ON ASSIGNMENT INC (Form: 10-Q, Received: 08/09/2010 17:03:35)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2010

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

Commission file number: 000-20540

ON ASSIGNMENT, INC.

(Exact name of registrant as specified in its charter)

Delaware			95-4023433
(State of Incorporation)			(I.R.S. Employer Identification No.)

26651 West Agoura Road, Calabasas, CA			91302
(Address of principal executive offices)			(Zip Code)

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

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

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes o No

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 filer x
Non-accelerated filer o	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).

o Yes x No

At July 30, 2010, the total number of outstanding shares of the Company’s Common Stock ($0.01 par value) was 36,471,182.

ON ASSIGNMENT, INC. AND SUBSIDIARIES

Index

PART I – FINANCIAL INFORMATION

Item 1 – Condensed Consolidated Financial Statements (unaudited)	3

Condensed Consolidated Balance Sheets at June 30, 2010 and December 31, 2009	3

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, 2010 and 2009	4

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and 2009	5

Notes to Condensed Consolidated Financial Statements	7

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3 – Quantitative and Qualitative Disclosures about Market Risks	23

Item 4 – Controls and Procedures	23

PART II – OTHER INFORMATION

Item 1 – Legal Proceedings	24

Item 1A – Risk Factors	24

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds	24

Item 3 – Defaults Upon Senior Securities	24

Item 4 – Removed and Reserved	24

Item 5 – Other Information	24

Item 6 – Exhibits	24

Signatures	27

PART I - FINANCIAL INFORMATION

Item 1 — Condensed Consolidated Financial Statements (Unaudited)

ON ASSIGNMENT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(Dollars in thousands, except per share data)

	June 30, 2010			December 31, 2009
ASSETS
Current Assets:
Cash and cash equivalents	$	30,483		$	25,974
Accounts receivable, net of allowance for doubtful accounts and billing adjustments of $1,965 and $1,949, respectively		52,237			50,173
Prepaid expenses		2,643			3,445
Prepaid income taxes		1,671			4,717
Deferred income tax assets		7,370			7,507
Other		2,406			2,376
Total current assets		96,810			94,192

Property and Equipment, net		15,371			15,618
Goodwill		209,209			202,814
Identifiable intangible assets, net		25,196			25,523
Other assets		4,608			5,315
Total Assets	$	351,194		$	343,462

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	4,785		$	4,164
Accrued payroll and contract professional pay		15,309			11,625
Deferred compensation		1,963			2,070
Workers’ compensation and medical malpractice loss reserves		10,500			10,349
Other		3,270			3,746
Total current liabilities		35,827			31,954

Deferred income taxes		5,951			5,697
Long-term debt		77,913			77,913
Other long-term liabilities		3,601			1,237
Total liabilities		123,292			116,801
Commitments and Contingencies (Note 10)
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, 36,451,849 and 36,262,810 issued respectively		364			363
Paid-in capital		222,429			220,082
Retained earnings		5,728			5,090
Accumulated other comprehensive income (loss)		(619	)		1,126
Total stockholders’ equity		227,902			226,661
Total Liabilities and Stockholders’ Equity	$	351,194		$	343,462

See notes to consolidated financial statements.

ON ASSIGNMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(In thousands, except per share data)

	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Revenues	$	104,459		$	101,834		$	200,772		$	218,636
Cost of services		69,163			68,437			134,653			148,255
Gross profit		35,296			33,397			66,119			70,381
Selling, general and administrative expenses		31,964			29,985			61,795			63,114
Operating income		3,332			3,412			4,324			7,267
Interest expense		(1,607	)		(2,059	)		(3,167	)		(3,146	)
Interest income		32			47			64			103
Income before income taxes		1,757			1,400			1,221			4,224
Provision for income taxes		817			830			583			2,006
Net income	$	940		$	570		$	638		$	2,218

Earnings per share:
Basic	$	0.03		$	0.02		$	0.02		$	0.06
Diluted	$	0.03		$	0.02		$	0.02		$	0.06
Number of shares used to calculate earnings per share:
Basic		36,427			36,181			36,394			36,011
Diluted		37,150			36,385			37,165			36,188

Reconciliation of net income to comprehensive income (loss):
Net income	$	940		$	570	$	638		$	2,218
Foreign currency translation gain (loss)		(995	)		715		(1,745	)		199
Comprehensive income (loss)	$	(55	)	$	1,285	$	(1,107	)	$	2,417

See notes to condensed consolidated financial statements.

ON ASSIGNMENT, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

	Six months ended June 30,
	2010			2009
Cash Flows from Operating Activities:
Net income	$	638		$	2,218
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		2,902			2,972
Amortization of intangible assets		1,073			3,076
Provision for doubtful accounts and billing adjustments		175			126
Deferred income tax provision		—			(54	)
Stock-based compensation		3,219			2,207
Amortization of deferred loan costs		510			385
Change in fair value of interest rate swap		—			(1,345	)
Loss (gain) on officers’ life insurance policies		98			(176	)
Gross excess tax benefits from stock-based compensation		(72	)		—
(Gain) loss on disposal of property and equipment		(30	)		31
Workers’ compensation and medical malpractice provision		1,989			2,661
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable		(1,424	)		27,055
Prepaid expenses		821			1,516
Prepaid income taxes		3,046			1,368
Accounts payable		620			(317	)
Accrued payroll and contract professional pay		3,235			(6,367	)
Deferred compensation		(107	)		177
Workers’ compensation and medical malpractice loss reserves		(1,840	)		(1,843	)
Other		(380	)		(2,288	)
Net cash provided by operating activities		14,473			31,402
Cash Flows from Investing Activities:
Purchase of property and equipment		(2,836	)		(2,585	)
Net cash paid for acquisitions		(5,361	)		(5,300	)
Other		149			267
Net cash used in investing activities		(8,048	)		(7,618	)
Cash Flows from Financing Activities:
Principal payments of long-term debt		—			(25,000	)
Proceeds from stock transactions		156			466
Payment of employment taxes related to release of restricted stock awards		(684	)		(207	)
Gross excess tax benefits from stock-based compensation		72			—
Payments for previous acquisitions		(22	)		—
Debt issuance or amendment costs		—			(1,065	)
Payments of other long-term liabilities		(34	)		(81	)
Net cash used in financing activities		(512	)		(25,887	)
Effect of exchange rate changes on cash and cash equivalents		(1,404	)		337
Net Increase (Decrease) in Cash and Cash Equivalents		4,509			(1,766	)
Cash and Cash Equivalents at Beginning of Period		25,974			46,271
Cash and Cash Equivalents at End of Period	$	30,483		$	44,505

(continued)

	Six months ended June 30,
	2010			2009
Supplemental Disclosure of Cash Flow Information:
Cash (received) paid for income taxes, net	$	(2,450	)	$	726
Cash paid for interest, net	$	2,872		$	2,616

Supplemental Disclosure of Non-Cash Transactions:
Accrued earn-out	$	2,300		$	—
Acquisition of property and equipment through accounts payable	$	408		$	636

See notes to condensed consolidated financial statements.

ON ASSIGNMENT, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Financial Statement Presentation. The accompanying condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). This report on Form 10-Q should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. Certain information and footnote disclosures, which are normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to SEC rules and regulations. The information reflects all normal and recurring adjustments which, in the opinion of the Company’s management, are necessary for a fair presentation of the financial position of the Company and its results of operations for the interim periods set forth herein. The results for the six months ended June 30, 2010 are not necessarily indicative of the results to be expected for the full year or any other period. The Company has evaluated subsequent events after the balance sheet date through the issuance date for appropriate accounting and disclosure.

2. Accounting Standards Updates . In January 2010, an update was made to ASC Topic 820, Fair Value Measurements and Disclosures (ASC 820), which required new disclosures for fair value measurements and provided clarification for existing disclosure requirements. The Company adopted the measurement requirements of this guidance in the first quarter of 2010 with no impact to the consolidated financial statements. See Note 7 for the disclosures required by this standard.

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.

3. Acquisitions. On April 16, 2010, the Company acquired the outstanding shares of The Cambridge Group Ltd. (Cambridge), a Connecticut-based privately-held provider of specialized staffing services. The primary reasons for the Cambridge acquisition were to expand our Life Sciences, IT and Engineering, and Physician business operations and to leverage the Company’s existing SG&A infrastructure. The purchase price included $5.4 million in cash plus potential for future consideration of up to $2.3 million based upon the operating results of the related business through March 31, 2012. The earn-outs are to be paid, if and to the extent earned, sixty days after the end of each of the preceding periods, pending the agreement of all applicable parties to all terms and provisions related to such payments. Pursuant to ASC Topic 805, Business Combinations , the Company accrued $2.3 million representing the estimated fair value of the future earn-out payments as of the acquisition date and the amount is included in the Consolidated Balance Sheets in other long-term liabilities.

We allocated the purchase price to assets acquired and liabilities assumed based on their estimated fair values on the acquisition date. The excess of the purchase price over the aggregate fair value was recorded as goodwill. None of the goodwill will be deductible for tax purposes. The fair value assigned to identifiable intangible assets was determined primarily by using a discounted cash flow method. See Note 4 for a discussion of the intangible assets acquired and the allocation of goodwill to the segments.

The following summarizes the allocation of the Cambridge purchase price (in thousands):

	(Unaudited)
Current assets	$	1,472
Goodwill		6,395
Identifiable intangible assets		746
Long-term deposits and other long-term assets		32
Total assets acquired	$	8,645

Current liabilities	$	731
Long-term liabilities		253
Total liabilities assumed		984
Total purchase price	$	7,661

Cambridge’s financial results have been included in our consolidated statements of operations as of the acquisition date. This

acquisition is not considered material to the Company, and therefore, pro-forma information has not been presented.

