10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

x    Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the fiscal year ended September 28, 2003

or

¨    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                          to                         

Commission file number 0-5260

REMEDYTEMP, INC.

(Exact Name of Registrant as Specified in Its Charter)

California (State or Other Jurisdiction of Incorporation or Organization) 95-2890471 (I.R.S. Employer Identification Number)

101 Enterprise

Aliso Viejo, California 92656

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number including area code: (949) 425-7600

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Class A Common Stock $.01 par value	NASDAQ National Market

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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No  ¨

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

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

The aggregate market value of the Class A Common Stock held by non-affiliates of the registrant based upon the closing sales price of its Class A Common Stock on March 30, 2003 on the NASDAQ National Market was $69,430,219. The aggregate market value of the Class B Common Stock (which converts to Class A upon certain transactions) held by non-affiliates of the registrant based upon the closing sales price of its Class A Common Stock on March 30, 2003 on the NASDAQ National Market was $2,620,677.

The number of shares of Class A Common Stock outstanding as of December 17, 2003 was 8,794,606 and the number of shares of Class B Common Stock outstanding as of December 17, 2003 was 804,642.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant will file a definitive Proxy Statement pursuant to Regulation 14A within 120 days of the end of the fiscal year ended September 28, 2003. Portions of the Company’s Proxy Statement, to be mailed to the shareholders in connection with the Annual Meeting, are incorporated by reference in Part III, Items 10-14, of this report on Form 10-K. Except for the portions expressly incorporated by reference, the Company’s Proxy Statement shall not be deemed to be part of this report.

RemedyTemp, Inc.

2003 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

	PART I	Page No.
Item 1	Business	3
Item 2	Properties	13
Item 3	Legal Proceedings	13
Item 4	Submission of Matters to a Vote of Security Holders	14
Executive Officers of the Registrant		14
	PART II
Item 5	Market for Registrant’s Common Equity and Related Shareholder Matters	15
Item 6	Selected Financial Data	17
Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	29
Item 8	Financial Statements and Supplementary Data	29
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	29
Item 9A	Controls and Procedures	29
	PART III
Item 10	Directors and Executive Officers of the Registrant	30
Item 11	Executive Compensation	30
Item 12	Security Ownership of Certain Beneficial Owners and Management	30
Item 13	Certain Relationships and Related Transactions	30
Item 14	Principal Accounting Fees and Services	30
	PART IV
Item 15	Exhibits, Financial Statement Schedules and Reports on Form 8-K	31
Signatures		34

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PART I

Item 1.    Business

In addition to historical information, the description of business below, management’s discussion and analysis in Part II and other statements contained elsewhere in this Annual Report on Form 10-K, include certain forward-looking statements, including, but not limited to, those related to the growth and strategies, future operating results and financial position as well as economic and market events and trends of RemedyTemp, Inc., including its wholly-owned subsidiaries, (collectively, the “Company”). All forward-looking statements made by the Company, including such statements herein, include material risks and uncertainties and are subject to change based on factors beyond the control of the Company (Certain of such statements are identified by the use of words such as “anticipate,” “believe,” “estimate,” “intend,” “plan,” “expect,” “will,” or “future”). Accordingly, the Company’s actual results may differ materially from those expressed or implied in any such forward-looking statements as a result of various factors, including, without limitation, the success of certain cost reduction efforts, the continued performance of the RemX® specialty division, the Company’s ability to realize improvements in the months ahead, changes in general or local economic conditions that could impact the Company’s expected financial results, the availability of sufficient personnel, various costs relating to temporary workers and personnel, including but not limited to workers’ compensation, the Company’s ability to expand its sales capacity and channels, to open new points of distribution and expand in core geographic markets, attract and retain clients and franchisees/licensees, the outcome of litigation, software integration and implementation, application of deferred tax assets and other factors described in the Company’s filings with the Securities and Exchange Commission regarding risks affecting the Company’s financial condition and results of operations. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. The following should be read in conjunction with the Consolidated Financial Statements of the Company and Notes thereto.

General

RemedyTemp, Inc., (“Remedy” or the “Company”) founded in 1965 and incorporated in California in 1974, is a national provider of clerical, light industrial, information technology and financial temporary staffing services to industrial, service and technology companies, professional organizations and governmental agencies. The Company provides its services in 37 states, Puerto Rico and Canada through a network of 238 offices, of which 116 are Company-owned and 122 are independently-managed franchises. During the twelve months ended September 28, 2003, the Company placed approximately 130,000 temporary workers, known as “associates,” and provided approximately 38 million hours of staffing services to over 10,000 clients. From the beginning of fiscal 1997 through the end of fiscal 2003, the Company added 77 offices, net of office closures.

The Company has positioned itself to take advantage of trends in the temporary staffing industry, such as increased integration of temporary workers as a significant, long-term workforce component in both manufacturing and service-oriented companies and increased outsourcing by clients of certain staffing functions. Historically, the Company focused on the clerical and light industrial sectors of the nation’s temporary workforce. Beginning in November 1998, the Company began servicing the information technology sector, and in fiscal 2002 began servicing the financial and accounting sector. The clerical, light industrial, information technology and financial sectors comprise approximately 81.8% of the nation’s temporary staffing industry revenues, according to the Staffing Industry Analysts, Inc. (“SIA”), an independent staffing industry publication. Additionally, the Company intends to continue focusing its efforts in these areas. Through the use of innovative technologies and value-added services, the Company strives to partner with its clients to deliver total solutions to their temporary staffing needs. The Company’s expertise in providing associates who possess the skills and attitudinal characteristics necessary to “fit” into its clients’ organizations and perform at a superior level distinguishes the Company as a premium provider of temporary staffing services and technologies.

The Company has invested significant human and financial resources in the development of these proprietary technologies designed to enable the Company to provide its clients with premium temporary workers and unique value-added services. The Company’s primary proprietary technologies are maintained and offered in the following

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three interactive systems: Human Performance Technology (“HPT^®”), an innovative series of multimedia evaluations used to profile the attitudinal characteristics of the Company’s associates; i/search 2000^®, an integrated front office and back office database system that is used to pay temporary associates and bill clients as well as to classify, search and match the Company’s associates to job openings using parameters based upon client needs; and Employee Data Gathering and Evaluation (“EDGE^®”), a proprietary computer system used by the Company at certain client locations to coordinate scheduling, track job performance and generate customized utilization reports for the client’s entire temporary workforce. The EDGE^® system is installed at the beginning of a temporary assignment and is removed upon completion of that assignment. The EDGE^® system, including the related hardware, is the property of the Company and is not sold or leased to its clients. Early in fiscal 2001, the Company completed its implementation of i/search 2000^®, which replaced the Company’s previous proprietary front office information system. The Company’s integrated i/search 2000^® has enabled its Company-owned and independently-managed offices to streamline operational efficiencies and enhance client service levels.

Additionally, the Company provides master vendor and on-site management programs to its clients in an effort to streamline the management of the temporary workforce and reduce the overall costs. As a master vendor, Remedy provides clients with centralized order processing, sub-contractor management and regular business reviews to track performance. The on-site management program provides a dedicated representative “on-site” at the client location to manage the entire temporary workforce including developing, coordinating and managing associate orientation, training, order fulfillment, payroll tracking and other personnel issues.

Management believes that the Company’s proprietary technologies and workforce management programs give the Company advantages over competing temporary staffing companies that do not provide similar value-added services.

This Annual Report, and each of the Company’s other periodic and current reports, including any amendments, are available, free of charge, on our website, www.remedytemp.com, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission. The information contained on the website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this report.

The Staffing Industry

Temporary help revenues for the United States staffing industry are projected to be $76.6 billion in 2003 as compared to $76.1 billion in 2002. This modest growth results from the impact of the overall slowdown in the U.S. economy and relatively high unemployment. Prior to 2002, annual growth rates in temporary help revenues from 1998 to 2001 averaged approximately 5.1%. Industry analysts project that the staffing market will eventually resume growth as the U.S. economy improves. Historically, the temporary staffing industry has experienced its greatest growth during economic recoveries. Growth has been slow to materialize out of this recovery, apparently due to high productivity gains, which has kept job creation to a minimum.

The staffing services industry was once used predominately as a short-term solution for greater workforce needs during peak production periods and to replace workers who were abruptly terminated or who were absent due to illness or vacation. Since the late 1980s, the use of temporary services has evolved into a permanent and significant component of the staffing plans of many employers. Corporate restructuring, government regulations, advances in technology and the desire by many business entities to shift employee costs from a fixed to a variable expense have resulted in the use of a wide range of staffing alternatives by businesses. Flexible staffing alternatives allow businesses to respond quickly and aggressively to changing market conditions which many economists and analysts believe is critical to future economic growth.

Additionally, many economists believe temporary staffing also encourages greater work force participation, which is critical as the U.S. faces a labor shortage. Temporary staffing provides employment flexibility and options to people who might otherwise choose not to work. Flexible work arrangements offer choices that fit the diverse

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needs and preferences of potential employees thereby contributing to increased participation and enhanced productivity. These, along with various other economic and social factors, have increased the help supply services employment rate from 1.1% of the non-farm U.S. workforce in 1990 to 1.7% in 2002, according to U.S. Department of Labor statistics. The American Staffing Association estimates that the average daily employment in temporary help services approximated 2.1 million nationwide in 2002.

The clerical, light industrial, information technology and financial sectors represent the largest four sectors of the temporary staffing industry. A staffing industry report by SIA, based on 2002 revenues, reported that the office and clerical sector accounted for $19.3 billion or approximately 25.4% of the temporary staffing industry revenues, the light industrial sector accounted for $15.7 billion or approximately 20.7% of industry revenues, the technical/information technology sectors accounted for $20.0 billion or approximately 26.3% of industry revenues, and the financial sector accounted for $7.2 billion or approximately 9.5% of industry revenues. Historically, the overall growth in temporary staffing revenues has resulted primarily from growth in these four sectors. While all sectors in the temporary staffing industry experienced contraction in 2001 and 2002, industry reports currently project modest growth in 2003 and higher growth in 2004.

Operations

The Company provides temporary personnel in the following three industry sectors: clerical, light industrial, and specialty staffing.

Clerical Services — As the use of temporary staffing has become more prevalent, the range of clerical positions provided by the Company has expanded beyond traditional secretarial staff to include a broad range of general business environment personnel. Clerical services include executive assistants, word processors, customer service representatives, data entry operators, hosts, telemarketers, other general office staff and call center agents, including customer service, help desk/product support, order takers, market surveyors, collection agents and telesales.

Light Industrial Services — Light industrial services personnel are furnished for a variety of assignments including assembly work (such as mechanical assemblers, general assemblers, solderers and electronic assemblers), factory work (including merchandise packagers, machine operators and pricing and tagging personnel), warehouse work (such as general laborers, stock clerks, material handlers, order pullers, forklift operators, palletizers and shipping/receiving clerks), technical work (such as lab technicians, quality control technicians, bench technicians, test operators, electronic technicians, inspectors, drafters, checkers, designers, expediters and buyers) and general services (such as maintenance and repair personnel, janitors and food service workers).

The Company also provides solutions for clients’ logistics staffing needs, including distribution and fulfillment. Logistics is the management of inventory, and includes warehousing, transportation, distribution and supply of goods. The Company supplies temporary associates in the following categories: inventory takers, material processors, warehouse workers, boxers, mail clerks, expeditors and inventory control clerks.

Specialty Services — The Company provides specialty staffing services in the areas of information technology, finance and accounting and high level office staffing through its RemX^® division. The RemX^® division and brands are exclusively a Company-owned operation. The Company now operates 19 offices within the RemX^® division:

Information Technology Services.    In November 1998, the Company began providing information technology temporary staffing and consulting services under the name RemX Technology Group^®. RemX Technology Group^®, now known as RemX^® IT Staffing, supplies contract staffing and consulting professionals in key technology categories including hardware and software engineering, database design development, application development, Internet/Intranet site development, networking, software quality assurance and technical support. The Company currently has four RemX^® IT Staffing offices.

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Financial Services.    RemX^® Financial Staffing, was launched during fiscal 2002 with ten office openings. RemX^® Financial Staffing is a highly specialized division focusing on placing financial and accounting personnel in key positions within the financial sector. RemX^® Financial Staffing provides its clients with controllers, financial analysts, certified public accountants, auditors, senior/staff accountants and a variety of other positions on a temporary, temp-to-hire or direct hire basis. The Company currently has 14 RemX^® Financial Staffing offices.

