—			—			(39	)
Translation adjustments		—			—			—			—			(1,390	)		—			—			(1,390	)
Net income		—			—			—			18,970			—			—			—			18,970
Balance at December 31, 2008		38,816,844			388			227,522			16,215			800			(3,097,364	)		(26,411	)		218,514
Exercise of common stock options		17,925			—			98			—			—			—			—			98
Employee Stock Purchase Plan		227,784			2			455			—			—			—			—			457
Stock-based compensation expense		—			—			5,015			—			—			—			—			5,015
Vesting of restricted stock units and restricted stock awards		297,621			3			(1,073	)		—			—			—			—			(1,070	)
Tax deficiency from stock-based compensation		—			—			(1,386	)		—			—			—			—			(1,386	)
Retirement of Treasury Stock		(3,097,364	)		(30	)		(10,549	)		(15,832	)		—			3,097,364			26,411			—
Translation adjustments		—			—			—			—			326			—			—			326
Net income		—			—			—			4,707			—			—			—			4,707
Balance at December 31, 2009		36,262,810		$	363		$	220,082		$	5,090		$	1,126			—			—		$	226,661

See notes to consolidated financial statements.

41

ON ASSIGNMENT, INC. AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year Ended December 31,
	2009			2008			2007
Cash Flows from Operating Activities:
Net income	$	4,707		$	18,970		$	9,322
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		5,731			5,106			6,194
Amortization of intangible assets		6,075			9,436			15,342
Provision for doubtful accounts and billing adjustments		296			641			680
Deferred income tax provision (benefit)		4,287			9			(4,163	)
Stock-based compensation		5,007			6,349			6,359
Amortization of deferred loan costs		894			591			542
Change in fair value of interest rate swap		(1,345	)		139			1,206
(Gain) loss on officers’ life insurance policies		(478	)		851			(166	)
Gross excess tax benefits from stock-based compensation		(34	)		(327	)		(860	)
(Gain) loss on disposal of property and equipment		(246	)		112			317
Workers’ compensation and medical malpractice provision		4,283			5,384			4,095
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable		28,024			(1,142	)		(7,335	)
Prepaid expenses		1,076			(411	)		(70	)
Prepaid income taxes		(958	)		(4,802	)		358
Accounts payable		(695	)		(809	)		1,035
Accrued payroll and contract professional pay		(9,017	)		877			1,074
Deferred compensation		460			(427	)		677
Workers’ compensation and medical malpractice loss reserves		(3,688	)		(4,551	)		(3,321	)
Other		(2,366	)		(638	)		2,372
Net cash provided by operating activities		42,013			35,358			33,658
Cash Flows from Investing Activities:
Purchase of property and equipment		(4,673	)		(8,201	)		(5,899	)
Proceeds from insurance settlements		512			—			—
Net cash paid for acquisitions		(10,239	)		(9,013	)		(232,273	)
Decrease in restricted cash		—			—			4,678
Other		572			(499	)		(530	)
Net cash used in investing activities		(13,828	)		(17,713	)		(234,024	)
Cash Flows from Financing Activities:
Proceeds from stock transactions		555			2,064			3,121
Payment of employment taxes related to release of restricted stock awards		(325	)		(411	)		(523	)
Gross excess tax benefits from stock-based compensation		34			327			860
Shelf offering costs		—			—			(300	)
Proceeds from issuance of long-term debt		—			—			145,000
Debt issuance or amendment costs		(1,065	)		—			(4,153	)
Repurchase of common stock		—			—			(1,997	)
Payments of other long-term liabilities		(156	)		(383	)		(144	)
Principal payments of long-term debt		(48,000	)		(10,000	)		(9,725	)
Net cash (used in) provided by financing activities		(48,957	)		(8,403	)		132,139
Effect of exchange rate changes on cash and cash equivalents		475			(735	)		508
Net Increase (Decrease) in Cash and Cash Equivalents		(20,297	)		8,507			(67,719	)
Cash and Cash Equivalents at Beginning of Year		46,271			37,764			105,483
Cash and Cash Equivalents at End of Year	$	25,974		$	46,271		$	37,764

(Continued)

See notes to consolidated financial statements.

42

ON ASSIGNMENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

	Year Ended December 31,
	2009		2008		2007
Supplemental Disclosure of Cash Flow Information
Cash paid for:
Income taxes, net of refunds	$	1,230	$	20,255	$	9,586
Interest	$	8,564	$	9,370	$	10,491
Acquisitions:
Goodwill	$	—	$	9,013	$	177,478
Intangible assets acquired		170		—		55,640
Net tangible assets acquired		44		—		18,841
Fair value of assets acquired, net of cash received	$	214	$	9,013	$	251,959
Supplemental Disclosure of Non-Cash Transactions
Payable for employment taxes withheld related to release of restricted stock awards	$	745	$	—	$	—
Common stock issued in connection with acquisition	$	—	$	—	$	10,000
Accrued earn-out payments and escrow claim receivable	$	—	$	8,766	$	8,525
Acquisition through notes payable	$	143	$	—	$	—
Acquisition of property and equipment through accounts payable	$	555	$	1,251	$	452

See notes to consolidated financial statements.

43

ON ASSIGNMENT, INC. AND SUBSIDIARIES

 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies.

Principles of Consolidation. The consolidated financial statements include the accounts of the Company and its wholly-owned domestic and foreign subsidiaries. All intercompany accounts and transactions have been eliminated.

Reclassifications. Certain reclassifications have been made to the prior year to conform with the current year presentation within cash flows from financing activities to provide for expanded disclosure as it relates to stock transactions.

Accounting Standards Codification. The Company adopted the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) in the quarter ended September 30, 2009. The ASC does not alter current accounting principles generally accepted in the Unites States (GAAP), but rather integrated existing accounting standards with other authoritative guidance. The ASC provides a single source of authoritative GAAP for nongovernmental entities and supersedes all other previously issued non-SEC accounting and reporting guidance. The adoption of the ASC did not have any effect on the Company’s consolidated financial statements.

Cash and Cash Equivalents. The Company considers all highly liquid investments with a maturity of three months or less on the date of purchase to be cash equivalents.

Accounts Receivable. The Company estimates an allowance for doubtful accounts and an allowance for billing adjustments related to trade receivables based on an analysis of historical collection and billing adjustment experience. The Company applies actual historical collection and adjustment percentages to the outstanding accounts receivable balances at the end of the period. If the Company experiences a significant change in collections or billing adjustment experience, the estimates of the recoverability of accounts receivable could change by a material amount.

Property and Equipment. Property and equipment are stated at cost. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the related assets, generally three to five years. Leasehold improvements are amortized over the shorter of the life of the related asset or the life of the lease. Costs associated with customized internal-use software systems that have reached the application stage and meet recoverability tests are capitalized. Such capitalized costs include external direct costs utilized in developing or obtaining the applications and payroll and payroll-related expenses for employees who are directly associated with the applications.

Goodwill and Identifiable Intangibles. Goodwill and other intangible assets having an indefinite useful life are not amortized for financial statement purposes. Goodwill and intangible assets with indefinite lives are reviewed for impairment on an annual basis as of December 31, and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Intangible assets with indefinite lives consist of trademarks.  In order to test the trademarks for impairment, we determine the fair value of the trademarks and compare such amount to its carrying value. We determine the fair value of the trademarks using a projected discounted cash flow analysis based on the relief-from-royalty approach. The principal factors used in the discounted cash flow analysis requiring judgment are projected net sales, discount rate, royalty rate and terminal value assumption. The royalty rate used in the analysis is based on transactions that have occurred in our industry.  Intangible assets having finite lives are amortized over their useful lives and are reviewed to ensure that no conditions exist indicating the recorded amount is not recoverable from future undiscounted cash flows.

Goodwill is tested for impairment using a two-step process that begins with an estimation of the fair value of a reporting unit.  This first step is a screen for impairment and compares the fair value of a reporting unit to its carrying value.  The second step, if necessary, measures the amount of impairment, if any. We determine the fair value based upon discounted cash flows prepared for each reporting unit. Cash flows are developed for each reporting unit based on assumptions including revenue growth expectations, gross margins, operating expense projections, working capital, capital expense requirements and tax rates. The multi-year financial forecasts for each reporting unit used in the cash flow models consider several key business drivers such as new product lines, historical performance and industry and economic trends, among other considerations.

44

 The principal factors used in the discounted cash flow analysis requiring judgment are the projected results of operations, discount rate, and terminal value assumptions. The discount rate is determined using the weighted average cost of capital (WACC).  The WACC takes into account the relative weights of each component of our consolidated capital structure (equity and debt) and represents the expected cost of new capital adjusted as appropriate to consider lower risk profiles associated with such things as longer term contracts and barriers to market entry.  It also considers our risk-free rate of return, equity market risk premium, beta and size premium adjustment. A single discount rate is utilized across each reporting unit since we do not believe that there would be significant differences by reporting unit.  Additionally, the selection of the discount rate accounts for any uncertainties in the forecasts.  The terminal value assumptions are applied subsequent to the tenth year of the discounted cash flow model. See Note 5 for the details of goodwill impairment testing by reportable segment.

Impairment of Long-Lived Assets. The Company evaluates long-lived assets, other than goodwill and identifiable intangible assets with indefinite lives, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss is recognized when the sum of the undiscounted future cash flows is less than the carrying amount of the asset, in which case a write-down is recorded to reduce the related asset to its estimated fair value.  There was no impairment of long-lived assets in 2009, 2008 or 2007.

Workers’ Compensation and Medical Malpractice Loss Reserves. The Company self-insures its workers’ compensation and medical malpractice liabilities up to certain stop-loss limits. The Company is insured for losses above these limits, both per occurrence and in the aggregate. The self-insurance claim liability is determined based on claims filed and claims incurred but not reported.

Contingencies. The Company records an estimated loss from a loss contingency when information available prior to issuance of its financial statements indicates it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements, and the amount of the loss can be reasonably estimated. Accounting for contingencies, such as legal settlements, workers’ compensation matters and medical malpractice insurance matters, requires the Company to use judgment. While the Company believes that the accruals for these matters are adequate, if the actual loss from a loss contingency is significantly different than the estimated loss, results of operations may be over or understated.

Income Taxes.Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  Deferred tax assets are reduced by a valuation allowance if it is more likely than not that a portion of the deferred tax asset will not be realized.

Revenue Recognition. Revenues from contract assignments, net of sales adjustments and discounts, are recognized when earned, based on hours worked by the Company’s contract professionals on a weekly basis. Conversion and direct hire fees are recognized when earned, upon conversion or direct hire of a contract professional to a client’s regular employee. In addition, the Company records a sales allowance against consolidated revenues, which is an estimate based on historical billing adjustment experience. The sales allowance is recorded as a reduction to revenues and an increase to the allowance for billing adjustments. The billing adjustment reserve includes an allowance for fallouts. Fallouts are direct hire and conversion fees that do not complete the contingency period. The contingency period is typically 90 days or less. The Company includes reimbursed expenses, including those related to travel and out-of-pocket expenses, in revenues and the associated amounts of reimbursable expenses in cost of services.

The Company generally records revenue on a gross basis as a principal versus on a net basis as an agent in the consolidated statement of operations.  The key indicators supporting the Company’s conclusion that it acts as a principal in substantially all of its transactions are that the Company (i) has the direct contractual relationships with its customers, (ii) bears the risks and rewards of the transactions, and (iii) has the discretion to select the contract professionals and establish their price.  To the extent that the Company concludes that it does not act as the principal in the arrangement, revenues are recorded on a net basis.

Foreign Currency Translation. The functional currency of the Company’s foreign operations is their local currency, and as such, their assets and liabilities are translated into U.S. dollars at the rate of exchange in effect on the balance sheet date. Revenue and expenses are translated at the average rates of exchange prevailing during each monthly period. The related translation adjustments are recorded as cumulative foreign currency translation adjustments in accumulated other comprehensive income as a separate component of stockholders’ equity. Gains and losses resulting from foreign currency transactions, which are not material, are included in SG&A expenses in the Consolidated Statements of Operations and Comprehensive Income.

45

Business Combinations.  The Company records acquisition transactions in accordance with the purchase method of accounting, and therefore this requires us to use judgment and estimates related to the allocation of the purchase price to the intangibles assets of the acquisition and the remaining amount, net of assets and liabilities assumed, to goodwill.  On January 1, 2009, new accounting guidance for business combinations was adopted as issued by FASB which establishes principles and requirements for how an acquirer in a business combination recognizes and measures in its financial statements the identifiable assets acquired, liabilities assumed, and any noncontrolling interests in the acquiree, as well as the goodwill acquired. Significant changes from previous guidance resulting from this new guidance include the expansion of the definitions of a “business” and a “business combination.” For all business combinations (whether partial, full or step acquisitions), the acquirer will record 100% of all assets and liabilities of the acquired business, including goodwill, generally at their fair values; contingent consideration will be recognized at its fair value on the acquisition date and; for certain arrangements, changes in fair value will be recognized in earnings until settlement; and acquisition-related transaction and restructuring costs will be expensed rather than treated as part of the cost of the acquisition. The new accounting guidance also establishes disclosure requirements to enable users to evaluate the nature and financial effects of the business combination.

Stock-Based Compensation. The fair value of restricted stock awards and stock units is calculated based upon the fair market value of the Company’s common stock at the date of grant.  Market-based awards are valued using a Monte Carlo simulation model.  Compensation expense for performance-based awards is measured based on the amount of shares ultimately expected to vest, estimated at each reporting date based on management’s expectations regarding the relevant performance criteria.  The fair value of stock options and ESPP shares is estimated using a Black-Scholes option valuation model.  This methodology requires the use of subjective assumptions including expected stock price volatility and the estimated life of each award.  The fair value of equity-based compensation awards less the estimated forfeitures is amortized over the vesting period of the award.

Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles 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. Actual results could differ from those estimates.

Concentration of Credit Risk. Financial instruments that potentially subject the Company to credit risks consist primarily of cash, cash equivalents and trade receivables. The Company places its cash and cash equivalents in low risk investments with quality credit institutions and limits the amount of credit exposure with any single institution above FDIC insured limits. For the Life Sciences, Physician, IT and Engineering segments, and the Nurse Travel and the Allied Healthcare lines of businesses, concentration of credit risk with respect to accounts receivable is limited because of the large number of geographically dispersed customers, thus spreading the trade credit risk. The Company performs ongoing credit evaluations to identify risks and maintains an allowance to address these risks.

Fair Value of Financial Instruments. The interest rate cap is the only financial instrument carried at fair value on a recurring basis at December 31, 2009. The interest rate swap was carried at fair value on a recurring basis but it expired on June 30, 2009. See Note 13 for the fair value disclosures of the interest rate cap and interest rate swap.  The recorded values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate their fair value based on their short-term nature.    The life insurance policies and the long-term debt are not measured at fair value on a recurring basis.  See Note 12 for fair value disclosures. Certain assets and liabilities, such as goodwill, are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (e.g., when there is evidence of impairment).

Derivative Instruments. The Company utilizes derivative financial instruments to manage interest rate risk. The Company does not use derivative financial instruments for trading or speculative purposes, nor does it use leveraged financial instruments.

Advertising Costs. Advertising costs, which are expensed as incurred, were $3.5 million for the year ended December 31, 2009, $4.9 million for the year ended December 31, 2008 and $4.3 million for the year ended December 31, 2007.

Treasury Stock.  Our treasury stock balance was primarily derived from the repurchases of our common stock in open market transactions.  The Company retired all treasury stock during the fourth quarter of 2009, which reduced additional paid in capital by $10.5 million and retained earnings by $15.8 million.

Subsequent Events. Management has evaluated subsequent events after the balance sheet date through the issuance date for appropriate accounting treatment and disclosure.

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Recent Accounting Pronouncements. In January 2010, the FASB issued an update to ASC Topic 820, Fair Value Measurements and Disclosures (ASC 820), which requires new disclosures for fair value measurements and provides clarification for existing disclosure requirements. More specifically, this update will require (a) an entity to disclose separately the amounts of significant transfers in and out of Levels 1 and 2 fair value measurements and to describe the reasons for the transfers; and (b) information about purchases, sales, issuances and settlements to be presented separately (i.e. present the activity on a gross basis rather than net) in the reconciliation for fair value measurements using significant unobservable inputs (Level 3 inputs). This guidance clarifies existing disclosure requirements for the level of disaggregation used for classes of assets and liabilities measured at fair value and requires disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements using Level 2 and Level 3 inputs. The new disclosures and clarifications of existing disclosure are effective for fiscal years beginning after December 15, 2009, except for the disclosure requirements related to the purchases, sales, issuances and settlements in the rollforward activity of Level 3 fair value measurements, which are effective for fiscal years ending after December 31, 2010. The Company is in the process of evaluating the impact of this guidance on the Company’s consolidated financial position or results of operations, which will be effective in the quarter ended March 31, 2010.

In September 2009, the FASB issued an update to ASC Topic 605, Revenue Recognition, which establishes the criteria for separating consideration in multiple-element arrangements.  The updated guidance requires companies allocating the overall consideration to each deliverable to use an estimated selling price of individual deliverables in the arrangement in the absence of vendor-specific evidence or other third-party evidence of the selling price for the deliverables and it also provides additional factors that should be considered when determining whether software in a tangible product is essential to its functionality. The Company is in the process of evaluating the impact of this guidance on the Company’s consolidated financial statements, which will be effective January 1, 2011.

In August 2009, the FASB issued an update to ASC 820on measuring liabilities at fair value. The updated guidance provides clarification that in circumstances in which a quoted market price in an active market for an identical liability is not available, an entity is required to measure fair value using a valuation technique that uses the quoted price of an identical liability when traded as an asset or, if unavailable, quoted prices for similar liabilities or similar assets when traded as assets. If none of this information is available, an entity should use a valuation technique in accordance with existing fair valuation principles.  The Company adopted the measurement requirements of this guidance in the quarter ended December 31, 2009 with no impact on the consolidated financial statements.

In May 2009, the FASB issued an update to ASC Topic 855, Subsequent Events, on accounting and disclosure.  The Company adopted this guidance in the quarter ended June 30, 2009 with no impact on the consolidated financial statements except for the inclusion of the required disclosure in the subsequent events accounting policy stated above.

In April 2009, the FASB issued an update to ASC 820 on determining fair value when the volume and level of activity for an asset or liability has significantly decreased, and in identifying transactions that are not orderly.  The Company adopted this guidance in the quarter ended June 30, 2009 with no impact to the consolidated financial statements.

        In April 2009, the FASB issued an update to ASC Topic 805, Business Combinations, to include additional requirements regarding accounting for assets acquired and liabilities assumed in a business combination. The Company implemented these requirements with no impact on the consolidated financial statements.

In April 2009, the FASB issued an update to ASC Topic 825, Financial Instruments, to include additional requirements regarding interim disclosures about the fair value of financial instruments which were previously only disclosed on an annual basis. The Company adopted these requirements in the quarter ended June 30, 2009. See Note 12 for the disclosures required by this standard.

On January 1, 2009, the Company implemented the deferred provisions under ASC 820 related to non-financial assets and liabilities.  See Note 12 for the disclosures required by this standard.

On January 1, 2009, the Company adopted the guidance in ASC Topic 815, Derivative Instruments and Hedging Activities.  See Note 13 for the disclosures required by this standard.

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2. Property and Equipment.

Property and equipment at December 31, 2009 and 2008 consisted of the following (in thousands):

	2009			2008
Furniture and fixtures	$	3,635		$	3,535
Computers and related equipment		4,433			4,401
Computer software		19,688			22,773
Machinery and equipment		1,265			1,192
Leasehold improvements		3,522			3,919
Work-in-progress		4,579			3,596
		37,122			39,416
Less accumulated depreciation and amortization		(21,504	)		(21,921	)
Total	$	15,618		$	17,495

Depreciation and amortization expense related to property and equipment for the year ended December 31, 2009 was $5.7 million, $5.1 million for the year ended December 31, 2008 and $6.2 million for the year ended December 31, 2007.

As discussed in Note 1 under Property and Equipment, the Company capitalizes costs associated with customized internal-use software systems that have reached the application stage and meet recoverability tests. All software costs capitalized are amortized over an estimated useful life of three to five years.

The Company has capitalized costs related to its various technology initiatives. The net book value of the property and equipment related to software development was $7.5 million as of December 31, 2009 and $7.6 million as of December 31, 2008, which includes work-in-progress of $4.5 million and $3.5 million. The Company has also capitalized website development costs of $0.1 million as of December 31, 2009 and $0.3 million as of December 31, 2008 of which no costs were considered work-in-progress.

3. Acquisitions.

On October 1, 2009, we acquired Fox Hill Associates, a physician permanent placement business specializing in retained and contingent search, included in our Physician operating segment. Pro-forma results of operations have not been presented because the acquisition, which had a purchase price of $0.2 million, was not material in relation to our consolidated financial position and results of operations.

On January 3, 2007, the Company acquired VSS Holding, Inc. and its subsidiaries, which includes VISTA Staffing Solutions, Inc. (VISTA), a privately-owned leading provider of physician staffing, known as locum tenens, and permanent physician search services. VISTA is headquartered in Salt Lake City, Utah and works with more than 1,000 physicians covering approximately thirty medical specialties. The primary reasons for the VISTA acquisition were to diversify the Company’s existing healthcare offerings, to complement its existing Nurse Travel business line with cross-selling opportunities and to leverage its SG&A expenses, including housing, travel and credentialing costs.