4. Goodwill and Identifiable Intangible Assets . The changes in the carrying amount of goodwill for the six months ended June 30, 2010 follow (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
Cambridge acquisition (see Note 3)		5,454		―		―		941		6,395
Balance as of June 30, 2010	$	6,651	$	15,912	$	37,163	$	149,483	$	209,209

During the current quarter, the Company recorded $0.7 million of intangible assets with definite lives related to the Cambridge acquisition (see Note 3) which included contractor relations of $96,000 (4 year amortization period), customer relations of $0.5 million (4 year amortization period) and non-compete agreements of $0.1 million (3 year amortization period). The purchased identifiable intangible assets are amortized on an accelerated or straight-line basis over their respective useful lives depending on the intangible asset.

As of June 30, 2010 and December 31, 2009, the Company had the following acquired intangible assets (in thousands):

		June 30, 2010						December 31, 2009
	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	$	7,210	$	6,571	$	639	$	6,660	$	6,257	$	403
Contractor relations	3 - 7 years		26,106		23,843		2,263		26,010		23,100		2,910
NNon-compete agreements	2 - 3 years		440		346		94		340		330		10
In-use software	2 years		500		500		—		500		500		―
			34,256		31,260		2,996		33,510		30,187		3,323
Intangible assets not subject to amortization:
Trademarks			22,200		—		22,200		22,200		—		22,200
Goodwill			209,209		—		209,209		202,814		—		202,814
Total		$	265,665	$	31,260	$	234,405	$	258,524	$	30,187	$	228,337

Amortization expense for intangible assets with finite lives was $0.4 million and $1.5 million for the three months ended June 30, 2010 and 2009, respectively. Amortization expense for intangible assets with finite lives was $1.1 million and $3.1 million for the six months ended June 30, 2010 and 2009, respectively. Estimated amortization for the remainder of 2010 is $0.9 million. Estimated amortization for each of the four years in the period ended December 31, 2014 is $1.0 million, $0.6 million, $0.5 million and $42,000, respectively.

Goodwill and other intangible assets having indefinite useful lives 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.

The Company's overall operating results for its reporting units through the second quarter 2010 were consistent with forecasts for the first quarter, except for the operating results for the Physician reporting unit. The revised 2010 revenue forecasts for the Physician group represented a 3 percent decline from prjected 2010 assumed in the first quarter 2010. The Company concluded that based on its analysis of the specific factors that led to the decrease in projected 2010 revenues for the Physicians segment, the decrease in projected revenues did not represent an indicator of goodwill impairment. The Physician reporting unit represented 17.8 percent of the $209.2 million goodwill balance and based on the Step 1 analysis performed as of the first quarter 2010, 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 June 30, 2010 was 13.6 percent. After considering the decline in projected revenues for 2010, as well as the expected impact to projected revenues in years beyond 2010, the Company continued to believe that the fair value of the Physicians reporting unit still remained above its carrying value as of June 30, 2010.

During the latter half of the quarter ended June 30, 2010, the Company's stock price declined from the higher share price achieved during the fourth quarter of 2009 and the first quarter of 2010 and the excess of the aggregated discounted cash flows of the reporting units as compared to the market capitalization had increased to more than 50 percent. The Company does not believe that the recent decline in the stock price represents a sustained decline. In addition, the Company noted that as of June 30, 2010, the Company's carrying value exceeded its market capitalization by less than 25 percent.

The discounted cash flows and the resulting fair value estimates of the reporting units are highly sensitive to changes in other assumptions which include an increase of less than 200 basis points in the discount rate and/or a less than 10 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 throughout 2010 for all of the reporting units except for Nurse Travel and Physician. Changes in the timing of the recovery and the impact on the 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 the 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 its carrying value, which would require a Step 2 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 the impairment analysis. Downward revisions of the 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.

5. Long-Term Debt. Long-term debt at June 30, 2010 and December 31, 2009, consisted of the following (in thousands):

	June 30, 2010		December 31, 2009

Senior Secured Debt:
$20 million revolving credit facility, due January 2012	$	—	$	—
$145 million term loan facility, bearing interest at LIBOR (defined with a 3.0 percent floor) plus 3.75 percent, due January 2013		77,913		77,913
Total	$	77,913	$	77,913

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. The credit facility is secured by all of the assets of the Company. As of June 30, 2010, the Company was in compliance with all financial covenants under the credit agreement.

6. 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. On June 30, 2009, the swap expired in accordance with the terms of the agreement. The Company recorded a gain of $0.7 million and a gain of $1.3 million for the three and six months ended June 30, 2009 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 (loss).

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 June 30, 2010 or December 31, 2009. 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 increased or decreased interest expense. The Company’s fair value measurement as of June 30, 2010 and 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 was 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 (Loss) for the three and six months ended June 30, 2010 and 2009 (in thousands):

Location of Gain (Loss) Recognized in Income on Derivative	Amount of Gain (Loss) Recognized in Income on Derivative	Amount of Gain(Loss) Recognized in Income on Derivative				Amount of Gain(Loss) Recognized in Income on Derivative
		Three months ended June 30,				Six months ended June 30,
		2010		2009		2010		2009
Interest rate cap	Interest expense	$	—	$	—	$	—	$	—
Interest rate swap	Interest expense	$	—	$	685	$	—	$	1,345

7. 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 June 30, 2010 and December 31, 2009. The Company’s fair value measurement as of June 30, 2010 and 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 June 30, 2010 or December 31, 2009. 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 June 30, 2010 and December 31, 2009 (in thousands):

	June 30, 2010						December 31, 2009
	Carrying Amount			Fair Value			Carrying Amount			Fair Value

Life Insurance Policies	$	2,016		$	2,016		$	2,114		$	2,114
Long-Term Debt	$	(77,913	)	$	(76,354	)	$	(77,913	)	$	(75,576	)

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.

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 June 30, 2010 and December 31, 2009, no fair value adjustments were required for non-financial assets or liabilities.

8. Property and Equipment. 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 $7.9 million as of June 30, 2010 and $7.5 million as of December 31, 2009, which includes work-in-progress of $2.8 million and $4.5 million, respectively. The Company has also capitalized website development costs of $0.1 million as of June 30, 2010 and December 31, 2009.

9. Incentive Award Plan and Employee Stock Purchase Plan . Effective June 3, 2010, the shareholders approved the adoption of the On Assignment, Inc. 2010 Incentive Award Plan (the 2010 Plan), which replaced the Company’s Restated 1987 Stock Option Plan. The 2010 Plan permits the grant of stock options, including incentive stock options, nonqualified stock options, restricted stock (RSAs), dividend equivalent rights, stock payments, deferred stock, restricted stock units (RSUs), performance shares and other incentive awards, stock appreciation rights and cash awards to its employees, directors and consultants for up to 2,184,983 shares of common stock, which includes the 884,983 shares that remained available for issuance under the 1987 Plan. 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. The 2010 Plan allows for stock option awards to be 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 ten year contractual terms. RSUs and RSAs generally vest over a three year continuous service period, though individual award vesting terms vary within these parameters. Certain stock option awards and RSUs and RSAs provide for accelerated vesting in the event of a change in control.

The preceding paragraph describes the general terms of most stock-based incentives awards granted by the Company. However, the Company has granted a discrete set of stock-based awards to its Chief Executive Officer (CEO) that differ from those generally stated terms. On June 3, 2010, the CEO was awarded a number of RSUs determined by dividing $0.5 million by the closing price of the Company’s stock on February 1, 2013 contingent upon the Company meeting certain stock price performance objectives measured over the thirty-six month period between January 1, 2010 and December 31, 2012. The grant-date fair value of the award is $0.1 million and is being expensed over a derived service period of 1.3 years, determined by applying certain provisions relative to market-based awards in ASC Topic 718, Stock Compensation . Furthermore, certain provisions of ASC Topic 480, Distinguishing Liabilities from Equity , require the Company to classify and account for this award as a liability award until the number of shares is determined and the grant-date fair value of the award is remeasured at each reporting period until the award is settled. Fluctuations in the grant-date fair value of the liability award and its derived service period are recorded as increases or decreases to stock-based compensation cost. The associated liability related to this award included in the Consolidated Balance Sheets in other long-term liabilities as of June 30, 2010 was $8,000.

On March 17, 2010 the CEO was granted 67,568 RSUs, with a grant-date fair value of $0.5 million, which will vest in two equal components on February 1, 2011 and February 1, 2012, contingent upon meeting certain performance objectives approved by the Compensation Committee based on adjusted EBITDA, measured over the twelve-month period between January 1, 2010 and December 31, 2010. The grant-date fair value is being expensed over the respective vesting term based on estimates of the probability that the targets will be met. Based on the current forecast for 2010, 79 percent of the performance target is expected to be met for this award. All awards are subject to the CEO’s continued employment through applicable vesting dates. All awards may vest on an accelerated basis in part or in full upon the occurrence of certain qualifying terminations of employment and/or corporate events.

In the first quarter of 2010, the Company granted RSUs to certain other executive officers with an aggregate grant-date fair value of $1.1 million, 40 percent of which vest on the first anniversary of the date of grant, contingent upon continued employment and the Company meeting certain performance objectives during this period and 60 percent of which vest in equal increments on the first three anniversaries of the grant date based on continued employment only. Compensation expense for the performance-based component of these awards is based on estimates of the probability that the targets will be met. Based on the current forecast for 2010, 63 percent of the applicable performance target is expected to be met. The maximum compensation expense related to the performance-based component of these awards that may be recognized is $0.2 million expensed over the vesting term. Compensation expense that will be recognized related to the time-based component of these awards is $0.9 million, which is being expensed over the vesting term beginning on the grant date.