Office Staff Services.    The Company’s newest division was launched during fiscal 2003 with its first RemX^® OfficeStaff office  opening. RemX^® OfficeStaff specializes in the recruitment and placement of high level administrative support personnel, including administrative assistants, office managers and corporate receptionists.

Office Organization.

The Company provides its services through a network of 238 office locations, 116 of which are owned and operated by the Company and 122 of which are operated as independently-managed franchised offices. The table below sets forth the geographic distribution of the Company-owned and independently-managed offices as of September 28, 2003.

		Independently Managed Franchised Offices
	Company- Owned Offices	Traditional	Licensed	Total Offices
California	67	—	2	69
Western Region(1)	5	4	14	23
Midwestern Region(2)	8	3	34	45
Southeastern Region(3)	24	6	44	74
Northeastern Region(4)	12	—	12	24
Puerto Rico	—	—	2	2
Canada	—	—	1	1
Total	116	13	109	238

(1) Includes Arizona, Colorado, Hawaii, Idaho, Nevada, Oregon, Utah and Washington.

(2) Includes Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, Ohio and Wisconsin.

(3) Includes Arkansas, Florida, Georgia, Kentucky, Louisiana, North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Virginia.

(4) Includes Connecticut, Delaware, Maryland, Massachusetts, New Jersey, New York and Pennsylvania.

Company-Owned Offices.

The Company-owned offices provide clerical, light industrial, information technology and financial services and are primarily concentrated in California, with locations in 19 other states. These offices are organized into five divisions; each managed by an Operational Vice President and other regional staff who provide operational support for the offices in their regions. Company-owned offices are organized into different matrices based upon geographic location and/or service offerings. Each matrix has an office manager who is accountable for the day-to-day operations and profitability of the offices within that matrix.

Managers report to their Operational Vice Presidents, and together they are responsible for sales, client development and retention, recruitment, placement and retention of associates and general administration for their respective offices and regions. The Company believes that this decentralized structure contributes to the initiative and commitment of its management team and that its incentive compensation approach motivates managers to increase profits.

Company-owned offices had average sales per office of approximately $2.6 million for fiscal 2003. The density of Company-owned offices in certain areas enables the Company to spread fixed costs such as advertising,

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recruiting and administration over a larger revenue base, and also to share associates and provide clients with superior coverage and service capabilities. In addition, the Company has divided highly successful Company-owned offices into separate clerical, light industrial, information technology and financial offices, allowing each to specialize and further penetrate its market.

Independently-Managed Franchised Offices.

Independently-managed franchised offices provide clerical and light industrial services and, in general, have been an important element of the Company’s growth strategy for more than a decade. Such offices have enabled the Company to expand into new markets with highly qualified franchisees without significant capital expenditures. The majority of the Company’s offices outside California are independently-managed franchises. Franchise agreements have ten-year terms and are renewable for successive five-year or ten-year terms, depending upon when such agreements originated. Such agreements cover exclusive geographic territories and contain minimum revenue performance standards. The Company’s franchise agreements are structured in either a “traditional” franchise format or a “licensed” franchise format.

Traditional Franchises.    The Company employed a traditional franchise model primarily from 1987 until 1990 (referred to as both “traditional franchise” and “traditional franchisee”). As of September 28, 2003, 13 of the Company’s 122 independently-managed offices were traditional franchises. These traditional franchisees pay all lease and working capital costs, fund payroll and collect clients’ accounts. Generally, traditional franchisees pay the Company an initial franchise fee and continuing franchise fees, or royalties, equal to approximately 7% of gross billings. Royalty fees are reduced when the franchisee serves a national client as these clients typically have lower margins and for franchisees that have renewed their franchise agreement and qualify for a discounted rate (ranging from 5.5% - 7.0%) based on gross billings. Traditional franchisees employ all office management staff and all temporary personnel affiliated with their offices. The Company provides training, the right to use certain designated service marks and trademarks, its business model, proprietary computer programs, as well as operational support. Material rights and terms of the form of the franchise agreement for traditional franchise offices include the right to operate a Remedy franchise business within an exclusive geographic territory, a non-exclusive license of the Remedy trademarks and service marks designated for use and operation of the franchised business, disclosure and use of Remedy’s trade secrets and operating guidance from Remedy. Furthermore, pursuant to the terms of the form of franchise agreement for traditional franchise offices, franchisees shall indemnify Remedy from any liability that may arise in connection with the franchised business and must comply with certain minimum performance standards and operating procedures. The Company no longer offers this form of franchise agreement.

Licensed Franchises.    Since 1990, the Company has recruited new franchisees under the licensed franchise format (referred to as “licensed franchise,” “licensed franchisee” and/or “licensee”). The Company moved from the traditional franchise to the licensed franchise format to exercise more control over the collection and tracking of the receivables of the independently-managed offices and to allow the Company to grow without being limited by the financial resources of traditional franchisees. As of September 28, 2003, 109 of the Company’s 122 independently-managed office locations were licensed franchise offices. The licensed franchise format differs from the traditional franchise format in that the Company employs all temporary personnel affiliated with the office. The Company funds payroll, collects clients’ accounts and remits to the licensee 60%-70% of the office’s gross profit, based upon the level of hours billed during the licensee’s contract year. However, the Company’s share of the licensee’s gross profit, representing its continuing franchise fees, is generally not less than 7.5% of the licensee’s gross billings; with the exception of national accounts on which the Company’s fee is reduced to compensate for lower gross margins and for licensees that have renewed their franchise agreement and qualify for a discounted rate (ranging from 6.0%—7.0%) based on gross revenues. Material rights and terms of the form of the franchise agreement for licensed offices include the right to operate a Remedy franchise business within an exclusive geographic territory, a non-exclusive license of the Remedy trademarks and service marks designated for use and operation of the franchised business, disclosure and use of Remedy’s trade secrets and operating guidance from Remedy. Furthermore, pursuant to the terms of the form of franchise agreement for licensed offices, licensees shall indemnify Remedy from any liability that may arise in connection with the franchised business and must

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comply with certain minimum performance standards and operating procedures. Currently, the Company only offers this form of franchise agreement to prospective franchisees.

Generally, licensed franchisees pay the Company an initial franchise fee of $10,000-$18,000 and continuing franchise fees consist of the Company’s share of the licensee’s gross profit as discussed above. Licensed franchise agreements entered into subsequent to January 2002 provide for deferred payment of a portion of the initial franchise fee. Currently, the initial investment for a licensed franchise business is estimated to be $92,000-$202,000 as disclosed in the Company’s Uniform Franchise Offering Circular (“UFOC”) to be issued by December 31, 2003 in accordance with Federal Trade Commission regulations. As outlined in the UFOC, this estimated initial investment includes the initial franchise fee payable to the Company, as well as estimated expenditures to various vendors for pre-operating costs and operating costs for the initial six months of operation. Continuing franchise fees are excluded from the total estimated initial investment. Refer to the franchise agreement for licensed offices, filed as an exhibit to this Annual Report on Form 10-K, for additional rights and terms of the franchise agreement currently offered by the Company.

Clients

The Company serves the needs of both medium-size and Fortune 500 businesses in a variety of industries. During the twelve months ended September 28, 2003, the Company serviced over 10,000 clients nationwide. The Company’s 10 highest volume clients in fiscal 2003 accounted for approximately 21.8% of the Company’s total revenues. No single client accounted for more than 4.4% of the Company’s total revenues for fiscal 2003.

Competition

The temporary services industry is highly competitive with limited barriers to entry. The Company believes that its largest competitors in the clerical and light industrial sectors include Adecco S.A., Kelly Services, Inc., Manpower Inc., Spherion Corporation, Labor Ready and Personnel Group of America. These and other large competitors have nationwide operations with substantially greater resources than the Company, which among other things could enable them to attempt to maintain or increase their market share by reducing prices. In addition, there are a number of other medium-sized firms that are regional or emphasize specialized niches and compete with the Company in certain markets where they have a stronger presence. Finally, numerous small or single-office firms compete effectively with the Company’s offices in their limited areas. In the information technology and financial sectors, the Company believes that its competitors include Modis Professional Services, Robert Half International, Inc., Adecco S.A., Alternative Resources Corporation, On Assignment, Inc., KForce, Comsys and CDI Corporation.

The Company’s management believes that the most important competitive factors in obtaining and retaining its targeted clients are understanding the customer’s specific job requirements, the ability to provide qualified temporary personnel in a timely manner and the quality and price of services. The primary competitive factors in obtaining qualified candidates for temporary employment assignments are wages, benefits and responsiveness to work schedules.

The Company expects ongoing vigorous competition and pricing pressure from national, regional and local providers, and there is no assurance that the Company will be able to maintain or increase its market share or profitability.

Workers’ Compensation

Remedy provides workers’ compensation insurance to its temporary associates and colleagues. Effective April 1, 2001 and for workers’ compensation claims originating in the majority of states (referred to as non-monopolistic states), the Company has contracted with independent, third-party carriers for workers’ compensation insurance and claims administration. Each annual contract covers all workers’ compensation claim costs greater than a

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specified deductible amount, on a “per occurrence” basis. The Company is self-insured for its deductible liability ($250,000 per individual claim incurred from April 1, 2001 to March 31, 2002 and $500,000 for all subsequent claims). The insurance carrier is responsible for incremental losses in excess of the applicable deductible amount.

Remedy establishes a reserve for the estimated remaining deductible portion of its workers’ compensation claims, representing the estimated ultimate cost of claims and related expenses that have been reported but not settled, and that have been incurred but not reported. The estimated ultimate cost of a claim is determined by applying actuarially determined loss development factors to current claims information. These development factors are determined based upon a detailed actuarial analysis of historical claims experience of both the Company and the staffing industry. The Company periodically updates the actuarial analysis supporting the development factors utilized and revises those development factors, as necessary. Adjustments to the claims reserve are charged or credited to expense in the periods in which they occur. The estimated remaining deductible liability under the aforementioned contracts as of September 28, 2003 is approximately $30.6 million.

The Company is contractually required to collateralize its remaining obligation under each of these workers’ compensation insurance contracts through use of irrevocable letters of credit, pledged cash and securities, or a combination thereof. The level and type of collateral required for each policy year is determined by the insurance carrier at the inception of the policy year and may be modified periodically. As of September 28, 2003, the Company has outstanding letters of credit and pledged securities totaling $21.9 and $21.6 million, respectively. The pledged cash and securities are restricted while the Company’s remaining obligations under the workers’ compensation program are outstanding and cannot be used for general corporate purposes. Accordingly, the Company has classified these pledged securities as restricted in the accompanying consolidated balance sheets.

The Company also has an aggregate $5.3 million liability recorded at September 28, 2003 for additional premiums due under previous guaranteed cost policies and for premiums due under current policies in states where the Company is statutorily required to participate in the state managed workers’ compensation fund.

From July 22, 1997 through March 31, 2001, the Company had a fully insured workers’ compensation program with Reliance National Insurance Company (“Reliance”). The annual premium for this program was based upon actual payroll costs multiplied by a fixed rate. Each year, the Company prepaid the premium based upon estimated payroll levels and an adjustment was subsequently made for differences between the estimated and actual amounts. Subsequent to March 31, 2001 (the end of the Company’s final policy year with Reliance), Reliance became insolvent and was subsequently liquidated. The Company is currently in litigation with the California Insurance Guaranty Association regarding financial responsibility for all remaining open claims under the Reliance workers’ compensation program (see further discussion under Item 3. Legal Proceedings).

Employees

As of September 28, 2003, the Company employed a staff of approximately 558 individuals (excluding temporary associates). During fiscal 2003, approximately 130,000 temporary associates were placed by the Company through Company-owned and independently-managed franchised offices. Approximately 70,000 of the temporary associates were employed by Company-owned offices and approximately 52,000 were employed by the Company, through licensed franchise offices. Approximately 8,000 of the temporary associates were placed by traditional franchise offices that are not employed by the Company but rather are legal employees of the traditional franchisees. At any given time during 2003, only a portion of these employees were placed on temporary assignments. The Company has no collective bargaining agreements and believes its employee relations are good.

Governmental Regulation

The Company’s marketing and sale of franchises is regulated by the Federal Trade Commission and by authorities in 19 states. In those states, the Company is required to file a registration application, provide notice or qualify for an exemption from registration. The Company has filed, or is in the process of filing, the appropriate

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registration applications, or has obtained an exemption from such registration requirements. The Company files and distributes, to prospective franchisees, Franchise Offering Circulars and other materials in order to comply with such registration and disclosure requirements. In addition, the Company’s ongoing relationships with its franchisees are regulated by applicable federal and state franchise laws.