The total purchase price of $48.6 million consisted of (i) an initial cash payment of $41.1 million, which included a $4.1 million holdback for potential claims indemnified by the selling shareholders, (ii) $0.9 million in direct acquisition costs, (iii) $2.6 million payment in April of 2008 of the earn-out related to the 2007 operating performance, and (iv) $5.3 million payment in April of 2009 of the earn-out related to the 2008 operating performance. VISTA’s purchase price included a $4.1 million holdback for potential claims that are indemnifiable by the selling shareholders pursuant to the acquisition agreement. The Company released $3.6 million of the $4.1 million holdback for potential claims that are indemnifiable by the selling shareholders of VISTA as of December 31, 2009.  Of the $3.6 million released from escrowed amounts, $2.9 million was distributed to VISTA’s selling shareholders and $0.7 million was distributed to the Company. The Company filed for claims indemnifiable by the selling shareholders of VISTA for $1.4 million, which was recorded as a decrease to goodwill and an increase in other current assets as of December 31, 2008.  The holdback is estimated to be reduced by the claims indemnifiable and will be released from escrow to the selling shareholders when agreement is achieved.  At December 31, 2009, there were still $0.5 million of remaining escrowed amounts pending resolution of the Company’s claims for indemnification which is expected to be settled in 2010.

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 The Company recorded the acquisition using the purchase method of accounting, and thus the results of operations from VISTA are included in the Company’s consolidated financial statements (Physician segment) from the acquisition date. Pursuant to ASC Topic 805, Business Combinations, the purchase price was allocated to the assets acquired and liabilities assumed based on their fair values as of the date of the acquisition. Adjustments to the purchase price are reflected in subsequent periods, if and when conditions are met. The purchase price was allocated as follows: $1.8 million to net tangible assets acquired, $3.1 million to identified intangible assets with definite lives, $6.5 million (trademarks) to identified intangible assets with indefinite lives and $37.2 million to goodwill. The weighted average amortization period for the identifiable intangible assets with definite lives is estimated to be 1.1 years. Intangible assets with definite lives include contractor relations of $1.7 million (1.7 year weighted average amortization period), customer relations of $1.4 million (3 month weighted average amortization period) and non-compete agreements of $40,000 (3.0 year weighted average amortization period). Goodwill is not deductible for tax purposes.

On January 31, 2007, the Company acquired Oxford Global Resources, Inc. (Oxford), a leading provider of high-end information technology and engineering staffing services. The primary reasons for the Oxford acquisition were to enter the markets for information technology and engineering staffing services and to leverage the Company’s existing SG&A infrastructure.

The total purchase price of $212.6 million consisted of (i) an initial price of $200.1 million, comprised of $190.1 million paid in cash and 795,292 shares of the Company’s common stock valued at $10.0 million, (ii) $1.3 million in direct acquisition costs, (iii) $6.3 million payment in April 2008 of the earn-out related to the 2007 operating performance of Oxford, and (iv) $4.8 million payment in October 2009 of the earn-out related to the 2008 operating performance of Oxford.  The initial price included a $20.0 million holdback for potential claims indemnifiable by the Oxford shareholders, which was held in escrow and was included as part of the purchase price allocation. This holdback was released from escrow to the selling shareholders on August 3, 2008.

 The Company recorded the acquisition using the purchase method of accounting, and thus the results of operations from Oxford are included in the Company’s consolidated financial statements (IT and Engineering segment) from the acquisition date. The purchase price was allocated to the assets acquired and liabilities assumed based on their fair values as of the date of the acquisition. The purchase price was allocated as follows: $17.1 million to net tangible assets acquired, $30.3 million to intangible assets with definite lives, $15.6 million to identified intangible assets with indefinite lives (trademarks) and $149.6 million to goodwill. The weighted average amortization period for the identifiable intangible assets with definite lives is estimated to be 2.1 years. Intangible assets with definite lives include contractor relations of $20.8 million (1.7 year weighted average amortization period), customer relations of $8.7 million (3.0 year weighted average amortization period), in-use software of $0.5 million (2.0 year weighted average amortization period) and non-compete agreements of $0.3 million (3.0 year weighted average amortization period). The Company is reducing its federal and state income tax liability by approximately $5.0 million per year over fifteen years as a result of an election to classify the Oxford acquisition as an asset sale for tax purposes under section 338(h)(10) of the Internal Revenue Code of 1986, as amended.

The Company utilized its existing cash and proceeds from the $165.0 million senior secured credit facility to finance the acquisitions. See Note 4 for a discussion of the credit facility.

The summary below presents the amounts assigned to each major asset and liability caption of VISTA and Oxford and presents pro-forma consolidated results of operations for the year ended December 31, 2007 as if the acquisition of VISTA and Oxford described above had occurred at the beginning of the earliest year presented. The unaudited pro-forma financial information presented below gives effect to certain adjustments, the amortization of intangible assets and interest expense on acquisition related debt, other non-recurring expenses related to VISTA and Oxford’s former owners and the shares issued as a result of the shelf offering as if they had been issued at the beginning of 2007. The pro-forma financial information is not necessarily indicative of the operating results that would have occurred had the acquisition been consummated as of the date indicated, nor are they necessarily indicative of future operating results.

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The purchase price allocation as of December 31, 2009 was as follows (in thousands):

	As of December 31, 2009
	VISTA		Oxford
Current assets	$	12,840	$	24,938
Property and equipment		2,221		3,433
Goodwill		37,163		149,573
Identifiable intangible assets		9,640		45,900
Long-term deposits and other long-term assets		58		644
Total assets acquired	$	61,922	$	224,488
Current liabilities	$	9,128	$	11,073
Long-term liabilities		4,239		853
Total liabilities assumed		13,367		11,926
Total purchase price	$	48,555	$	212,562

The Pro-Forma Consolidated Statement of Operations for the year ended December 31, 2007 was as follows (in thousands, except per share data):

	Year ended December 31,
	2007
Revenues	$	582,712
Cost of service		397,528
Gross profit		185,184
Selling, general and administrative expenses		157,098
Operating income	$	28,086
Net income	$	8,951
Basic earnings per share	$	0.25

4. Long-Term Debt.

Long-term debt at December 31, 2009 and 2008 consisted of the following (in thousands):

	2009		2008
Senior Secured Debt:
$20 million revolving credit facility, due January 2012	$	—	$	—
$145 million term loan facility, due January 2013		77,913		125,913
Total	$	77,913	$	125,913

Under terms of the senior credit facility, the Company is required to maintain certain financial covenants, including a maximum total leverage ratio, a minimum interest coverage ratio and a limitation on capital expenditures. In addition, terms of the credit facility restrict the Company’s ability to pay dividends of more than $2.0 million per year.  On March 27, 2009, the Company entered into an amendment to its senior credit facility that modified certain financial covenants.  Under the terms of the amended facility, the maximum total leverage ratio (total debt to adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, as defined by the credit agreement for the preceding 12 months) is as follows:

January 1, 2009 – December 31, 2009	3.25 to 1.00
January 1, 2010 – September 30, 2010	3.00 to 1.00
October 1, 2010 – December 31, 2011	2.75 to 1.00
January 1, 2012 and thereafter	2.50 to 1.00

The minimum interest coverage ratio (EBITDA to interest expense, as defined by the credit agreement for the preceding 12 months) is 4.00 to 1.00 until maturity.  The amendment also modified the definition of the LIBOR rate to include a 3.0 percent floor and increased the spread on revolving and term loans by 150 basis points to 3.75 percent. In connection with the amendment, the Company paid down the principal balance on the term loan by $15.0 million.  The credit facility is secured by all of the assets of the Company.  As of December 31, 2009, the Company was in compliance with all covenants under its agreement with the credit facility.

In 2009, the Company paid down the principal balance of its term loan by a total of $48.0 million.  The payments were sufficient to cover the excess cash flow payment required by the bank for 2009, as well as all minimum quarterly payments until maturity on January 31, 2013.

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5. Goodwill and Other Identifiable Intangible Assets.

The Company acquired VISTA and Oxford in the first quarter of 2007(see Note 3). In December 2007, a small portion of the Oxford business (RMS) was sold for $1.0 million, reducing the acquired goodwill balance allocated to that respective portion of the business.

The changes in the carrying amount of goodwill for the years ended December 31, 2009 and 2008 are as follows (in thousands):

	Life Sciences		Healthcare		Physician		IT and Engineering			Total
Balance as of December 31, 2009	$	1,197	$	15,912	$	37,163	$	148,542		$	202,814
Additional consideration for earn-outs		―		―		20		17			37
Balance as of December 31, 2008	$	1,197	$	15,912	$	37,143	$	148,525		$	202,777
Additional consideration for earn-outs and escrow claim receivable		―		―		4,299		4,952			9,251
Additional consideration for RMS sale		―		―		―		(26	)		(26	)
Balance as of December 31, 2007	$	1,197	$	15,912	$	32,844	$	143,599		$	193,552

 The Company’s accumulated goodwill impairment losses at December 31, 2009 and 2008 were $26.4 million recorded in connection with our Health Personnel Options Corporation acquisition made in 2002 which is included in our Healthcare operating segment.

    As of December 31, 2009 and December 31, 2008, the Company had the following acquired identifiable intangible assets (in thousands):

		December 31, 2009						December 31, 2008
	Estimated Useful Life	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible assets subject to amortization:
Customer relations	3 months - 7 years	$	6,660	$	6,257	$	403	$	17,615	$	14,387	$	3,228
Contractor relations	3 - 7 years		26,010		23,100		2,910		26,012		20,134		5,878
Non-compete agreements	2 - 3 years		340		330		10		390		268		122
In-use software	2 years		500		500		―		500		500		―
			33,510		30,187		3,323		44,517		35,289		9,228
Intangible assets not subject to amortization:
Trademarks			22,200		—		22,200		22,200		—		22,200
Goodwill			202,814		—		202,814		202,777		—		202,777
Total		$	258,524	$	30,187	$	228,337	$	269,494	$	35,289	$	234,205

Amortization expense for intangible assets subject to amortization was $6.1 million, $9.4 million and $15.3 million for the years ended December 31, 2009, 2008 and 2007, respectively. Estimated amortization for each of the five years in the period ended December 31, 2014 is $1.7 million in 2010, $0.7 million in 2011, $0.4 million in 2012, $0.3 million in 2013 and $0.2 million in 2014.

Goodwill and other intangible assets having an indefinite useful life are not amortized for financial statement purposes. Goodwill and intangible assets with indefinite lives are reviewed for impairment on an annual basis as of December 31, and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

For purposes of establishing inputs for the estimated fair value calculations described above, an annual revenue growth rate was applied based on the then current economic and market conditions and a terminal growth rate of 4.0 percent.  These growth factors were applied to each reporting unit for the purpose of projecting future cash flows.  The cash flows as of December 31, 2008 were discounted at a rate of approximately 12.0 percent.  No impairment of goodwill or intangible assets with indefinite lives was determined to exist as of December 31, 2008.

The Company determined that there had been a triggering event as of March 31, 2009 due to the fact that the market capitalization was below book value, and there was a significant decline in forecasted cash flows for 2009.   The Company revised the assumptions used to determine the fair value of each reporting unit as of March 31, 2009 from those assumptions used at December 31, 2008 to reflect estimated reductions in future expected cash flows for 2009 and 2010 and to increase forecasts for 2011 and later years based on our review of the historical revenue growth rates. The discount rate used was approximately 13.5 percent.  The interim analysis performed at March 31, 2009 did not indicate impairment.

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The Company determined that there continued to be a triggering event as of June 30, 2009 due to the fact that our market capitalization continued to be below book value, and due to additional reductions in forecasted cash flows for 2009 based on actual results through June 30, 2009.  Step one of the impairment analysis was performed as of June 30, 2009.  The assumptions used to determine the fair value of each reporting unit as of June 30, 2009 were revised from the assumptions used at March 31, 2009 to reflect further reductions in future expected cash flows for 2009 and 2010, offset by future expected increases in cash flows from cost savings measures taken in 2009 and revised cash flow forecasts for later years to incorporate future cost savings resulting from initiatives which contemplate further synergies from system and operational improvements in infrastructure and field support. Given the current economic environment as of June 30, 2009, the Company evaluated historical revenue growth rates experienced during a recovery from a recession in establishing inputs.  Despite the significant decline in revenue in 2009 as a result of the economic downturn, large annual increases were forecasted over the next four to five years anticipating an economic recovery. Revenue was forecasted to stabilize in the second half of 2009.  Revenue growth rates in the years beginning in 2010 reflect a recovery from the recession, but were within the range of historical growth rates experienced during similar economic recoveries.   The discount rate used was approximately 16.0 percent as of June 30, 2009 due primarily to increases in the cost of debt, the small company risk premium based on current market capitalization and the risk-free interest rate in the second quarter.  The interim analysis performed at June 30, 2009 did not indicate impairment.

Given that our market capitalization as of June 30, 2009 was significantly below book value, the Company performed a review of market-based data to perform the step one analysis.  The market data review included a comparable trading multiple analysis based on public company competitors in the staffing industry.  The Company also performed a selected transaction premiums paid analysis using 2009 transactions with characteristics similar to ours.   Both market analyses were performed on a consolidated basis to assess the reasonableness of the results of the discounted cash flow analysis.  The market analyses were performed on a consolidated basis because the Company did not believe that there were direct competitors with publicly available financial data that were comparable to each of our reporting units.

Based on these analyses, the fair value determination based on the discounted cash flow model was determined to be reasonable in comparison to the fair values derived from these other valuation methods.

During the quarter ended September 30, 2009, operating results for the reporting units, with the exception of the Nurse Travel reporting unit, were consistent with forecasts for the quarter.  Additionally, the Company’s stock price increased during the third quarter and the excess of book value over market capitalization declined significantly.  As a result, with the exception of the Nurse Travel reporting unit, none of our other reporting units had triggering events as of September 30, 2009.  The Nurse Travel reporting unit was evaluated with no impairments noted as of September 30, 2009.

During the quarter ended December 31, 2009, overall operating results for the reporting units, with the exception of the Physician reporting unit, were consistent with forecasts.  Additionally, the stock price continued to increase during the fourth quarter and the excess of book value over market capitalization continued to decline and was within a reasonable range.  Step one analyses were performed for each reporting unit because December 31 is our annual impairment test date.  No impairment was noted for any of the reporting units as of December 31, 2009. The discount rate that was used was 16.9 percent.  The Company performed a review of market-based data to perform the step one analysis as part of its annual impairment test.  The market data review included a comparable trading multiple analysis based on public company competitors in the staffing industry.  The market analysis was performed on a consolidated basis to assess the reasonableness of the results of the discounted cash flow analysis.  The market analysis was performed on a consolidated basis because the Company did not believe that there were direct competitors with publicly available financial data that were comparable to each of our reporting units.  Based on this analysis, the fair value determination based on the discounted cash flow model was determined to be reasonable in comparison to the fair values derived from these other valuation methods.

While the Nurse Travel reporting unit’s revenues declined to an amount which was below the forecasted amount in the third quarter, it met the forecasted amounts in the fourth quarter of 2009.  Forecasted revenues for each of the five years beginning in 2011 are less than 2008 actual revenues.  As of December 31, 2009, the Nurse Travel reporting unit represented 7.6 percent of our $202.8 million goodwill balance and the estimated fair value of the reporting unit as determined by the discounted cash flow analysis exceeded the carrying value by 53.5 percent.

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The current economic environment significantly impacted the results of the IT and Engineering reporting unit and as a result, the assumptions related to its forecasts require a higher degree of management estimate and judgment.  The forecasted results, particularly as it relates to revenue, are dependent on the Company’s assumptions about the timing and degree of recovery for this reporting unit.  This is also the case for the Nurse Travel reporting unit and the related assumptions described above.  The IT and Engineering reporting unit represented 73.2 percent of the $202.8 million goodwill balance and the percentage by which its fair value exceeded its carrying value at December 31, 2009 was 7.7 percent.  The reporting unit’s historical revenue growth over the past ten years was reviewed noting that the assumptions used for the revenue growth rates in the discounted cash flow analysis lead to a result 0.5 percent higher than what the reporting unit had achieved historically.  Second quarter forecasts projected IT and Engineering revenues to begin to stabilize in the second half of 2009 and to increase beginning in 2010.  Third quarter results showed the stabilization anticipated and they achieved growth in the fourth quarter.  Given that the Company’s forecasts assume recovery and revenue growth from the recession beginning in 2010, disclosed below are the five-year compounded annual revenue growth rates for periods after the 2009 decline that were used in the discounted cash flow analysis to show the level of expected revenue growth after the economic downturn.  A comparison has been provided below of these revenue growth rates reflected in the discounted cash flow analysis to the historical five-year compounded annual growth rates. This comparison demonstrates that the revenue growth rates reflected in the discounted cash flow analysis were reasonable based on the reporting unit’s historical financial performance.

The IT and Engineering reporting unit was heavily impacted by the economic environment because this business is concentrated in highly specialized projects which decline significantly when companies are not investing in capital expenditures.  However, historically the reverse has occurred during a period of economic recovery since the work that the reporting unit performs is necessary to develop systems or product enhancements.   The ten-year compounded annual revenue growth rate between 2008 and 2018 for the reporting unit forecasted in the December 31, 2009 analysis was 5.1 percent and its historical ten-year compounded annual revenue growth rate between 1998 and 2008 was 4.6 percent. Both of these periods include the impact of an economic decline and a subsequent recovery.  Had we used a ten-year compounded annual revenue growth rate of 4.6 percent in our discounted cash flow analysis, the percentage by which the estimated fair value would have exceeded its carrying value at December 31, 2009 was 3.6 percent. The reporting unit experienced an economic downturn between 2002 and 2003 and as a result, revenues declined by 38.7 percent.  When the economy recovered over the next several years through 2008, the five-year compounded annual revenue growth rate was 16.3 percent.  In the discounted cash flow analysis, a five-year compounded annual revenue growth rate has been used between 2009 and 2014 of 15.9 percent reflecting the expected stabilization of revenues in the second half of 2009 and the economic recovery at the beginning of 2010, which the Company believes is reasonable based on the historical growth rates recovering from an economic downturn.

The Physician segment’s revenues were growing the first half of 2009, which was offset by a recent decline which resulted in a small year-over-year decline of 1.7 percent.  The Company does not believe that the decline in the Physician reporting unit is sustainable and will not significantly impact the forecasts for the future years. As such, the five-year compounded annual growth rate for VISTA between 2008 and 2013 has remained consistent around 6.6 to 6.7 percent between the third and fourth quarter discounted cash flow analyses. This is based on various factors such as the growth of the permanent placement business in the third and fourth quarter which are high margin and the increase in the gross margins throughout 2009. The Physician reporting unit represented 18.3 percent of our $202.8 million goodwill balance and the percentage by which the estimated fair value of the reporting unit as determined by the discounted cash flow analysis exceeded its carrying value at December 31, 2009 was 5.2 percent.

In addition to the sensitivity to changes in assumptions related to revenue growth and timing described above, the discounted cash flows and the resulting fair value estimates of our reporting units are highly sensitive to changes in other assumptions.  Therefore, in some instances, minor changes in these assumptions could impact whether the fair value of the reporting unit is greater than its carrying value.  For example, an increase of less than 100 basis points in the discount rate and/or a less than five percent decline in the cash flow projections of a reporting unit could cause the fair value of certain significant reporting units to be below their carrying value.  Additionally, the Company has assumed that there will be an economic recovery at the beginning of 2010 for all of the reporting units. Changes in the timing of the recovery and the impact on the Company’s operations and costs may also affect the sensitivity of the projections.  Ultimately, future changes in these assumptions may impact the estimated fair value of a reporting unit and cause the fair value of the reporting unit to be below their carrying value, which would require a step two analysis and may result in impairment of goodwill.

Due to the many variables inherent in the estimation of a business’s fair value and the relative size of recorded goodwill, changes in assumptions may have a material effect on the results of our impairment analysis. Downward revisions of the Company’s forecasts, extended delays in the economic recovery, or a sustained decline of the stock price resulting in market capitalization significantly below book value could lead to an impairment of goodwill or intangible assets with indefinite lives in future periods.

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6. 401(k) Retirement Savings Plan, Deferred Compensation Plan and Change in Control Severance Plan.

Under the Company’s 401(k) Retirement Savings Plan, which covers eligible employees of On Assignment and its wholly-owned subsidiaries, Assignment Ready Inc., On Assignment Staffing Services, Inc., VISTA, and Oxford, eligible employees may elect to have a portion of their salary deferred and contributed to the plans. The amount of salary deferred, up to certain limits set by the IRS, is not subject to federal and state income tax at the time of deferral, but together with any earnings on deferred amounts, is subject to taxation upon distribution. The plan covers all eligible employees and permits matching or other discretionary contributions at the Company’s discretion. Eligible employees may enroll once they complete three months of service prior to the next quarterly offering. The Company made no contributions to the 401(k) plan during 2009 and it made $1.3 million during 2008 and $1.1 million of contributions during 2007.

Effective January 1, 1998, the Company implemented the On Assignment, Inc. Deferred Compensation Plan. The plan permits a select group of management and highly compensated employees and directors that contribute materially to the continued growth, development and future business success of the Company to annually elect to defer up to 100 percent of their base salary, annual bonus, stock option gain or fees on a pre-tax basis and earn tax-deferred returns on these amounts. On September 4, 2008, effective as of January 1, 2008, the Company amended the On Assignment Deferred Compensation Plan so that it applies to deferrals made before January 1, 2005 only (hereinafter referred to as the 1998 Deferred Compensation Plan) and, also effective January 1, 2008, adopted a new plan, called the On Assignment Deferred Compensation Plan – Effective January 1, 2008, applicable to deferrals made on or after January 1, 2005 (referred to herein as the 2008 Deferred Compensation Plan).  The plans are not intended to be “qualified” within the meaning of IRS Code Section 401(a), rather, the plans are “unfunded and maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees” within the meaning of the Employee Retirement Income Security Act of 1974, as amended (ERISA), Sections 201(2), 301(a)(3) and 401(a)(1).