Compensation expense charged to operations related to stock-based compensation was $1.9 million and $3.2 million for the three and six months ended June 30, 2010, respectively, and $1.1 million and $2.2 million for the three and six months ended June 30, 2009, respectively, and is included in the Consolidated Statements of Operations and Comprehensive Income (Loss) in selling, general and administrative expenses.

Effective June 3, 2010 when the shareholders approved the On Assignment 2010 Employee Stock Purchase Plan (ESPP), the Company reinstated the employee stock purchase program for issuance of up to 3,500,000 shares of common stock with the first offering periods. The ESPP allows eligible employees to purchase common stock of the Company, through payroll deductions, at 85 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 up to a certain percentage set by the plan administrator of their eligible earnings toward the purchase of the stock (subject to certain IRS limitations).

10. Commitments and Contingencies . The Company is partially self-insured for its workers’ compensation liability related to the Life Sciences, Healthcare, and IT and Engineering segments, as well as its medical malpractice liability in the Physician segment. 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 or 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 $10.5 million at June 30, 2010 and $10.3 million at December 31, 2009. 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 June 30, 2010 were $2.6 million and at December 31, 2009 were $3.8 million.

As of June 30, 2010 and December 31, 2009, the Company has an income tax reserve in other long-term liabilities related to uncertain tax positions of $0.3 million.

As discussed in Note 3, the Company has accrued $2.3 million for the earn-out payments related to our Cambridge acquisition which are based upon the operating performance of the related business, and have been included in the Consolidated Balance Sheets in other long-term liabilities.

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, the Company does not believe that the disposition of matters that are pending or asserted will have a material adverse effect on its financial position, results of operations or cash flows.

11. Earnings per share. Basic earnings per share are computed based upon the weighted average number of common shares outstanding, and diluted earnings per share are computed based upon the weighted average number of common shares outstanding and dilutive common share equivalents (consisting of incentive stock options, non-qualified stock options, restricted stock awards and units and employee stock purchase plan shares) 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):

	Three months ended June 30,				Six months ended June 30,
	2010		2009		2010		2009
Weighted average number of common shares outstanding used to compute basic earnings per share		36,427		36,181		36,394		36,011
Dilutive effect of stock-based awards		723		204		771		177
Number of shares used to compute diluted earnings per share		37,150		36,385		37,165		36,188

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 (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2010		2009		2010		2009
Anti-dilutive common share equivalents outstanding		1,685		2,982		1,364		3,157

12. Income Taxes. For the interim reporting periods, the Company prepares an estimate of the full-year income and the related income tax expense for each jurisdiction in which the Company operates. Changes in the geographical mix, permanent differences or estimated level of annual pretax income can impact our actual effective rate.

As of June 30, 2010 and 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.

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.

13. Segment Reporting. The Company has four reportable segments: Life Sciences, Healthcare, Physician, and IT and Engineering. 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.

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Revenues:
Life Sciences	$	25,511		$	22,749		$	48,561		$	48,125
Healthcare		19,300			23,252			37,876			54,763
Physician		18,417			23,320			37,288			45,064
IT and Engineering		41,231			32,513			77,047			70,684
Total Revenues	$	104,459		$	101,834		$	200,772		$	218,636
Gross Profit:
Life Sciences	$	8,115		$	7,244		$	15,409		$	15,346
Healthcare		5,752			6,616			10,721			14,923
Physician		6,280			7,584			12,269			14,126
IT and Engineering		15,149			11,953			27,720			25,986
Total Gross Profit	$	35,296		$	33,397		$	66,119		$	70,381
Operating Income (Loss):
Life Sciences	$	763		$	1,034		$	1,402		$	2,781
Healthcare		(1,711	)		(998	)		(3,836	)		(1,420	)
Physician		1,543			2,354			2,781			3,810
IT and Engineering		2,737			1,022			3,977			2,096
Total Operating Income	$	3,332		$	3,412		$	4,324		$	7,267

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2010		2009		2010		2009
Revenues:
Domestic	$	98,231	$	96,988	$	187,959	$	208,145
Foreign		6,228		4,846		12,813		10,491
Total Revenues	$	104,459	$	101,834	$	200,772	$	218,636

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

	June 30, 2010		December 31, 2009
Total Assets:
Life Sciences and Healthcare	$	82,790	$	78,645
Physician		67,621		69,912
IT and Engineering		200,783		194,905
Total Assets	$	351,194	$	343,462

14. Subsequent Event. On July 19, 2010, the Company acquired all of the outstanding shares of Sharpstream Holdings, Ltd. (Sharpstream), a London-based privately-held provider of international search services in the life sciences sector, for a purchase price of $7.2 million in cash, plus a maximum earn-out opportunity of $1.4 million based on future operating results. Sharpstream will be reported under the Life Sciences segment.

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

The information in 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 are intended to identify 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 herein. Factors that could cause or contribute to such differences include, but are not limited to, the following: (1) the continued negative impact of the current credit crisis and global economic slowdown; (2) actual demand for our services; (3) our ability to attract, train and retain qualified staffing consultants; (4) our ability to remain competitive in obtaining and retaining temporary staffing clients; (5) the availability of qualified contract nurses and other qualified contract professionals; (6) our ability to manage our growth efficiently and effectively; (7) continued performance of our information systems; and (8) other risks detailed from time to time in our reports filed with the Securities and Exchange Commission, including in our Annual Report on Form 10-K, for the year ended December 31, 2009, as filed with the SEC on March 16, 2010, under the section “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 Quarterly Report on Form 10-Q, 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.

The Life Sciences segment includes our domestic and international life science staffing lines of business. We provide locally-based, contract life science professionals to clients in the biotechnology, pharmaceutical, food and beverage, medical device, personal care, chemical, nutraceutical, materials science, consumer products, environmental petrochemical and contract manufacturing 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.

The Healthcare segment includes our Nurse Travel and Allied Healthcare lines of business. We offer our healthcare clients contract professionals, both locally-based and traveling, from more than ten healthcare and allied healthcare 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 mainly of VISTA Staffing Solutions, Inc. (VISTA) which is a leading provider of physician staffing, known as locum tenens coverage, and permanent physician search services based in Salt Lake City, Utah. We provide short and long-term locum tenens coverage and full-service physician search and consulting in the United States with capabilities in Australia and New Zealand. VISTA works with physicians from nearly all medical specialties, placing them in hospitals, community-based practices, and federal, state and local facilities.

Our IT and Engineering segment consists mainly of Oxford Global Resources, Inc. (Oxford) which delivers high-end consultants with expertise in specialized information technology, software and hardware engineering, 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. Oxford is based in Beverly, Massachusetts.

Second Quarter 2010 Update

In the second quarter, consolidated revenues grew year-over-year and over the first quarter and gross margin expanded to a record level. We completed the acquisition of The Cambridge Group Ltd. (Cambridge), a Connecticut-based privately-held provider of specialized staffing services in the second quarter. The purchase price included $5.4 million in cash plus two earn-out opportunities of up to $2.3 million based upon future operating results of the related business. The primary reasons for the Cambridge acquisition were to expand our Life Sciences, IT and Engineering, and Physician business operations and to leverage the Company’s existing SG&A infrastructure. Going forward our strategy is to continue growing our business both organically and through strategic acquisitions.

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.

RESULTS OF OPERATIONS

The following table summarizes selected statements of operations data expressed as a percentage of revenues:

	Three Months Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
	(Unaudited)						(Unaudited)
Revenues		100.0	%		100.0	%		100.0	%		100.0	%
Cost of services		66.2			67.2			67.1			67.8
Gross profit		33.8			32.8			32.9			32.2
Selling, general and administrative expenses		30.6			29.4			30.8			28.9
Operating income		3.2			3.4			2.1			3.3
Interest expense		(1.5	)		(2.0	)		(1.5	)		(1.4	)
Interest income		0.0			0.0			0.0			0.0
Income before income taxes		1.7			1.4			0.6			1.9
Provision for income taxes		0.8			0.8			0.3			0.9
Net income		0.9	%		0.6	%		0.3	%		1.0	%

CHANGES IN RESULTS OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 30, 2010 AND 2009

Revenues

	Three months ended June 30,				Change
	2010		2009		$			%
Revenues by segment (in thousands):	(Unaudited)				(Unaudited)
Life Sciences	$	25,511	$	22,749	$	2,762		12.1%
Healthcare		19,300		23,252		(3,952	)	(17.0%	)
Physician		18,417		23,320		(4,903	)	(21.0%	)
IT and Engineering		41,231		32,513		8,718		26.8%
Total Revenues	$	104,459	$	101,834	$	2,625		2.6%

Revenues increased $2.6 million, or 2.6 percent, mainly due to improved operating environments in our IT and Engineering and Life Sciences segments and our acquisition of The Cambridge Group Ltd. (Cambridge). Cambridge is reported under the Life Sciences, IT and Engineering, and Physician segments. Consolidated revenues for the three months ended June 30, 2010 include $2.1 million related to our Cambridge acquisition.

Life Sciences segment revenues increased $2.8 million, or 12.1 percent. The increase in revenues was due to an 8.6 percent increase in the average number of contract professionals on assignment and an 81.5 percent increase in direct hire and conversion fees. The year-over-year increase in revenues was primarily attributable to increased demand for our service offerings as our clients’ end markets have improved in the second quarter of 2010 with the economic recovery and the Cambridge acquisition. Life Sciences revenues for the three months ended June 30, 2010 include $1.4 million related to our Cambridge acquisition.