Proprietary Rights and Systems

The Company has developed, either internally or through hired consultants, its HPT^®, EDGE^® and i/search 2000^® computer systems. These and other proprietary systems are trade secrets of the Company and the Company has copyrights to certain software used in these systems.

The Company has registered the following trademarks and service marks with the U.S. Patent & Trademark Office for use in its operation: REMEDY^®, REMEDY TEMPORARY SERVICES^®, REMEDYTEMP^®, REMEDY TECHNICAL^®, CALLER ACCESS^®, INTELLISEARCH^®, INTELLIGENT STAFFING^®, HIRE INTELLIGENCE^®, EDGE^®, VSM^®, HPT^®, THE INTELLIGENT TEMPORARY^®, REMEDY LOGISTICS GROUP^®, REMX TECHNOLOGY GROUP^®, REMX^® Financial Staffing, AXCESS INTERACTIVE CUSTOMER CARE^®, RECRUITRAC^®, I/SEARCH 2000^® and REMX^® OfficeStaffing. In addition, the Company asserts ownership of, and has filed applications with the U.S. Patent & Trademark Office to register the service mark MEGABLAST^SM . In general, these marks are used by the Company and its licensees and franchisees, except that REMX TECHNOLOGY GROUP^®, REMX^® Financial, REMX^® IT Staffing and REMX^® OfficeStaff are used exclusively by the Company.

Risk Factors

In evaluating Remedy’s business, you should carefully consider the following risk factors in addition to information contained elsewhere in this Annual Report on Form 10-K.

Any significant economic downturn could result in our clients using fewer temporary employees, which could materially adversely affect the Company.

Demand for temporary services is significantly affected by the general level of economic activity. As economic activity slows, businesses may reduce their use of temporary employees before undertaking layoffs of their full-time employees, resulting in decreased demand for Remedy’s temporary personnel. Further, in an economic downturn, the Company may face pricing pressure from its customers and increased competition from other staffing companies, which could have a material adverse effect on the Company’s business. The overall slowdown in the U.S. economy in 2001 and 2002 had a significant adverse impact on the Company’s revenues. Additionally, because the Company currently derives a significant portion of its revenues from the California market (approximately 44.0% in fiscal 2003), an economic downturn in California would have a greater impact on the Company than if the Company had a more widely dispersed revenue base.

Remedy operates in highly competitive markets with low barriers to entry, potentially limiting its ability to maintain or increase its market share or profit margins.

The temporary services industry is highly competitive with limited barriers to entry and in recent years has been undergoing significant consolidation. The Company competes in national, regional and local markets with full service agencies and with specialized temporary service agencies. Many competitors are smaller than the Company but have an advantage over the Company in discrete geographic markets because of their stronger local presence. Other competitors are more well-known and have greater marketing and financial resources than the Company, which among other things could enable them to attempt to maintain or increase their market share by reducing prices. The Company expects the level of competition to remain high in the future, and competitive pricing pressures may have an adverse effect on the Company’s operating margins.

Remedy’s success depends upon its ability to attract and retain qualified temporary personnel.

Remedy depends upon its ability to attract qualified temporary personnel who possess the skills and experience necessary to meet the staffing requirements of its clients. Remedy must continually evaluate and upgrade its base

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of available qualified personnel to keep pace with changing client needs and emerging technologies. Competition for individuals with proven skills is intense, and demand for these individuals is expected to remain very strong for the foreseeable future. There can be no assurance that qualified personnel will continue to be available to Remedy in sufficient numbers and on terms of employment acceptable to the Company. Remedy’s success will depend on its ability to recruit qualified temporary personnel and retain them.

Remedy’s business may suffer if it loses its key personnel.

Remedy’s operations are dependent on the continued efforts of its executive officers and senior management. Additionally, Remedy is dependent on the performance and productivity of its local managers and field personnel. Remedy’s ability to attract and retain business is significantly affected by local relationships and the quality of service rendered. The loss of those key executive officers and senior management who have acquired experience in operating a staffing service company may cause a significant disruption to Remedy’s business. Moreover, the loss of Remedy’s key local managers and field personnel may jeopardize existing customer relationships with businesses that continue to use Remedy’s staffing services based upon past direct relationships with these local managers and field personnel. Either of these types of losses could adversely affect Remedy’s operations, including Remedy’s ability to establish and maintain customer relationships.

Remedy may be exposed to employment-related claims and costs that could materially adversely affect its business.

Remedy is in the business of employing people and placing them in the workplace of other businesses. Attendant risks of these activities include possible claims by customers of employee misconduct or negligence, claims by employees of discrimination or harassment (including claims relating to actions of Remedy’s customers), claims related to the inadvertent employment of illegal aliens or unlicensed personnel, payment of workers’ compensation claims and other similar claims. Remedy has policies and guidelines in place to help reduce its exposure to these risks and has purchased insurance policies against certain risks in amounts that it believes to be adequate. However, there can be no assurances that Remedy will not experience these problems in the future or that Remedy may not incur fines or other losses or negative publicity with respect to these problems that could have a material adverse effect on Remedy’s business.

The cost of unemployment insurance premiums and workers’ compensation costs for Remedy’s temporary employees may rise and reduce Remedy’s profit margins.

Businesses use temporary staffing in part to shift certain employment costs and risks to personnel services companies. For example, Remedy is responsible for, and pays unemployment insurance premiums and workers’ compensation for, its temporary employees. These costs have generally risen as a result of increased claims, general economic conditions and governmental regulation. There can be no assurance that Remedy will be able to increase the fees charged to its clients in the future to keep pace with increased costs. Price competition in the personnel services industry is intense. If Remedy is unable to maintain its margins, it expects that it may choose to stop servicing certain clients. Further, there can be no assurance that certain clients will continue to use Remedy at increased cost. There can be no assurance that Remedy will maintain its margins, and if it does not; its results of operations, financial condition and liquidity could be adversely affected.

On November 18, 2003, the Company was notified by the State of California Employment Development Department that the Company underpaid its state unemployment insurance by approximately $2.0 million for the period January 1, 2003 through September 30, 2003. Based on preliminary evaluations, the Company believes that this assessment is without merit. The Company believes that its methodology in calculating its state unemployment insurance is in compliance with all applicable laws and regulations and disputes this assessment. The Company has not accrued for this amount as of September 28, 2003.

Remedy retains a portion of the risk under its workers’ compensation program (see “Business – Workers’ Compensation”). The estimated remaining deductible liability for all existing and incurred but not reported claims is accrued based upon actuarial methods using current claims information, as well as prior experience, and may be subsequently revised based on new developments related to such claims. Changes in the estimates underlying the

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claims reserve are charged or credited to earnings in the period determined, and therefore large fluctuations in any given quarter could materially adversely affect earnings in that period.

The Company is contractually required to maintain irrevocable letters of credit and pledged securities (cash and investments), aggregating $21.9 million and $21.6 million, respectively, to collateralize its remaining recorded obligations under these workers’ compensation insurance contracts. Remedy expects the amount of collateral required will continue to increase. In the event that Remedy loses its current credit facilities, or cash flow and borrowing capacity under the existing credit facilities are insufficient to meet this increasing obligation, the Company will be required to seek additional sources of capital to satisfy its liquidity needs which could have a material adverse effect on the Company’s business.

The cost of mandated health insurance cost may not be able to be passed onto customers.

On October 5, 2003 the state of California passed health insurance mandate “SB2.” This law will require employers, with more than 200 employees, to either provide health coverage for their employees and their families, or to pay into a state fund for the provision of health coverage. The law would be effective for the year beginning January 1, 2006 and would require the Company to cover 80% of the cost of insurance. As a result of the changing business environment in California, some believe that this law may be repealed prior to the required implementation date. In the event that this law does not get repealed, these costs will be substantial and there can be no assurance that Remedy will be able to pass these costs onto customers and maintain its current margins. In addition, there can be no assurance made that other states will not enact similar health insurance legislation that could have a material impact on the Company. However, since the adoption of ERISA, several states have attempted to pass mandatory health-coverage bills that failed legal challenges under ERISA. Currently, Hawaii, which adopted mandatory health coverage before the passage of ERISA and received a “grandfather clause” exempting the state from the regulation, is the only other state with mandated employer provided health care.

Remedy derives a significant portion of its revenues from franchised operations.

The Company derives a substantial amount of its revenues (37.7% in fiscal 2003) from traditional and licensed franchise operations. The ownership of the Company’s traditional and licensed franchise offices is concentrated, with the ten largest franchisees together accounting for approximately 17.0% of the Company’s revenues in fiscal 2003. There can be no assurance that the Company will be able to attract new franchisees or that the Company will be able to retain its existing franchisees. The loss of one or more of these relationships, or other franchisees who may in the future account for a significant portion of the Company’s revenues, could have a material adverse effect on the Company’s results of operations.

The Company is continually subject to the risk of new regulations, which could harm its business.

The Company is subject to bills introduced in Congress and various state legislatures, which, if enacted, could impose conditions that could have a negative financial impact on the Company and harm its business operations. Remedy takes an active role (through its affiliations with, and participation in, various staffing industry organizations) in opposing proposed legislation adverse to its business and in informing policy makers as to the social and economic benefits of its business. However, there can be no assurance or guarantees that any of these bills (or future bills) will not be enacted, in which case, demand for the Company’s services may suffer.

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Item 2.    Properties

The Company does not own any real property. The Company leases its corporate headquarters in Aliso Viejo, California, from OTR, an Ohio general partnership. The lease agreement, as amended, provides for leased premises, totaling approximately 51,202 square feet in size, at a fixed rate of $1.80 per square foot per month until September 30, 2007 and $2.05 per square foot per month from October 1, 2007 until September 30, 2010. Additionally, the Company’s obligation to pay base rent of $461,000 has been waived for the period of time from October 1, 2003 until February 29, 2004. The base rent includes amounts for operating costs, which include, but are not limited to, property taxes, utilities, supplies, repairs and maintenance, janitorial staff, security staff and insurance premiums on the building. In addition to base rent, the Company is obligated to pay a portion of the increase in operating costs and real property taxes for the leased premises. The Company has an option to renew the lease for an additional term of five years. The Company moved into its current corporate headquarters in September 1998, and the initial term of its lease, as amended, expires in September 30, 2010.

As of September 28, 2003, the Company leased the space occupied by all of its Company-owned offices. The Company selects the sites for these offices by evaluating proximity to potential clients and available temporary personnel. The Company assists its franchisees in selecting sites for independently-managed offices, but presently does not own and is not obligated under any leases at these sites.

Item 3.    Legal Proceedings

On October 16, 2001, GLF Holding Company, Inc. and Fredrick S. Pallas filed a complaint in the Superior Court of the State of California, County of Los Angeles, against RemedyTemp, Inc., its wholly-owned subsidiaries (Remedy Intelligent Staffing, Inc. and Remedy Temporary Services, Inc.), Karin Somogyi, Paul W. Mikos and Greg Palmer (the “Complaint”). The Complaint purports to be a class action brought by the individual plaintiffs on behalf of all of Remedy’s traditional and licensed franchisees. The Complaint alleges claims for fraud and deceit, negligent misrepresentation, negligence, breach of contract, breach of warranty, conversion and accounting, unfair and deceptive practices, and plaintiffs seek restitution and equitable relief. The plaintiffs claim that Remedy wrongfully induced its franchisees into signing franchise agreements and breached the agreements, thus causing the franchisees damage. Remedy has sought to compel arbitration with the plaintiffs in accordance with its franchise agreement with each of them and to deny class certification. Remedy believes it has meritorious defenses to the allegations contained in this complaint and intends to defend this action with vigor. Remedy has filed a counterclaim in arbitration with the American Arbitration Association alleging, among other things, breach of contract. At this time management is unable to give an estimate as to the amount or range of potential loss, if any, which might result to the Company if the outcome in this matter were unfavorable.