Distributions from the 1998 Deferred Compensation Plan are commenced within 60 days after the participant’s retirement, death or termination of employment, in a lump sum, or over five, ten or fifteen years, except that payments made upon termination (other than due to death or retirement), are paid in a lump sum if the participant’s account balance at the time of termination is less than $25,000.  Furthermore, if the Company determines in good faith prior to a change in control that there is a reasonable likelihood that any compensation paid to a participant for a taxable year of the Company would not be deductible by the Company solely by reason of the limitation under IRS Code Section 162(m), (Section 162(m)) then the Company may defer all or any portion of a distribution until the earliest possible date, as determined by the Company in good faith, on which the deductibility of compensation paid or payable to the participant for the taxable year of the Company during which the distribution is made will not be limited by Section 162(m), or if earlier, the effective date of a change in control.

Distributions from the 2008 Deferred Compensation Plan are commenced within 60 days following the participant’s termination of employment, in a lump sum or in annual installments of up to fifteen years, except that if the participant’s account balance is less than the applicable dollar amount specified in IRS Code Section 402(g)(1)(B), in effect for the year in which the distribution is to occur, payment shall be made in a lump sum.  Notwithstanding the foregoing, in compliance with certain requirements of IRS Code Section 409A, plan distributions to “specified employees” will commence the first day after the end of the six month period immediately following the date on which the participant experiences a termination of employment.  Furthermore, if the Company reasonably anticipates that the Company’s deduction with respect to any distribution from the 2008 Deferred Compensation Plan would be limited or eliminated by application of Section 162(m), then to the extent permitted by applicable treasury regulations, payment shall be delayed until the earliest date the Company reasonably anticipates that the deduction of the payment will not be limited or eliminated by application of Section 162(m).

The deferred compensation liability under the deferred compensation plan were approximately $2.1 million and $1.4 million at December 31, 2009 and 2008, respectively. Life insurance policies are maintained as a funding source to the plans, under which the Company is the sole owner and beneficiary of such insurance. The cash surrender value of these life insurance policies, which is reflected in other assets in the accompanying Consolidated Balance Sheets, was approximately $2.1 million and $1.6 million at December 31, 2009 and 2008, respectively.

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The Company adopted the On Assignment, Inc. Change in Control Severance Plan (the CIC Plan) to provide severance benefits for officers and certain other employees who are terminated following an acquisition of the Company. This CIC Plan was adopted on February 12, 1998 and amended on August 8, 2004, January 23, 2007, May 21, 2009 and December 10, 2009. Under the CIC Plan, if an eligible employee is involuntarily terminated within eighteen months after a change in control, as defined in the CIC Plan, then the employee will be entitled to (i) a payment equal to the employee’s annual salary plus the employee’s target bonus, payable in a lump sum, and (ii) a lump sum payment representing the cost of continuation of health and welfare benefits, under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) for periods of time ranging from nine months to eighteen months, for employees with titles of vice president or higher. Severance benefits under the plan range from one month to eighteen months of salary and target bonus, depending on the employee’s length of service and position with the Company.

The Company entered into an Amended and Restated Executive Change of Control Agreements with the Chief Executive Officer and the Chief Financial Officer on December 11, 2008, primarily for the purpose of causing their existing agreements to meet the requirements of Code Section 409A.  These agreements supersede the CIC Plan with respect to these officers and provide, in the event of an involuntary termination occurring within six months and ten days following a change of control of the Company, for the following benefits (i) a lump-sum payment equal to three times (for the Chief Executive Officer’s salary plus target bonus) or two and a half times (for the Chief Financial Officer) the sum of the officer’s base salary plus target bonus, (ii) eighteen months continuation of the officer’s health and welfare benefits and car allowance, (subject to limitations in connection with subsequent employment), (iii) cash payments equal to insurance premiums and retirement and deferred compensation contributions that the Company would have paid (in each case, if any), over a period of eighteen months following termination, and (iv) payment of up to $15,000 of the cost of outplacement services. Additionally, under the arrangements, immediately prior to a change of control, all outstanding Company stock options, restricted stock and stock units held by the officer will become fully vested (and, in the case of options, remain exercisable for an extended period), subject, in the case of certain performance-vesting awards, to any express limitations contained in the officer’s employment or other governing agreement.  In addition, the agreements entitle the executives to tax gross-up payments in the event that any payments to the executives are subject to “golden parachute” excise taxes under IRS Code Section 280G.

7. Commitments and Contingencies.

The Company leases its facilities and certain office equipment under operating leases, which expire at various dates through 2016. Certain leases contain rent escalations and/or renewal options. Rent expense for all significant leases is recognized on a straight-line basis. At December 31, 2009 and 2008, the balance of the deferred rent liability reflected in other current liabilities in the accompanying Consolidated Balance Sheets was $0.3 million and the balance reflected in long-term liabilities was $0.5 million and $0.7 million, respectively.

The following is a summary of specified contractual cash obligation payments by the Company as of December 31, 2009 (in thousands):

	Long-Term Debt		Operating Leases		Total
2010	$	―	$	6,196	$	6,196
2011		―		3,939		3,939
2012		―		2,492		2,492
2013		77,913		1,936		79,849
2014		―		1,733		1,733
Thereafter		―		2,317		2,317
Total	$	77,913	$	18,613	$	96,526

Rent expense, which is included in SG&A expenses, was $8.2 million for 2009, $9.5 million for 2008 and $8.8 million for 2007.

As discussed in Note 1, the Company is partially self-insured for its workers’ compensation liability and its medical malpractice liability. The Company accounts for claims incurred but not yet reported based on estimates derived from historical claims experience and current trends of industry data. Changes in estimates, differences in estimates and actual payments for claims are recognized in the period that the estimates changed or the payments were made. The self-insurance claim liability was approximately $10.3 million and $9.8 million at December 31, 2009 and 2008, respectively.  Additionally, the Company has letters of credit outstanding to secure obligations for workers’ compensation claims with various insurance carriers.  The letters of credit outstanding at December 31, 2009 were $3.8 million and at December 31, 2008 were $3.5 million.

As of December 31, 2009 and 2008, the Company has an income tax reserve in other long-term liabilities related to uncertain tax positions of $0.3 million.

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Legal Proceedings

The Company is involved in various legal proceedings, claims and litigation arising in the ordinary course of business. However, based on the facts currently available, we do not believe that the disposition of matters that are pending or asserted will have a material adverse effect on our financial position, results of operations or cash flows.

8. Income Taxes.

Income before provision for income taxes consists of the following (in thousands):

	Year Ended December 31,
	2009		2008		2007
United States	$	7,602	$	32,085	$	14,435
Foreign		1,183		2,146		2,380
	$	8,785	$	34,231	$	16,815

The provision (benefit) for income taxes consists of the following (in thousands):

	Year Ended December 31,
	2009			2008			2007
Current:
Federal	$	(736	)	$	13,319		$	9,804
State		75			2,314			1,125
Foreign		452			691			727
		(209	)		16,324			11,656
Deferred:
Federal		3,852			(1,292	)		(4,536	)
State		427			232			365
Foreign		(98	)		(3	)		8
		4,181			(1,063	)		(4,163	)
Change in Valuation Allowance		106			―			―
Total	$	4,078		$	15,261		$	7,493

As of December 31, 2009, the Company had no federal net operating losses and total combined state net operating losses of $7.5 million. The state net operating losses can be carried forward for up to 20 years and begin expiring in 2013.

At December 31, 2009, the Company had accumulated net foreign earnings of $8.1 million. The Company intends to reinvest the undistributed earnings of its foreign subsidiaries and, therefore, no U.S. income tax has been provided on the foreign earnings.

The Company had gross deferred tax assets of $10.3 million and $12.3 million and gross deferred tax liabilities of $8.5 million and $5.0 million at December 31, 2009 and 2008, respectively. Foreign deferred tax assets and liabilities were not material as of December 31, 2009 and 2008.

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The components of deferred tax assets (liabilities) are as follows (in thousands):

	December 31, 2009						December 31, 2008
	Federal			State			Federal			State
Deferred income tax assets (liabilities):
Current:
Allowance for doubtful accounts	$	653		$	79		$	836		$	103
Employee related accruals		1,750			212			2,321			299
State taxes		225			—			776			—
Workers’ compensation loss reserve		695			89			991			139
Medical malpractice loss reserve		3,008			314			2,648			116
Net operating loss carry-forwards		—			86			—			138
Prepaid insurance		(356	)		(37	)		—			—
Other		775			14			850			130
Total current deferred income tax assets		6,750			757			8,422			925
Non-current:
Net operating loss carry-forwards		—			292			—			453
Stock-based compensation		1,841			123			2,259			147
Purchased intangibles		(5,218	)		(490	)		(2,584	)		(164	)
Depreciation and amortization expense		(1,663	)		(203	)		(1,833	)		(152	)
Employee related accruals		(460	)		(50	)		—			—
Other		112			19			112			(235	)
Total non-current deferred income tax (liabilities) assets		(5,388	)		(309	)		(2,046	)		49
Total deferred income tax assets	$	1,362		$	448		$	6,376		$	974

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The reconciliation between the amount computed by applying the U.S. federal statutory tax rate of 35 percent to income before income taxes and the income tax provision is as follows (in thousands):

	Year Ended December 31,
	2009			2008			2007
Income tax provision at the statutory rate	$	3,075		$	11,981		$	5,885
State income taxes, net of federal benefit		471			1,569			892
Permanent difference – (gain)/loss on cash surrender value of life insurance		(178	)		309			(58	)
Permanent difference – non deductible items		614			1,035			520
Valuation allowance		106			—			—
Income tax contingency		(232	)		32			(53	)
Return to provision adjustment		280			—			—
Foreign tax rate differential		46			(61	)		(105	)
Other		(104	)		396			412
Total	$	4,078		$	15,261		$	7,493

The Company receives a tax deduction for stock-based awards upon exercise of a non-qualified stock option or as the result of disqualifying dispositions made by directors, officers and employees. A disqualifying disposition occurs when stock acquired through the exercise of incentive stock options or the Employee Stock Purchase Plan is disposed of prior to the required holding period. The Company also receives a tax deduction upon the vesting of restricted stock units or restricted stock awards. The Company received tax deductions of $2.9 million and $2.0 million, respectively, from stock-based awards in 2009 and 2008.

On January 1, 2007, the Company adopted certain provisions related to uncertainty in income taxes of ASC Topic 740, Income Taxes (ASC 740),which provides interpretative guidance for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As a result, the Company made a comprehensive review of its portfolio of uncertain tax positions in accordance with recognition standards. In this regard, an uncertain tax position represents the Company’s expected tax treatment of a tax position taken in a filed tax return, or planned to be taken in a future return, that has not been reflected in measuring income tax expense for financial reporting purposes. As a result of this review, the Company adjusted the estimated value of its uncertain tax positions by recognizing additional liabilities totaling $0.2 million, including an accrual for interest and penalties of $21,000, through a charge to retained earnings. Upon the adoption of these new provisions in ASC 740, the estimated value of the Company’s uncertain tax positions was a liability of $0.6 million, which includes penalties and interest, of which $0.2 million was carried in other long-term liabilities and $0.4 million was carried as a reduction to non-current deferred tax assets in the consolidated condensed statement of financial position as of March 31, 2007. As of December 31, 2009, the estimated value of the Company’s uncertain tax positions is a liability of $0.3 million, which includes penalties and interest, all of which was carried in other long-term liabilities.  If the Company’s positions are sustained by the taxing authority in favor of the Company, the entire $0.3 million would reduce the Company’s effective tax rate. The Company recognizes accrued interest and penalties related to uncertain tax positions in income tax expense.

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The following is a reconciliation of the total amounts of unrecognized tax (in thousands):

	Year ended December 31,
	2009			2008			2007
Unrecognized Tax Benefit beginning of year	$	812		$	832		$	841
Gross Decreases - tax positions in prior year		—			(109	)		(122	)
Gross Increases - tax positions in prior year		—			—			(46	)
Gross Increases - tax positions in current year		—			89			159
Reductions for tax positions as a result of a lapse of the applicable statute of limitations		(415	)		—			—
Unrecognized Tax Benefit end of year	$	397		$	812		$	832

During 2009, 2008 and 2007, the Company recognized $8,000, ($7,000) and $14,000, respectively, in interest on unrecognized tax benefits. Accruals for interest and penalties totaled $56,000 at December 31, 2009 and $19,000 at December 31, 2008.

The Company believes that there will be no significant increases or decreases to unrecognized tax benefits within the next twelve months.

The Company is subject to taxation in the United States and various states and foreign jurisdictions. The IRS has examined and concluded all tax matters for years through 2006. Open tax years related to federal, state and foreign jurisdictions remain subject to examination but are not considered material.

9. Earnings per Share.

Basic earnings per share are computed based upon the weighted average number of shares outstanding and diluted earnings per share are computed based upon the weighted average number of shares and dilutive share equivalents (consisting of incentive stock options, non-qualified stock options, restricted stock units and restricted stock awards) outstanding during the periods using the treasury stock method.

The following is a reconciliation of the shares used to compute basic and diluted earnings per share (in thousands):

	Year Ended December 31,
	2009		2008		2007
Weighted average number of shares outstanding used to compute basic earnings per share		36,011		35,487		35,138
Dilutive effect of stock-based awards		324		371		633
Number of shares used to compute diluted earnings per share		36,335		35,858		35,771

The following table outlines the weighted average share equivalents outstanding during each period that were excluded from the computation of diluted earnings per share because the exercise price for these options was greater than the average market price of the Company’s shares of common stock during the respective periods. Also excluded from the computation of diluted earnings per share were other share equivalents that became anti-dilutive when applying the treasury stock method.

	Year Ended December 31,
	2009		2008		2007
Anti-dilutive common share equivalents outstanding (in thousands):		2,660		2,645		1,974

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10. Stock Option Plan and Employee Stock Purchase Plan.

As of December 31, 2009, the Company maintained its Restated 1987 Stock Option Plan (as amended and restated through December 11, 2008) that was most recently approved by shareholders on June 1, 2007 (the Plan). The Company issues stock options, restricted stock units (RSUs) and restricted stock awards (RSAs) in accordance with the Plan and records compensation expense in accordance with the guidance in ASC Topic 718, Stock Compensation (ASC 718). Compensation expense charged against income related to stock-based compensation was $5.0 million, $6.3 million and $6.4 million for the years ended December 31, 2009, 2008 and 2007, respectively, and is included in the Consolidated Statements of Operations and Comprehensive Income in selling, general and administrative expenses (SG&A). The Company has recognized an income tax benefit of $1.9 million for the year ended December 31, 2009, $2.2 million for the year ended December 31, 2008 and $2.0 million for the year ended December 31, 2007 in the income statement for stock-based compensation arrangements.

The Plan, which is shareholder-approved, permits the grant of awards, including cash, stock options, RSUs, RSAs, stock appreciation rights, stock units and dividend equivalent rights to its employees, officers, members of its Board of Directors, consultants and advisors covering up to 13.9 million shares of common stock, subject to per-recipient, annual and other periodic caps. The Company believes that stock-based compensation better aligns the interests of its employees and directors with those of its shareholders versus exclusively providing cash-based compensation. Stock options are granted with an exercise price equal to the closing market price of the Company’s stock at the date of grant. Stock option awards generally vest over four years of continuous service with the Company and generally have 10-year contractual terms while RSUs and RSAs generally vest over a three year continuous service period, however individual vesting and other terms may vary with respect to all types of awards. Certain awards also provide for accelerated vesting in the event of a change in control and/or upon certain qualifying terminations of service (see Note 6).

The preceding paragraph describes the general terms of most stock-based incentives awarded by the Company. However, the Company has granted a discrete set of stock-based awards to its Chief Executive Officer that differ from those generally stated terms. On November 4, 2009, we entered into a new employment agreement with our Chief Executive Officer that provides for three annual stock award grants with grant-date values at $0.8 million each (to be awarded in 2010, 2011 and 2012) that vest and become payable, subject to continued employment, on February 1, 2011, 2012, and 2013, respectively, contingent upon achieving positive adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) during the thirteen month period ending on February 1 the year following the grant.  On January 2,  2009, the Chief Executive Officer was granted 1) 90,252 RSUs valued at $0.5 million which vest on the third anniversary of the date of the grant, (2) 90,252 RSAs valued at $0.5 million, which were to vest on December 31, 2009 but did not vest because the performance objectives approved by the Compensation Committee (based on adjusted EBITDA) were not met, and (3) 90,252 RSUs valued at $0.5 million, which vest December 31, 2011 contingent upon the Company meeting certain stock price performance objectives relative to its peers over three years from the date of grant.  On January 2, 2008, the Chief Executive Officer was granted (1) 78,369 RSUs valued at $0.5 million which vest on the third anniversary of the date of the grant, (2) 78,369 RSAs valued at $0.5 million, which vested December 31, 2009 when the Company met the performance objectives approved by the Compensation Committee (based on adjusted EBITDA), and (3) 78,369 RSUs valued at $0.5 million, which vest December 31, 2010 contingent upon the Company meeting certain stock price performance objectives relative to its peers over three years from the date of grant. On January 2, 2007, the Chief Executive Officer was granted (1) 42,553 RSUs valued at $0.5 million, which vested on the third anniversary of the date of the grant, (2) 42,553 shares of RSAs valued at $0.5 million, which vested on December 31, 2009 when the Company met the performance objectives approved by the Compensation Committee (based on adjusted EBITDA), and (3) 42,553 RSUs valued at $0.5 million, which vested December 31, 2009 when the Company met certain stock price performance objectives relative to its peers over three years from the date of grant. All awards are subject to the executive’s continued employment through such vesting dates, however, the vesting of certain awards will accelerate upon the occurrence of a change in control of the Company and/or upon certain qualifying terminations of employment. The grant-date fair-value of these awards, which was determined by applying certain provisions of the Stock Compensation guidance relative to performance-based and market-based awards, is generally being expensed over the vesting term. The impact of these awards is reflected in the Restricted Stock Units and Restricted Stock Awards section below.

On September 6, 2007, the Company issued RSUs to certain officers. Sixty percent of the total RSU award will vest in three annual increments subject to continued employment.  Forty percent of the awards will vest in three consecutive annual installments contingent upon the officer attaining certain performance objectives approved by the Compensation Committee.

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The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model that incorporates assumptions disclosed in the table below. Expected volatility is based on historical volatility of the underlying stock for a period consistent with the expected lives of the stock options as the Company believes this is a reasonable representation of future volatility. Additionally, the stock option valuation model selected by the Company uses historical data and management judgment to estimate stock option exercise behavior and employee turnover rates to estimate the number of stock option awards that will eventually vest. The expected life, or term, of options granted is derived from historical exercise behavior and represents the period of time that stock option awards are expected to be outstanding. The Company has selected a risk-free rate based on the implied yield available on U.S. Treasury Securities with a maturity equivalent to the options’ expected term. For RSUs and RSAs, the Company records compensation expense based on the fair market value of the awards on the grant date.

Stock Options

The following table displays the weighted average assumptions that have been applied to estimate the fair value of stock option awards on the date of grant for the years ended December 31, 2009, 2008 and 2007:

	Year Ended December 31,
	2009		2008		2007
Dividend yield		—		—		—
Risk-free interest rate		1.6%		1.7%		4.6%
Expected volatility		73.1%		51.5%		47.1%
Expected lives	3.5 years		3.4 years		3.4 years

The following summarizes pricing and term information for options outstanding as of December 31, 2009:

					Options Outstanding					Options Exercisable
Range of Exercise Prices					Number Outstanding at December 31, 2009		Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable at December 31, 2009		Weighted Average Exercise Price
$	2.82	─	$	4.97		439,477	6.4 years	$	4.59		297,705	$	4.75
	4.98	─		5.17		426,967	5.4 years		5.12		354,173		5.11
	5.20	─		7.00		408,096	5.2 years		5.78		362,986		5.77
	7.01	─		11.39		436,261	8.0 years		9.29		177,703		10.52
	11.45	─		13.31		625,169	7.0 years		12.75		442,391		12.75
	14.28	─		29.75		100,971	1.4 years		21.94		100,971		21.94
$	2.82	─	$	29.75		2,436,941	6.3 years	$	8.54		1,735,929	$	8.67

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The following table is a summary of stock option activity under the Plan as of December 31, 2009 and changes for the year then ended:

	Incentive Stock Options			Non- Qualified Stock Options			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2009		682,308			2,900,365		$	10.07		6.9	$	782,000
Granted		―			236,600		$	6.57
Exercised		(11,120	)		(6,805	)	$	4.96
Canceled		(246,356	)		(1,118,051	)	$	12.27
Outstanding at December 31, 2009		424,832			2,012,109		$	8.54		6.3	$	2,549,000
Vested or Expected to Vest at December 31, 2009		424,610			1,883,815		$	8.64		6.1	$	2,420,000
Exercisable at December 31, 2009		423,587			1,312,342		$	8.67		5.4	$	1,938,000

In January 2009, the Company implemented a stock option exchange program that gave eligible employees the opportunity to exchange options with an exercise price greater than $8.00 per share that were granted on or after December 31, 2000, for a reduced number of restricted stock units at an exchange price with a fair value approximately equivalent to the fair value of the cancelled options.  Certain executive officers and the Board of Directors were not eligible to participate in the stock option exchange program.  As a result of this stock option exchange program, 603,700 stock options were cancelled (included in the table above) and exchanged for 87,375 RSU awards (included in the Unvested RSUs and RSAs table in the Restricted Stock Units and Restricted Stock Awards disclosure that follows), which will vest 50 percent on January 22, 2011, 25 percent on January 22, 2012 and 25 percent on January 22, 2013 subject to the employee’s continued employment through such vesting dates.  Incremental compensation cost related to the Option Exchange was not significant to the Company’s financial statements.