Healthcare segment revenues (comprised of our Nurse Travel and Allied Healthcare lines of business) decreased $4.0 million, or 17.0 percent. Nurse Travel revenues decreased $4.5 million, or 32.1 percent, to $9.5 million, which included $2.1 million of revenue generated from supporting a customer that experienced a labor disruption. The decrease was due primarily to a 43.8 percent decrease in the average number of nurses on assignment and a 4.6 percent decrease in the average bill rate. Allied Healthcare revenues increased $0.6 million, or 6.1 percent, to $9.8 million due to a 5.4 percent increase in the average bill rate and a 1.2 percent increase in the average number of contract professionals on assignment. These increases were slightly offset by a $0.1 million decrease in direct hire and conversion fee revenues. Based on our research and client feedback, the decrease in revenues was attributable to continued adverse economic trends, which contributed to the decrease in number of travelers on assignment, open orders, and average bill rates. While the Allied Healthcare operating environment continued to demonstrate signs of improvement, growth was constrained by a continued reduction in demand for elective procedures, a greater number of patients choosing more cost effective forms of treatment such as self-medication, hospitals reduced usage of contract professionals in response to declining cash balances and patient admissions, and reduced demand for less critical allied skill modalities.

Physician segment revenues decreased $4.9 million, or 21.0 percent. The decrease in revenues was primarily attributable to a 12.5 percent decrease in the average number of physicians on assignment and a 2.8 percent decrease in the average bill rate, partially offset by a $0.2 million increase in direct hire and conversion fee revenues. Based on industry research and client feedback, we believe the decrease in revenues is primarily due to the current economic conditions and high unemployment which have reduced the number of elective procedures and lowered patient census at client facilities. As a result, short term demand has been lower.

IT and Engineering segment revenues increased $8.7 million, or 26.8 percent. The increase in revenues was primarily due to a 34.6 percent increase in the average number of contract professionals on assignment and a $0.3 million increase in direct hire and conversion fee revenues. These increases were partially offset by a 6.1 percent decrease in the average bill rate. Because many of our placements involve capital projects, we believe that one of the reasons the demand for our services has increased with the economic recovery is that more companies have increased their capital spending.

Gross profit and gross margin

	Three months ended June 30,
	2010				2009
	Gross Profit		Gross Margin		Gross Profit		Gross Margin
Gross Profit by segment (in thousands):	(Unaudited)
Life Sciences	$	8,115		31.8%	$	7,244		31.8%
Healthcare		5,752		29.8%		6,616		28.5%
Physician		6,280		34.1%		7,584		32.5%
IT and Engineering		15,149		36.7%		11,953		36.8%
Total Gross Profit	$	35,296		33.8%	$	33,397		32.8%

The year-over-year gross profit increase was primarily due to improved revenues and a one percentage 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 reduction in the percent of revenues related to the Nurse Travel line of business which has the lowest gross margin.

Life Sciences segment gross profit increased $0.9 million, or 12.0 percent. The increase in gross profit was primarily due to a 12.1 percent increase in the segment revenues and slightly offset by a 3 basis point contraction in gross margin mainly due to a 2.3 percent decrease in bill/pay spread. The contraction in gross margin was partially offset by a $0.4 million, or 81.5 percent, increase in direct hire and conversion fee revenues.

Healthcare segment gross profit decreased $0.9 million, or 13.1 percent. The decrease in gross profit was due to a 17.0 percent decrease in the segment revenues, partially offset by a 135 basis point expansion in gross margin, mainly from margin expansion generated from supporting a customer that experienced a labor disruption. The expansion in gross margin was partially offset by a 10.9 percent decrease in the bill/pay spread, an increase in unemployment insurance and workers’ compensation insurance expense. Within this segment Allied Healthcare gross profit increased 3.4 percent while gross margin decreased 83 basis points and Nurse Travel gross profit decreased 27.8 percent while gross margin increased 159 basis points.

Physician segment gross profit decreased $1.3 million, or 17.2 percent. The decrease in gross profit was due to a $4.9 million, or 21.0 percent, decrease in the segment revenues, partially offset by a 158 basis point expansion in gross margin. The expansion in gross margin was primarily due to a $0.5 million decrease in medical malpractice expense as well as a $0.2 million increase in direct hire and conversion fee revenues. The expansion in gross margin was partially offset by a 6.1 percent decrease in bill/pay spread.

IT and Engineering segment gross profit increased $3.2 million, or 26.7 percent, primarily due to an $8.7 million, or 26.8 percent increase in revenues. Gross margin for the segment was flat compared with that for the quarter ended June 30, 2009.

Selling, General and Administrative Expenses

For the three months ended June 30, 2010, SG&A expenses increased $2.0 million, or 6.6 percent, to $32.0 million from $30.0 million for the same period in 2009. The increase in SG&A expenses was primarily due to a $3.1 million increase in compensation and benefits as a result of increased headcount primarily related to the Cambridge acquisition. The increase in SG&A expenses was partially offset by a $1.1 million decrease in amortization expense. Total SG&A expenses as a percentage of revenues increased to 30.6 percent for the three months ended June 30, 2010 from 29.4 percent in the same period in 2009.

Interest expense and interest income

Interest expense was $1.6 million for the three months ended June 30, 2010 compared with $2.1 million in the same period in 2009. This decrease was primarily due to lower average debt balances, partially offset by a $0.7 million gain in 2009 for the mark-to-market adjustment on our interest rate swap, which expired on June 30, 2009.

Interest income decreased to $32,000 for the three months ended June 30, 2010 compared with $47,000 in the same period in 2009 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 $0.8 million for the three months ended June 30, 2010 and 2009. The annual effective tax rate was 46.6 percent for the three months ended June 30, 2010 and 59.3 percent for the same period in 2009. The higher effective tax rate in 2009 was due to the effects of the year-over-year and sequential quarterly decline in forecasted income before income taxes, which resulted in a higher estimated annual effective tax rate for 2009 than the estimated rate used in calculating the provision in the first quarter of 2009.

CHANGES IN RESULTS OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009

Revenues

	Six months ended June 30,				Change
	2010		2009		$			%
Revenues by segment (in thousands):	(Unaudited)				(Unaudited)
Life Sciences	$	48,561	$	48,125	$	436		0.9%
Healthcare		37,876		54,763		(16,887	)	(30.8%	)
Physician		37,288		45,064		(7,776	)	(17.3%	)
IT and Engineering		77,047		70,684		6,363		9.0%
Total Revenues	$	200,772	$	218,636	$	(17,864	)	(8.2%	)

Revenues decreased $17.9 million, or 8.2 percent, as a result of continued weak demand for our services in our Healthcare and Physician segments. Consolidated revenues for the six months ended June 30, 2010 include $2.1 million related to our Cambridge acquisition in the second quarter of 2010.

Life Sciences segment revenues increased $0.4 million, or 0.9 percent, primarily due to a $0.6 million, or 44.3 percent increase in direct hire and conversion fees partially offset by a 1.3 percent decrease in the average bill rate. The increase in revenues was primarily due to the increase in demand for Life Sciences service offerings as our clients’ end markets have improved with the economic recovery in the second quarter of 2010 and the Cambridge acquisition.

Healthcare segment revenues (comprised of our Nurse Travel and Allied Healthcare lines of business) decreased $16.9 million, or 30.8 percent. Nurse Travel revenues decreased $16.8 million, or 47.5 percent, to $18.6 million, which included $2.1 million of revenue generated from supporting a customer that experienced a labor disruption. The decrease was primarily due to a 50.4 percent decrease in the average number of nurses on assignment and a 5.4 percent decrease in the average bill rate. Allied Healthcare revenues decreased $84,000, or 0.4 percent, to $19.3 million due to a 5.2 percent decrease in the average number of contract professionals on assignment and a $0.3 million decrease in direct hire and conversion fee revenues. These decreases were partially offset by a 5.4 percent increase in the average bill rate. Based on our research and client feedback, we believe the decrease in revenues was attributable to continued adverse economic trends, which contributed to the decrease in number of travelers on assignment, open orders, and average bill rates. While the Allied Healthcare operating environment continued to demonstrate signs of improvement, growth was constrained by a continued reduction in demand for elective procedures, a greater number of patients choosing more cost effective forms of treatment such as self-medication, hospitals reduced usage of contract professionals in response to declining cash balances and patient admissions, and reduced demand for less critical allied skill modalities.

Physician segment revenues decreased $7.8 million, or 17.3 percent. The decrease in revenues was primarily attributable to a 17.9 percent decrease in the average number of physicians on assignment and a 3.3 percent decrease in the average bill rate. These decreases were partially offset by a $0.5 million, or 42.9 percent increase in direct hire and conversion fee revenues. Based on industry research and client feedback, we believe the decrease in revenues is prmarily due to the current economic conditions and high unemployment which have reduced the number of elective procedures and lowered patient census at client facilities. As a result, short term demand has been lower.

IT and Engineering segment revenues increased $6.4 million, or 9.0 percent. The increase in revenues was primarily due to an 18.2 percent increase in the average number of contract professionals on assignment and a $0.4 million increase in conversion fee revenues. These increases were partially offset by an 8.1 percent decrease in the average bill rate. Because many of our placements involve capital projects, we believe that one of the reasons the demand for our services has increased with the economic recovery is that more companies have increased their capital spending.

Gross profit and gross margin

	Six months ended June 30,
	2010				2009
	Gross Profit		Gross Margin		Gross Profit		Gross Margin
Gross Profit by segment (in thousands):	(Unaudited)
Life Sciences	$	15,409		31.7%	$	15,346		31.9%
Healthcare		10,721		28.3%		14,923		27.3%
Physician		12,269		32.9%		14,126		31.3%
IT and Engineering		27,720		36.0%		25,986		36.8%
Total Gross Profit	$	66,119		32.9%	$	70,381		32.2%

The year-over-year gross profit decrease was primarily due to the decline in revenues, partially offset by a 74 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 reduction in the percent of revenues related to the Nurse Travel line of business which has the lowest gross margin.