In early 2002, the California Insurance Guarantee Association (“CIGA”) began making efforts to join some of the Company’s customers and their workers’ compensation insurance carriers (collectively, “Customers”), in pending workers’ compensation claims filed by Remedy’s employees as a result of the liquidation of Remedy’s former carrier, Reliance. At the time of these injuries, from July 22, 1997 through March 31, 2001, Remedy was covered by workers’ compensation policies issued by Reliance. The Company believes that, under California law, CIGA is responsible for Reliance’s outstanding liabilities. Remedy initiated legal proceedings against CIGA in both Superior Court for the State of California, County of Los Angeles and the California Workers’ Compensation Appeals Board (“WCAB”) on February 15, 2002 and February 26, 2002, respectively. On April 5, 2002, the WCAB granted Remedy’s motion and consolidated the various workers’ compensation claims in which CIGA tried to join Remedy’s Customers. The WCAB also granted Remedy’s motion to stay CIGA’s efforts to join Remedy’s Customers in those claims. The WCAB selected a single test case from the consolidated pending cases to review and decide on the legal issues involved (i.e., whether it is proper for CIGA to join Remedy’s Customers in the pending claims). The trial occurred on September 20, 2002. The WCAB Administrative Law Judge ruled in favor of CIGA and dismissed it from the lawsuit, thus allowing the pending workers’ compensation matters to proceed against the Company’s Customers and their insurance carriers. Remedy then filed a motion for reconsideration of the decision by the WCAB Administrative Law Judge to the entire WCAB. On March 28, 2003, the entire WCAB affirmed the ruling of the Administrative Law

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Judge and as a result, the Company filed an appeal of this matter to the California Court of Appeals in May 2003. The WCAB continued the “stay” in effect since April 5, 2002, thus preventing CIGA from proceeding until the appeals process has been exhausted. Management believes, based upon the advice from outside counsel, that its position on this issue will ultimately prevail and, accordingly, the Company will suffer no loss.

Despite the Company’s determination to pursue the review process, there can be no assurance that further review will be granted, or of ultimate success in the overturning the WCAB decision. In the event of an unfavorable outcome, Remedy may be obligated to reimburse certain clients and believes that it would consider reimbursement to its other clients for actual losses incurred as a result of an unfavorable ruling in this matter. If CIGA is permitted to join Remedy’s Customers, thus triggering the client’s insurance carriers obligation to pay for the claims, the exposure to Remedy becomes a function of the ultimate claims’ losses and the impact of such claims, if any, on the clients’ insurance coverage. Presently, the Company is unable to ascertain the specific details regarding the insurance coverage of its affected clients and the impact of an unfavorable ruling on such coverage. The Company has received data from the trustee for Reliance regarding outstanding claims that CIGA has attempted to pursue against the Company’s current and former clients. The information indicates incurred losses, as of September 28, 2003, for the claims in question amount to $38.7 million. The losses incurred to date represent amounts paid to date by the trustee and the remaining claim reserves on open files. At this time, the Company believes that it is unable to ascertain if the remaining reserves on the claims are appropriate or adequate since the Company has not been able to gain access to the files due to pending litigation. Further, as stated above, the Company cautions that: (i) it believes the Company’s exposure in this matter is not the remaining claims liability, but rather a function of the impact of such claims, if any, on the client’s insurance costs; and (ii) it expects to ultimately prevail in this matter and that it will suffer no loss.

From time to time, the Company becomes a party to other litigation incidental to its business and operations. The Company maintains insurance coverage that management believes is reasonable and prudent for the business risks that the Company faces. Based on current available information, management does not believe the Company is party to any legal proceedings that are likely to have a material adverse effect on its business, financial condition, cash flows or results of operations.

Item 4.    Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of the Company’s security holders during the Company’s fourth quarter of the fiscal year ended September 28, 2003.

Executive Officers of the Registrant

The executive officers of the Company and their respective ages as of September 28, 2003 are set forth below.

Name	Age	Position(s) Held
Greg D. Palmer	47	President and Chief Executive Officer
Robert E. McDonough, Sr.	81	Founder and Vice Chairman of the Board of Directors
Monty A. Houdeshell	55	Senior Vice President and Chief Financial Officer
Janet L. Hawkins	48	Senior Vice President, Sales and Marketing
Gunnar B. Gooding	40	Vice President, Human Resources and Legal Affairs
Cosmas N. Lykos	35	Vice President of Business Affairs, General Counsel and Secretary

Greg D. Palmer has served as President and Chief Executive Officer of the Company since January 2001. From January 1998 to January 2001, Mr. Palmer served as Executive Vice President and Chief Operations Officer of the Company. From 1985 to December 1997, and prior to joining the Company, Mr. Palmer served in senior level management positions in the southeast and northeast divisions and previously as Senior Vice President in charge of managing operations in the western United States for Olsten Corporation, formerly a provider of staffing and health care services.

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Robert E. McDonough, Sr. has served as Vice Chairman of the Board of Directors of the Company (the “Board”) since January 2001. He served as Chairman of the Board from August 1978 to January 2001. Mr. McDonough founded the Company in 1965 and has been involved in the management and long-term operation and strategic planning of the Company since that time. For 29 years, until May 1994, he served as the Company’s Chief Executive Officer.

Monty A. Houdeshell has served as Senior Vice President, Chief Financial Officer of the Company since of January 1, 2003. From 1988 until November 1999 he was Vice President, Chief Financial Officer of Furon Company. Prior to 1988, he was Vice President, Chief Financial Officer of Oak Industries, Inc.

Janet L. Hawkins has served as the Senior Vice President of Sales and Marketing for the Company since July 2003. From 1978 to June 2003, and prior to joining the Company, Mrs. Hawkins served as President of Hawkins Advertising and Public Relations.

Gunnar B. Gooding has served as Vice President, Human Resources and Legal Affairs of the Company since April 2000 and prior to that as Vice President, General Counsel since September 1998. From September 1989 to September 1998, Mr. Gooding worked as an attorney at Gibson, Dunn & Crutcher LLP where he specialized in employment litigation.

Cosmas N. Lykos has served as Vice President of Business Affairs, General Counsel and Secretary of the Company since December 2000 and prior to that as Vice President, General Counsel and Secretary since September 1998. From September 1994 to September 1998, Mr. Lykos served as a corporate associate at Gibson, Dunn & Crutcher LLP, specializing in mergers and acquisitions, public offerings, franchise and general corporate matters.

PART II

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

Since July 11, 1996, the Company’s Class A Common Stock has been traded on the NASDAQ National Market under the symbol “REMX.” Prior to July 11, 1996, the Company’s stock was not publicly traded. The following table sets forth the high and low sales prices for the Class A Common Stock for fiscal 2003 and fiscal 2002:

	For the Three Months Ended
	December 29, 2002		March 30, 2003		June 29, 2003		September 28, 2003
High	$	15.85	$	14.10	$	12.56	$	13.02
Low	$	12.53	$	10.02	$	8.60	$	9.27
	December 30, 2001		March 31, 2002		June 30, 2002		September 29, 2002
High	$	14.45	$	16.25	$	18.88	$	19.50
Low	$	9.05	$	12.27	$	15.40	$	10.15

As of December 17, 2003, there were an estimated 900 shareholders of record of the Company’s Class A Common Stock and 5 shareholders of record of the Company’s Class B Common Stock.

Subsequent to the Company’s initial public offering in fiscal 1996, the Company has not declared or paid cash dividends on its Class A or Class B Common Stock and does not anticipate that it will do so in the foreseeable future. The present policy of the Company is to retain earnings for use in its operations and the expansion of its business.

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Securities Available for Issuance Under Our Equity Compensation Plans

The following table provides information with respect to the Company’s equity compensation plans as of September 28, 2003 of which the plans were as follows: the Company’s 1996 Amended and Restated Stock Incentive Plan, 1996 Employee Stock Purchase and the Non-Employee Director Plan.

Plan category	(a) Number of securities to be issued upon exercise of outstanding options, warrants and rights	(b) Weighted-average exercise price of outstanding options, warrants and rights		(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders	701,663	$	15.07	369,351	(1)
Equity compensation plans not approved by security holders	—		—	42,304	(2)
Total	701,663	$	15.07	411,655

(1) Includes 149,846 shares of Common Stock that may be issued under the Company’s 1996 Employee Stock Purchase Plan and 219,505 shares of Common Stock that may be issued under the Company’s 1996 Amended and Restated Stock Incentive Plan.

(2) Pertains to shares of Common Stock that may be issued under the Non-Employee Director Plan discussed below.

Non-Employee Director Plan

Directors who are also employees or officers of the Company receive no extra compensation for their service on the Board. Pursuant to the Non-Employee Director Plan, effective March 16, 1998, and amended by the Board on October 1, 2003, independent directors receive an annual retainer in the form of cash or shares of Common Stock valued at $25,000 on the date of their election or re-election to the Board. For those directors electing to receive their retainer in stock, the Shares that are issued under the Non-Employee Director Plan are held in trust, on a deferred basis (subject to an exception for financial hardship) until a director is no longer a director of the Company. Such shares are issued in trust no later than ten (10) business days after the next annual meeting of shareholders following election or re-election, provided that the director has remained a director during such time. The maximum aggregate number of shares that have been authorized for issuance under the Non-Employee Director Plan is 75,000 shares, subject to adjustment upon recapitalization, stock dividends, stock splits and similar changes in the Company’s capitalization as provided in the plan. As of September 28, 2003, 42,304 shares of Common Stock were available for issuance under the Non-Employee Director Plan.

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Item 6.    Selected Financial Data

The selected financial data with respect to the Company set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and Notes thereto. The following selected financial information as of and for the fiscal years ended September 28, 2003, September 29, 2002, September 30, 2001, October 1, 2000 and October 3, 1999 has been derived from the audited financial statements of the Company.

	For the Fiscal Year Ended (1)
	2003			2002		2001		2000		1999
	(amounts in thousands, except per share data)
Statement of Operation Data:
Total revenues	$	481,965		$	464,538	$	519,223	$	557,860	$	513,536
(Loss) income before income taxes and cumulative effect of adoption of a new accounting standard	$	(18,542	)	$	2,514	$	12,356	$	22,515	$	24,749
Provision for income taxes		8,280			377		3,960		8,151		9,528
(Loss) income before cumulative effect of adoption of a new accounting standard		(26,822	)		2,137		8,396		14,364		15,221
Cumulative effect of adoption of a new accounting standard, net of tax		2,421			—		—		—		—
Net (loss) income	$	(29,243	)	$	2,137	$	8,396	$	14,364	$	15,221
Earnings per share—basic:
(Loss) income before cumulative effect of adoption of a new accounting standard	$	(2.98	)	$	0.24	$	0.94	$	1.62	$	1.72
Cumulative effect of adoption of a new accounting standard, net of taxes		(0.27	)		—		—		—		—
Net (loss) income—basic	$	(3.25	)	$	0.24	$	0.94	$	1.62	$	1.72
Earnings per share—diluted:
(Loss) income before cumulative effect of adoption of a new accounting standard	$	(2.98	)	$	0.24	$	0.94	$	1.59	$	1.71
Cumulative effect of adoption of a new accounting standard, net of taxes		(0.27	)		—		—		—		—
Net (loss) income—diluted	$	(3.25	)	$	0.24	$	0.94	$	1.59	$	1.71
Weighted-average number of shares:
Basic		9,010			8,973		8,917		8,878		8,864
Diluted		9,010			9,076		8,940		9,020		8,923
Balance Sheet Data: (2)
Cash and cash equivalents	$	13,236		$	26,101	$	37,362	$	1,084	$	7,887
Investments	$	18,384		$	22,955	$	1,708	$	1,960	$	1,321
Working capital	$	56,074		$	83,822	$	74,496	$	62,983	$	51,969
Restricted cash and investments	$	21,615		$	—	$	—	$	—	$	—
Total assets	$	139,194		$	146,544	$	137,302	$	119,534	$	116,721
Shareholders’ equity	$	75,364		$	102,984	$	99,575	$	90,471	$	75,456

(1) The fiscal year end of the Company is a 52 or 53 week period ending the Sunday closest to September 30. Thus, “fiscal 2003,” “fiscal 2002,” “fiscal 2001,” “fiscal 2000” and “fiscal 1999” refer to the Company’s fiscal years ending September 28, 2003, September 29, 2002, September 30, 2001, October 1, 2000 and October 3, 1999, respectively. Fiscal year 1999 consisted of 53 weeks. All other fiscal years consisted of 52 weeks.

(2) Certain items in prior periods have been reclassified to conform to current year classifications.

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

General

The Company provides temporary staffing services to industrial, service and technology businesses, professional organizations and governmental agencies. During the twelve fiscal months ended September 28, 2003, the Company placed approximately 130,000 temporary workers and provided approximately 38 million hours of staffing services to over 10,000 clients. From the beginning of fiscal 1997 through the end of fiscal 2003, the Company added 77 offices, net of office closures, for a total of 238 offices.