The table above includes 90,000 non-employee director stock options outstanding as of December 31, 2009 and 144,000 as of January 1, 2009.

The weighted-average grant-date fair value of options granted during the years ended December 31, 2009, 2008 and 2007 was $3.45, $2.08, and $4.05 per option, respectively.  The total intrinsic value of options exercised during the years ended December 31, 2009, 2008 and 2007 was $27,000, $0.2 million, and $2.4 million, respectively.

As of December 31, 2009 there was unrecognized compensation expense of $1.3 million related to unvested stock options based on options that are expected to vest. The unrecognized compensation expense is expected to be recognized over a weighted-average period of 2.5 years.

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Restricted Stock Units and Restricted Stock Awards

A summary of the status of the Company’s unvested RSUs and RSAs as of December 31, 2009 and changes during the year then ended are presented below:

	Restricted Stock Units / Awards			Weighted Average Grant-Date Fair Value Per Unit / Award
Unvested RSUs and RSAs outstanding at January 1, 2009		759,717		$	8.54
Granted		1,022,059			5.62
RSUs granted for Stock Exchange Program		87,375			4.55
Vested		(478,226	)		6.11
Forfeited		(168,336	)		5.43
Unvested RSUs and RSAs outstanding at December 31, 2009		1,222,589		$	7.19
Unvested and expected to vest RSUs and RSAs outstanding at December 31, 2009		1,050,271		$	6.31

In the table above, the number of shares vested includes 337,030 shares surrendered by the employees to the Company for payment of minimum tax withholding obligations.  Shares of stock withheld for purposes of satisfying minimum tax withholding obligations are again available for issuance under the Plan.

The table above includes 50,252 RSUs that were awarded to non-employee directors on August 6, 2009, of which 25,128 shares vested immediately upon issuance and the remaining shares will vest on August 6, 2010.  The weighted average grant-date fair value of these awards was $3.98. The Company records compensation expense based on the fair market value of the awards on the grant date. There was unrecognized compensation of $51,000 as of December 31, 2009 related to these RSUs that will be recorded over the remaining term of approximately seven months.

The Company has approved certain awards in which a variable number of shares are to be granted to the employees based on a fixed monetary amount. As such, certain provisions of ASC 718 and ASC Topic 480, Distinguishing Liabilities from Equity (ASC 480), require the Company to classify and account for these awards as liability awards until the number of shares is determined. The expense related to these awards for the years ended December 31, 2009 and 2008 was $0.2 million, and is included in SG&A in the Consolidated Statements of Operations and Comprehensive Income.  The associated liability included in the Consolidated Balance Sheets in other long-term liabilities as of December 31, 2009 and 2008 was $0.2 million.

The weighted-average grant-date fair value of RSUs and RSAs granted during the years ended December 31, 2009, 2008 and 2007 was $5.62, $6.77 and $11.98 per award, respectively.  The total intrinsic value of RSUs and RSAs vested during years ended December 31, 2009, 2008 and 2007 was $2.9 million, $1.3 million and $1.7 million, respectively.

As of December 31, 2009, there was unrecognized compensation expense of $5.2 million related to unvested RSUs and RSAs based on awards that are expected to vest. The unrecognized compensation expense is expected to be recognized over a weighted-average period of 1.9 years.

 On November 4, 2009, the Chief Executive Officer entered into an employment agreement that provides for the following equity incentive award grants:  (i) three annual $0.8 million stock award grants (in each of 2010, 2011 and 2012) that vest and become payable (if applicable), subject to continued employment, on February 1 of the year following grant if the company’s adjusted EBITDA during the vesting period is positive, (ii) three annual $0.5 million stock award grants (in each of 2010, 2011, and 2012) that vest and become payable (if applicable), subject to continued employment, as to 50% of the earned portion of the award on February 1 of each of the first two years following grant with the earned portion determined by reference to the Company’s adjusted EBITDA , contingent upon meeting certain performance objectives, which are yet to be determined, approved by the Compensation Committee during the thirteen months ending on the first February 1 following grant, and (iii) three annual awards, each providing an opportunity to earn up to $1.5 million (and each denominated in three $500,000 annual grant increments) during overlapping 37-month measurement periods beginning on January 1, 2010, 2011, and 2012, payable at the end of each 37-month period in shares of Company stock based on attainment, during three distinct but overlapping 13-month performance periods running each January 1-January 31 of each 37-

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month measurement period, of performance criteria to be determined.  These awards will vest in full and become payable upon a change of control of the Company and the Chief Executive Officer will be eligible for pro-rated vesting and payouts under these awards upon certain terminations of employment. The equity incentive award grants described in (ii) and (iii) above are not included in the disclosures above and there is no related expense in the current period as the performance targets have not yet been set.

Employee Stock Purchase Plan

The Employee Stock Purchase Plan (ESPP) allows eligible employees to purchase common stock of the Company, through payroll deductions, at eighty-five percent of the lower of the market price on the first day or the last day of semi-annual purchase periods. The ESPP is intended to qualify as an “employee stock purchase plan” under IRS Code Section 423. Eligible employees may contribute multiples of one percent of their eligible earnings toward the purchase of the stock (subject to certain IRS limitations). Under this plan, 227,784, 315,827 and 126,484 shares of common stock were issued to employees for the years ended December 31, 2009, 2008 and 2007, respectively.

In accordance with the ESPP, shares of common stock are transferred to participating employees at the conclusion of each six month enrollment period, which end on the last business day of the month in February and August each year. The weighted average fair value of stock purchased under the Company’s ESPP was $2.67 per share for the year ended December 31, 2009, $2.21 per share for the year ended December 31, 2008 and $3.02 per share for the year ended December 31, 2007. Compensation expense of shares purchased under the ESPP is measured based on a Black-Scholes option-pricing model. The model accounts for the discount from market value and applies an expected life in line with each six month purchase period. All shares authorized and available for issuance under the Company’s ESPP were allocated and purchased as of February 27, 2009 and, at this time, there is no authorization from the shareholders to replenish shares for the ESPP program going forward.  As a result, the Company has suspended the ESPP program.  The amount recognized as stock-based compensation expense related to the ESPP for 2009 was not significant.  The amounts recognized as stock-based compensation expense related to the ESPP for 2008 and 2007 were $0.6 million and $0.5 million for the years ended December 31, 2008 and 2007, respectively.

11. Business Segments.

The Company has four reportable segments: Life Sciences, Healthcare, Physician and IT and Engineering. The Life Sciences segment provides contract, contract-to-permanent and direct placement services of laboratory and scientific professionals to the biotechnology, pharmaceutical, food and beverage, medical device, personal care, chemical and environmental industries. These contract staffing specialties include chemists, clinical research associates, clinical lab assistants, engineers, biologists, biochemists, microbiologists, molecular biologists, food scientists, regulatory affairs specialists, lab assistants and other skilled scientific professionals.

The Healthcare segment includes the combined results of the Nurse Travel and Allied Healthcare (formerly Medical Financial and Allied, or MF&A) lines of business. The lines of business have been aggregated into the Healthcare segment based on similar economic characteristics, end-market customers and management personnel. The Healthcare segment provides contract, contract-to-permanent and direct placement of professionals from more than ten healthcare, medical financial and allied occupations. These contract staffing specialties include nurses, specialty nurses, respiratory therapists, surgical technicians, imaging technicians, x-ray technicians, medical technologists, phlebotomists, coders, billers, claims processors and collections staff.

The Physician segment, comprised of VISTA Staffing Solutions, Inc., provides contract and direct placement physicians to healthcare organizations. The Physician segment works with nearly all medical specialties, placing locum tenens physicians in hospitals, community-based practices, and federal, state and local facilities.

The IT and Engineering segment, comprised of Oxford Global Resources, Inc., provides high-end contract placement services of information technology and engineering professionals with expertise in specialized information technology; software and hardware engineering; and mechanical, electrical, validation and telecommunications engineering fields.

The Company’s management evaluates the performance of each segment primarily based on revenues, gross profit and operating income. The information in the following table is derived directly from the segments’ internal financial reporting used for corporate management purposes.

All revenues, gross profit and operating income disclosed in the tables below include activity for the Physician and IT and Engineering segments from January 3, 2007 and January 31, 2007, respectively.

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The following table represents revenues, gross profit and operating income by reportable segment (in thousands):

	Year Ended December 31,
	2009			2008		2007
Revenues:
Life Sciences	$	93,664		$	129,483	$	134,622
Healthcare		97,137			180,671		175,079
Physician		87,719			89,217		74,599
IT and Engineering		138,093			218,687		182,880
Total Revenues	$	416,613		$	618,058	$	567,180
Gross Profit:
Life Sciences	$	30,470		$	43,502	$	45,024
Healthcare		27,329			46,265		44,269
Physician		28,545			27,369		21,808
IT and Engineering		50,024			82,320		68,436
Total Gross Profit	$	136,368		$	199,456	$	179,537
Operating Income (Loss):
Life Sciences	$	6,176		$	13,048	$	14,731
Healthcare		(3,074	)		6,285		3,099
Physician		8,214			5,869		1,447
IT and Engineering		3,911			18,312		8,318
Total Operating Income	$	15,227		$	43,514	$	27,595

The Company does not report Life Sciences and Healthcare segments’ total assets separately as the operations are largely centralized. The following table represents total assets as allocated by reportable segment (in thousands):

		Year Ended December 31,
		2009		2008
	.
Total Assets:
Life Sciences and Healthcare		$	78,645	$	115,458
Physician			69,912		72,940
IT and Engineering			194,905		213,452
Total Assets		$	343,462	$	401,850

The Company does not report all assets by segment for all reportable segments. The following table represents identifiable assets by reportable segment (in thousands):

		Year Ended December 31,
		2009		2008
	.
Gross Accounts Receivable:
Life Sciences		$	10,548	$	15,418
Healthcare			9,722		25,108
Physician			12,453		14,978
IT and Engineering			19,399		25,309
Total Gross Accounts Receivable		$	52,122	$	80,813

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The Company operates internationally, with operations in the United States, Europe, Canada, Australia, New Zealand and Bermuda. The following table represents revenues by geographic location (in thousands):

	Year Ended December 31,
	2009		2008		2007
Revenues:
Domestic	$	393,846	$	584,316	$	539,776
Foreign		22,767		33,742		27,404
Total Revenues	$	416,613	$	618,058	$	567,180

The following table represents long-lived assets by geographic location (in thousands):

	Year Ended December 31,
	2009		2008		2007
Long-Lived Assets:
Domestic	$	20,364	$	22,300	$	19,479
Foreign		569		622		833
Total Long-Lived Assets	$	20,933	$	22,922	$	20,312

12. Fair Value of Financial Instruments.

The valuation techniques utilized are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

The recorded values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate their fair value based on their short-term nature.

The interest rate cap was the only financial instrument carried at fair value on a recurring basis at December 31, 2009.  The Company’s fair value measurement as of December 31, 2009 using significant other observable inputs (Level 2) for the interest rate cap was not significant. The interest rate swap expired on June 30, 2009, thus there was no related fair value measurement as of December 31, 2009. The Company’s fair value measurement as of December 31, 2008 using significant other observable inputs (Level 2) for the interest rate swap was $1.3 million. The interest rate swap was a pay-fixed, receive-variable interest rate swap based on a LIBOR swap rate. The LIBOR swap rate was observable at commonly quoted intervals for the full term of the swap and, therefore, was considered a Level 2 item.

The following table presents the carrying amounts and the related estimated fair values of the financial assets and liabilities not measured at fair value on a recurring basis at December 31, 2009 and 2008 (in thousands):

	December 31, 2009				December 31, 2008
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets
Life Insurance Policies	$	2,114	$	2,114	$	1,610	$	1,610
Liabilities
Long-Term Debt	$	77,913	$	75,576	$	125,913	$	107,026

The Company maintains life insurance policies for use as a funding source for its deferred compensation arrangements. These life insurance policies are recorded at their cash surrender value as determined by the insurance broker. Amounts associated with these policies are recorded in other assets in the condensed consolidated balance sheets.  The fair value of the long-term debt is based on the yields of comparable companies with similar credit characteristics.

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Certain assets and liabilities, such as goodwill, are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (e.g., when there is evidence of impairment).  At December 31, 2009, no fair value adjustments were required for non-financial assets or liabilities.

13. Derivative Instruments.

The Company utilizes derivative financial instruments to manage interest rate risk. The Company does not use derivative financial instruments for trading or speculative purposes, nor does it use leveraged financial instruments.

On May 2, 2007, the Company entered into a transaction with a financial institution to fix the underlying interest rate on $73.0 million of its outstanding bank loan for a period of two years beginning June 30, 2007. This transaction, commonly known as an interest rate swap, essentially fixed the Company’s base borrowing rate at 4.9425 percent as opposed to a floating rate, which reset at selected periods. The current base rate on the loan balance in excess of $73.0 million was 3.75 percent plus LIBOR (subject to a 3.00 percent LIBOR floor).  On June 30, 2009, the swap expired in accordance with the terms of the agreement.  The Company recorded a gain of $1.3 million for the year ended December 31, 2009, and a loss of $0.1 million for the year ended December 31, 2008 for the change in fair value of the interest rate swap.  The change in the fair value of the swap is included in interest expense in the consolidated statements of operations and comprehensive income.

The interest rate swap was not designated as a hedging instrument for accounting purposes.  The fair value of the interest rate swap was the estimated amount the Company would have received to terminate the swap agreement at the reporting date, taking into account current interest rates and the creditworthiness of the Company and the swap counterparty depending on whether the swap was in an asset or liability position, referred to as a credit valuation adjustment.  The interest rate swap expired on June 30, 2009, thus there was no related fair value measurement as of December 31, 2009. The Company’s fair value measurement as of December 31, 2008 using significant other observable inputs (Level 2) for the interest rate swap was $1.3 million, and was included in the condensed consolidated balance sheets in other current liabilities. The interest rate swap was a pay-fixed, receive-variable interest rate swap based on a LIBOR swap rate. The LIBOR swap rate was observable at commonly quoted intervals for the full term of the swap and, therefore, was considered a Level 2 item.  Credit risk related to the swap was considered minimal and was managed by requiring high credit standards for the counterparty and periodic settlements of the underlying transactions.

Effective July 1, 2009, pursuant to terms of the amended credit agreement, the Company entered into an interest rate cap contract, in order to mitigate the interest rate risk.  The interest rate cap contract is for a notional amount of $51.0 million with a one-month LIBOR cap of 3.0 percent for a term of one year.  As this agreement has not been designated as a hedging instrument, changes in the fair value of this agreement will increase or decrease interest expense.  The Company’s fair value measurement as of December 31, 2009 using significant other observable inputs (Level 2) for the interest rate cap was not significant. The LIBOR rate is observable at commonly quoted intervals for the full term of the interest rate cap contract and, therefore, is considered a Level 2 item.  Credit risk related to the contract is considered minimal and will be managed by requiring high credit standards for the counterparty.

The following table reflects the effect of derivative instruments on the Consolidated Statements of Operations and Comprehensive Income (in thousands):

Derivative not Designated as Hedging Instruments	Location of Gain/Loss Recognized in Income on Derivative	Amount of Gain(Loss) Recognized in Income on Derivative
		Year ended December 31,
		2009		2008
Interest rate swap	Interest expense	$	1,345	$	(139	)

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14. Unaudited Quarterly Results.

The following table presents unaudited quarterly financial information for each of the four quarters ended December 31, 2009 and December 31, 2008. In the opinion of the Company’s management, the quarterly information contains all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation thereof. The operating results for any quarter are not necessarily indicative of the results for any future period.

	(In thousands, except per share data) Quarter Ended
	Dec. 31, 2009			Sep. 30, 2009			June 30, 2009			Mar. 31, 2009			Dec. 31, 2008			Sep. 30, 2008			June 30, 2008			Mar. 31, 2008
Revenues	$	99,924		$	98,053		$	101,834		$	116,802		$	147,616		$	161,947		$	156,082		$	152,413
Cost of services		66,710			65,280			68,437			79,818			99,061			109,138			105,418			104,985
Gross profit		33,214			32,773			33,397			36,984			48,555			52,809			50,664			47,428
Selling, general and administrative expenses		29,576			28,451			29,985			33,129			38,229			39,190			38,826			39,697
Operating income		3,638			4,322			3,412			3,855			10,326			13,619			11,838			7,731
Interest expense		(1,689	)		(1,777	)		(2,744	)		(1,747	)		(2,999	)		(1,863	)		(1,252	)		(3,884	)
Interest income		33			34			732			716			126			158			158			273
Earnings before income taxes		1,982			2,579			1,400			2,824			7,453			11,914			10,744			4,120
Provision for income taxes		947			1,125			830			1,176			3,915			4,977			4,652			1,717
Net income	$	1,035		$	1,454		$	570		$	1,648		$	3,538		$	6,937		$	6,092		$	2,403
Earnings per share:
Basic	$	0.03		$	0.04		$	0.02		$	0.05		$	0.10		$	0.20		$	0.17		$	0.07
Diluted	$	0.03		$	0.04		$	0.02		$	0.05		$	0.10		$	0.19		$	0.17		$	0.07
Number of shares and share equivalents used to calculate earnings per share:
Basic		36,110			36,068			36,181			35,840			35,707			35,546			35,426			35,266
Dilutive		36,760			36,578			36,385			35,982			35,985			36,071			35,838			35,375

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

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Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company’s management carried out an evaluation, under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934). Based on this evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures are effective as of the end of the period covered by this report.  The term “disclosure controls and procedures” means controls and other procedures of the Company that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.  “Disclosure controls and procedures” include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934) for the Company. The term “internal control over financial reporting” is defined as 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 and includes those policies and procedures that:

·   Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

·   Provide reasonable assurance that the 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 director of the Company; and

·   Provide reasonable assurance regarding prevention of 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 its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

Management, under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Based on our assessment and those criteria, management believes that the Company maintained effective internal control over financial reporting as of December 31, 2009. Our independent registered public accounting firm, Deloitte & Touche LLP, has included an attestation report on our internal control over financial reporting, which is included below.

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Changes in Internal Controls

There were no changes in the Company’s internal control over financial reporting that occurred during the Company’s fourth quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information

None.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of On Assignment, Inc.

Calabasas, California

We have audited the internal control over financial reporting of On Assignment, Inc. and subsidiaries (the "Company") as of December 31, 2009, 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, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on 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, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

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, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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 December 31, 2009 of the Company and our report dated March 16, 2010 expressed an unqualified opinion on those financial statements and financial statement schedule.

/s/ Deloitte & Touche LLP

Los Angeles, California

March 16, 2010

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PART III

Item 10. Directors and Executive Officers of the Registrant

Information responsive to this item will be set forth in the Company’s proxy statement for use in connection with its 2010 Annual Meeting of Stockholders (the “2010 Proxy Statement”) and is incorporated herein by reference. The 2010 Proxy Statement will be filed with the SEC within 120 days after the end of the Company’s fiscal year. The information under the heading “Executive Officers of the Registrant” in Item 1 of this Form 10-K is also incorporated by reference in this section.

Item 11. Executive Compensation

Information responsive to this item will be set forth in the 2010 Proxy Statement to be filed with the SEC within 120 days after the end of the Company’s fiscal year and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information responsive to this item will be set forth in the 2010 Proxy Statement to be filed with the SEC within 120 days after the end of the Company’s fiscal year and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

Information responsive to this Item will be set forth in the 2010 Proxy Statement to be filed with the SEC within 120 days after the end of the Company’s fiscal year and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

Information responsive to this Item will be set forth in the 2010 Proxy Statement, to be filed with the SEC within 120 days after the end of the Company’s fiscal year and is incorporated herein by reference.

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PART IV

Item 15. Exhibits and Financial Statement Schedule

(a) List of documents filed as part of this report

1. Financial Statements:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at December 31, 2009 and 2008

Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years Ended December 31, 2009, 2008 and 2007

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2009, 2008 and 2007

                                Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and 2007

Notes to Consolidated Financial Statements

2.Financial Statement Schedule:

Schedule II—Valuation and Qualifying Accounts

Schedules other than those referred to above have been omitted because they are not applicable or not required under the instructions contained in Regulation S-X or because the information is included elsewhere in the financial statements or notes thereto.

 (b) Exhibits

See Index to Exhibits.

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SIGNATURES

Pursuant to the requirements of the Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this to report to be signed on its behalf by the undersigned, thereunto duly authorized, on this 16th day of March 2010.

ON ASSIGNMENT, INC.