Life Sciences segment gross profit increased $63,000, or 0.4 percent. The increase in gross profit was primarily due to a 0.9 percent increase in the segment revenues, partially offset by a 16 basis point contraction in gross margin mainly due to a 3.0 percent decrease in bill/pay spread, an increase in unemployment insurance expense and worker’s compensation insurance expense. The contraction in gross margin was partially offset by a $0.6 million, or 44.3 percent, increase in direct hire and conversion fee revenues.

Healthcare segment gross profit decreased $4.2 million, or 28.2 percent. The decrease in gross profit was due to a 30.8 percent decrease in the segment revenues, partially offset by a 106 basis point expansion in gross margin. The expansion in gross margin was primarily due to a $2.7 million, or 51.4 percent, decrease in other employee-related expenses and a $1.2 million, or 40.5 percent decrease in travel-related expense. The expansion in gross margin was partially offset by a 12.9 percent decrease in the bill/pay spread, an increase in unemployment insurance and workers’ compensation insurance expense. Within this segment, Allied Healthcare gross profit decreased 3.6 percent while gross margin decreased 106 basis points and Nurse Travel gross profit decreased 46.6 percent while gross margin increased 42 basis points.

Physician segment gross profit decreased $1.9 million, or 13.1 percent. The decrease in gross profit was due to a $7.8 million, or 17.3 percent, decrease in the segment revenues, partially offset by a 155 basis point expansion in gross margin. The expansion in gross margin was primarily due to a $1.2 million decrease in medical malpractice expense as well as a $0.5 million increase in direct hire and conversion fee revenues. The expansion in gross margin was partially offset by a 6.7 percent decrease in bill/pay spread.

IT and Engineering segment gross profit increased $1.7 million, or 6.7 percent. The increase in gross profit was primarily due to a $6.4 million, or 9.0 percent increase in revenues, partially offset by a 78 basis point contraction in gross margin. The contraction in gross margin was primarily due to a 9.7 percent decrease in the bill/pay spread and a $0.2 million decrease in conversion fee revenues. The decrease in gross margin was partially offset by a $0.4 million decrease in other employee expenses.

Selling, General and Administrative Expenses

For the six months ended June 30, 2010, SG&A expenses decreased $1.3 million, or 2.1 percent, to $61.8 million from $63.1 million for the same period in 2009. The decrease in SG&A expenses was primarily due to a $2.0 million decrease in amortization expense, $0.3 million decrease in insurance expense and $0.3 million decrease in bad debt expense. These decreases were partially offset by a $1.2 million increase in stock-based compensation expense due to new awards granted at the end of the first quarter. Total SG&A expenses as a percentage of revenues increased to 30.8 percent for the six months ended June 30, 2010 from 28.9 percent in the same period in 2009, primarily due to revenues decreasing more than SG&A expenses in the six months ended June 30, 2010.

Interest expense and interest income

Interest expense was $3.2 million for the six months ended June 30, 2010 compared with $3.1 million in the same period in 2009. This increase was primarily due to a $1.3 million gain in 2009 for the mark-to-market adjustment on our interest rate swap, which expired on June 30, 2009, partially offset by lower average debt balances.

Interest income decreased to $64,000 for the six months ended June 30, 2010 compared with $0.1 million in the same period in 2009 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 $0.6 million for the six months ended June 30, 2010 compared with $2.0 million for the same period in the prior year. The annual effective tax rate was 47.8 percent for the six months ended June 30, 2010 and 47.5 percent for the same period in 2009.

LIQUIDITY AND CAPITAL RESOURCES

Our working capital at June 30, 2010 was $61.0 million, including $30.5 million in cash and cash equivalents. 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 $14.5 million for the six months ended June 30, 2010 compared with $31.4 million in the same period in 2009. This decrease was primarily due to lower earnings in the first six months of 2010 and the decline in cash generated from the change in net operating assets and liabilities.

Net cash used in investing activities was $8.0 million in the six months ended June 30, 2010 compared with $7.6 million in the same period in 2009. This increase was primarily related to the acquisition of Cambridge for $5.4 million in cash. Capital expenditures related to information technology projects, leasehold improvements and various property and equipment purchases for the six months ended June 30, 2010 totaled $2.8 million, compared with $2.6 million in the comparable 2009 period. We estimate capital expenditures to be approximately $5.2 million for 2010.

Net cash used in financing activities was $0.5 million for the six months ended June 30, 2010, compared with net cash used by financing activities of $25.9 million for the same period in 2009, which included a $25.0 million pay down of our term loan facility in 2009.

In 2009, we paid down $48.0 million on the principal balance of our term loan. The payments were sufficient to cover the excess cash flow payment required under the loan, as well as all minimum quarterly payments until maturity on January 31, 2013. Based on our most recent forecast, we believe we will maintain compliance with the financial covenants contained in our credit facility for the next 12 months.

We have two potential earn-out payment obligations related to the Cambridge acquisition based upon operating results of the related business for the period beginning April 1, 2010 through March 31, 2012. As of June 30, 2010, we have accrued $2.3 million representing the estimated fair value of the future earn-out payments as of the acquisition date. Payments of the earn-out are scheduled for May 2011 and 2012.

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 June 30, 2010, 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. In addition, we will, from time to time, consider strategic business acquisitions which might affect our liquidity requirements or cause us to issue additional equity or incur additional debt.

Recent Accounting Pronouncements

See Note 2, Recent Accounting Updates, to the Condensed Consolidated Financial Statements in Part I, Item I of this report for a discussion of new accounting pronouncements.

Critical Accounting Policies

Other than the expanded disclosure of our goodwill and identifiable intangible assets policy presented below, there have been no other significant changes to our critical accounting policies and estimates during the six months ended June 30, 2010 compared with those disclosed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the SEC on March 16, 2010.

Goodwill and Identifiable Intangible Assets . The overall operating results for our reporting units through the second quarter 2010 were consistent with forecasts for the first quarter, except for the operating results for the Physician reporting unit. The revised 2010 revenue forecasts for the Physician group represented a 3 percent decline from projected 2010 assumed in the first quarter 2010. We concluded that based on our analysis of the specific factors that led to the decrease in projected 2010 revenues for the Physicans segment, the decrease in projected revenues did not represent an indicator of goodwill impairment. The Physician reporting unit represented 17.8 percent of our $209.2 million goodwill balance and based on the Step 1 analysis performed as of the first quarter 2010, 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 June 30, 2010 was 13.6 percent. After considering the decline in projected revenues for 2010, as well as the expected impact to projected revenues in years beyond 2010, we continued to believe that the fair value of the Physicians reporting unit still remained above its carrying value as of June 30, 2010.

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 200 basis points in the discount rate and/or a less than ten 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 throughout 2010 for all of the reporting units except for Nurse Travel and Physician. 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 its carrying value, which would require a Step 2 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.

Commitments

We have not entered into any significant commitments or contractual obligations that have not been previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the SEC on March 16, 2010.

Item 3 – Quantitative and Qualitative Disclosures about Market Risk

There have been no material changes to the information included in our Annual Report on Form 10-K for the year ended December 31, 2009. We are exposed to certain market risks arising from transactions in the normal course of business, principally risks associated with foreign currency fluctuations and changes in 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 10 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 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for further description of our debt instruments. Including and excluding the effect of our interest rate cap contract, a 1 percent change in interest rates on variable debt would have resulted in interest expense fluctuating approximately $0.2 million and $0.4 million during the three and six months ended June 30, 2010. Excluding the effect of our interest rate swap agreement, a 1 percent change in interest rates on variable rate debt would have resulted in interest expense fluctuating approximately $0.3 million and $0.6 million, respectively, during the three and six months ended June 30, 2009. Including the effect of our interest rate swap agreement, a 1 percent change in interest rates on variable debt would have resulted in interest expense fluctuating approximately $0.1 million and $0.2 million during the three and six months ended June 30, 2009, 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 move up by approximately 250 basis points before it would impact us. We have not entered into any market risk sensitive instruments for trading purposes.

Item 4 – Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial and Accounting Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934). Based on this evaluation, our Chief Executive Officer and Principal Financial and Accounting 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 required time periods. We have established disclosure controls and procedures 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 management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There have been no changes in our internal control over financial reporting that occurred during the six months ended June 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1 – Legal Proceedings

The information set forth above under Note 10, Commitments and Contingencies, contained in the Notes to Consolidated Condensed Financial Statements in Part I, Item 1 of this report is incorporated herein by reference.

Item 1A – Risk Factors

There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K, under the Section “Risk Factors” for the year ended December 31, 2009, as filed with the SEC on March 16, 20 10.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3 – Defaults Upon Senior Securities

None.

Item 4 – Removed and Reserved

Item 5 – Other Information

None.

Item 6 – Exhibits

INDEX TO EXHIBITS

Number	Footnote	Description
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	(5)	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	(6)	2010 Employee Stock Purchase Plan, dated March 18, 2010. †
10.2	(6)	On Assignment, Inc. 2010 Incentive Award Plan, dated March 18, 2010. †
10.3*		Form of On Assignment, Inc. Stock Option Agreement. †
10.4*		Form of On Assignment, Inc. Restricted Stock Unit Award Agreement. †
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 of 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 of 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.

(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 Current Report on Form 8-K (File No. 0-20540) filed with the Securities and Exchange Commission on June 5, 2003.

(6)	Incorporated by reference from our Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission on April 27, 2010.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ON ASSIGNMENT, INC.