Operations

The Company’s revenues are derived from Company-owned offices (direct sales) and independently-managed franchise offices (licensed sales and franchise royalties). The Company’s franchise arrangements are structured in either a traditional franchise format or a licensed franchise format. Under the Company’s traditional franchise agreements, the traditional franchisee pays all lease and working capital costs relating to its office, including funding payroll and collecting clients’ accounts. Generally, the franchisee pays the Company an initial franchise fee and continuing franchise fees, or royalties, equal to approximately 7% of its gross billings. Royalty fees are reduced when the franchise serves a national client as these clients typically have lower margins and for franchises that have renewed their franchise agreement and qualify for a discounted rate (ranging from 5.5% - 7.0%) based on gross billings. The Company processes payroll and invoices clients, and the franchisee employs all management staff and temporary personnel affiliated with its office. Under the Company’s licensed franchise agreements, the licensee pays the Company an initial franchise fee and pays all lease and operating costs relating to its office. The licensee employs all management staff affiliated with its office, but the Company employs all temporary personnel affiliated with the licensed franchise office, handles invoicing and collecting clients’ accounts, and generally remits to the licensed franchisee 60% — 70% of the office’s gross profit. However, the Company’s share of the licensee’s gross profit, representing the continuing franchise fees, is generally not less than 7.5% of the licensed franchisee’s gross billings; with the exception of national accounts on which the Company’s fee is reduced to compensate for lower gross margins and licensees that have renewed their franchise agreement and qualify for a discounted rate (ranging from 6.0% — 7.0%) based on gross revenues. The percentage of gross profit paid to the licensee is generally based on the level of hours billed during the contract year.

As of September 28, 2003, there were 13 independently-managed franchise offices operating as traditional franchises and 109 operating as licensed franchise offices. In general, franchise offices opened from 1987 to 1990 are operated as traditional franchises, and independently-managed offices opened since 1990 are operated as licensed franchise offices. The Company moved from the traditional to the licensed franchise format to exercise more control over the collection and tracking of the receivables generated by the independently-managed offices and to allow the Company to grow without being limited by the financial resources of traditional franchisees. Accordingly, the number of traditional franchise offices is not anticipated to increase, except in certain circumstances when a licensed franchise office may convert to the traditional franchise format. Additionally, existing traditional franchisees have the option under their contract to open new franchise offices within their territory. The number of licensed franchise offices is expected to increase because new independently-managed offices will be opened in licensed franchise format and offices currently operated as traditional franchises may, depending upon various factors, convert to the licensed franchise format. If the number of traditional franchise offices is reduced, royalty revenues will decrease.

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The following table sets forth for the last five fiscal years, the number of Company-owned, traditional and licensed franchise offices and revenues associated with each. For traditional franchised offices, Company revenues are limited to the royalties revenues earned on gross billings. Average revenues per office are computed by dividing the relevant revenues by the number of related offices. The Company’s long-term revenue growth depends in part upon its ability to continue to attract new clients, retain existing clients and open new offices, as well as its ability to enhance the sales of existing offices beyond historical levels.

	Fiscal Year
	2003		2002		2001		2000		1999
	(dollars in thousands)
Company-Owned Offices
Number of offices		116		126		117		114		101
Average hours billed per office		193,492		168,258		204,782		225,682		241,108
Total revenue	$	300,070	$	267,207	$	288,396	$	306,955	$	279,206
Average revenue per office	$	2,587	$	2,121	$	2,465	$	2,693	$	2,764
Licensed Franchise Offices
Number of offices		109		126		156		141		130
Average hours billed per office		125,072		115,617		106,185		130,303		137,065
Total revenue	$	180,262	$	195,588	$	228,236	$	247,246	$	231,481
Average revenue per office	$	1,654	$	1,552	$	1,463	$	1,754	$	1,781
Traditional Franchise Offices
Number of offices		13		14		17		27		20
Average hours billed per office		124,696		137,904		180,973		154,869		158,713
Total billings	$	23,255	$	26,776	$	40,420	$	55,906	$	43,845
Average billings per office	$	1,789	$	1,913	$	2,378	$	2,071	$	2,192
Royalties revenues	$	1,614	$	1,732	$	2,531	$	3,552	$	2,689
Total Offices		238		266		290		282		251
Average Hours Billed Per Office		158,399		141,726		150,348		171,212		180,656
Total Office Revenues	$	481,946	$	464,527	$	519,163	$	557,753	$	513,376
Initial Franchise Fees	$	19	$	11	$	60	$	107	$	160
Total Company Revenues	$	481,965	$	464,538	$	519,223	$	557,860	$	513,536

Results of Operations

Fiscal 2003 Compared to Fiscal 2002

Total revenues increased 3.8% or $17.4 million to $482.0 million for fiscal 2003 from $464.5 million for fiscal 2002. Direct revenues increased 12.3% to $300.1 million from $267.2 million, licensed franchise revenues decreased 7.8% to $180.3 million from $195.6 million and traditional franchise royalties decreased 6.8% to $1.6 million from $1.7 million for fiscal 2003 compared to fiscal 2002, respectively. The main contributing factor ($17.7 million) for the shift between direct and franchise revenues is attributable to the acquisition of two franchises in Tennessee and Texas in the second and third quarters of fiscal 2003. The Company’s fiscal 2003 fourth quarter revenue increased 0.9% over the corresponding quarter in fiscal 2002 and 6.4% over the preceding fiscal 2003 third quarter. Although modest, this overall growth continues to be a positive trend compared with the prior year. The Company’s RemX^® specialty staffing division, launched during fiscal 2002, increased revenues $11.1 million to 3.1% of total consolidated revenue for fiscal 2003 as compared to 0.9% of total consolidated revenue for fiscal 2002. Additionally, the Company experienced a modest increase in the permanent placement revenues as compared to the prior year. Moreover, the Company’s revenue growth resulted from the change in its strategic plan to shift its overall business mix to higher margin services, in addition to increasing its sales capacity and new sales channels.

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The mix between direct, licensed franchise and traditional royalty revenues shifted with direct revenues accounting for 62.3% of total revenues for fiscal 2003 as compared to 57.5% for fiscal 2002. This shift resulted primarily from (i) fewer licensed franchise offices in the current year as a result of the acquisition of a significant licensed franchise consisting of several offices (see Note 6 to the Consolidated Financial Statements), closures due to reduced business and the non-renewal of expired licensed franchisee agreements, and (ii) incremental revenues generated from new Company-owned traditional and specialty staffing offices, as previously discussed. This overall shift in business mix is consistent with the Company’s long-term strategy of generating a higher proportion of its overall revenues from its Company-owned offices.

Revenues from the light industrial sector decreased as a percentage of total revenues to 67.6% as compared to 69.0% in the prior year. Revenues from the clerical business line decreased to 29.3% of revenue for fiscal 2003 as compared to 30.1% of revenue for fiscal 2002. However, the clerical business line for the fiscal 2003 fourth quarter increased to 28.1% compared to 27.7% of revenues for the same prior year period. The slight increase in the clerical business during the fourth quarter is consistent with the Company’s overall strategic plan to focus on higher margin business. As discussed earlier, the RemX^® division increased to 3.1% of total consolidated revenue and is the Company’s fastest growing business line. The Company opened seven and ten RemX^® offices during fiscal 2003 and 2002, respectively. RemX^® is exclusively a Company-owned operation that provides specialized finance and accounting, IT staffing and office staff services. The Company closed 31 marginally profitable or non-revenue generating Company-owned offices during fiscal 2003. Management continues to strategically evaluate its existing and target markets and will continue to open additional offices where market conditions appear favorable and to consolidate underutilized offices as deemed appropriate. Our target customer is the small-to-mid size account, generating approximately $200,000 to $5 million in annual revenue. The margins typically are higher on this type of business, and it lessens our dependence on individual large-scale accounts. For the fiscal 2003 fourth quarter, our single largest customer represented 5.1% of revenue and the Company’s top ten customers combined comprised approximately 26.0%. Our goal is to significantly lower this percentage over the next three years from 26.0% to less than 15.0%. The Company’s ability to increase revenues depends significantly on the Company’s ability to continue to attract new clients, retain existing clients, open new offices, find and retain licensed franchisees and office managers, and manage newly opened offices to maturity. There can be no assurance that the Company’s revenues will increase.

Total cost of direct and licensed franchise sales, which consists of wages and other expenses related to temporary associates, increased 8.8% or $32.7 million to $405.2 million for fiscal 2003 from $372.5 million for fiscal 2002. Total cost of direct and licensed sales as a percentage of revenues was 84.1% for fiscal 2003 compared to 80.2% for fiscal 2002. The overall reduction in gross margin is a continued trend and is primarily related to an increase in workers’ compensation costs from $18.7 million for fiscal 2002 to $33.2 million for fiscal 2003. A substantial portion of the increase resulted from increases in medical costs in California. The decrease in the gross margin is also attributable to a lower markup resulting from continued pricing pressures experienced throughout the staffing industry and a sharp increase in state unemployment insurance costs that the Company believes will continue to increase in fiscal 2004, both within and outside of California. There can be no assurance that the Company’s gross margin will improve in the future.

On November 18, 2003, the Company was notified by the State of California Employment Development Department that the Company underpaid its state unemployment insurance by approximately $2.0 million for the period January 1, 2003 through September 30, 2003. Based on preliminary evaluations, the Company believes that this assessment is without merit. The Company believes that its methodology in calculating its state unemployment insurance is in compliance with all applicable laws and regulations and disputes this assessment. The Company has not accrued for this amount as of September 28, 2003.

Licensees’ share of gross profit represents the net payments to licensed franchisees based upon a percentage of gross profit generated by the licensed franchise operation, as previously discussed. Licensees’ share of gross profit decreased 15.0% or $4.3 million to $24.4 million for fiscal 2003 from $28.7 million for fiscal 2002 due to an overall 13.6% net decrease in licensed franchise gross profits, as well as reduced permanent placement business for which licensed franchisees typically earn a larger percentage of the related gross margin. Licensees’ share of gross profit as a percentage of licensed gross profit was 66.6% for fiscal 2003 as compared to 67.7% for fiscal 2002.

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Selling and administrative expenses increased 14.7% or $8.4 million to $65.4 million for fiscal 2003 from $57.0 million for fiscal 2002. Selling and administrative expenses as a percentage of total revenues was 13.6% for fiscal 2003 and 12.3% for fiscal 2002. Several factors contributed to this increase, including the Company’s continued investment in its revenue-generating projects, specifically $2.1 million related to the RemX^® specialty staffing division and the Company’s national expansion efforts in targeted geographic locations. The Company increased its sales force by 10.9% during the fourth quarter of fiscal 2003. Additionally, as discussed in Note 7 to the Consolidated Financial Statements, the Company closed or consolidated several under-performing offices during the third and fourth quarters of fiscal 2003 resulting in a $1.0 million charge for the related remaining lease obligations, severance benefits and other associated costs. The Company also experienced an increase of $0.6 million in group health insurance premiums, $0.5 million in general insurance costs, $0.7 million in legal fees, $1.0 million in consulting costs, $1.2 million in colleague salaries and $0.5 million in amortization of unearned compensation. There can be no assurance that selling and administrative expenses will not increase in the future, both in absolute terms and as a percentage of total revenues. Increases in these expenses could adversely affect the Company’s profitability.

Depreciation and amortization increased 25.6% or $1.4 million to $6.7 million for fiscal 2003 from $5.3 million for fiscal 2002. This increase primarily resulted from the change in accounting estimate related to the useful life of certain capitalized software costs, as discussed in Note 1 to the Consolidated Financial Statements. The change in estimate resulted in an additional $1.0 million amortization charge during the fourth quarter of fiscal 2003. The primary factor contributing to the change in the estimated useful life was that the software’s function was no longer consistent with the Company’s strategic plan and its offices were not fully utilizing the system. Additionally, included in depreciation expense during the fourth quarter of fiscal 2003, the Company recorded a $0.5 million impairment charge related to capitalized software costs, as discussed in Note 1 to the Consolidated Financial Statements.

Income from operations decreased $20.7 million to an operating loss of $19.8 million for fiscal 2003 from operating income of $0.9 million for fiscal 2002 due to the factors described above, which included significant increases in workers’ compensation expense, continued increases in state unemployment insurance, decrease in licensee’s gross profit margins, increase in selling and administrative expenses, and increased depreciation expense.

The Company incurred a loss (before cumulative effect of adoption of a new accounting standard) of $26.8 million for fiscal 2003, as compared to income of $2.1 million for fiscal 2002. In addition to the reasons for the loss described above, the Company provided a $16.9 million valuation allowance against the net deferred tax assets based upon the Company’s recent cumulative losses over the past three years (see Note 5 to the Consolidated Financial Statements).