 

Peter T. Dameris

Chief Executive Officer and President

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

Signature	Title	Date
	Chief Executive Officer, President and Director	March 16, 2010
Peter T. Dameris	(Principal Executive Officer)
	Senior Vice President, Finance and Chief Financial Officer	March 16, 2010
James L. Brill	(Principal Financial and Accounting Officer)
/s/ William E. Brock	Director	March 16, 2010
William E. Brock
/s/ Jonathan S. Holman	Director	March 16, 2010
Jonathan S. Holman
/s/ Edward L. Pierce	Director	March 16, 2010
Edward L. Pierce
/s/ Jeremy M. Jones	Director	March 16, 2010
Jeremy M. Jones

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ON ASSIGNMENT, INC. AND SUBSIDIARIES

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

 Year Ended December 31, 2009, 2008 and 2007

(In thousands)

Description	Balance at beginning of year		Acquired balances		Provisions		Deductions from reserves			Balance at end of year
Year ended December 31, 2009
Allowance for doubtful accounts and billing adjustments	$	2,443		—		296		(790	)	$	1,949
Workers’ compensation and medical malpractice loss reserves	$	9,754		—		4,283		(3,688	)	$	10,349
Year ended December 31, 2008
Allowance for doubtful accounts and billing adjustments	$	2,254		—		641		(452	)	$	2,443
Workers’ compensation and medical malpractice loss reserves	$	8,921		—		5,384		(4,551	)	$	9,754
Year ended December 31, 2007
Allowance for doubtful accounts and billing adjustments	$	1,380		805		680		(611	)	$	2,254
Workers’ compensation and medical malpractice loss reserves	$	3,551		4,596		4,095		(3,321	)	$	8,921

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INDEX TO EXHIBITS

Number	Footnote	Description
2.1	(14)	Agreement and Plan of Merger, dated as of January 3, 2007, by and among On Assignment, Inc., On Assignment 2007 Acquisition Corp. and Oxford Global Resources, Inc. and Thomas F. Ryan, as Indemnification Representative.
2.2	(15)	Stock Purchase Agreement, dated as of December 20, 2006, by and among On Assignment, Inc., VSS Holding, Inc., the stockholders of VSS Holding, Inc. and the optionholders of VSS Holding, Inc.
3.1	(1)	Certificate of Amendment of Restated Certificate of Incorporation of On Assignment, Inc.
3.2	(2)	Restated Certificate of Incorporation of On Assignment, Inc., as amended.
3.3	(3)	Amended and Restated Bylaws of On Assignment, Inc.
4.1	(4)	Specimen Common Stock Certificate.
4.2	(9)	Rights Agreement, dated June 4, 2003, between On Assignment, Inc. and U.S. Stock Transfer Corporation as Rights Agent, which includes the Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock as Exhibit A, the Summary of Rights to Purchase Series A Junior Participating Preferred Stock as Exhibit B and the Form of Rights Certificate as Exhibit C.
10.1	(13)	Form of Indemnification Agreements. †
10.2	(12)	Restated 1987 Stock Option Plan, as amended and restated April 7, 2006. †
10.3	(13)	First Amendment to Restated 1987 Stock Option Plan, dated January 23, 2007. †
10.4	(12)	Second Amendment to the Restated 1987 Stock Option Plan, dated April 17, 2007. †
10.5	(17)	Third Amendment to the Restated 1987 Stock Option Plan, dated December 11, 2008. †
10.6	(12)	Employee Stock Purchase Plan, as amended and restated June 18, 2002. †
10.7	(12)	First Amendment to the Employee Stock Purchase Plan, dated January 23, 2007. †
10.8	(5)	Office Lease, dated December 7, 1993, by and between On Assignment, Inc. and Malibu Canyon Office Partners, LP.
10.9	(6)	Seventh Amendment to Office Lease, dated August 20, 2002.
10.10*		On Assignment, Inc. Amended and Restated Change in Control Severance Plan and Summary Plan Description. †
10.11	(8)	On Assignment, Inc. Amended and Restated Deferred Compensation Plan, effective January  1, 1998. †
10.12	(16)	Amendment No. 1 to the On Assignment, Inc. Amended and Restated Deferred Compensation Plan, dated September 4, 2008. †
10.13	(8)	Master Trust Agreement for On Assignment, Inc. Amended and Restated Deferred Compensation Plan.
10.14	(16)	On Assignment, Inc. Deferred Compensation Plan, effective January 1, 2008. †
10.15	(19)	Amended and Restated Senior Executive Agreement between On Assignment, Inc. and Peter Dameris, dated December 11, 2008. †
10.16	(20)	First Amendment to Amended and Restated Senior Executive Agreement between On Assignment, Inc. and Peter Dameris, dated March 19, 2009. †
10.17*		Senior Executive Agreement between On Assignment, Inc. and Peter Dameris, dated November 4, 2009. †
10.18	(19)	Amended and Restated Employment Agreement between Oxford Global Resources, Inc., On Assignment, Inc. and Michael J. McGowan dated December 30, 2008. †
10.19	(19)	Amended and Restated Employment Agreement between On Assignment, Inc. and James Brill, dated December 11, 2008. †

76

10.20	(19)	Amended and Restated Employment Agreement between VISTA Staffing Solutions, Inc., On Assignment, Inc. and Mark S. Brouse, dated December 11, 2008. †
10.21	(19)	Amended and Restated Senior Executive Agreement between On Assignment, Inc. and Emmett McGrath, dated December 11, 2008. †
10.22	(19)	Amended and Restated Executive Change in Control Agreement between On Assignment and Peter T. Dameris, dated December 11, 2008. †
10.23	(19)	Amended and Restated Executive Change in Control Agreement between On Assignment, Inc. and James L. Brill, dated December 11, 2008. †
10.24	(7)	Form of Option Agreements.
10.25	(10)	Executive Incentive Compensation Plan. †
10.26	(11)	Form of Restricted Stock Unit Agreements.
10.27	(13)	Credit Agreement among On Assignment, Inc., UBS Securities, LLC, UBS AG, Stamford Branch, UBS Loan Finance, LLC and other parties thereto, dated January 31, 2007.
10.28	(18)	Amendment No. 1 to Credit Agreement, dated as of March 27, 2009.
21.1*		Subsidiaries of the Registrant.
23.1*		Consent of Independent Registered Public Accounting Firm.
31.1*		Certification of Peter T. Dameris, Chief Executive Officer and President pursuant to Rule 13a-14(a) or 15d-14(a).
31.2*		Certification of James L. Brill, Senior Vice President, Finance and Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a).
32.1*		Certification of Peter T. Dameris, Chief Executive Officer and President, and James L. Brill, Senior Vice President, Finance and Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

* Filed herewith.

†           These exhibits relate to management contracts or compensatory plans, contracts or arrangements in which directors and/or executive officers of the Registrant may participate.

77

(1) Incorporated by reference from an exhibit filed with our Current Report on Form 8-K (File No. 0-20540) filed with the Securities and Exchange Commission on October 5, 2000.

(2) Incorporated by reference from an exhibit filed with our Annual Report on Form 10-K (File No. 0-20540) filed with the Securities and Exchange Commission on March 30, 1993.

(3) Incorporated by reference from an exhibit filed with our Current Report on Form 8-K (File No. 0-20540) filed with the Securities and Exchange Commission on May 3, 2002.

(4) Incorporated by reference from an exhibit filed with our Registration Statement on Form S-1 (File No. 33-50646) declared effective by the Securities and Exchange Commission on September 21, 1992.

(5) Incorporated by reference from an exhibit filed with our Annual Report on Form 10-K (File No. 0-20540) filed with the Securities and Exchange Commission on March 24, 1994.

(6) Incorporated by reference from an exhibit filed with our Quarterly Report on Form 10-Q (File No. 0-20540) filed with the Securities and Exchange Commission on November 14, 2002.

(7) Incorporated by reference from an exhibit filed with our Annual Report on Form 10-K (File No. 0-20540) filed with the Securities and Exchange Commission on March 16, 2005.

(8) Incorporated by reference from an exhibit filed with our Quarterly Report on Form 10-Q (File No. 0-20540) filed with the Securities and Exchange Commission on May 15, 1998.

(9) Incorporated by reference from an exhibit filed with our Current Report on Form 8-K (File No. 0-20540) filed with the Securities and Exchange Commission on June 5, 2003.

(10) Incorporated by reference from an exhibit filed with our Current Report on Form 8-K (File No. 0-20540) filed with the Securities and Exchange Commission on April 1, 2005.

(11) Incorporated by reference from an exhibit filed with our Current Report on Form 8-K (File No. 0-20540) filed with the Securities and Exchange Commission on August 8, 2005.

(12)   Incorporated by reference from an exhibit filed with our Registration Statement on Form S−8 (File No. 333−143907) filed with the Securities and Exchange  Commission on June 20,  2007.

(13) Incorporated by reference from an exhibit filed with our Annual Report on Form 10-K (File No. 0-20540) filed with the Securities and Exchange Commission on March 16, 2007.

(14) Incorporated by reference from an exhibit filed with our Current Report on Form 8-K (File No. 0-20540) filed with the Securities and Exchange Commission on January 9, 2007.

(15) Incorporated by reference from an exhibit filed with our Current Report on Form 8-K (File No. 0-20540) filed with the Securities and Exchange Commission on December 22, 2006.

(16)  Incorporated by reference from an exhibit filed with our Current Report on Form 8-K (File No. 0-20540) filed with the Securities and Exchange Commission on September 9, 2008.

(17) Incorporated by reference from an exhibit filed with our Current Report on Form 8-K (File No. 0-20540) filed with the Securities and Exchange Commission on December 16, 2008.

(18)  Incorporated by reference from an exhibit filed with our Current Report on Form 8-K (File No. 0-20540) filed with the Securities and Exchange Commission on March 30, 2009.

(19)  Incorporated by reference from an exhibit filed with our Annual Report on Form 10-K (File No. 0-20540) filed with the Securities and Exchange Commission on March 16, 2009.

(20)    Incorporated by reference from an exhibit filed with our Current Report on Form 8-K (File No. 0-20540) filed with the Securities and Exchange Commission on

           May 11, 2009.

78

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULES 13a-14(a) AND 15d-14(a)

 UNDER THE SECURITIES EXCHANGE ACT OF 1934 AS ADOPTED PURSUANT TO

 SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Peter T. Dameris, certify that:

1. I have reviewed this annual report on Form 10-K of On Assignment, Inc.;

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 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 fourth fiscal quarter 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 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: March 16, 2010
	Peter T. Dameris
	Chief Executive Officer and President

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULES 13a-14(a) AND 15d-14(a)

 UNDER THE SECURITIES EXCHANGE ACT OF 1934 AS ADOPTED PURSUANT TO

 SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, James L. Brill, certify that:

1. I have reviewed this annual report on Form 10-K of On Assignment, Inc.;

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 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 fourth fiscal quarter 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 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: March 16, 2010
	James L. Brill,
	Senior Vice President, Finance and Chief Financial Officer

EX-32.1

Exhibit 32.1

Written Statement of Chief Executive Officer and Chief Financial Officer

 Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

The undersigned, the Chief Executive Officer and the Chief Financial Officer of On Assignment, Inc. (the “Company”), each hereby certifies that, to his knowledge on the date hereof:

(a) the Annual Report on Form 10-K of the Company for the period ended December 31, 2009 filed on the date hereof with the Securities and Exchange Commission (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(b) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 16, 2010
	Peter T. Dameris
	Chief Executive Officer and President
Date: March 16, 2010
	James L. Brill
	Senior Vice President, Finance and Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

The foregoing certification is being furnished to the Securities and Exchange Commission as an exhibit to the Annual Report on Form 10-K and shall not be deemed to be considered filed as part of the Annual Report on Form 10-K.

EX-21.1

EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

Assignment Ready, Inc., a Delaware corporation

On Assignment Staffing Services, Inc., a Delaware corporation

VSS Holding, Inc., a Nevada corporation

VISTA Staffing Solutions, Inc., a Utah corporation

VISTA Physician Search and Consulting, Inc., a Utah corporation

VISTA Staffing International, Inc., a Nevada corporation

VISTA Holdings (Hong Kong) Limited, a Hong Kong corporation

Oxford Global Resources, Inc., a Delaware corporation

Other subsidiaries of the Registrant are omitted from this exhibit pursuant to Regulation S-K 601(b)(21)(ii)

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-57078, 333-38849, 333-61998, 333-106203, 333-143907 and 333-148000 on Form S-8 and 333-88034, 333-134479 and 333-142382 on Form S-3 of our reports dated March 16, 2010 relating to the financial statements and financial statement schedule of On Assignment, Inc. (the "Company") and the effectiveness of the Company's internal control over financial reporting, appearing in this Annual Report on Form 10-K of On Assignment, Inc. for the year ended December 31, 2009.

/s/ Deloitte & Touche LLP

Los Angeles, California

March 16, 2010

EX-10.17

SENIOR EXECUTIVE AGREEMENT

THIS SENIOR EXECUTIVE AGREEMENT (the “Agreement”)  by and between ON ASSIGNMENT, INC., a Delaware corporation (the “Company”) and PETER T. DAMERIS (“Executive”) is entered into on November 4, 2009.

Recitals

A.     The Company and Executive previously entered into an agreement, dated October 27, 2003, pursuant to which Executive is employed as the Chief Executive Officer and President of the Company (as amended on December 14, 2006 and as Amended and Restated on December 11, 2008, the “Prior Agreement”).

B.      The Company and Executive wish to enter into a new agreement, effective January 1, 2010 (the “Effective Date”) pursuant to which Executive will continue his employment as the Chief Executive Officer and President of the Company under the terms and conditions set forth herein.  The Prior Agreement shall continue to govern all compensation paid or payable to Executive under that Prior Agreement, including the 2006 Equity Awards (as defined in that Prior Agreement), while the Agreement shall govern all compensation paid or payable to Executive under the Agreement.

C.         Certain definitions are set forth in Section 4 of this Agreement.

Agreement

The parties hereto agree as follows:

1.             Employment.  The Company hereby engages Executive to continue to serve as the Chief Executive Officer and President of the Company, and Executive agrees to continue to serve the Company, during the Service Term (as defined in Section 1(f) hereof) in the capacities, and subject to the terms and conditions, set forth in this Agreement.

(a)           Services.During the Service Term, Executive, as Chief Executive Officer and President of the Company, shall have all the duties and responsibilities customarily rendered by Chief Executive Officers and Presidents of companies of similar size and nature and as may be reasonably assigned from time to time by the Board (as defined below).  Executive will report directly to the Board.  Executive will devote his best efforts and substantially all of his business time and attention (except for vacation periods and periods of illness or other incapacity) to the business of the Company and its Affiliates.  Notwithstanding the foregoing, and provided that such activities do not interfere with the fulfillment of Executive’s obligations hereunder, Executive may (A) serve as an officer, director or trustee of any charitable or non-profit entity; (B) own a passive investment in any private company and own up to 5% of the outstanding voting securities of any public company; or (C) with the prior approval of the Board, serve as a director of up to two other companies so long as such companies do not compete with the Company and Executive notifies the Board in advance of accepting any such position.  Unless the Company and Executive agree to the contrary, Executive’s place of employment shall be at the Company’s principal executive offices in Calabasas, California; provided, however, that Executive shall be permitted under the terms of this Agreement, upon conditions approved by the Board, to relocate his principal residence to Texas and to perform his duties and responsibilities under this Agreement from such location and commute from time to time to the Company’s principal executive offices so long as such relocation does not materially interfere with Executive’s satisfactory performance of his duties and responsibilities under this Agreement and, provided, further, that Executive will travel to such other locations as may be reasonably

necessary in order to discharge his duties and responsibilities hereunder.  Executive shall have the right to attend all meetings of the Board of Directors of the Company and will be nominated for election as a director for each term for which he is eligible to serve during the Service Term.

(b)           Salary, Bonus and Benefits.

(i)            Salary and Bonus.During the Service Term, effective from and after January 1, 2010, the Company will pay Executive a base salary (the “Annual Base Salary”) as the Board may designate from time to time, at the rate of not less than $635,250 per annum; provided, however, that the Annual Base Salary shall be subject to review by the Board for upward increases annually during the first quarter of each calendar year of the Service Term, with any such upward increases having retroactive effect to January 1 of the year to which such increases apply.  With respect to calendar year 2010 and thereafter during the Service Term, Executive will be eligible to receive an annual bonus in an amount of up to 120% of Executive’s Annual Base Salary for each fiscal year, as determined by the Compensation Committee of the Board of Directors (the “Compensation Committee”) based upon the Company’s achievement of budgetary and other objectives set by the Compensation Committee after review of a financial performance plan that is prepared by Executive and recommended to the Compensation Committee.  Such annual bonus opportunity shall be comprised of (A) a 60% bonus opportunity applicable to achievement of plan targets that are a combination of targets for revenue and EBITDA (“Component A”), and (B) an additional 60% bonus opportunity (thereby making the total annual bonus opportunity 120% of Executive’s Annual Base Salary) for performance exceeding plan targets based upon revenue and EBITDA performance (“Component B” and, together with Component A, the “Annual Bonus”).  The performance targets for Component A and Component B may be revised in future years by the Compensation Committee after consultation with Executive.  Within 90 days of the beginning of each calendar year during the Service Term, the Compensation Committee will determine, after consultation with Executive, the targets applicable to the Annual Bonuses based on the Company’s performance plan.  All performance plan targets will be defined in terms that exclude the effects of any nonrecurring charges, including without limitation, charges related to goodwill write-offs, acquisitions, dispositions or changes in accounting treatment.  The annual bonus, if any, shall be due and payable to Executive, in cash, on or prior to March 15 of the year immediately following that in which such annual bonus is earned (for the avoidance of doubt, this deadline is intended to comply with the “short-term deferral” exemption from the application of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”)).

(ii)           Benefits.  During the Service Term, Executive shall be entitled to participate in and shall receive all benefits under pension benefit plans provided by the Company (including without limitation participation in any Company incentive, savings and retirement plans, practices, policies and programs) to the extent applicable generally to other peer executives of the Company.  In addition, during the Service Term, Executive and/or Executive’s family shall be entitled to participate and shall receive all benefits under welfare plans provided by the Company (including without limitation medical prescriptions, dental, disability, employee life, group life, accidental life and travel accident insurance plans and plans) to the extent and on the same basis applicable generally to other peer executives of the Company.  Executive shall be reimbursed for customary travel and other expenses, subject to standard and reasonable documentation requirements.  In addition, Executive will receive a stipend of $450 per month for lease of an automobile and other related expenses during the Service Term, payable in equal monthly increments during the Service Term.  Executive shall also be eligible to receive four weeks paid vacation

per annum.  Any unused vacation time during each fiscal year shall be “rolled-over” to the following fiscal year to the extent permitted by the Company’s policies for other senior executives of the Company.

(iii)         Long-Term Incentive Awards.   The Company shall grant the awards identified in this Section 1(b)(iii) (the “LTIP Awards”) to Executive at the times and subject to the terms and conditions set forth below, pursuant to either (1) the Company’s Restated 1987 Stock Option Plan, as amended from time to time (the “Existing Plan”), or (2) an incentive plan adopted by the Company and approved by its shareholders subsequent to the Effective Date that provides for the grant of awards constituting “qualified performance-based compensation” (within the meaning of Code Section 162(m)) based on the attainment of the performance criteria identified below in this Section 1(b)(iii)  (in any case, the applicable incentive plan pursuant to which any LTIP Award is granted, the “Plan”).  Each LTIP Award shall be set forth in an award agreement between Executive and the Company that is consistent with the terms and conditions contained in comparable award agreements provided to other key executives of the Company  (each such agreement, an “Award Agreement”).

(A)                  Positive EBITDA Awards.  During the first ninety days of each of calendar years 2010, 2011 and 2012, subject to Section 1(b)(iii)(D) and Section 1(b)(iii)(F)(3) below, the Company shall grant to Executive under a Plan a number of restricted stock units (“RSUs”) or restricted shares (as determined by the Company at the time of grant) determined by dividing $800,000 by the Fair Market Value (as defined in the applicable Plan) (“Fair Market Value”) of a share of the Company’s common stock as of January 2 of the calendar year in which such award is granted (or, if January 2 is not a Business Day (as defined below), the first Business Day thereafter) (such awards, the “PEA Grants”), subject to Executive’s continued employment with the Company through the applicable grant date.   Each PEA Grant shall vest, subject to Sections 1(b)(iii)(E) and (F) below, on February 1 of the calendar year immediately following the year in which such PEA Grant is made (any date on which a PEA Grant vests, a “PEA Vesting Date”), subject to  (i) the Company attaining positive EBITDA (as defined below), as determined by the Compensation Committee, during the thirteen-month period beginning on January 1 of the year of grant, and (ii) Executive’s continued employment with the Company through the applicable February 1 vesting date.   If PEA Grants are made in the form of RSUs, any such PEA Grants that vest in accordance herewith shall be settled in whole shares of Company common stock as soon as practicable after the applicable PEA Vesting Date, but in no event later than the March 15 immediately following the applicable PEA Vesting Date, with the actual settlement or payment date determined in the Company’s sole discretion.

(B)                  EBITDA Target Awards.  During the first ninety days of each of calendar years 2010, 2011 and 2012, subject to Section 1(b)(iii)(D) and Section 1(b)(iii)(F)(3) below, the Company shall grant to Executive under a Plan a number of RSUs or restricted shares (as determined by the Company at the time of grant) determined by dividing $500,000 by the Fair Market Value of a share of the Company’s common stock as of January 2 of the calendar year in which such award is granted (or, if January 2 is not a Business Day, the first Business Day thereafter) (the “ETA Grants”), subject to Executive’s continued employment with the Company through the applicable grant date.  The Compensation Committee shall establish in writing an EBITDA target applicable to each ETA Grant during the first ninety days of the calendar year in which such ETA Grant is made (and, in any event, upon or prior to making such grant).   The ETA Grants shall vest, subject to Sections 1(b)(iii)(E) and (F) below, as to 50% of the ETA Grant multiplied by the applicable ETA Performance Percentage (as defined below) on February 1 of each of the first two calendar years immediately following the year of grant, subject, in each case, to Executive’s continued employment through such date (any date on which

an ETA Grant vests, an “ETA Vesting Date”).  The “ETA Performance Percentage” with respect to each ETA Grant shall mean (i) zero if the applicable EBITDA target is attained at less than 80%, (ii) 50% if the applicable EBITDA target is attained at 80%, (iii) 100% if the applicable EBITDA target is attained at 100% or greater, and (iv) a linear pro ration between 50 – 100% if the applicable EBITDA target is attained between 80% - 100%  (for example, the ETA Performance Percentage will equal 87.5% upon attainment of 95% of the applicable EBITDA target).  If ETA Grants are made in the form of RSUs, any such ETA Grants that vest in accordance herewith shall be settled in whole shares of Company common stock as soon as practicable after the applicable ETA Vesting Date, but in no event later than the March 15 immediately following the applicable ETA Vesting Date, with the actual settlement date determined in the Company’s sole discretion.