Date: August 9, 2010	By:	/s/ Peter T. Dameris
		Peter T. Dameris
		Chief Executive Officer and President (Principal Executive Officer)

Date: August 9, 2010	By:	/s/ James L. Brill
		James L. Brill
		Senior Vice President of Finance and Chief Financial Officer
		(Principal Financial and Accounting Officer)

Exhibit 31.1

CERTIFICATION PURSUANT TO RULES 13a-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 Quarterly Report on Form 10-Q 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 most recent 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: August 9, 2010

/s/ Peter T. Dameris
Peter T. Dameris
Chief Executive Officer and President

Exhibit 31.2

CERTIFICATION PURSUANT TO RULES 13a-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 Quarterly Report on Form 10-Q of On Assignment, Inc.;

(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: August 9, 2010

/s/ James L. Brill
James L. Brill
Senior Vice President of Finance and Chief Financial Officer

Exhibit 32.1

Certifications 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 Quarterly Report on Form 10-Q of the Company for the period ended June 30, 2010 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: August 9, 2010	By:	/s/ Peter T. Dameris
		Peter T. Dameris
		Chief Executive Officer and President

Date: August 9, 2010	By:	/s/ James L. Brill
		James L. Brill
		Senior Vice President of Finance and Chief Financial Officer

ON ASSIGNMENT, INC.

2010 INCENTIVE AWARD PLAN

STOCK OPTION GRANT NOTICE

On Assignment, Inc., a Delaware corporation, (the “ Company ”), pursuant to its 2010 Incentive Award Plan, as amended from time to time (the “ Plan ”), hereby grants to the holder listed below (“ Participant ”), an option to purchase the number of Shares (as defined in the Plan) set forth below (the “ Option ”). This Option is subject to all of the terms and conditions set forth herein and in the Stock Option Agreement attached hereto as Exhibit A (the “ Stock Option Agreement ”) and the Plan, each of which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Stock Option Agreement.

Participant:	[__________________________]

Grant Date:	[__________________________]

Grant Number:	[__________]

Exercise Price per Share:	$[_____]

Total Exercise Price:	$ [_____________]

Total Number of Shares Subject to the Option:	[_____________] shares

Expiration Date:	[__________________________]

Vesting Schedule:	[To be specified in individual agreements]

Type of Option: ¨ Incentive Stock Option ¨ Non-Qualified Stock Option

By his or her signature and the Company’s signature below, Participant agrees to be bound by the terms and conditions of the Plan, the Stock Option Agreement and this Grant Notice. Participant has reviewed the Stock Option Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Stock Option Agreement and the Plan. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Stock Option Agreement. If Participant is married, his or her spouse has signed the Consent of Spouse attached to this Grant Notice as Exhibit B .

ON ASSIGNMENT, INC.:		PARTICIPANT:
By:		By:
Print Name:		Print Name:
Title:
Address:		Address:

EXHIBIT A

TO STOCK OPTION GRANT NOTICE

ON ASSIGNMENT, INC. STOCK OPTION AGREEMENT

Pursuant to the Stock Option Grant Notice (the “ Grant Notice ”) to which this Stock Option Agreement (this “ Agreement ”) is attached, On Assignment, Inc., a Delaware corporation (the “ Company ”), has granted to Participant an Option under the On Assignment, Inc. 2010 Incentive Award Plan, as amended from time to time (the “ Plan ”), to purchase the number of Shares indicated in the Grant Notice.

ARTICLE 1.

GENERAL

(a) “ Termination of Consultancy ” shall mean the time when the engagement of Participant as a Consultant to the Company or a Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, by resignation, discharge, death, Disability or retirement, but excluding: (a) terminations where there is a simultaneous employment or continuing employment of Participant by the Company or any Subsidiary, and (b) terminations where there is a simultaneous re-establishment of a consulting relationship or continuing consulting relationship between Participant and the Company or any Subsidiary. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Consultancy, including, but not by way of limitation, the question of whether a particular leave of absence constitutes a Termination of Consultancy. Notwithstanding any other provision of the Plan, the Company or any Subsidiary has an absolute and unrestricted right to terminate a Consultant’s service at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in writing.

(b) “ Termination of Directorship ” shall mean the time when Participant, if he or she is or becomes an Independent Director, ceases to be a Director for any reason, including, but not by way of limitation, a termination by resignation, failure to be elected, death or retirement. The Board, in its sole and absolute discretion, shall determine the effect of all matters and questions relating to Termination of Directorship with respect to Independent Directors.

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(c) “ Termination of Employment ” shall mean the time when the employee-employer relationship between Participant and the Company or any Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death, Disability or retirement; but excluding: (a) terminations where there is a simultaneous reemployment or continuing employment of Participant by the Company or any Subsidiary, and (b) terminations where there is a simultaneous establishment of a consulting relationship or continuing consulting relationship between Participant and the Company or any Subsidiary. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a particular leave of absence constitutes a Termination of Employment; provided, however, that, if this Option is an Incentive Stock Option, unless otherwise determined by the Administrator in its discretion, a leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer relationship shall constitute a Termination of Employment if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations and other guidance promulgated under said Section.

(d) “ Termination of Services ” shall mean Participant’s Termination of Consultancy, Termination of Directorship or Termination of Employment, as applicable.

1.2 Incorporation of Terms of Plan . The Option is subject to the terms and conditions of the Plan which are incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.

ARTICLE 2.

GRANT OF OPTION

2.1 Grant of Option . In consideration of Participant’s past and/or continued employment with or service to the Company or a Subsidiary and for other good and valuable consideration, effective as of the Grant Date set forth in the Grant Notice (the “ Grant Date ”), the Company grants to Participant the Option to purchase any part or all of an aggregate of the number of Shares set forth in the Grant Notice, upon the terms and conditions set forth in the Plan and this Agreement, subject to adjustments as provided in Section 13.2 of the Plan. Unless designated as a Non-Qualified Stock Option in the Grant Notice, the Option shall be an Incentive Stock Option to the maximum extent permitted by law.

2.2 Exercise Price . The exercise price of the Shares subject to the Option shall be as set forth in the Grant Notice, without commission or other charge; provided , however , that the price per share of the Shares subject to the Option shall not be less than 100% of the Fair Market Value of a Share on the Grant Date. Notwithstanding the foregoing, if this Option is designated as an Incentive Stock Option and Participant owns (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any “subsidiary corporation” of the Company or any “parent corporation” of the Company (each within the meaning of Section 424 of the Code), the price per share of the Shares subject to the Option shall not be less than 110% of the Fair Market Value of a Share on the Grant Date.

A-2

2.3 Consideration to the Company . In consideration of the grant of the Option by the Company, Participant agrees to render faithful and efficient services to the Company or any Subsidiary. Nothing in the Plan or this Agreement shall confer upon Participant any right to continue in the employ or service of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and its Subsidiaries, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between the Company or a Subsidiary and Participant.

ARTICLE 3.

PERIOD OF EXERCISABILITY

3.1 Commencement of Exercisability .

(a) Subject to Sections 3.2 , 3.3 , 5.10 and 5.15 hereof, the Option shall become vested and exercisable in such amounts and at such times as are set forth in the Grant Notice.

(b) No portion of the Option which has not become vested and exercisable at the date of Participant’s Termination of Employment, Termination of Directorship or Termination of Consultancy shall thereafter become vested and exercisable, except as may be otherwise provided by the Administrator or as set forth in a written agreement between the Company and Participant.

3.2 Duration of Exercisability . The installments provided for in the vesting schedule set forth in the Grant Notice are cumulative. Each such installment which becomes vested and exercisable pursuant to the vesting schedule set forth in the Grant Notice shall remain vested and exercisable until it becomes unexercisable under Section 3.3 hereof.

3.3 Expiration of Option . The Option may not be exercised to any extent by anyone after the first to occur of the following events:

(a) The Expiration Date set forth in the Grant Notice, which shall in no event be more than ten (10) years from the Grant Date;

(b) If this Option is designated as an Incentive Stock Option and Participant owned (within the meaning of Section 424(d) of the Code), at the time the Option was granted, more than 10% of the total combined voting power of all classes of stock of the Company or any “subsidiary corporation” of the Company or any “parent corporation” of the Company (each within the meaning of Section 424 of the Code), the expiration of five (5) years from the Grant Date;

(c) The expiration of three (3) months from the date of Participant’s Termination of Services, unless such termination occurs by reason of Participant’s death or Disability; or

(d) The expiration of one (1) year from the date of Participant’s Termination of Services by reason of Participant’s death or Disability.

The Participant acknowledges that an Incentive Stock Option exercised more than three (3) months after the Participant’s Termination of Employment, other than by reason of Death or Disability will be taxed as a Non-Qualified Stock Option.

A-3

3.4 Special Tax Consequences . Participant acknowledges that, to the extent that the aggregate Fair Market Value (determined as of the time the Option is granted) of all Shares with respect to which Incentive Stock Options, including the Option (if applicable), are exercisable for the first time by Participant in any calendar year exceeds $100,000, the Option and such other options shall be Non-Qualified Stock Options to the extent necessary to comply with the limitations imposed by Section 422(d) of the Code. Participant further acknowledges that the rule set forth in the preceding sentence shall be applied by taking the Option and other “incentive stock options” into account in the order in which they were granted, as determined under Section 422(d) of the Code and the Treasury Regulations thereunder. Participant also acknowledges that an Incentive Stock Option exercised more than three (3) months after Participant’s Termination of Employment, other than by reason of death or Disability, will be taxed as a Non-Qualified Stock Option.

ARTICLE 4.

EXERCISE OF OPTION

4.1 Person Eligible to Exercise . During the lifetime of Participant, only Participant may exercise the Option or any portion thereof. After the death of Participant, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3 hereof, be exercised by Participant’s personal representative or by any person empowered to do so under the deceased Participant’s will or under the then applicable laws of descent and distribution.