The cumulative effect of adoption of a new accounting standard of $2.4 million (net of tax of $1.6 million) for fiscal 2003 represents the goodwill impairment charge resulting from the Company’s adoption of Statement of Financial Accounting Standard (“SFAS”) No. 142 effective the beginning of fiscal 2003, as discussed in Note 1 to the Consolidated Financial Statements.

The Company generated a net loss of $29.2 million for fiscal 2003 as compared to net income of $2.1 million for fiscal 2002.

Fiscal 2002 Compared to Fiscal 2001

Total revenues decreased 10.5% or $54.7 million to $464.5 million for fiscal 2002 from $519.2 million for fiscal 2001. Direct revenues decreased 7.3% to $267.2 million from $288.4 million, licensed franchise revenues decreased 14.3% to $195.6 million from $228.2 million and traditional franchise royalties decreased 31.6% to $1.7 million from $2.5 million for fiscal 2002 compared to fiscal 2001, respectively. The overall decrease in revenues as compared to the prior year is largely attributed to the continued downturn in the U.S. economy that began early in 2001, including a related reduction in permanent placement billings, whereby the Company receives a fee for placing an individual on a permanent basis. Although revenues for the year were lower overall, the Company’s fiscal

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2002 fourth quarter revenues increased over the immediately preceding third quarter, as well as the fourth quarter of fiscal 2001. Additionally, fiscal 2002 revenues were adversely impacted by the closure of several licensed and traditional franchise locations, as noted below. The decrease in franchise royalties resulted from lower billings at existing traditional franchised operations, certain office closures resulting from reduced business, non-renewal of franchise agreements and conversion to the licensed franchise format.

The mix between direct, licensed franchise and traditional royalty revenues shifted with direct revenues accounting for 57.5% of total revenues for fiscal 2002 as compared to 55.5% for fiscal 2001. This shift resulted primarily from incremental revenues generated from new Company-owned offices opened during the current year, the non-renewal of an expired licensed franchise agreement at the end of the first quarter of fiscal 2002, the closure of several licensed franchise locations resulting from reduced business and the acquisition of several licensed franchise operations late in fiscal 2001.

Revenues from the light industrial sector, the Company’s core focus, increased as a percentage of total revenues over the prior year as well. This is notable as the manufacturing sector (which encompasses the Company’s light industrial classification) was early into the economic downturn and has, historically, led the subsequent economic recovery, according to industry analysts. Overall, and in accordance with the Company’s marketing focus, revenues from middle market clients (defined as clients with $200,000 to $5.0 million in annual temporary billings) increased to 56.0% of total revenues for fiscal 2002 from 51.5% in the preceding year.

During the second quarter of fiscal 2002, the Company launched its financial staffing division, RemX^® Financial Staffing, and opened ten Company-owned offices. RemX^® Financial Staffing is exclusively a Company-owned operation. Additionally, the Company opened four Company-owned replacement offices in the former licensed franchisee’s territory discussed above. The Company continues to strategically evaluate its existing and target markets and will continue to open additional offices where market conditions appear favorable and to consolidate underutilized offices as deemed appropriate. The Company’s ability to increase revenues depends significantly on the Company’s ability to continue to attract new clients, retain existing clients, open new offices, find and retain licensed franchisees and office managers and manage newly opened offices to maturity. There can be no assurance that the Company’s revenues will increase.

Total cost of direct and licensed franchise sales, which consists of wages and other expenses related to the temporary associates, decreased 7.2% or $29.1 million to $372.5 million for fiscal 2002 from $401.6 million for fiscal 2001. Total cost of direct and licensed sales as a percentage of revenues was 80.2% for fiscal 2002 compared to 77.4% for fiscal 2001. The overall reduction in margin is attributable to (i) lower markup resulting from the continued pricing pressures experienced throughout the staffing industry as a result of current economic factors, (ii) an increasing shift in the Company’s mix towards light industrial business, noted above, which is typically high volume/lower margin business, (iii) reduced permanent placement business and royalty income and (iv) increased workers’ compensation costs. Many factors, including increased wage costs or other employment expenses, could adversely affect the Company’s cost of direct and licensed franchise sales.

Licensees’ share of gross profit represents the net payments to licensed franchisees based upon a percentage of gross profit generated by the licensed franchise operation, as previously discussed. Licensees’ share of gross profit decreased 25.1% or $9.6 million to $28.7 million for fiscal 2002 from $38.4 million for fiscal 2001 due to an overall net 23.6% decrease in licensed franchise gross profits, as well as reduced permanent placement business for which licensed franchisees typically earn a larger percentage of the related gross margin. Licensees’ share of gross profit as a percentage of licensed gross profit was 67.7% for fiscal 2002 as compared to 69.0% for fiscal 2001.

Selling and administrative expenses decreased 9.5% or $6.0 million to $57.0 million for fiscal 2002 from $63.0 million for fiscal 2001. In the prior year, the Company recorded two unusual charges totaling $4.2 million, which consisted of $1.9 million related to a large customer’s accounts receivable balance deemed uncollectible due to sudden financial deterioration, and $2.3 million related to severance benefits for the Company’s former President and Chief Executive Officer. Fiscal 2002 selling and administrative expenses also reflect $0.7 million related to reduced post-implementation support costs for the Company’s information systems and $0.5 million related to the

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outcome of a favorable legal matter. Additionally, the Company continued its overall cost containment initiatives during fiscal 2002 resulting in operational and organizational efficiencies and related cost reductions. The realized cost savings from these efforts were offset by increased legal fees of $1.4 million (see Item 3. Legal Proceedings) and planned expenditures during fiscal 2002 associated with new office openings, the launch of the RemX^® Financial Staffing division and implementation of a telemarketing program. Selling and administrative expenses as a percentage of total revenues was 12.3% for fiscal 2002 and 12.1% for fiscal 2001. There can be no assurance that selling and administrative expenses will not increase in the future, both in absolute terms and as a percentage of total revenues. Increases in these expenses could adversely affect the Company’s profitability.

Depreciation and amortization decreased 6.0% or $0.3 million to $5.4 million for fiscal 2002 from $5.7 million for fiscal 2001.

Income from operations decreased 91.6% or $9.6 million to $0.9 million for fiscal 2002 from $10.5 million for fiscal 2001 due to the factors described above. Income from operations as a percentage of revenues was 0.2% for fiscal 2002 compared to 2.0% for fiscal 2001.

Net income decreased 74.5% or $6.3 million to $2.1 million for fiscal 2002 from $8.4 million for fiscal 2001 due to the factors described above, as well as reduced customer late fee income. The overall decrease in pretax income was offset by a reduction in the Company’s effective tax rate from 32.0% in fiscal 2001 to 15.0% in fiscal 2002, as a result of expected federal income tax credits as discussed below. As a percentage of total revenues, net income was 0.5% for fiscal 2002 compared to 1.6% for the fiscal 2001.

The Company’s overall annual effective tax rate reflects the expected benefit generated from federal Work Opportunity and Welfare to Work Tax Credits. The Internal Revenue Code provides these wage based tax credits to companies who employ personnel meeting certain defined eligibility criteria. The Company has proactively implemented programs to recruit and place eligible associates to maximize the tax credits available. When determining its annual effective tax rate, the Company considers the effect of expected Work Opportunity and Welfare to Work Tax Credits. The estimated annual effective tax rate is revised quarterly based upon actual operating results, the tax credits earned to date as well as current annual projections. The cumulative impact of any change in the estimated annual effective tax rate is recognized in the period the change in estimate occurs.

Liquidity and Capital Resources

The Company’s balance sheet and cash flow remain strong. The Company has $53.2 million in cash and investments as of September 28, 2003 (including restricted cash and investments discussed below), an increase of $4.2 million from the corresponding prior year period, and it continues to be debt free. Historically, the Company has financed its operations through cash generated by operating activities and its line of credit facility, as necessary. Generally, the Company’s principal uses of cash are working capital needs, direct office openings, capital expenditures (including management information systems initiatives) and franchise acquisitions. Beginning in the third quarter of fiscal 2003, the Company began collateralizing a portion of its remaining workers’ compensation liability with pledged cash and securities, as opposed to issuing additional letters of credit (see related discussion below). The nature of the Company’s business requires payment of wages to its temporary associates on a weekly basis, while payments from clients are generally received 30-60 days after the related billing.

Cash provided by operating activities was $9.4 million in fiscal 2003, $14.6 million in fiscal 2002 and $38.7 million in fiscal 2001. Cash flows from operating activities, compared to the preceding years, were impacted by reduced operating margins, timing of receivables collections, as well as the timing of vendor payments and realization of net tax benefits. Cash flows from operations were also impacted by the timing of the Company’s workers’ compensation claims payments. While the Company records its liability for open claims based upon the ultimate cost of the claims (as discussed below), the cash outflow for those recorded claims cost occurs over time.

Prior to fiscal 2002, the Company invested its excess cash primarily in cash equivalents (e.g., money market accounts, overnight investments and debt securities with original maturities less than 90 days). During fiscal 2002,

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and as a result of the strong cash position generated from operations, the Company expanded its investment portfolio to include highly rated debt securities with maturities ranging from three months to three years. Net cash outflows related to available-for-sale investments were $9.0 million for fiscal 2003 as compared to $21.2 million for fiscal 2002.

Cash used for purchases of fixed assets, including information systems development costs, was $2.6 million for fiscal 2003, $3.5 million for fiscal 2002 and $3.0 million for fiscal 2001. The Company continues to invest in computer-based technologies and direct office openings and anticipates approximately $2.5 million in related capital expenditures during the next twelve months.

As discussed in Note 3 to the Consolidated Financial Statements, Remedy provides workers’ compensation insurance to its temporary associates and colleagues. Effective April 1, 2001, the Company contracted with independent, third-party carriers for workers’ compensation insurance and claims administration in the majority of states. The Company is self-insured for its deductible liability under these insurance contracts ($250,000 per occurrence for claims incurred from April 1, 2001 to March 31, 2002 and $500,000 per occurrence for all subsequent claims). All losses and expenses for individual claims in excess of the applicable deductible amounts would be paid by the appropriate insurance carrier. Remedy establishes a reserve for the remaining deductible portion of its workers’ compensation claims using actuarial estimates of the ultimate cost of claims and related expenses that have been reported but not settled, and that have been incurred but not reported. Adjustments to the claims reserve are charged or credited to expense in the periods in which they occur. The estimated remaining deductible liability under the aforementioned contracts as of September 28, 2003 is approximately $30.6 million.

The Company is contractually required to collateralize its remaining obligation under each of these workers’ compensation insurance contracts through use of irrevocable letters of credit, pledged securities (cash and investments) or a combination thereof. The level and type of collateral required for each policy year is determined by the insurance carrier at the inception of the policy year and may be modified periodically. As of September 28, 2003, the Company has outstanding letters of credit and pledged securities totaling $21.9 million and $21.6 million, respectively. The pledged securities are restricted while the Company’s remaining obligations under the workers’ compensation program are outstanding and cannot be used for general corporate purposes.

From July 22, 1997 through March 31, 2001, the Company had a fully insured workers’ compensation program with Reliance National Insurance Company (“Reliance”). Subsequent to March 31, 2001 (the end of Company’s final policy year with Reliance), Reliance became insolvent and is currently in liquidation. The Company is in litigation with the California Insurance Guaranty Association regarding financial responsibility for all remaining open claims under the Reliance workers’ compensation program as discussed in Part I, Item 3. Legal Proceedings and in Note 8 to the Consolidated Financial Statements. An unfavorable outcome in this matter could adversely affect the Company’s liquidity and results of operations.

The Company’s national expansion plans include increasing market presence in certain identified geographic regions. Due to exclusive territory rights contractually granted to its traditional and licensed franchisees, the Company may be limited in certain circumstances from opening Company-owned offices in those identified geographic areas. Additionally, the franchisee(s) may not have the resources to expand the existing franchised operation(s). As a result, and from time to time, the Company may selectively purchase franchised operations to facilitate its expansion plans. During fiscal 2003, the Company acquired a large licensed franchise operation in Tennessee consisting of several offices and a smaller franchise operation in Texas consisting of one office. During fiscal years 2002 and 2001, the Company acquired two and five licensed franchise offices, respectively. Additionally, the Company made an earnout payment during fiscal 2002 relating to a previous licensed franchise acquisition in accordance with the provisions of the purchase agreement. The Company is contemplating the continued selective repurchase of licensed and traditional franchise offices in certain territories with the intent of expanding the Company’s market presence in such regions.