(C)                  Additional Performance Awards.  Subject to Executive’s continued employment with the Company through  each such grant date and further subject Section 1(b)(iii)(D) and Section 1(b)(iii)(F)(3) below, the Company shall make the following grants of additional performance awards under a Plan to Executive (the “Additional Grants”):

·   2010 Grant.  During the first ninety days of calendar year 2010, the Company shall grant to Executive an Additional Grant that provides the opportunity to earn up to $500,000, payable as soon as practicable after February 1, 2013, but in no event later than March 15, 2013.

·   2011 Grants.  During the first ninety days of calendar year 2011, the Company shall grant to Executive two Additional Grants, each providing the opportunity to earn up to $500,000, payable as soon as practicable after February 1, 2013 and February 1, 2014, respectively, but in no event later than March 15, 2013 and March 15, 2014, respectively.

·   2012 Grants.  During the first ninety days of calendar year 2012, the Company shall grant to Executive three Additional Grants, each providing the opportunity to earn up to $500,000, payable as soon as practicable after February 1, 2013, February 1, 2014 and February 1, 2015, respectively, but in no event later than March 15, 2013, March 15, 2014 and March 15, 2015, respectively.

·   2013 Grants.  During the first ninety days of calendar year 2013, the Company shall grant to Executive two Additional Grants, each providing the opportunity to earn up to $500,000, payable as soon as practicable after February 1, 2014 and February 1, 2015, respectively, but in no event later than March 15, 2014 and March 15, 2015, respectively.

·   2014 Grant.  During the first ninety days of calendar year 2014, the Company shall grant to Executive an Additional Grant that provides the opportunity to earn up to $500,000, payable as soon as practicable after February 1, 2015, but in no event later than March 15, 2015.

Notwithstanding the foregoing, payment or settlement  of Additional Grants, if applicable, may be accelerated as provided in Section 1(b)(iii)(E) and (F) below.  Subject to the foregoing requirements, Additional Grants shall be made under a Plan and shall be paid at the time of settlement, to the extent earned, in either (i) fully vested, freely transferable shares of Company common stock (subject to limitations on transfer imposed under applicable law) or (ii) if insufficient shares remain under the applicable Plan at the time of settlement to pay any earned portion of an Additional Grant in shares of Company common stock, then such portion of the Additional Grant shall instead be paid in cash.   During the first ninety days of the calendar year

in which such Additional Grant is made (and, in any event, upon or prior to making the applicable grant), the Company and Executive shall determine by mutual agreement the performance criteria applicable to the vesting of Additional Grants (selected from performance criteria enumerated in a Plan) and the Compensation Committee shall, in consultation with Executive, establish in writing performance goals applicable to each Additional Grant based on such performance criteria and determined by reference to the thirteen-month performance period beginning on January 1 of the year of grant.  Each Additional Grant shall vest, subject to Sections 1(b)(iii)(E) and (F) below, on February 1 of the year immediately following the year in which such Additional Grant is made, subject to Executive’s continued employment through such February 1, in each case, as to (i) no portion of the award if the applicable performance goals are attained at less than 90% of target, (ii) 80% of the award if the applicable performance goals are attained at 90% of target, (iii) 100% of the award if the applicable performance goals are attained at or above 110% of target, and (iv) a linear pro ration between 80% – 100% of the award if the applicable performance goals are attained between 90% – 110% of target  (for example, an Additional Grant shall vest as to 95% of the award upon attainment of 105% of the applicable target).

(D)                 Stockholder Approval.  If and to the extent that a sufficient number of shares do not remain available for issuance under a Plan to grant any LTIP Award(s), the Company agrees to adopt and submit for stockholder approval at the next regularly scheduled Company annual stockholders’ meeting either (i) an amendment to the Existing Plan, or (ii) a  new equity incentive plan that includes as performance-vesting criteria (without limitation) the performance-vesting criteria identified in the Existing Plan, in either case, authorizing the issuance of additional shares under such plan sufficient to grant such LTIP Award(s).  All affected LTIP Awards shall be granted as soon as reasonably practicable after stockholder approval is obtained.   If stockholder approval is not timely obtained, the Company and Executive shall mutually agree to either delay the grant, issuance and vesting of the affected LTIP Award(s) until the Company’s stockholders approve a new equity plan or additional shares under the Existing Plan, or the Company shall grant to Executive the LTIP Award(s) as cash-settled awards under a Plan, pursuant to all other terms and conditions contemplated above.

(E)                           Corporate Events.  Immediately prior to the earliest to occur of a Corporate Transaction (as defined in the Existing Plan or any comparable definition in a new equity plan approved by the Company’s stockholders) (and notwithstanding Section 18.3 of the Existing Plan), or a Change of Control (as defined in the Amended and Restated Executive Change of Control Agreement between the Company and Executive, dated December 11, 2008) (together, “Corporate Events”), in any case, occurring during the Service Term, any outstanding and unvested LTIP Awards shall vest fully as if all applicable performance targets were fully attained and all service requirements satisfied, and the LTIP Awards shall be settled or paid, if applicable, immediately prior to, upon or within fifteen days after the occurrence of such Corporate Event, provided, that to the extent that any LTIP Awards constitute “nonqualified deferred compensation” (within the meaning of Code Section 409A), including without limitation, any Additional Grants, such LTIP Awards shall only be paid or settled in connection with the Corporate Event if the Corporate Event constitutes a “change in control event” within the meaning of Code Section 409A, and shall otherwise be paid or settled upon the earliest to occur of (i) the Date of Termination, (ii) Executive’s death or Disability, or (iii) the date specified in Sections 1(b)(iii)(A) – (C) above, as applicable, subject to Section 1(g) below.

(F)                 Termination of Employment.   The following provisions shall govern the LTIP Awards in the event of Executive’s termination of employment:

(1)           Termination Without Cause, for Good

Reason or Due to Death or Disability.   If Executive’s employment with the Company terminates due to his death or Disability or due to a termination by the Company without Cause or by Executive for Good Reason (each as defined below and each, a “Qualifying Termination”), subject to Section 1(g) below, the following provisions shall govern the LTIP Awards:

 (a)           PEA Grants.  PEA Grants that have vested but have not been settled or paid as of the date of a Qualifying Termination shall be settled or paid (if applicable) as soon as practicable after the Date of Termination, but in no event later than the March 15 immediately following such Date of Termination.  PEA Grants that have not vested as of the Date of Termination shall remain outstanding and eligible to vest (without the requirement of continued employment beyond such termination) on a pro-rated basis upon the February 1 immediately following the Date of Termination.  PEA Grants shall vest upon and, in the case of RSUs, be settled, as soon as practicable after, such February 1 (but in no event later than the March 15 immediately following the Date of Termination), if EBITDA during the thirteen-month period beginning on January 1 of the year of grant of the PEA Grant was positive, in an amount determined by multiplying amounts subject to the PEA Grant by a fraction, the numerator of which equals the number of days Executive was employed by the Company from January 1 of the applicable year of grant through the Date of Termination, and the denominator of which equals 396.

 (b)           ETA Grants.  ETA Grants that have vested but have not been settled or paid as of the date of a Qualifying Termination shall be settled or paid (if applicable) as soon as practicable after the Date of Termination, but in no event later than the March 15 immediately following such Date of Termination.  If the performance period applicable to an ETA Grant is ongoing as of the Date of Termination, such ETA Grant shall remain outstanding and eligible to vest (without the requirement of continued employment beyond such termination) on a pro-rated basis upon the February 1 immediately following the Date of Termination and shall vest upon and, in the case of RSUs, be settled, as soon as practicable after, such February 1 (but in no event later than the March 15 immediately following such Date of Termination), in a manner determined by multiplying amounts that would be earned under such ETA Grant on such February 1 based solely on attainment of EBITDA by a fraction, the numerator of which equals the number of days Executive was employed by the Company from January 1 of the applicable year of grant through the Date of Termination, and the denominator of which equals 396.  If the performance period applicable to an ETA Grant has terminated as of the Date of Termination but the vesting of a portion of the ETA Grant remains subject to continued employment, any earned component of such ETA Grant that would otherwise vest on the second February 1 following the year of grant of such ETA Grant based on continued employment shall instead vest in full upon the Qualifying Termination and be paid as soon as practicable following the Date of Termination, but in no event later than the March 15 immediately following such Date of Termination.

(c)           Additional Grants.  Additional Grants that have vested but have not been settled or paid as of the date of a Qualifying Termination shall be settled or paid as soon as practicable after the February 1 immediately following the Date of Termination, but in no event later than the March 15 immediately following such Date of Termination.   Additional Grants that have not vested as of the Date of Termination shall remain outstanding and eligible to vest upon the February 1 immediately following the Date of Termination (without the requirement of continued employment beyond such termination) and shall vest on a pro-rated basis upon and be paid as soon as practicable after such February 1 (but in no event later than the March 15 immediately following such Date of Termination), in a manner determined by multiplying amounts that would be earned under such Additional Grant based solely on attainment of the applicable performance objectives by a fraction, the numerator of which equals the number of days Executive was employed by the Company from January 1 of the applicable year of grant through the Date of Termination, and the denominator of which equals 396.

 (2)           Termination for Cause; Resignation Other Than for Good Reason.  If Executive’s employment is terminated by the Company for Cause or due to Executive’s resignation other than for Good Reason, (a) all LTIP Awards that have not vested as of the Date of Termination shall terminate, (b) all LTIP Awards other than Additional Grants that have vested prior to the Date of Termination, but have not been settled or paid as of the Date of Termination (if applicable) shall, subject to Section 1(g) below, be settled or paid as soon as practicable after the Date of Termination, but in no event later than the March 15 immediately following such Date of Termination and (c) all LTIP Awards that are Additional Grants and have vested prior to the Date of Termination, but have not been settled or paid as of the Date of Termination (if applicable), subject to Section 1(g) below, shall be settled or paid as soon as practicable after the February 1 immediately following the Date of Termination, but in no event later than the March 15 immediately following the Date of Termination.

(3)           Termination of Employment Prior to Grant.  If, during the first ninety days of any calendar year in which Executive is entitled to receive one or more LTIP Awards in accordance with Section 1(c)(iii)(A) – (C) above, Executive experiences a Qualifying Termination occurring  prior to the date in such calendar year on which any such LTIP Awards would otherwise be granted, the LTIP Award grants to which Executive is entitled for such calendar year shall instead be granted to Executive as of no later than immediately prior to such Qualifying Termination and shall be administered in accordance 1(c)(iii)(F)(1) above.  Except as expressly provided in the immediately preceding sentence, any LTIP Awards that have not been granted as of the Date of Termination shall be forfeited and Executive shall have no further rights or interests in respect of such un-granted LTIP Awards.

 (4)           Forfeiture of Awards.  All LTIP Awards that have not vested (a) in the case of a termination of Executive’s employment for Cause or due to Executive’s resignation other than for Good Reason, as of the Date of Termination, shall terminate as of the Date of Termination, and (b) in the case of a Qualifying Termination in which the LTIP Awards remain unvested as of the February 1 following the Date of Termination (after taking into consideration any vesting that may occur upon or following the Date of Termination as provided above or under any other agreement between Executive and Company), shall terminate as of such February 1, and, in all cases, shall be canceled without payment of consideration therefor.  Following settlement or payment of any vested LTIP Awards, if applicable, such awards shall terminate and Executive shall have no further rights or interests in respect of such awards.

(G)           Employment Taxes.  Notwithstanding anything contained herein to the contrary, to the extent that any compensation payable hereunder, including without limitation, under any of the LTIP Awards, constitutes “nonqualified deferred compensation” within the meaning of Code Section 409A, the payment of any such compensation may be accelerated to the greatest extent permitted under Treasury Regulation 1.409A-3(j)(4)(vi) to pay any taxes imposed under the Federal Insurance Contribution Act (“FICA”) on such compensation or under Code Section 3401 or corresponding withholding provisions of applicable state, local or foreign tax laws as income tax obligations arising in connection with any such acceleration, including any additional taxes attributable to pyramiding wages and taxes, provided, that the total of any such accelerated payment shall not exceed the applicable FICA and income tax obligations to which such accelerated payments relate.

(H)           Payment Dates.  With respect to any payment under an LTIP Award that may be made by its terms over a range of dates, the Company shall determine the exact date of payment in its sole discretion and the Executive shall not be able to directly or indirectly designate the calendar year of such payment.

(c)           Termination.

(i)           Events of Termination.  Executive’s employment with the Company shall cease upon:

(A) Executive’s death.

(B) Executive’s voluntary retirement.

(C)          Executive’s “Disability” which means Executive has become disabled within the meaning of Code Section 409A.

(D)          Termination by the Company by the delivery to Executive of a written notice from the Board or the CEO that Executive has been terminated (“Notice of Termination”) with or without Cause.   “Cause” shall mean:

(1)           Executive’s (aa) conviction of a felony; (bb) Executive’s commission of any other material act or omission involving dishonesty or fraud with respect to the Company or any of its Affiliates or any of the customers, vendors or suppliers of the Company or its Subsidiaries; (cc) Executive’s misappropriation of material funds or assets of the Company for personal use; or (dd) Executive’s engagement in unlawful harassment or other discrimination with respect to the employees of the Company or its Subsidiaries;

(2)           Executive’s continued substantial and repeated neglect of his duties, after written notice thereof from the Board, and such neglect has not been cured within 30 days after Executive receives notice thereof from the Board;

(3)           Executive’s gross negligence or willful misconduct in the performance of his duties hereunder that is materially and demonstrably injurious to the Company;

(4)           Executive’s engaging in conduct constituting a breach of Sections 2  or  3  hereof that is not cured in full within 15 days, and is materially and demonstrably injurious to the Company, after  notice of default thereof, from the Company, as determined by a court of law.

In order for the termination to be effective: Executive must be notified in writing (which writing shall specify the cause in reasonable detail) of any termination of his employment for Cause.  Executive will then have the right, within ten days of receipt of such notice, to file a written request for review by the Company.  In such case, Executive will be given the opportunity to be heard, personally or by counsel, by the Board and a majority of the Directors must thereafter confirm that such termination is for Cause.  If the Directors do not provide such confirmation, the termination shall be treated as other than for Cause.  Notwithstanding anything to the contrary contained in this paragraph, Executive shall have the right after termination has occurred to appeal any determination by the Board that such termination was for “Cause” in accordance with the provisions of  Section 8(f)  hereof.

The delivery by the Company of notice to Executive that it does not intend to renew this Agreement as provided in  Section 1(f)  shall constitute a termination by the Company without Cause if, at the time of such notice, Executive is willing and able to renew the Agreement and continue providing services on terms and conditions substantially similar to those contained in this Agreement, provided, that in no event shall notice which fulfills the requirements of  Section 1(c)(i)(D)(1) , (2) , (3) or (4)  above constitute a termination by the Company without Cause.

(E)           Executive’s voluntary resignation by the delivery to the Company and the Board of at least 30 days written notice from Executive that Executive has resigned with or without Good Reason.   “Good Reason” shall mean Executive’s resignation from employment with the Company after the occurrence of any one of the following:

(1)           the failure of the Company to pay an amount owing to Executive in breach of this Agreement; or

(2)           without Executive’s consent, a relocation of Executive’s principal work location from the Calabasas, California metropolitan area  that constitutes a material change in the geographic location at which he must perform services under this Agreement (within the meaning of Code Section 409A);

provided, that Executive’s resignation shall only constitute a resignation for “Good Reason” hereunder if (I) Executive provides the Company with written notice setting forth in reasonable detail the facts or circumstances constituting Good Reason within thirty days after Executive becomes reasonably aware of the existence of such facts and circumstances, (or reasonably aware that there is a controversy between the Company’s interpretation of any payment obligation or principal work location requirement of this Agreement and the Executive’s interpretation of same), (II) the Company has failed to cure such facts or circumstances within thirty days after receipt of such written notice, and (III) the date of Executive’s “separation from service” (within the meaning of Code Section 409A(a)(2)(A)(i) of the Code, and Treasury Regulation Section 1.409A-1(h)) (“Separation from Service”) occurs no later than thirty-five days after Executive gives notice of the event constituting Good Reason.

The delivery by Executive of notice to the Company that he does not intend to renew this Agreement as provided in  Section 1(f)  shall constitute a resignation by Executive without Good Reason unless such notice fulfills the requirements of  Section 1(c)(i)(E)(1) or  (2)  above.

For the avoidance of doubt, in no event shall Executive’s ceasing to serve as the President of the Company, whether voluntarily or involuntarily, constitute Good Reason.

(ii)           Date of Termination.  “Date of Termination” means the date on which Executive experiences a Separation from Service.

(iii)         Rights on Termination.

(A)            In the event that termination is by the Company without Cause (including by operation of the last paragraph of Section 1(c)(i)(D) above) or by Executive with Good Reason and Executive experiences a Separation from Service as a result of such termination, subject to Section 1(g) below:

(1)      The Company will pay Executive (i) an amount equal to 150% of the Annual Base Salary, payable over a period of eighteen (18) months commencing on the Date of Termination (the “Severance Period”) in substantially equal installments in accordance with Company payroll procedures applicable to senior executives of the Company, as in effect from time to time (but no less often than monthly), provided, that payment of the amounts described in this Section  shall not commence until the Company’s first payroll date occurring on or after the 30th day following the Date of Termination (the “First Payroll Date”) and any amounts that would otherwise have been paid prior to the First Payroll Date shall instead be paid on the First Payroll Date, and (ii) a cash amount equal to the aggregate premiums that the Company would have paid for basic life insurance, accidental death and dismemberment insurance and long- and short-term disability insurance, each as in effect on the Date of Termination, had Executive remained employed by the Company during the Severance Period (together, “Insurance Benefits”).  In addition, during the Severance Period, subject to Executive’s proper election to continue healthcare coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company will pay Executive’s COBRA premiums in respect of COBRA benefits to be provided through third-party insurance maintained by the Company under the Company’s benefit plans in a manner that causes such COBRA benefits to be exempt from the application of Code Section 409A under Treasury Regulation Section 1.409A-1(a)(5), provided, that if during the period of continuation coverage, any plan pursuant to which such benefits are to be provided ceases to be exempt from the application of Code Section 409A under Treasury Regulation Section 1.409A-1(a)(5), then an amount equal to each such remaining premium shall thereafter be paid to Executive as currently taxable compensation in substantially equal monthly installments over the remainder of the continuation coverage period; and

(2)                  All LTIP Awards shall be treated as provided in Section 1(b)(iii)(F)(1) above.

For purposes of paragraph (e) below, payments of Annual Base Salary, amounts in lieu of Insurance Benefits, COBRA premiums and any vesting of LTIP Awards following the Date of Termination, in each case, as described in this Agreement, are collectively referred to as “Severance Payments.”In addition, the Company will pay to Executive in a lump-sum the value of any accrued but unused vacation time.  No Severance Payments or benefits shall be paid or provided unless Executive has executed and not revoked a release in a form mutually acceptable to both the Company and Executive that is subject to  paragraph (e) below.  In addition, the Company agrees that concurrently with Executive’s execution of such release, the Company shall execute a contingent mutual release in a form that is mutually acceptable to both the Company and Executive that is subject to paragraph (e) below.  Each payment under Section 1(c)(iii)(A) above shall be treated as a separate payment for purposes of Code Section 409A.

(B)           If the Company terminates Executive’s employment for Cause, or if Executive resigns without Good Reason (including by operation of the last paragraph of Section 1(c)(i)(E)), the Company’s obligations to pay any compensation or benefits under this Agreement (other than accrued but unused vacation time which shall be paid to Executive in a lump sum payment) and all vesting under all equity awards held by Executive will cease effective as of the date of termination, provided, that LTIP Awards which have vested prior to such Date of Termination shall be treated in accordance with Section 1(b)(iii)(F)(2) above.  Executive’s right to receive any other health or other benefits, if any, will be determined under the provisions of applicable plans, programs or other coverages.

(C)           If Executive’s employment terminates because of  Executive’s death or Disability,  then Executive or his estate shall be entitled to any disability income or life insurance payments from any insurance policies (other than any  “key man” life insurance policy) maintained by the Company.  In addition, in the event of such a termination, for a period of six (6) months commencing on the Date of Termination, Executive or his estate shall be entitled to payment of an amount equal to 50% of the Annual Base Salary, payable over six months from Executive’s death or Disability in approximately equal installments on regular salary payment dates.  LTIP Awards shall be treated in accordance with Section 1(b)(iii)(F)(1) above.

Notwithstanding the foregoing, the Company’s obligation to Executive for Severance Payments shall cease if Executive is found by a court of law to be in material violation of the provisions of  Sections 2 or 3  hereof. 

(d)           Mitigation. The Company’s obligation to continue to provide Executive with the Severance Payments pursuant to  Section 1(c)(iii)(A) above and the benefits pursuant to the second sentence of  Section 1(c)(iii)(C)  above shall cease if Executive becomes employed as a senior executive by a third party.

(e)           Liquidated Damages. The parties acknowledge and agree that damages which will result to Executive for termination by the Company without Cause shall be extremely difficult or impossible to establish or prove, and agree that the Severance Payments shall constitute liquidated damages for any breach of this Agreement by the Company through the Date of Termination.  Executive agrees that, except for such other payments and benefits to which Executive may be entitled as expressly provided by the terms of this Agreement or any applicable Benefit Plan, such liquidated damages shall be in lieu of all other claims that Executive may make by reason of termination of his employment or any such breach of this Agreement and that, as a condition to receiving the Severance Payments, Executive will execute a contingent mutual release of claims in a form reasonably satisfactory to both the Company and Executive.

