**EXHIBIT 10.4**

 

 

***Spherion Corporation******Lineof BusinessExecutive Management2006 Variable Pay Plan***

***For Plan Year:Fiscal 2006***

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***Introduction***

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

 

Yourdedication and commitment to the Company is greatly appreciated.  Thank you for your continued support now andin the future.

 

***EffectiveDate/Plan Year***

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

 

***Eligibility***

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

 

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

 

***Changeof Positions/Leave of Absence/ Other types of Pro-rated Compensation***

Inorder to be eligible for or earn any compensation under this Plan, a PlanEligible Associate must remain employed by Spherion in some capacity throughthe last date of the Variable Pay Period. If the Plan Eligible Associate does not meet this condition, he/she willnot earn any compensation under this Plan. (***See the Variable Pay Period/Payment Section below) *** If a Plan Eligible Associate meets thiscondition, but was actively employed as a Plan Eligible Associate for only apart of the Variable Pay Period, his/her compensation under this Plan will bepro-rated based on the number of weeks he/she was actively employed as a PlanEligible Associate.  Some examplesinclude:

 

1.               New Hires

2.               Leave of Absence - LOA

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

4.               Position Changes resulting in Incentive Plan &/orSalary Changes

5.               P&L Roll Up Structure Changes (with noposition change)

 

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

 

***Components***

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

 

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To the extent permitted by the law, Spherionshall have the right to withhold, deduct, and/or set off any and all amountsfor bad debts (including write-off’s), re-bills, credits, or other adjustmentsfrom the payment calculations.

 

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

 

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

 

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

 

**Spherion EPS(75% of Variable Pay Opportunity)**

 

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

 

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

 

Payout of this component will be capped at200% of the EPS Component Awarded; provided however, in the event that CompanyEPS exceeds a 200% payout, the Compensation Committee, in its sole discretion,upon recommendation by the CEO may create and distribute a pool of additionalpayout dollars as it deems appropriate.

 

**2.****             ****LOB Performance Zone(LOB-PZ) Target.  25%** of the Variable Pay Opportunity is basedon the 2006 Performance Zone targetestablished for the Plan Eligible Associate’s LOB.   In order for a Plan EligibleAssociate to earn any compensation under this LOB-PZ component, LOB-PZ mustattain a minimum Threshold of the Target PZ as reflected in the chart below.   Performance Zone theory of managementadvocates monitoring the activity of expense dollars and Gross Profit dollarsto ensure

 

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* Confidentialportions omitted and filed separately with the Commission.

 

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

 

1)              *

2)              *

3)              *

4)              *

5)              *

 

OperatingExpenses will include interest allocation

 

**LOBPZ(25% of Variable Pay Opportunity)**

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

 

***Please see the example providedat the end of this Plan.***

 

***Variable Pay Period/ Payment***

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

 

***Terminationof Employment***

Eligibilityto participate in and ability to earn any, or receive any compensation underthis Plan ceases immediately upon termination of employment with Spherionregardless of whether such termination of employment is due to resignation,termination without cause, termination for cause, or otherwise.

 

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

 

Inaddition, any Plan Eligible Associate who resigns his/her employment or who isterminated for cause after the end of the Variable Pay Period but beforeSpherion pays the actual compensation earned under this Plan will not beeligible for or be considered to have earned any compensation under thisPlan.   If a Plan Eligible Associate isterminated by Spherion without cause after the Variable Pay Period but beforeSpherion pays the compensation, the

 

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* Confidentialportions omitted and filed separately with the Commission.

 

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PlanEligible Associate will be considered to have earned compensation under thisPlan through the end of the Variable Pay Period.

 

***RetentionBonus***

If variable pay that exceeds200% of the Plan Eligible Associate’s opportunity is calculated, this retentionbonus will be distributed along with the regularly scheduled variable paycompensation for Fiscal Year 2007 (within 45 business days after the close ofthe 2007 accounting year).  In order toearn the retention bonus, the Plan Eligible Associate must still be employedwith Spherion on the date the payment is made; provided, that if a PlanEligible Associate is terminated by Spherion without cause during the periodbetween the end of the Variable Pay Period and the date the retention bonus ispaid, the Plan Eligible Associate will still be eligible to receive theretention bonus.

 

***Disputes***

*If thereis a dispute related to this Plan, including, but not limited to, a disputeover eligibility or award, it will be resolved by the Principal ExecutiveOfficer or his/her designee, whose decision shall be final.*

* *

***At-Will Employment***

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

 

***Amendments,Exceptions, or Termination of the Plan***

ThePrincipal Executive Officer or his/her designee will administer this Plan andhave the power to implement, operate, and interpret this Plan and to take suchaction as he/she deems equitable and consistent with the purpose of this Planin particular circumstances.   Noexception or modification to this Plan will be valid unless it has beenapproved in writing by a Principal Executive Officer or his/her designee.

 

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

 

***Acknowledgement***

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

 

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EXAMPLE (This example is not intended toimply any actual percentages, payout, or targets under this Variable PayPlan.  It is merely for illustrativepurposes to show how the Variable Pay Plan components may be calculated in ahypothetical situation)

 

***Executive Management Variable PayPlanLine of Business Employees***

*** ***

***2006 Variable Pay Plan Example***

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

 

***Year End Results***

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

*** ***

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* Confidentialportions omitted and filed separately with the Commission.

 

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EXHIBIT A

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

 

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