The Company’s RemX^® specialty staffing division includes RemX^® Financial Staffing, RemX^® IT Staffing and RemX^® OfficeStaff. RemX^® specialty staffing division is an exclusively Company-owned operation and brand focused

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on providing financial, IT and high level office staff personnel, respectively, on a temporary, temp-to-hire or direct hire basis in major markets nationwide. The Company has opened fourteen, four and one RemX^® Financial Staffing, RemX^® IT Staffing and RemX^® OfficeStaff offices respectively. In fiscal 2004, the Company anticipates $0.4 million in capital expenditures to further expand the RemX^® specialty division into both new and existing markets. Continued expansion and operation of the RemX^® specialty staffing division may have an impact on future liquidity.

The Company has a joint credit agreement with Bank of America and Union Bank of California providing for aggregate borrowings of $40.0 million, including $35.0 million available in letters of credit. The line of credit is collateralized by certain assets of the Company and interest on outstanding borrowings is generally payable quarterly. The interest rate is the higher of the bank’s prime rate or the federal funds rate plus 50 basis points or, at the Company’s discretion, the eurodollar rate plus 1.125% to 1.375% based upon specified financial covenants. The Company is required to pay administrative fees on the outstanding letters of credit and the aggregate unused portion of the credit facility. The credit agreement expires on June 1, 2004. This credit agreement requires the Company to maintain certain financial ratios and comply with certain restrictive covenants. As of September 28, 2003, the Company was in compliance with all restrictive covenants and required ratios, with the exception of its fixed charge coverage ratio and its consolidated EBITDA requirements. In this regard the Company executed the First Amendment and Waiver to the credit agreement, dated November 14, 2003, whereby, non-compliance with the fixed charge coverage ratio and consolidated EBITDA requirements have been waived through January 15, 2004. The Company is in the process of negotiating a new credit facility and anticipates it will be executed and in place prior to January 15, 2004.

The Company has no borrowings outstanding as of September 28, 2003, September 29, 2002 and September 30, 2001. The Company has outstanding letters of credit totaling $21.9 million, $31.1 million and $17.3 million as of fiscal years 2003, 2002 and 2001, respectively, as contractually required under the terms of its workers’ compensation insurance agreements discussed above.

The Company may continue evaluating certain strategic acquisitions. Such acquisitions may have an impact on liquidity depending on the size of the acquisition.

The Company has certain contractual obligations as of September 28, 2003, as listed below:

	Payment Due by Period Fiscal Years
	Total		2004		2005-2006		2007-2008		Thereafter
Contractual Obligations
Operating Leases	$	17,508	$	4,678	$	6,616	$	3,775	$	2,439
Workers Compensation		35,944		15,263		9,931		5,287		5,463
Total	$	53,452	$	19,941	$	16,547	$	9,062	$	7,902

The Company believes that its current and expected levels of working capital of $56.1 million and line of credit are adequate to support present operations and to fund future growth and business opportunities through October 3, 2004 and for the foreseeable future.

Critical Accounting Policies

The discussions and analyses of the Company’s consolidated financial condition and results of operations were based on the Company’s consolidated financial statements, which have been prepared in conformity with generally accepted accounting principles in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent assets and liabilities at the financial statement date, and reported amounts of revenue and expenses during the reporting period. On an ongoing basis, the Company’s management reviews and evaluates these estimates and assumptions, including those that relate to revenue recognition, accounts receivable, workers’ compensation costs, goodwill, intangible and other long-lived assets, income taxes including the valuation

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allowance for deferred tax assets, contingencies and litigation. These estimates are based on historical experience and a variety of other assumptions believed reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions.

Management believes the following critical accounting policies are those most significantly affected by the judgment, estimates and/or assumptions used in the preparation of Remedy’s consolidated financial statements.

Revenue Recognition – The Company generates revenue from the sale of temporary staffing and permanent placement services by its Company-owned and licensed franchise operations and from royalties on sales of such services by its traditional franchise operations. Temporary staffing revenues and the related labor costs and payroll taxes are recorded in the period in which the services are performed. Permanent placement revenues are recognized when the permanent placement candidate begins full-time employment. Sales allowances are established to estimate losses due to placed candidates not remaining employed for the Company’s permanent placement guarantee period, typically 30-100 days and have historically been insignificant to the Company’s overall results of operations.

The Company accounts for the revenues and the related direct costs in accordance with Emerging Issues Task Force 99-19 “Reporting Revenue Gross as a Principal versus Net as an Agent.” The Company is required to assess whether it acts as a principal in its transactions or as an agent acting on the behalf of others. Where the Company is the principal in a transaction and has the risks and rewards of ownership, the transaction is recorded gross in the income statement, and where the Company acts merely as an agent, only the net fees earned are recorded in the income statement. Under the Company’s “traditional” franchised agreement, the franchisee has the direct contractual relationship with customers, holds title to the related customer receivables and is the legal employer of the temporary employees. Accordingly, the Company does not include the revenues and direct expenses from these transactions in its income statement and only records the royalty fee earned. Alternatively, under the Company’s “licensed” franchise agreements the Company has the direct contractual relationship with customers, holds title to the related customer receivables and is the legal employer of the temporary employees. As the Company retains the risks and rewards of ownership (such as the liability for the cost of temporary personnel and the risk of loss for collection), the revenues and direct expenses of its licensed franchise operations are included in the Company’s results of operations. The Company remits to each licensed franchisee a portion of the gross margin generated by its office(s).

Accounts Receivable – Remedy provides an allowance for doubtful accounts on its accounts receivable for estimated losses resulting from the inability of its customers to make required payments. This allowance is based upon management’s analysis of historical write-off levels, current economic trends, routine assessment of its customers’ financial strength and any other known factors impacting collectibility. If the financial condition of its customers were to deteriorate, which may result in the impairment of their ability to make payments, additional allowances may be required. Remedy’s estimates are influenced by the following considerations: the large number of customers and their dispersion across wide geographic areas, the fact that no single customer accounts for 10% or more of its net sales and its continuing credit evaluation of its customers’ financial conditions.

Workers’ Compensation Costs – The Company maintains reserves for its workers’ compensation obligations using actuarial methods to estimate the remaining undiscounted liability for the deductible portion of all claims, including those incurred but not reported. This process includes establishing loss development factors, based on the historical claims experience of the Company and the industry, and applying those factors to current claims information to derive an estimate of the Company’s ultimate claims liability. The calculated ultimate liability is then reduced by cumulative claims payments to determine the required reserve. Management evaluates the reserve, and the underlying assumptions, regularly throughout the year and makes adjustments as needed. While management believes that the recorded amounts are adequate, there can be no assurance that changes to management’s estimates will not occur due to limitations inherent in the estimation process.

Goodwill and Other Intangible Assets – Effective the first quarter of fiscal 2003, the Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible

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Assets.” SFAS No. 142 requires goodwill to no longer be amortized but instead be subject to an impairment test at least annually or if events or circumstances change that may reduce the fair value of the reporting unit below its book value. Intangible assets with finite lives will continue to be amortized over their estimated useful lives. In connection with the initial impairment test upon adoption, the Company obtained valuations of its individual reporting units from an independent third-party valuation firm. The valuation methodologies considered included analyses of discounted cash flows at the reporting unit level, guidelines for publicly traded company multiples and comparable transactions. As a result of these impairment tests, the Company recorded a non-cash charge of $2.4 million, net of income taxes of $1.6 million, to reduce the carrying value of the goodwill to its implied fair value. This charge is reflected as a cumulative effect of adoption of a new accounting standard in the Company’s consolidated statements of operations.

Other Long-Lived Assets – Effective the first quarter of fiscal 2003, the Company adopted SFAS No. 144, “Accounting for the Impairment or disposal of Long-Lived Assets.” In accordance with SFAS No. 144, the Company assesses the fair value and recoverability of its long-lived assets, whenever events and circumstances indicate the carrying value of an asset may not be recoverable from estimated future cash flows expected to result from its use and eventual disposition. In doing so, the Company makes assumptions and estimates regarding future cash flows and other factors. The fair value of the long-lived assets is dependent upon the forecasted performance of the Company’s business and the overall economic environment. When it determines that the carrying value of the long-lived assets may not be recoverable, it measures impairment based upon a forecasted discounted cash flow method. If these forecasts are not met, the Company may have to record additional impairment charges not previously recognized. The Company recorded $0.8 million, of asset impairment charges related to capitalized software for fiscal 2003, of which $0.5 million is included in depreciation expense and $0.3 million is included in selling and administrative expense (see Note 1 to Consolidated Financial Statements). There were no asset impairment charges in fiscal year 2002 and 2001.

Income Taxes – In preparing the Company’s consolidated financial statements, management estimates the Company’s income taxes in each of the taxing jurisdictions in which it operates. This includes estimating the Company’s actual current tax expense together with any temporary differences resulting from the different treatment of certain items, such as the timing for recognizing revenues and expenses, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in the Company’s consolidated balance sheet.

Deferred tax assets and liabilities are determined based on temporary differences between income and expenses reported for financial reporting and tax reporting. The Company is required to record a valuation allowance to reduce its deferred tax assets to the amount that it believes is more likely than not to be realized. In assessing the need for a valuation allowance, the Company considered all positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial performance. The Company had been profitable through the first fiscal quarter of 2003, however, continued market softness and significant increases in workers’ compensation costs resulted in significant losses in the remainder of the fiscal year.

The accounting guidance states that forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as cumulative losses in recent years. As a result of this guidance, and the Company’s recent cumulative losses, management concluded that a full valuation allowance of $16.9 million against the deferred tax assets was appropriate. While the Company hopes to be profitable in fiscal 2004 and beyond, in view of the recent losses, there is no assurance that there will be sufficient future taxable income to realize the benefit of the deferred tax asset. If, after future assessments of the realizability of the deferred tax assets, the Company determines a lesser allowance is required, it would record a reduction to income tax expense and the valuation allowance in the period of such determination.

Contingencies and Litigation – There are various claims, lawsuits and pending actions against the Company incident to its operations. If a loss arising from these actions is probable and can be reasonably estimated, the Company must record the amount of the estimated liability. Based on current available information, management

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believes that the ultimate resolution of these actions will not have a material adverse effect on the Company’s consolidated financial statements. As additional information becomes available, management will continue assessing any potential liability related to these actions and may need to revise its estimates.

New Accounting Standards

In May 2003, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. The statement requires an issuer to classify a financial instrument issued in the form of shares that are mandatorily redeemable (embodies an unconditional obligation requiring the issuer to redeem them by transferring its assets at a specified or determinable date) as a liability. SFAS No. 150 was effective immediately for all financial instruments entered into or modified after May 31, 2003. For all other instruments, SFAS No. 150 was effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have an impact on the Company’s consolidated financial condition or results of operations.

In January 2003, the FASB issued FASB Interpretation No. 46, “Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin (“ARB”) No. 51”, (“FIN 46”). FIN 46 provides guidance on identifying variable interest entities (“VIE”) and assessing whether or not a VIE should be consolidated. The provisions of FIN 46 are to be applied immediately to VIEs created after January 31, 2003, to the first reporting period ending after December 15, 2003. For all VIEs created prior to February 1, 2003, public companies will be required to apply the provisions of FIN 46 at the end of the first interim or annual reporting period ending after March 15, 2004. The Company is currently evaluating the implication of FIN 46 on certain franchisee and licensee relationships. The Company plans to adopt the provisions of FIN 46 during the second quarter of fiscal 2004 and is currently evaluating the impact, if any, on its consolidated results of operations and financial position.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure.” This statement amends SFAS No. 123, “Accounting for Stock-Based Compensation”, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and of the effect of the method used on reported results. The provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002. The disclosure provisions of SFAS No. 148 have been adopted by the Company, however, the Company has elected not to change to the fair value based method of accounting for stock-based employee compensation but rather to continue to apply the intrinsic value method as prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, under which no compensation cost is generally recognized by the Company.

Seasonality

The Company’s quarterly operating results are affected by the number of billing days in the quarter and the seasonality of its clients’ businesses. The first fiscal quarter has historically been strong as a result of manufacturing and retail emphasis on holiday sales. Historically, the second fiscal quarter shows a slight decline in comparable revenues from the first fiscal quarter. Revenue growth has historically accelerated in each of the third and fourth fiscal quarters as manufacturers, retailers and service businesses increase their level of business activity.