(f)            Term of Employment.  Unless Executive’s employment under this Agreement is sooner terminated as a result of Executive’s termination in accordance with the provisions of Section 1(c) above, Executive’s employment under this Agreement shall continue through January 31, 2013 (the “Service Term”); provided, however, that Executive’s employment under this Agreement, and the Service Term, shall be automatically renewed for additional one-year periods commencing on February 1, 2013 and, thereafter, on each successive anniversary of such date unless either the Company or Executive notify the other party in writing within ninety (90) days prior to any such anniversary that it or he desires not to renew Executive’s employment under this Agreement.  All references herein to “Service Term” shall include any renewals thereof after February 1, 2013.

(g)         Potential Six-Month Delay.  Notwithstanding anything to the contrary in this Agreement,  no compensation or benefits, including without limitation any Severance  Payments or payments in respect of any LTIP Awards in connection with a Separation from Service, shall be paid to Executive during the 6-month period following his Separation from Service to the extent that the Company reasonably determines that Executive is a “specified employee” (within the meaning of Code Section 409A) at the time of such Separation from Service and that paying such amounts at the time or times indicated in this Agreement would be a prohibited distribution under Code Section 409A(a)(2)(b)(i) of the Code.  If the payment of any such amounts is delayed as a result of the previous sentence, then on the first business day following the end of such 6-month period (or such

earlier date upon which such amount can be paid under Code Section 409A without being subject to such additional taxes, including as a result of Executive’s death), the Company shall pay to Executive a lump-sum amount equal to the cumulative amount that would have otherwise been payable to Executive during such 6-month period, without interest thereon.

2.             Confidential Information; Proprietary Information, etc.

(a)           Obligation to Maintain Confidentiality. Executive acknowledges that any Proprietary Information disclosed or made available to Executive or obtained, observed or known by Executive as a direct or indirect consequence of his employment with or performance of services for the Company or any of its Affiliates during the course of his performance of services for, or employment with, any of the foregoing Persons (whether or not compensated for such services) and during the period in which Executive is receiving Severance Payments, are the property of the Company and its Affiliates.  Therefore, Executive agrees that he will not at any time (whether during or after Executive’s term of employment) disclose or permit to be disclosed to any Person or, directly or indirectly, utilize for his own account or permit to be utilized by any Person any Proprietary Information or Records for any reason whatsoever without the Board’s consent, unless and to the extent that (except as otherwise provided in the definition of Proprietary Information) the aforementioned matters become generally known to and available for use by the public other than as a direct or indirect result of Executive’s acts or omissions to act. Executive agrees to deliver to the Company at the termination of his employment, as a condition to receipt of the next or final payment of compensation, or at any other time the Company may request in writing (whether during or after Executive’s term of employment), all Records which he may then possess or have under his control. Executive further agrees that any property situated on the Company’s or its Affiliates’ premises and owned by the Company or its Affiliates, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company or its Affiliates and their personnel at any time with or without notice.  Nothing in this Section  shall be construed to prevent Executive from using his general knowledge and experience in future employment so long as Executive complies with thisSection  and the other restrictions contained in this Agreement.

(b)           Ownership of Property. Executive acknowledges that all inventions, innovations, improvements, developments, methods, processes, programs, designs, analyses, drawings, reports and all similar or related information  (whether or not patentable) that relate to the Company’s or any of its Affiliates’ actual or anticipated business, research and development, or existing or future products or services and that are conceived, developed, contributed to, made, or reduced to practice by Executive (either solely or jointly with others) while employed by the Company or any of its Affiliates (including any of the foregoing that constitutes any Proprietary Information or Records) (“Work Product”) belong to the Company or such Affiliate and Executive hereby assigns, and agrees to assign, all of the above Work Product to the Company or such Affiliate.  Any copyrightable work prepared in whole or in part by Executive in the course of his work for any of the foregoing entities shall be deemed a “work made for hire” under the copyright laws, and the Company or such Affiliate shall own all rights therein. To the extent that any such copyrightable work is not a “work made for hire,” Executive hereby assigns and agrees to assign to Company or such Affiliate all right, title and interest, including without limitation, copyright in and to such copyrightable work.  Executive shall promptly disclose such Work Product and copyrightable work to the Board and perform all actions reasonably requested by the Board (whether during or after Executive’s term of employment) to establish and confirm the Company’s or its Affiliate’s ownership (including, without limitation, execution of assignments, consents, powers of attorney and other instruments).  Notwithstanding anything

contained in this  Section to the contrary, the Company’s ownership of Work Product does not apply to any invention that Executive develops entirely on his own time without using the equipment, supplies or facilities of the Company or its Affiliates or Subsidiaries or any Proprietary Information (including trade secrets), except that the Company’s ownership of Work Product does include those inventions that:  (i) relate to the business of the Company or its Affiliates or Subsidiaries or to the actual or demonstrably anticipated research or development relating to the Company’s business; or (ii) result from any work that Executive performs for the Company or its Affiliates or Subsidiaries.

(c)           Third Party Information. Executive understands that the Company and its Affiliates will receive from third parties confidential or proprietary information (“Third Party Information”) subject to a duty on the Company’s and its Affiliates’ part to maintain the confidentiality of such information and to use it only for certain limited purposes.  During the term of Executive’s employment and thereafter, and without in any way limiting the provisions of  Sections 2(a)  and  2(b)  above, Executive shall hold Third Party Information in the strictest confidence and shall not disclose to anyone (other than personnel of the Company or its Affiliates who need to know such information in connection with their work for the Company or its Affiliates) or use, except in connection with his work for the Company or its Affiliates, Third Party Information unless expressly authorized by a member of the Board in writing.

(d)           Use of Information of Prior Employers, etc. Executive will abide by any enforceable obligations contained in any agreements that Executive has entered into with his prior employers or other parties to whom Executive has an obligation of confidentiality.

(e)           Compelled Disclosure. If Executive is required by law or governmental regulation or by subpoena or other valid legal process to disclose any Proprietary Information or Third Party Information to any Person, Executive will immediately provide the Company with written notice of the applicable law, regulation or process so that the Company may seek a protective order or other appropriate remedy.  Executive will cooperate fully with the Company and the Company’s Representatives in any attempt by the Company to obtain any such protective order or other remedy.  If the Company elects not to seek, or is unsuccessful in obtaining, any such protective order or other remedy in connection with any requirement that Executive disclose Proprietary Information or Third Party Information, and if Executive furnishes the Company with a written opinion of reputable legal counsel acceptable to the Company confirming that the disclosure of such Proprietary Information or Third Party Information is legally required, then Executive may disclose such Proprietary Information or Third Party Information to the extent legally required;  provided, however,  that Executive will use his reasonable best efforts to ensure that such Proprietary Information is treated confidentially by each Person to whom it is disclosed.

3.             Nonsolicitation.

(a)           Nonsolicitation. As long as Executive is an employee of the Company or any Affiliate thereof, and for eighteen (18) months thereafter, Executive shall not directly or indirectly through another entity: (i) induce or attempt to induce any employee of the Company or any Affiliate to leave the employ of the Company or such Affiliate, or in any way interfere with the relationship between the Company or any Affiliate and any employee thereof; (ii) hire or employ any person who was an employee of the Company or any Affiliate at any time during the nine (9) month period immediately preceding the date of such Executive’s termination; (iii) induce or attempt to induce any customer, client, supplier,

licensee or other business relation of the Company or any Affiliate to cease doing business with the Company or such Affiliate, or in any way interfere with the relationship between any such customer, client, supplier, licensee or business relation and the Company or any Affiliate; (iv) call on, solicit or service any Person who was a customer or client of the Company or any Affiliate or (v) call on, solicit or service any Person who was Prospective Client for any purpose which directly or indirectly competes with the business of the Company.  For purposes hereof, a  “Prospective Client”  means any Person whom the Company or any of its Affiliates has entertained discussions with to become a client or customer at any time during the twelve (12) month period immediately preceding the date of such Executive’s termination.

(b)           Acknowledgment. Executive acknowledges that in the course of his employment with the Company and its Affiliates, he has and will become familiar with the trade secrets and other Proprietary Information of the Company and its Affiliates. It is specifically recognized by Executive that his services to the Company and its Subsidiaries are special, unique and of extraordinary value, that the Company has a protectable interest in prohibiting Executive as provided in this  Section 3 , that money damages are insufficient to protect such interests, that there is adequate consideration being provided to Executive hereunder, that such prohibitions are necessary and appropriate without regard to payments being made to Executive hereunder and that the Company would not enter this Agreement with Executive without the restriction of this  Section 3. Executive further acknowledges that the restrictions contained in this Section 3 do not impose an undue hardship on him and, since he has general business skills which may be used in industries other than that in which the Company and its Subsidiaries conduct their business, do not deprive Executive of his livelihood.  Executive further acknowledges that the provisions of this Section 3 are separate and independent of the other sections of this Agreement.

(c)           Enforcement, etc.  If, at the time of enforcement of Section 2 or 3 of this Agreement, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances as determined by the court shall be substituted for the stated period, scope or area.  Because Executive’s services are unique, because Executive has access to Proprietary Information and for the other reasons set forth herein, the parties hereto agree that money damages would be an inadequate remedy for any breach of this Agreement.  Therefore, without limiting the generality of Section 8(g), in the event of a breach or threatened breach of this Agreement, the Company or its successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof.

(d)           Submission to Jurisdiction.  The parties hereby: (i) submit to the jurisdiction of any state or federal court sitting in California in any action or proceeding arising out of or relating to Section 2 and/or 3 of this Agreement; (ii) agree that all claims in respect of such action or proceeding may be heard or determined in any such court; and (iii) agree not to bring any action or proceeding arising out of or relating to Section 2 and/or 3 of this Agreement in any other court.  The parties hereby waive any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other party with respect thereto. The parties hereby agree that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law.

GENERAL PROVISIONS

4.             Definitions.

“Affiliate” of any Person means any other Person which directly or indirectly controls, is controlled by or is under common control with such Person.

“Board” means the Company’s board of directors or the board of directors or similar management body of any successor of the Company.

“EBITDA” shall mean earnings before interest, taxes, depreciation and amortization, but excluding gains, losses or expenses associated with all Unusual Items.

“Proprietary Information” means any and all data and information concerning the business affairs of the Company or any of its Affiliates and not generally known in the industry in which the Company or any of its Affiliates is or may become engaged, and any other information concerning any matters affecting or relating to the Company’s or its Affiliates businesses, but in any event Proprietary Information shall include, any of the Company’s and its Affiliates’ past, present or prospective business opportunities, including information concerning acquisition opportunities in or reasonably related to the Company’s or its Affiliates businesses or industries, customers, customer lists, clients, client lists, the prices the Company and its Affiliates obtain or have obtained from the sale of, or at which they sell or have sold, their products, unit volume of sales to past or present customers and clients, or any other information concerning the business of the Company and its Affiliates, their manner of operation, their plans, processes, figures, sales figures, projections, estimates, tax records, personnel history, accounting procedures, promotions, supply sources, contracts, know-how, trade secrets, information relating to research, development, inventions, technology, manufacture, purchasing, engineering, marketing, merchandising or selling, or other data without regard to whether all of the foregoing matters will be deemed confidential, material or important.  Proprietary Information does not include any information which Executive has obtained from a Person other than an employee of the Company, which was disclosed to him without a breach of a duty of confidentiality.

“Person” means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof.

“Records” means (i) any and all procedure manuals, books, records and accounts; (ii) all property of the Company and its Affiliates, including papers, note books, tapes and similar repositories containing Proprietary Information; (iii) all invoices and commission reports; (iv) customer lists — partial and/or complete; (v) data layouts, magnetic tape layouts, diskette layouts, etc.; (vi) samples; (vii) promotional letters, brochures and advertising materials; (viii) displays and display materials; (ix) correspondence and old or current proposals to any former, present or prospective customer of the Company and its Affiliates; (x) information concerning revenues and profitability and any other financial conditions of the Company and its Affiliates; (xi) information concerning the Company and its Affiliates which was input by Executive or at his direction, under his supervision or with his knowledge, including on any floppy disk, diskette, cassette or similar device used in, or in connection with, any computer, recording devices or typewriter; (xii) data, account information or other matters furnished by customers of the Company and its Affiliates; and (xiii) all copies of any of the foregoing data, documents or devices whether in the form of carbon copies, photo copies, copies of floppy disks, diskettes, tapes or in any other manner whatsoever. 

“Subsidiary” means any corporation of which the Company owns securities having a majority of the ordinary voting power in electing the board of directors directly or through one or more subsidiaries.

“Unusual Items” shall mean: (i) restructurings, discontinued operations, extraordinary items or events, and other unusual or non-recurring charges as described in Accounting Principles Board Opinion No. 30 and/or management’s discussion and analysis of financial condition and results of operations appearing or incorporated by reference in the Company’s Form 10-K for the applicable year; (ii) a force majeure or other event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management; (iii) litigation (including attorneys’ fees and other litigation expenses), judgments, settlements, except to the extent that any such litigation, judgments, and/or settlements result from the willful or intentional misconduct of Executive; (iv) changes in tax laws or accounting standards required by generally accepted accounting principles or changes in other such laws or provisions affecting reported results; (v) expenses resulting from severance arrangements with terminated employees; (vi) equity-based compensation expenses; (vii) one-time gains or losses from the disposal or sale of assets; and (viii) impairments of goodwill or other intangible assets.

5.             Notices. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class United States mail (postage prepaid, return receipt requested) or sent by reputable overnight courier service (charges prepaid) or by facsimile to the recipient at the address below indicated:

If to Executive:
	Peter T. Dameris
	26651 West Agoura Road
	Calabasas, California 91302
	Tel No.:		(818) 878-7900
If to the Company:
		26651 West Agoura Road
		Calabasas, California 91302
		Attention:		General Counsel
		Tel No.:		(818) 871-3300
		Fax No.:		(818) 880-0056

or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party.

6.             Executive’s Representations and Warranties.  Executive represents and warrants that he has full authority to enter into this Agreement and fully to perform his obligations hereunder, that he is not subject to any non-competition agreement, and that his past, present and anticipated future activities have not and will not infringe on the proprietary rights of others, including, but not limited to, proprietary information rights or interfere with any agreements he has with any prior employee.  Executive further represents

and warrants that he is not obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, which would conflict with or result in a breach of this Agreement or which would in any manner interfere with the performance of his duties for the Company.

7.        Code Section 409A.

(a)           General.  The payments and benefits provided hereunder are intended to be exempt from or compliant with the requirements of Code Section 409A.  Notwithstanding any provision of this Agreement to the contrary, in the event that following the Effective Date, the Company reasonably determines that any payments or benefits hereunder are not either exempt from or compliant with the requirements of Code Section 409A, the Company and Executive shall work together to adopt such amendments to this Agreement or adopt such other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that are necessary or appropriate (i) to preserve the intended tax treatment of the payments and benefits provided hereunder, to preserve the economic benefits with respect to such payments and benefits, and/or (ii) to exempt such payments and benefits from Code Section 409A or to comply with the requirements of Code Section 409A and thereby avoid the application of penalty taxes thereunder, provided¸ that the Company shall have no obligation to take any action described in this Section 7(a) or to indemnify Executive for any failure to take any such action.

(b)           Certain Reimbursements.  To the extent that any reimbursements hereunder constitute taxable compensation to Executive, such reimbursements shall be reimbursable to Executive only during his lifetime and shall be made to Executive promptly, but in no event after December 31st of the year following the year in which the expense was incurred, the amount of any such amounts reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year, and Executive’s right to reimbursement of any such expenses shall not be subject to liquidation or exchange for any other benefit.

8.         General Provisions.

(a)           Expenses. Each party shall bear his or its own expenses in connection with the negotiation and execution of this Agreement and the consummation of the transactions contemplated by this Agreement.

(b)           Severability.  Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

(c)           Complete Agreement. This Agreement and those documents expressly referred to herein embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way, including without limitation, the Prior Agreement (as amended).  Notwithstanding the foregoing, the Prior Agreement shall continue to govern the terms and conditions of all compensation and benefits paid, provided or payable thereunder, including without limitation, the 2006 Equity Awards.

(d)           Counterparts; Facsimile Transmission. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. Each party to this Agreement agrees that it will be bound by its own telecopied signature and that it accepts the telecopied signature of each other party to this Agreement.

(e)           Successors and Assigns. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company and their respective successors and assigns; provided that the rights and obligations of Executive under this Agreement shall not be assignable and, provided further that, the rights and obligations of the Company may be assigned to any Affiliate of the Company.

(f)            Choice of Law; Jurisdiction. All questions concerning the construction, validity and interpretation of this Agreement and the exhibits hereto will be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.  The parties hereby: (i) submit to the jurisdiction of any state or federal court sitting in California in any action or proceeding arising out of or relating to Agreement; (ii) agree that all claims in respect of such action or proceeding may be heard or determined in any such court; and (iii) agree not to bring any action or proceeding arising out of or relating to this Agreement in any other court. Executive hereby waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety or other security that might be required of any other party with respect thereto. The parties hereby agree that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law.

(g)           Remedies. Each of the parties to this Agreement will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including attorney’s fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement.

(h)           Amendment and Waiver. The provisions of this Agreement may be amended or waived only with the prior written consent of the Company and Executive.

(i)            Business Days. If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or holiday in the state in which the Company’s chief executive office is located, the time period shall be automatically extended to the business day immediately following, such Saturday, Sunday or holiday.

(j)            Termination. This Agreement shall survive the termination of Executive’s employment with the Company and shall remain in full force and effect after such termination.

(k)           No Waiver. A waiver by any party hereto of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which such party would otherwise have on any future occasion.  No failure to exercise nor any delay in exercising on the part of any party hereto, any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  The rights and remedies herein provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law.

(l)            Insurance.  The Company, at its discretion, may apply for and procure in its own name for its own benefit life and/or disability insurance on Executive in any amount or amounts considered available. Executive agrees to cooperate in any medical or other examination, supply any information, and to execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain and constitute such insurance. Executive hereby represents that he has no reason to believe that his life is not insurable at rates now prevailing for healthy men of his age.

(m)          Offset.  Whenever the Company or any of its Subsidiaries is obligated to pay any sum to Executive or any Affiliate or related person thereof pursuant to this Agreement, any bona fide debts that Executive or such Affiliate or related person owes to the Company or any of its Subsidiaries may be deducted from that sum before payment, to the greatest extent permitted under applicable law.

 (n)           Indemnification and Reimbursement of Payments on Behalf of Executive.  The Company and its Subsidiaries shall be entitled to deduct or withhold from any amounts owing from the Company or any of its Subsidiaries to Executive any federal, state, provincial, local or foreign withholding taxes, excise taxes, or employment taxes ( “Taxes” ) imposed with respect to Executive’s compensation or other payments from the Company or any of its Subsidiaries or Executive’s ownership interest in the Company, including, but not limited to, wages, bonuses, dividends, the receipt or exercise of stock options and/or the receipt or vesting of restricted stock.

(o)           Insurance and Indemnification.  For the period from the date of this Agreement through at least the tenth anniversary of Executive’s termination of employment from the Company, the Company shall maintain Executive as an insured party on all directors’ and officers’ insurance maintained by the Company for the benefit of its directors and officers on at least the same basis as all other covered individuals and provide Executive with at least the same corporate indemnification as it provides to the peer executives of the Company.

(p)                   Clawback.  To the extent permitted under applicable law, Executive agrees to reimburse the Company for amounts determined by final judicial process to be due to the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002.

[THIS SPACE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above.

ON ASSIGNMENT, INC.
By:	/s/Jeremy Jones
Name:	Jeremy Jones
Title:	Chairman of the Board of Directors
/s/Peter T. Dameris
PETER T. DAMERIS

EX-10.10

ON ASSIGNMENT, INC.

 AMENDED AND RESTATED CHANGE IN CONTROL SEVERANCE PLAN

 AND

 SUMMARY PLAN DESCRIPTION

Plan Effective Date:  February 12, 2004

 As Amended and Restated:  December 11, 2008

The On Assignment, Inc. Change in Control Severance Plan (the “Plan”) is primarily designed to provide eligible employees of On Assignment, Inc. (the “Company”) whose employment is terminated on or after February 12, 2004 with separation pay in the event of an involuntary termination.

This Plan is designed to be an “employee welfare benefit plan,” as defined in Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  This Plan is governed by ERISA and, to the extent applicable, the laws of the State of California.  This document constitutes both the official plan document and the required summary plan description under ERISA.

I.           ELIGIBILITY

You will be an Eligible Employee for purposes of receiving severance benefits under the Plan if:

•      you are a regular, full-time employee of the Company and are identified on Exhibit A (to be supplied separately);

•      your active employment with the Company is Involuntarily Terminated (within the meaning set forth below) within the eighteen (18) month period following a Change in Control;

•      you execute the General Release of All Claims (a “General Release”), within five (5) business days after your termination date or, if you are age forty (40) or over, you execute the General Release, within forty-five (45) business days after your termination and any rescission period specified therein has elapsed without you having rescinded said General Release; and

•      you are not in one of the excluded categories listed below.

Excluded Categories of Employees

You are not eligible for severance benefits under this Plan if:

•     you are a temporary employee, part-time employee working fewer than 30 hours per week (no minimum number of hours shall apply to salaried employees), probationary employee or student employee hired to be placed on assignment with clients of the Company;

•     you have a separate change in control, severance or similar agreement or arrangement with the Company that specifically provides that you are not eligible to participate in the Plan;

•     you voluntarily terminate your employment, unless your termination constitutes an “Involuntary Termination” as defined below;

•     you are employed with a successor employer which directly or indirectly acquires (i) all or any portion of the assets or operations of the Company or any subsidiary, (ii) all or any portion of the outstanding capital stock of the Company, or (iii) fifty percent (50%) or more of the capital stock of any subsidiary of the Company. However, you would be eligible for severance benefits pursuant to the terms of the Plan upon a subsequent termination by the successor employer within 18 months following a Change in Control; or

•     you are dismissed for Cause, whether or not you prior to your dismissal you received notice of a termination which would otherwise qualify you for severance benefits.