4.2 Partial Exercise . Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.3 hereof.

4.3 Manner of Exercise . The Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary of the Company (or any third party administrator or other person or entity designated by the Company), during regular business hours, of all of the following prior to the time when the Option or such portion thereof becomes unexercisable under Section 3.3 hereof:

(a) An exercise notice in a form specified by the Administrator, stating that the Option or portion thereof is thereby exercised, such notice complying with all applicable rules established by the Administrator;

(b) The receipt by the Company of full payment for the Shares with respect to which the Option or portion thereof is exercised, including payment of any applicable withholding tax, which shall be made by deduction from other compensation payable to Participant or in such other form of consideration permitted under Section 4.4 hereof that is acceptable to the Company;

(c) Any other written representations as may be required in the Administrator’s reasonable discretion to evidence compliance with the Securities Act or any other applicable law, rule or regulation; and

(d) In the event the Option or portion thereof shall be exercised pursuant to Section 4.1 hereof by any person or persons other than Participant, appropriate proof of the right of such person or persons to exercise the Option.

Notwithstanding any of the foregoing, the Company shall have the right to specify all conditions of the manner of exercise, which conditions may vary by country and which may be subject to change from time to time.

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4.4 Method of Payment . Payment of the exercise price shall be by any of the following, or a combination thereof, at the election of Participant:

(a) Cash or check;

(b) With the consent of the Administrator, surrender of Shares (including, without limitation, Shares otherwise issuable upon exercise of the Option) held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences and having a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof; or

(c) Other property acceptable to the Administrator (including, without limitation, through the delivery of a notice that Participant has placed a market sell order with a broker with respect to Shares then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price; provided that payment of such proceeds is then made to the Company at such time as may be required by the Company, but in any event not later than the settlement of such sale).

4.5 Conditions to Issuance of Stock . The Shares deliverable upon the exercise of the Option, or any portion thereof, may be either previously authorized but unissued Shares or issued Shares which have then been reacquired by the Company. Such Shares shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any Shares purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the following conditions:

(a) The admission of such Shares to listing on all stock exchanges on which such Shares are then listed;

(b) The completion of any registration or other qualification of such Shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Administrator shall, in its absolute discretion, deem necessary or advisable;

(c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable;

(d) The receipt by the Company of full payment for such Shares, including payment of any applicable withholding tax, which may be in one or more of the forms of consideration permitted under Section 4.4 hereof; and

(e) The lapse of such reasonable period of time following the exercise of the Option as the Administrator may from time to time establish for reasons of administrative convenience.

4.6 Rights as Stockholder . The holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company, including, without limitation, voting rights and rights to dividends, in respect of any Shares purchasable upon the exercise of any part of the Option unless and until such Shares shall have been issued by the Company and held of record by such holder (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 13.2 of the Plan.

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ARTICLE 5.

OTHER PROVISIONS

5.1 Administration . The Administrator shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon Participant, the Company and all other interested persons. No person or persons acting as the Administrator and no member of the Committee or the Board shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, this Agreement or the Option.

5.2 Whole Shares . The Option may only be exercised for whole Shares.

5.3 Option Not Transferable . Subject to Section 4.1 hereof and except as expressly provided under the Plan, (i) the Option may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution, unless and until the Shares underlying the Option have been issued, and all restrictions applicable to such Shares have lapsed, (ii) neither the Option nor any interest or right therein shall be liable for the debts, contracts or engagements of Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence.

5.4 Binding Agreement . Subject to the limitation on the transferability of the Option contained herein, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.

5.5 Adjustments Upon Specified Events . The Administrator may accelerate the vesting of the Option in such circumstances as it, in its sole discretion, may determine. In addition, upon the occurrence of certain events relating to the Shares contemplated by Section 13.2 of the Plan (including, without limitation, an extraordinary cash dividend on such Shares), the Administrator shall make such adjustments the Administrator deems appropriate in the number of Shares subject to the Option, the exercise price of the Option and the kind of securities that may be issued upon exercise of the Option. Participant acknowledges that the Option is subject to adjustment, modification and termination in certain events as provided in this Agreement and Section 13.2 of the Plan.

5.6 Notices . Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Company’s principal office, and any notice to be given to Participant shall be addressed to Participant at Participant’s last address reflected on the Company’s records. By a notice given pursuant to this Section 5.6 , either party may hereafter designate a different address for notices to be given to that party. Any notice which is required to be given to Participant shall, if Participant is then deceased, be given to the person entitled to exercise his or her Option pursuant to Section 4.1 hereof by written notice under this Section 5.6 . Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.

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5.7 Titles . Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

5.8 Governing Law . The laws of the State of California shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.

5.9 Conformity to Securities Laws . Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

5.10 Amendments, Suspension and Termination . To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator; provided , that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely affect the Option in any material way without the prior written consent of Participant.

5.11 Successors and Assigns . The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth in Section 5.3 hereof, this Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns.

5.12 Notification of Disposition . If this Option is designated as an Incentive Stock Option, Participant shall give prompt notice to the Company of any disposition or other transfer of any Shares acquired under this Agreement if such disposition or transfer is made (a) within two (2) years from the Grant Date with respect to such Shares or (b) within one (1) year after the transfer of such Shares to Participant. Such notice shall specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by Participant in such disposition or other transfer.

5.13 Limitations Applicable to Section 16 Persons . Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the Option and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

5.14 Entire Agreement . The Plan, the Grant Notice and this Agreement (including all Exhibits thereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.

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5.15 Section 409A . This Option is not intended to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof, “ Section 409A ”). However, notwithstanding any other provision of the Plan, the Grant Notice or this Agreement, if at any time the Administrator determines that the Option (or any portion thereof) may be subject to Section 409A, the Administrator shall have the right in its sole discretion (without any obligation to do so or to indemnify Participant or any other person for failure to do so) to adopt such amendments to the Plan, the Grant Notice or this Agreement, or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate either for the Option to be exempt from the application of Section 409A or to comply with the requirements of Section 409A.

5.16 Limitation on Participant’s Rights . Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. Participant shall have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the Option, and rights no greater than the right to receive the Shares as a general unsecured creditor with respect to options, as and when exercised pursuant to the terms hereof.

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EXHIBIT B

TO STOCK OPTION GRANT NOTICE

CONSENT OF SPOUSE

I, ____________________, spouse of ____________________, have read and approve the foregoing On Assignment, Inc. Stock Option Agreement (the “ Agreement ”). In consideration of issuing to my spouse the shares of the common stock of On Assignment, Inc. set forth in the Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of any rights under the Agreement and agree to be bound by the provisions of the Agreement insofar as I may have any rights in said Agreement or any shares of the common stock of On Assignment, Inc. issued pursuant thereto under the community property laws or similar laws relating to marital property in effect in the state of our residence as of the date of the signing of the foregoing Agreement.

Dated: _______________, 2010

Signature of Spouse

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ON ASSIGNMENT, INC.

2010 INCENTIVE AWARD PLAN

RESTRICTED STOCK UNIT AWARD GRANT NOTICE

On Assignment, Inc., a Delaware corporation, (the “ Company ”), pursuant to its 2010 Incentive Award Plan, as amended from time to time (the “ Plan ”), hereby grants to the holder listed below (“ Participant ”), an award of restricted stock units (“ Restricted Stock Units ” or “ RSUs ”). Each Restricted Stock Unit represents the right to receive one Share upon vesting of such Restricted Stock Unit. This award of Restricted Stock Units is subject to all of the terms and conditions set forth herein and in the Restricted Stock Unit Award Agreement attached hereto as Exhibit A (the “ Restricted Stock Unit Award Agreement ”) and the Plan, each of which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Restricted Stock Unit Award Agreement.

Participant:

Grant Date:

Grant Number:

Total Number of RSUs:

Vesting Schedule:	Your Restricted Stock Unit grant vests and becomes exercisable over a ___ year period; ____ percent of the shares vest on the first anniversary of the grant date and the balance will vest in ___ equal _____________ installments thereafter.

Termination:	Pursuant to Section 2.5 of the Restricted Stock Unit Award Agreement, if Participant ceases to be an Employee, Consultant or Director prior to the applicable vesting date, all RSUs that have not become vested on or prior to the date of such termination of services will thereupon be automatically forfeited by Participant without payment of any consideration therefor.

By his or her signature and the Company’s signature below, Participant agrees to be bound by the terms and conditions of the Plan, the Restricted Stock Unit Award Agreement and this Grant Notice. Participant has reviewed the Restricted Stock Unit Award Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Restricted Stock Unit Award Agreement and the Plan. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Restricted Stock Unit Award Agreement. If Participant is married, his or her spouse has signed the Consent of Spouse attached to this Grant Notice as Exhibit B .

ON ASSIGNMENT, INC.:		PARTICIPANT:
By:		By:
Print Name:	Peter Dameris	Print Name:
Title:	President and Chief Executive Officer
Address:	26651 W. Agoura Road	Address:
	Calabasas, CA 91302

EXHIBIT A

TO RESTRICTED STOCK UNIT AWARD GRANT NOTICE

ON ASSIGNMENT, INC. RESTRICTED STOCK UNIT AWARD AGREEMENT

Pursuant to the Restricted Stock Unit Award Grant Notice (the “ Grant Notice ”) to which this Restricted Stock Unit Award Agreement (this “ Agreement ”) is attached, On Assignment, Inc., a Delaware corporation (the “ Company ”), has granted to Participant an award of restricted stock units (“ Restricted Stock Units ” or “ RSUs ”) under the On Assignment, Inc. 2010 Incentive Award Plan, as amended from time to time (the “ Plan ”).

ARTICLE 1.

GENERAL

1.1 Defined Terms . Wherever the following terms are used in this Agreement they shall have the meanings specified below, unless the context clearly indicates otherwise. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan and the Grant Notice. As used herein, the term “stock unit” shall mean a non-voting unit of measurement which is deemed for bookkeeping purposes to be equivalent to one outstanding Share (subject to adjustment as provided in Section 13.2 of the Plan) solely for purposes of the Plan and this Agreement. The Restricted Stock Units shall be used solely as a device for the determination of the payment to eventually be made to Participant if such Restricted Stock Units vest pursuant to Section 2.3 hereof. The Restricted Stock Units shall not be treated as property or as a trust fund of any kind.