II.           HOW THE PLAN WORKS

If you are eligible for severance benefits under the Plan, the amount of your severance pay will be determined in accordance with the guidelines set forth below, subject to the Golden Parachute Tax limitation set forth below.  Subject to the Potential Six Month Delay set forth below, you will receive your severance pay in a lump-sum payment (with appropriate taxes deducted or withheld) which will be made as soon as administratively practicable after you experience a separation from service within the meaning of Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended, and Treasury Regulation Section 1.409A-1(h) (a “Separation from Service”) as a result of your Involuntary Termination within 18 months after a Change in Control, but in no event later than 30 days following the date of your Separation from Service, subject in all cases to the Company’s receipt of your executed General Release and the expiration of any rescission period applicable to your executed General Release.

Severance Guidelines

If your employment is Involuntarily Terminated within eighteen (18) months after a Change in Control and you are an Eligible Employee, you will be paid all Accrued Compensation and the following severance pay:

• A Pro-Rata Bonus;

•     If the Eligible Employee was the Chief Executive Officer of the Company immediately before the Change in Control:  (1) the Eligible Employee will receive 300% of the Eligible Employee’s Annual Base Pay and Target Bonus; (2)  for eighteen months following the Eligible Employee’s Separation from Service, the Eligible Employee may elect to continue the group health, vision and dental coverage he or she had in effect as of the Separation from Service (or generally comparable coverage) for the Eligible Employee, and if applicable, spouse and dependents, under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”)1, and (3) to assist the Eligible Employee in offsetting the cost of such continuing benefits, the Eligible Employee shall receive a lump sum payment in an after-tax amount, calculated based upon the COBRA premium rates as may be charged from time to time for employees of the Company (or any successor) generally for the medical, dental and/or vision coverage the Eligible Employee had elected under the Company’s group health plan at the time of the Eligible Employees Separation from Service, for eighteen months (rounded up, if applicable, to the next full month). For clarification and avoidance of doubt, if the Eligible Employee is not covered under the medical, dental and/or vision portions of the Company’s (or any successor’s group health plan as of the date of Separation from Service, then the Eligible Employee is not eligible for this additional payment.

 

1A separate election form and notice outlining continuation coverage under COBRA will be provided to the Eligible Employee (and, if applicable, his or her eligible dependents) and must be timely returned to effect enrollment.

•     If the Eligible Employee was an executive vice president and Chief Operating Officer of the Company immediately before the Change in Control:  (1)  275% of the Eligible Employee’s Annual Base Pay and Target Bonus; (2) for eighteen months following the Eligible Employee’s Separation from Service, the Eligible Employee may elect to continue the group health, vision and dental coverage he or she had in effect as of the Separation from Service (or generally comparable coverage) for the Eligible Employee, and if applicable, spouse and dependents, under COBRA1;and (3) to assist the Eligible Employee in offsetting the cost of such continuing benefits, the Eligible Employee shall receive a lump sum payment in an after-tax amount, calculated based upon the COBRA premium rates as may be charged from time to time for employees of the Company (or any successor) generally for the medical, dental and/or vision coverage the Eligible Employee had elected under the Company’s group health plan at the time of the Eligible Employees Separation from Service, for eighteen months (rounded up, if applicable, to the next full month). For clarification and avoidance of doubt, if the Eligible Employee is not covered under the medical, dental and/or vision portions of the Company’s (or any successor’s group health plan as of the date of Separation from Service, then the Eligible Employee is not eligible for this additional payment.

•     If the Eligible Employee was an executive vice president and Chief Financial Officer of the Company immediately before the Change in Control:  (1) 250% of the Eligible Employee’s Annual Base Pay and Target Bonus;  (2) for eighteen months following the Eligible Employee’s Separation from Service, the Eligible Employee may elect to continue the group health, vision and dental coverage he or she had in effect as of the Separation from Service (or generally comparable coverage) for the Eligible Employee, and if applicable, spouse and dependents, under COBRA1;and (3) to assist the Eligible Employee in offsetting the cost of such continuing benefits, the Eligible Employee shall receive a lump sum payment in an after-tax amount, calculated based upon the COBRA premium rates as may be charged from time to time for employees of the Company (or any successor) generally for the medical, dental and/or vision coverage the Eligible Employee had elected under the Company’s group health plan at the time of the Eligible Employees Separation from Service, for eighteen months (rounded up, if applicable, to the next full month). For clarification and avoidance of doubt, if the Eligible Employee is not covered under the medical, dental and/or vision portions of the Company’s (or any successor’s group health plan as of the date of Separation from Service, then the Eligible Employee is not eligible for this additional payment.

•     If the Eligible Employee was a senior vice president of the Company and/or president of a division of the Company (whether or not an executive officer) immediately before the Change in Control:  (1) 200% of the Eligible Employee’s Annual Base Pay and Target Bonus; (2) for eighteen months following the Eligible Employee’s Separation from Service, the Eligible Employee may elect to continue the group health, vision and dental coverage he or she had in effect as of the Separation from Service (or generally comparable coverage) for the Eligible Employee, and if applicable, spouse and dependents, under COBRA1;and (3) to assist the Eligible Employee in offsetting the cost of such continuing benefits, the Eligible Employee shall receive a lump sum payment in an after-tax amount, calculated based upon the COBRA premium rates as may be charged from time to time for employees of the Company (or any successor) generally for the medical, dental and/or vision coverage the Eligible Employee had elected under the Company’s group health plan at the time of the Eligible Employees Separation from Service, for eighteen months (rounded up, if applicable, to the next full month). For clarification and avoidance of doubt, if the Eligible Employee is not covered under the medical, dental and/or vision portions of the Company’s (or any successor’s group health plan as of the date of Separation from Service, then the Eligible Employee is not eligible for this additional payment.

•     If the Eligible Employee was a vice president or corporate controller (whether or not an executive officer), of the Company immediately before the Change in Control: (1) 75% of the Eligible Employee’s Annual Base Pay and Target Bonus; (2) for eighteen months following the Eligible Employee’s Separation from Service, the Eligible Employee may elect to continue the group health, vision and dental coverage he or she had in effect as of the Separation from Service (or generally comparable coverage) for the Eligible Employee, and if applicable, spouse and dependents, under COBRA1;and (3) to assist the Eligible Employee in offsetting the cost of such continuing benefits, the Eligible Employee shall receive a lump sum payment in an after-tax amount, calculated based upon the COBRA premium rates as may be charged from time to time for employees of the Company (or any successor) generally for the medical, dental and/or vision coverage the Eligible Employee had elected under the Company’s group health plan at the time of the Eligible Employees Separation from Service, for eighteen months (rounded up, if applicable, to the next full month). For clarification and avoidance of doubt, if the Eligible Employee is not covered under the medical, dental and/or vision portions of the Company’s (or any successor’s group health plan as of the date of Separation from Service, then the Eligible Employee is not eligible for this additional payment.;

•     1 month of the Eligible Employee’s Annual Base Pay and Incentive Compensation for each year or partial year of service to the Company as an employee, up to a maximum of 6 months of Annual Base Pay, with a minimum of two months of Annual Base Pay, if the Eligible Employee was a “director,” “assistant-director,” “manager,” “regional manager,” or “Senior Staffing Consultant” immediately before the Change in Control;

•     1 month of the Eligible Employee’s Annual Base Pay for each year or partial year of service to the Company as an employee, up to a maximum of 3 months of Annual Base Pay, with a minimum of one month of Annual Base Pay, if the Eligible Employee was an exempt employee of the Company (other than those employees described above) immediately before the Change in Control; or

•     1 week of the Eligible Employee’s Annual Base Pay for each year or partial year of service to the Company as an employee, up to a maximum of 3 months of Annual Base Pay, with a minimum of one week of Annual Base Pay, for all other Eligible Employee not included in the above categories.

Accrued Compensation shall mean an amount which shall consist of all amounts earned or accrued through the termination date but not paid as of the termination date including (i) Annual Base Pay, (ii) reimbursement for reasonable and necessary expenses incurred by you on behalf of the Company during the period ending on the termination date, (iii) vacation and sick leave pay (to the extent provided by Company policy or applicable law), and (iv) incentive compensation (if any) earned in respect of any period ended prior to the termination date.  It is expressly understood that incentive compensation shall have been “earned” as of the time that the conditions to such incentive compensation have been met, even if not calculated or payable at such time.

Annual Base Pay generally means your annualized base salary at the rate in effect during the last regularly scheduled payroll period immediately preceding the occurrence of the Change in Control and does not include, for example, bonuses, overtime compensation, incentive pay, fringe benefits, sales commissions or expense allowances.

Cause means your willful breach of duty unless waived by the Company (which willful breach is limited to your deliberate and consistent refusal to perform your duties or the deliberate and consistent refusal to conform to or follow any reasonable policy adopted by the Company provided you have had prior written notice of such refusal and an opportunity of at least thirty (30) days to cure such refusal), your unauthorized use or disclosure of confidential information or trade secrets of the Company, your breach of non-competition or non-solicitation agreements, your conviction of a felony under the laws of the United States or any state thereof, or your gross negligence.

Change in Control shall be deemed to occur upon the consummation of any of the following transactions:

1. a change in the ownership of Company whereby one person, or more than one person acting as a group, acquires ownership of the outstanding voting stock of the Company that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of Company, as determined in accordance with Treas. Reg. §1.409A-3(i)(5)(v).  If a person or group is considered either to own more than 50% of the total fair market value or total voting power of the Company’s stock, or to have effective control of the Company within the meaning of part 2 of the definition, and such person or group acquires additional stock of the Company, the acquisition of the additional stock shall not be considered to cause a change in the ownership of the Company; or

2. a change in the effective control of the Company whereby one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or group) ownership of Company stock possessing 30% or more of the total voting power of the Company stock, as determined in accordance with Treas. Reg. §1.409A-3(i)(5)(vi).  However, if a person or group is considered to possess 30% or more of the total voting power of the stock of the Company, and such person or group acquires additional stock of the Company, the acquisition of additional stock by such person or group shall not be considered to cause a change in the effective control of Company ; or

3. a change in the effective control of the Company whereby a majority of the members of the Company’s board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s board of directors before the date of the appointment or election, as determined in accordance with Treas. Reg. §1.409A-3(i)(5)(vi).  In determining whether the event described in the preceding sentence has occurred, the Company to which the event must relate shall only include a corporation identified in accordance with Treas. Reg. §1.409A-3(i)(5)(ii) for which no other corporation is a majority shareholder; or

4. a change in the ownership of a substantial portion of the assets of the Company, whereby any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all Company assets immediately before such acquisition or acquisitions, as determined in accordance with Treas. Reg. §1.409A-3(i)(5)(vii).  A transfer of assets shall not be treated as a change in the ownership of a substantial portion of the assets when such transfer is made to an entity that is controlled by the shareholders of the Company, as determined in accordance with Treas. Reg. §1.409A-3(i)(5)(vii)(B)..

Incentive Compensation shall mean 100% of the commission, bonus or other incentive-type pay paid to you (excluding stock options) for the fiscal year immediately preceding the Change in Control.

Involuntary Termination shall mean the termination of your employment with the Company (or, if applicable, successor entity) other than by reason of death or disability:

(A)           involuntarily upon your discharge or dismissal other than for Cause, or

(B) upon your resignation following (I) a reduction in your level of Annual Base Pay or any Target Bonus, (II) a material reduction in your benefits or (III) a relocation of your place of employment which is more than 35 miles from your place of employment prior to the Change in Control, such that it constitutes a material change in the geographic location at which you must perform services (within the meaning of Section 409A), provided and only if such change or reduction is effected without your written concurrence, or

(C) upon your resignation in the case of an employee who was an executive officer or vice president immediately before the applicable Change in Control following a change in the employee’s position with the Company (or, if applicable, with the successor entity) that is effected without the employee’s consent and materially reduces his or her level of responsibility or authority.

Pro Rata Bonus means an amount equal to 100% of the target bonus that you would have been eligible to receive for the Company’s fiscal year in which your employment terminates following a Change of Control, multiplied by a fraction, the numerator of which is the number of days in such fiscal year through the Termination Date and the denominator of which is 365.

Target Bonus shall mean the bonus which would have been paid to you for full achievement of specific performance objectives pertaining to the business of the Company or any of its specific business units or divisions, or to individual performance criteria applicable to you, which objectives have been established by the Board of Directors (or the Compensation Committee thereof) for the year in question.  “Target Bonus” shall not mean the “maximum bonus” which you might have been paid for overachievement of such performance objectives or criteria or any purely discretionary bonus.

Golden Parachute Tax Gross-Up

In the event that any payment or benefit made or provided to or for your benefit in connection with this Plan and/or your employment with the Company or the termination thereof (a “Payment” ) is determined to be subject to any excise tax (“Excise Tax” ) imposed by Section 4999 of the Code (or any successor to such Section), the Company shall pay to you, prior to the time any Excise Tax is payable with respect to such Payment (through withholding or otherwise), an additional amount (a “Gross-Up Payment” ) which, after the imposition of all income, employment, excise and other taxes, penalties and interest thereon, is equal to the sum of (i) the Excise Tax on such Payment plus (ii) any penalty and interest assessments associated with such Excise Tax.  The determination of whether any Payment is subject to an Excise Tax and, if so, the amount and time of any Gross-Up Payment pursuant to this Plan shall be made by an independent auditor (the “Auditor”) selected and paid by the Company.  The parties shall cooperate with each other in connection with any proceeding or claim relating to the existence or amount of any liability for Excise Tax.

Potential Six Month Delay

Notwithstanding anything to the contrary in this Plan, no compensation or Benefits, shall be paid to you during the 6-month period following your “separation from service” (within the meaning of Section 409A(a)(2)(A)(i) of the Internal Revenue Code of 1986, as amended (the “Code”)) to the extent the Plan Administrator determines Executive is a “specified employee” at the time of such Separation from Service (within the meaning of Section 409A) and that that paying such amounts at the time or times indicated in this Plan would be a prohibited distribution under Section 409A(a)(2)(b)(i) of the Code and/or cause you to incur additional taxes under Section 409A of the Code.  If the payment of any such amounts is delayed as a result of the previous sentence, then on the first business day following the end of such 6-month period, (or such earlier date upon which such amount can be paid under Section 409A without being subject to such additional taxes, including as a result of your death), the Company shall pay you a lump-sum amount equal to the cumulative amount that would have otherwise been payable to you during such 6-month period, without interest thereon.

III.           OTHER IMPORTANT INFORMATION

 Plan Administration.  As the Plan Administrator, the Company has full discretionary authority to administer and interpret the Plan, including discretionary authority to determine eligibility for benefits under the Plan and the amount of benefits (if any) payable per participant. Any determination by the Plan Administrator will be final and conclusive upon all persons.  When benefits are due, they will be paid from the general assets of the Company.  The Company is not required to establish a trust to fund the Plan.  The benefits provided under this Plan are not assignable and may be conditioned upon your compliance with any confidentiality agreement you have entered into with the Company or upon your compliance with any Company policy or program communicated to you in writing.

Claims Procedure.  If you believe you are incorrectly denied a benefit or are entitled to a greater benefit than the benefit you receive under the Plan, you may submit a signed, written application to the Plan Administrator within ninety (90) days of your termination.  You will be notified of the approval or denial of this claim within ninety (90) days of the date that the Plan Administrator receives the claim, unless special circumstances require an extension of time for processing the claim.  If your claim is denied, the notification will state specific reasons for the denial and you will have sixty (60) days from receipt of the written notification of the denial of your claim to file a signed, written request for a review of the denial with the Plan Administrator.  This request should include the reasons you are requesting a review, facts supporting your request and any other relevant comments.  Pursuant to its discretionary authority to administer and interpret the Plan and to determine eligibility for benefits under the Plan, the Plan Administrator will generally make a final, written determination of your eligibility for benefits within sixty (60) days of receipt of your request for review.

Plan Terms.  Except as otherwise set forth herein, this Plan supersedes any and all prior separation, severance and salary continuation arrangements, programs and plans which were previously offered by the Company for the purpose of paying benefits to any Eligible Employee upon a termination following a Change in Control, including pursuant to an employment agreement or offer letter.  Nothing in this Plan shall affect an Eligible Employee’s right to severance benefits under circumstances not involving a termination following a Change in Control.  In no event, however, shall any individual receive severance benefits under both this Plan and any other separation, severance pay or salary continuation program, plan or other arrangement with the Company.

Plan Amendment or Termination.  The Company reserves the right to terminate or amend the Plan at any time upon the vote of a two-thirds majority of the Board of Directors; provided, however, that no amendment which materially impairs the rights of an Eligible Employee under the Plan may be made after the occurrence of a Change in Control or after discussions have commenced with another entity which results in the occurrence of a Change in Control within 270 days of when such discussions commenced.  Any termination or amendment of the Plan may be made effective immediately with respect to any benefits not yet paid, whether or not prior notice of such amendment or termination has been given to affected employees.

Taxes.  The Company will withhold all applicable taxes and other payroll deductions from any payment made pursuant to this Plan.

No Right To Employment.  This Plan does not provide you with any right to continue employment with the Company or affect the Company’s right, which right is hereby expressly reserved, to terminate the employment of any individual at any time for any reason with or without Cause.

IV.           STATEMENT OF ERISA RIGHTS

As a participant in the Plan, you are entitled to certain rights and protections under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  ERISA provides that all Plan participants shall be entitled to: 

1. Examine, without charge, at the Plan Administrator’s office, all Plan documents, including all documents filed by the Plan with the U.S. Department of Labor.

2. Obtain copies of all Plan documents and other Plan information upon written request to the Plan Administrator.  The Plan Administrator may make a reasonable charge for the copies.

3.             Receive a summary of the Plan’s annual financial report.

4. File suit in a federal court, if you, as a participant, request materials and do not receive them within thirty (30) days of your request.  In such a case, the court may require the Plan Administrator to provide the materials and to pay you a fine of up to $110 for each day’s delay until the materials are received, unless the materials were not sent because of reasons beyond the control of the Plan Administrator.

In addition to creating rights for certain employees of the Company under the Plan, ERISA imposes obligations upon the people who are responsible for the operation of the Plan.  The people who operate the Plan (called “fiduciaries”) have a duty to do so prudently and in the interest of the Company’s employees who are covered by the Plan.

No one, including your employer or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a benefit to which you are entitled under the Plan or from exercising your rights under ERISA.

If your claim for a severance benefit is denied or ignored, in whole or in part, you have a right to file suit in a federal or a state court.  If Plan fiduciaries are misusing the Plan’s assets (if any) or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor or file suit in a federal court.  The court will decide who should pay court costs and legal fees.  If you are successful in your lawsuit, the court may, if it so decides, order the party you have sued to pay your legal costs, including attorney fees.  However, if you lose, the court may order you to pay these costs and fees, for example, if it finds that your claim or suit is frivolous.

If you have any questions about the Plan, this statement or your rights under ERISA, you should contact the Plan Administrator or the nearest Area Office of the  Employee Benefits Security Administration, listed in your telephone directory, or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue, N.W., Washington, D.C. 20210

V.   SECTION 409A

The payments and benefits provided hereunder are intended to be exempt from or compliant with the requirements of Section 409A.  Notwithstanding any provision of this Plan to the contrary, in the event that following the effective date hereof, the Company reasonably determines that any payments or benefits hereunder are not either exempt from or compliant with the requirements of Section 409A, the Company reserves the right (without any obligation to do so or to indemnify you for failure to do so), in its discretion, to amend this Plan, or adopt such other policies and procedures (including amendments to policies and procedures with retroactive effect), or take any other actions, that the Company reasonably determines to be necessary or appropriate (i) to preserve the intended tax treatment of the payments and benefits provided hereunder, to preserve the economic benefits with respect to such payments and benefits, and/or to avoid less favorable accounting or tax consequences and/or (ii) to exempt such payments and benefits from Section 409A or to comply with the requirements of Section 409A and thereby avoid the application of penalty taxes thereunder.

To the extent that any reimbursements hereunder constitute taxable compensation to you, such reimbursements shall be made to you promptly, but in no event after December 31st of the year following the year in which the expense was incurred, the amount of any such amounts reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year, and your right to reimbursement of any such expenses shall not be subject to liquidation or exchange for any other benefit.

ADDITIONAL PLAN INFORMATION

Name of Plan:	On Assignment, Inc. Change in Control Severance Plan
Company Sponsoring Plan:	On Assignment, Inc. 26651 West Agoura Road Calabasas, California  91302
Employer Identification Number:	95-4023433
Plan Number:	505
Plan Year:	The calendar year; the first plan year is a short plan year starting February 12, 1998 and ending December 31, 1998
Plan Administrator:	On Assignment, Inc. 26651 West Agoura Road Calabasas, California 91302 (818) 878-7900
Agent for Service of Legal Process:	Plan Administrator
Type of Plan:	Severance Plan/Employee Welfare Benefit Plan
Plan Costs:	The cost of the Plan is paid by On Assignment, Inc.

Exhibit A

• Category 1.

•Category 2.

• Category 3.

• Category 4.  Eligible Employee who was a senior vice president of the Company and/or president of a division of the Company (whether or not an executive officer) immediately before the Change in Control;

1.   Emmett McGrath

2.   Michael Payne

3.   Mark Brouse

4.   Michael McGowan

5.   Thomas McKenna

• Category 5.  Eligible Employee who was a vice president or corporate controller (whether or not an executive officer), of the Company immediately before the Change in Control;

1.   Christina Gibson

2.   Karen Keppel

3.   Carol McNamara

4.   Angela Kolarek

5.   Tarini Ramaprakash

6.   James Jandl

7.   Dean Burdett

·   Category 6.  Eligible Employee who was a “director” or an “assistant-director” immediately before the Change in Control.

1.   Dave Garaway

2.   Michael Leroy

3.   Eric Radke