(b) “ Termination of Directorship ” shall mean the time when Participant, if he or she is or becomes a Non-Employee Director, ceases to be a Director for any reason, including, but not by way of limitation, a termination by resignation, failure to be elected, death or retirement. The Board, in its sole and absolute discretion, shall determine the effect of all matters and questions relating to Termination of Directorship with respect to a Non-Employee Director.

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(d) “ Termination of Services ” shall mean Participant’s Termination of Consultancy, Termination of Directorship or Termination of Employment, as applicable.

1.2 Incorporation of Terms of Plan . The RSUs are subject to the terms and conditions of the Plan which are incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.

ARTICLE 2.

GRANT OF RESTRICTED STOCK UNITS

2.1 Grant of RSUs . In consideration of Participant’s past and/or continued employment with or service to the Company or a Subsidiary and for other good and valuable consideration, effective as of the Grant Date set forth in the Grant Notice (the “ Grant Date ”), the Company grants to Participant an award of RSUs as set forth in the Grant Notice, upon the terms and conditions set forth in the Plan and this Agreement.

2.2 Company’s Obligation to Pay . Each RSU has a value equal to the Fair Market Value of a Share on the date it becomes vested. Unless and until the RSUs will have vested in the manner set forth in Article 2 hereof, Participant will have no right to payment of any such RSUs. Prior to actual payment of any vested RSUs, such RSUs will represent an unsecured obligation of the Company, payable (if at all) only from the general assets of the Company.

2.3 Vesting Schedule .

Subject to Sections 2.3(b) and 2.5 hereof, the RSUs awarded by the Grant Notice will vest and become nonforfeitable with respect to the applicable portion thereof according to the vesting schedule set forth on the Grant Notice to which this Agreement is attached (the “ Vesting Schedule ”), subject to Participant’s continued employment or services through the applicable vesting dates, as a condition to the vesting of the applicable installment of the RSUs and the rights and benefits under this Agreement. Unless otherwise determined by the Administrator, partial employment or service, even if substantial, during any vesting period will not entitle Participant to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a Termination of Services as provided in Section 2.5 hereof or under the Plan.

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2.4 Consideration to the Company . In consideration of the grant of the award of RSUs by the Company, Participant agrees to render faithful and efficient services to the Company or any Subsidiary. Nothing in the Plan or this Agreement shall confer upon Participant any right to continue in the employ or service of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and its Subsidiaries, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between the Company or a Subsidiary and Participant.

2.5 Forfeiture, Termination and Cancellation upon Termination of Services . Notwithstanding any contrary provision of this Agreement, upon Participant’s Termination of Services for any or no reason, all then unvested RSUs subject to this Agreement will thereupon be automatically forfeited, terminated and cancelled as of the applicable termination date without payment of any consideration by the Company, and Participant, or Participant’s beneficiary or personal representative, as the case may be, shall have no further rights hereunder.

2.6 Payment upon Vesting .

(a) As soon as administratively practicable following the vesting of any Restricted Stock Units pursuant to Section 2.3 hereof, but in no event later than sixty (60) days after such vesting date (for the avoidance of doubt, this deadline is intended to comply with the “short-term deferral” exemption from Section 409A of the Code), the Company shall deliver to Participant (or any transferee permitted under Section 3.2 hereof) a number of Shares (either by delivering one or more certificates for such shares or by entering such shares in book entry form, as determined by the Company in its sole discretion) equal to the number of Restricted Stock Units subject to this award that vest on the applicable vesting date, unless such Restricted Stock Units terminate prior to the given vesting date pursuant to Section 2.5 hereof. Notwithstanding the foregoing, in the event Shares cannot be issued pursuant to Section 2.7(a) , (b) or (c) hereof, then the Shares shall be issued pursuant to the preceding sentence as soon as administratively practicable after the Administrator determines that Shares can again be issued in accordance with Sections 2.7(a) , (b) and (c) hereof.

(b) Notwithstanding anything to the contrary in this Agreement, the Company shall be entitled to require payment by Participant of any sums required by applicable law to be withheld with respect to the grant of RSUs or the issuance of Shares. Such payment shall be made by deduction from other compensation payable to Participant or in such other form of consideration acceptable to the Company which may, in the sole discretion of the Administrator, include:

(i) Cash or check;

(ii) Surrender of Shares (including, without limitation, Shares otherwise issuable under the RSUs) held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences and having a Fair Market Value on the date of delivery equal to the minimum amount required to be withheld by statute; or

(iii) Other property acceptable to the Administrator (including, without limitation, through the delivery of a notice that Participant has placed a market sell order with a broker with respect to Shares then issuable under the RSUs, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of its withholding obligations; provided that payment of such proceeds is then made to the Company at such time as may be required by the Company, but in any event not later than the settlement of such sale).

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The Company shall not be obligated to deliver any new certificate representing Shares to Participant or Participant’s legal representative or enter such Share in book entry form unless and until Participant or Participant’s legal representative shall have paid or otherwise satisfied in full the amount of all federal, state and local taxes applicable to the taxable income of Participant resulting from the grant or vesting of the RSUs or the issuance of Shares.

2.7 Conditions to Delivery of Stock . Subject to Section 2.6, the Shares deliverable hereunder, or any portion thereof, may be either previously authorized but unissued Shares or issued Shares which have then been reacquired by the Company. Such Shares shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any Shares deliverable hereunder or portion thereof prior to fulfillment of all of the following conditions:

(a) The admission of such Shares to listing on all stock exchanges on which such Shares are then listed;

(c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable;

(e) The lapse of such reasonable period of time following the vesting of any Restricted Stock Units as the Administrator may from time to time establish for reasons of administrative convenience.

2.8 Rights as Stockholder . The holder of the RSUs shall not be, nor have any of the rights or privileges of, a stockholder of the Company, including, without limitation, voting rights and rights to dividends, in respect of the RSUs and any Shares underlying the RSUs and deliverable hereunder unless and until such Shares shall have been issued by the Company and held of record by such holder (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 13.2 of the Plan.

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ARTICLE 3.

OTHER PROVISIONS

3.1 Administration . The Administrator shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon Participant, the Company and all other interested persons. Neither any person or persons acting as the Administrator and nor any member of the Committee or the Board shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, this Agreement or the RSUs.

3.2 Grant is Not Transferable . During the lifetime of Participant, the RSUs may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution, unless and until the Shares underlying the RSUs have been issued, and all restrictions applicable to such Shares have lapsed. Neither the RSUs nor any interest or right therein shall be liable for the debts, contracts or engagements of Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence.

3.3 Binding Agreement . Subject to the limitation on the transferability of the RSUs contained herein, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.

3.4 Adjustments Upon Specified Events . The Administrator may accelerate payment and vesting of the Restricted Stock Units in such circumstances as it, in its sole discretion, may determine. In addition, upon the occurrence of certain events relating to the Shares contemplated by Section 13.2 of the Plan (including, without limitation, an extraordinary cash dividend on such Stock), the Administrator shall make such adjustments the Administrator deems appropriate in the number of Restricted Stock Units then outstanding and the number and kind of securities that may be issued in respect of the Restricted Stock Units. Participant acknowledges that the RSUs are subject to amendment, modification and termination in certain events as provided in this Agreement and under the Plan, including without limitation, under Section 13.2 of the Plan.

3.5 Notices . Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Company’s principal office, and any notice to be given to Participant shall be addressed to Participant at Participant’s last address reflected on the Company’s records. By a notice given pursuant to this Section 3.5 , either party may hereafter designate a different address for notices to be given to that party. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.

3.6 Titles . Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

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3.7 Governing Law . The laws of the State of California shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.

3.8 Conformity to Securities Laws . Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the RSUs are granted, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

3.9 Amendments, Suspension and Termination . To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator; provided that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely affect the RSUs in any material way without the prior written consent of Participant.

3.10 Successors and Assigns . The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth in Section 3.2 hereof, this Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns.

3.11 Limitations Applicable to Section 16 Persons . Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the RSUs and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

3.12 Entire Agreement . The Plan, the Grant Notice and this Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.

3.13 Section 409A . The RSUs are not intended to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof, “ Section 409A ”). However, notwithstanding any other provision of the Plan, the Grant Notice or this Agreement, if at any time the Administrator determines that the RSUs (or any portion thereof) may be subject to Section 409A, the Administrator shall have the right in its sole discretion (without any obligation to do so or to indemnify Participant or any other person for failure to do so) to adopt such amendments to the Plan, the Grant Notice or this Agreement, or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate either for the RSUs to be exempt from the application of Section 409A or to comply with the requirements of Section 409A.

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3.14 Limitation on Participant’s Rights . Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. Participant shall have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the RSUs, and rights no greater than the right to receive the Shares as a general unsecured creditor with respect to RSUs, as and when payable hereunder.

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EXHIBIT B

TO RESTRICTED STOCK UNIT AWARD GRANT NOTICE

CONSENT OF SPOUSE

I, ____________________, spouse of ____________________, have read and approve the foregoing On Assignment, Inc. Restricted Stock Unit Award Agreement (the “ Agreement ”). In consideration of issuing to my spouse the shares of the common stock of On Assignment, Inc. set forth in the Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of any rights under the Agreement and agree to be bound by the provisions of the Agreement insofar as I may have any rights in said Agreement or any shares of the common stock of On Assignment, Inc. issued pursuant thereto under the community property laws or similar laws relating to marital property in effect in the state of our residence as of the date of the signing of the foregoing Agreement.

Dated: _______________, 2010

Signature of Spouse

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