Inflation

The effects of inflation on the Company’s operations were not significant during the periods presented in the consolidated financial statements.

28

Item 7A.    Qualitative and Quantitative Disclosures about Market Risk

The Company is exposed to market risk resulting from changes in interest rates and equity prices and, to a lesser extent, foreign currency rates. Under its current policy, the Company does not engage in speculative or leveraged transactions to manage exposure to market risk.

Interest rate risk.    The interest payable on the Company’s line of credit is based on the higher of the bank’s prime rate or the federal funds rate plus 50 basis points or, at the Company’s discretion, the eurodollar rate plus 1.125% to 1.375%. If interest rates paid on the credit facility had changed by 10% compared to actual rates, the increase or decrease in interest expense would have been immaterial in fiscal 2003.

In addition, the Company has approximately $14.6 million in fixed rate investments as of September 28, 2003. The fixed rate securities mature throughout fiscal 2006 and have an average weighted interest rate of 2.6%.

Equity price risk.    The Company holds investments in various marketable available-for-sale and trading securities which are subject to price risk. The fair market value of such investments as of September 28, 2003 and September 29, 2002 was $18.4 million and $17.0 million, respectively. The potential change in fair market value of these investments, assuming a 10% change in prices would have been an increase or decrease of $1.8 million and $1.7 million, respectively.

Foreign currency risks.    To date, the Company has had minimal sales outside the United States. Therefore, it has only minimal exposure to foreign currency exchange risk. The Company does not hedge against foreign currency risks and believes that foreign exchange risk is immaterial to its current business.

Item 8.    Financial Statements and Supplementary Data

The information required by Item 8 of this report is set forth in Item 15(a) under the caption “Financial Statements” as a part of this report.

Item 9.    Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A.    Controls and Procedures

As of September 28, 2003, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-14, including the Company’s internal controls. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective to allow timely decisions regarding disclosures to be included in the Company’s periodic filings with the Securities and Exchange Commission.

There were no significant changes in the Company’s internal control over financial reporting that occurred during the Company’s fourth quarter of fiscal 2003 that has materially affected or is reasonably likely to materially affect the Company’s internal control over financial reporting.

29

PART III

Item 10.    Directors and Executive Officers of the Registrant

Information as to the officers of the Company required by this item is set forth at the end of Part I of this report under the caption “Executive Officers of the Registrant.” Information as to the Board of Directors of the Company required by this item is incorporated by reference from the portion of the Company’s definitive Proxy Statement under the caption “Proposal 1—Election of Directors.” Information as to the Company’s reporting persons’ compliance with Section 16(a) of the Exchange Act, required by this item, is incorporated by reference from the portion of the Company’s definitive Proxy Statement under the caption “Section 16(A) Beneficial Ownership Reporting Compliance” to be filed with the Commission pursuant to Regulation 14A under the Exchange Act and mailed to the Company’s shareholders prior to the Company’s Annual Meeting of Shareholders, which is scheduled to be held on February 25, 2004.

The Company has adopted a Code of Ethics that applies to all directors and employees, including the Company’s principal executive, financial and accounting officers. The Code of Ethics is posted on the Company website at www.remedytemp.com and is filed as an exhibit to this Annual Report on Form 10-K. The Company intends to satisfy the requirements under Item 10 of Form 8K regarding disclosure of amendments to, or waivers from, provisions of our Code of Ethics that apply, by posting such information on the Company’s website. Copies of the Code of Ethics will be provided, free of charge, upon written request directed to Investment Relations, RemedyTemp, Inc. 101 Enterprise, Aliso Viejo, California 92656.

Item 11.      Executive Compensation

Information as to Executive Compensation required by this item is incorporated by reference from the Company’s definitive Proxy Statement, under the caption “Executive Compensation and Other Information,” to be filed with the Commission pursuant to Regulation 14A under the Exchange Act and mailed to the Company’s shareholders prior to the Company’s Annual Meeting of Shareholders, which is scheduled to be held on February 25, 2004.

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

Information as to Security Ownership of Certain Beneficial Owners and Management and Related Shareholder matters required by this item is incorporated by reference from the Company’s definitive Proxy Statement, under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” to be filed with the Commission pursuant to Regulation 14A under the Exchange Act and mailed to the Company’s shareholders prior to the Company’s Annual Meeting of Shareholders, which is scheduled to be held on February 25, 2004.

Item 13.    Certain Relationships and Related Transactions

Information as to Certain Relationships and Certain Transactions required by this item is incorporated by reference from the Company’s definitive Proxy Statement, under the caption “Certain Transactions,” to be filed with the Commission pursuant to Regulation 14A under the Exchange Act and mailed to the Company’s shareholders prior to the Company’s Annual Meeting of Shareholders, which is scheduled to be held on February 25, 2004.

Item 14.    Principal Accounting Fees and Services

Information as to Principal Accounting Fees and Services required by this item is incorporated by reference from the Company’s definitive Proxy Statement, under the caption “Independent Auditor Fees for Fiscal 2003 and 2002,” to be filed with the Commission pursuant to Regulation 14A under the Exchange Act and mailed to the Company’s shareholders prior to the Company’s Annual Meeting of Shareholders, which is scheduled to be held on February 25, 2004.

30

PART IV

Item 15.    Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)    Financial Statements.

(1) Consolidated Financial Statements filed as part of this Report are set forth in the “Index to Consolidated Financial Statements” on page F-1 of this Report.

(2) Financial Statement Schedule filed as part of this report is set forth in the “Index to Consolidated Financial Statements” on page F-1 of this report.

(3) The following Exhibits are filed as part of this Report.

Exhibit No.	Description
3.1	Amended and Restated Articles of Incorporation of the Company (a)
3.2	Amended and Restated Bylaws of the Company (e)
4.1	Specimen Stock Certificate (a)
4.2	Shareholder Rights Agreement (a)
*10.1	Robert E. McDonough, Sr. Amended and Restated Employment Agreement (f)
*10.2	Paul W. Mikos Employment Agreement, as amended (i)
10.5	Registration Rights Agreement with R. Emmett McDonough and Related Trusts (a)
*10.6	Alan M. Purdy Change in Control Severance Agreement (h)
*10.7	Deferred Compensation Agreement for Alan M. Purdy (a)
10.9	Form of Indemnification Agreement (a)
*10.11	Amended and Restated RemedyTemp, Inc. 1996 Stock Incentive Plan (g)
*10.12	Amended and Restated RemedyTemp, Inc. 1996 Employee Stock Purchase Plan (a)
10.13	Form of Franchising Agreement for Licensed Offices (k)
10.14	Form of Franchising Agreement for Franchised Offices (a)
10.15	Form of Licensing Agreement for IntelliSearch® (a)
*10.18	Additional Deferred Compensation Agreement for Alan M. Purdy (b)
10.19	Lease Agreement between RemedyTemp, Inc. and Parker-Summit, LLC (c)
*10.22	RemedyTemp, Inc. Deferred Compensation Plan (d)
*10.23	Amended and Restated Employment Agreement for Greg Palmer (m)
*10.24	1998 RemedyTemp, Inc. Amended and Restated Deferred Compensation and Stock Ownership Plan for Outside Directors
10.25	Form of Licensing Agreement for i/Search 2000® (e)
10.26	Credit Agreement among Bank of America N.A., Union Bank N.A. and RemedyTemp, Inc. (n)
*10.27	Paul W. Mikos Severance Agreement and General Release (j)
*10.28	Gunnar B. Gooding Employment and Severance Letter (l)
*10.29	Cosmas N. Lykos Employment and Severance Letter (l)
*10.30	Alan M. Purdy Retirement Agreement and General Release (n)

31

Exhibit No.	Description
*10.31	Monty Houdeshell Employment Letter (o)
*10.32	Monty Houdeshell Change in Control Severance Agreement (p)
*10.33	Shawn Mohr Severance Agreement (p)
10.34	Amendment No. 2 to the Lease Agreement between RemedyTemp, Inc. and Parker-Summit, LLC
10.35	First Amendment and Waiver to Credit Agreement among Bank of America N.A., Union Bank N.A. and RemedyTemp, Inc.
14.1	Code of Business Conduct and Ethics
23.1	Consent of Independent Accountants
31.1	Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Chief Executive Officer and Chief Financial Officer Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*	Indicates a management contract or a compensatory plan, contract or arrangement.
(a)	Incorporated by reference to the exhibit of same number to the Registrant’s Registration Statement on Form S-1 (Reg. No. 333-4276), as amended.
(b)	Incorporated by reference to the exhibit of same number to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended December 29, 1996.
(c)	Incorporated by reference to the exhibit of same number to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 30, 1997.
(d)	Incorporated by reference to the exhibit of same number to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 29, 1997.
(e)	Incorporated by reference to the exhibit of same number to the Registrant’s Annual Report on Form 10-K for the yearly period ended September 27, 1998.
(f)	Incorporated by reference to the exhibit of same number to the Registrant’s Quarterly Reports on Form 10-Q for the quarterly period ended December 27, 1998.
(g)	Incorporated by reference to the exhibit of same number to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 28, 1999.
(h)	Incorporated by reference to the exhibit of same number to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 28, 1999.
(i)	Incorporated by reference to the exhibit of same number to the Registrant’s Quarterly Reports on Form 10-Q for the quarterly period ended June 28, 1999 (original agreement) and for the quarterly period ended December 31, 2000 (amendment).
(j)	Incorporated by reference to the exhibit of same number to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended April 1, 2001.
(k)	Incorporated by reference to the exhibit of same number to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended July 1, 2001.
(l)	Incorporated by reference to the exhibit of same number to the Registrant’s Annual Report on Form 10-K for the yearly period ended September 30, 2001.

32

(m)	Incorporated by reference to the exhibit of same number to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended December 30, 2001.
(n)	Incorporated by reference to the exhibit of same number to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2002.
(o)	Incorporated by reference to the exhibit of same number to the Registrant’s Annual Report on Form 10-K for the yearly period ended September 29, 2002.
(p)	Incorporated by reference to the exhibit of same number to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 29, 2003.

(b)    Reports on Form 8-K.

The Company filed a current Report on Form 8-K on the following:

On July 30, 2003 in connection with the issuance of its press release announcing the financial results for the three and nine fiscal months ended June 29, 2003.

On November 19, 2003 in connection with the issuance of its press release announcing the financial results for the fourth fiscal quarter and year-ended September 28, 2003.

33

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

REMEDYTEMP, INC.

/s/  GREG D. PALMER        

Greg D. Palmer

President and Chief Executive Officer

December 19, 2003

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

Signature	Title	Date
/s/  GREG D. PALMER         Greg D. Palmer	President and Chief Executive Officer	December 19, 2003
/s/  PAUL W. MIKOS         Paul W. Mikos	Chairman of the Board of Directors	December 19, 2003
/s/  ROBERT E. MCDONOUGH         Robert E. McDonough, Sr.	Vice-Chairman of the Board of Directors	December 19, 2003
/s/  MONTY A. HOUDESHELL Monty A. Houdeshell	Senior Vice President and Chief Financial Officer (Principal Financial Officer)	December 19, 2003
/s/  JOHN D. SWANCOAT         John D. Swancoat	Vice President and Controller (Principal Accounting Officer)	December 19, 2003
/s/  WILLIAM D. CVENGROS         William D. Cvengros	Director	December 19, 2003
/s/  JAMES L. DOTI         James L. Doti, Ph.D.	Director	December 19, 2003
/s/  ROBERT A. ELLIOTT         Robert A. Elliott	Director	December 19, 2003
/s/  MARY GEORGE         Mary George	Director	December 19, 2003
/s/  J. MICHAEL HAGAN         J. Michael Hagan	Director	December 19, 2003
/s/  JOHN B. ZAEPFEL         John B. Zaepfel	Director	December 19, 2003

34

REMEDYTEMP, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Statements:

Report of Independent Auditors	F-2
Consolidated Balance Sheets as of September 28, 2003 and September 29, 2002	F-3
Consolidated Statements of Operations for the three fiscal years ended September 28, 2003, September 29, 2002 and September 30, 2001	F-4
Consolidated Statements of Shareholders’ Equity for the three fiscal years ended September 28, 2003, September 29, 2002 and September 30, 2001	F-5
Consolidated Statements of Cash Flows for the three fiscal years ended September 28, 2003, September 29, 2002 and September 30, 2001	F-6
Notes to Consolidated Financial Statements	F-7

Financial Statement Schedules:

For the three fiscal years ended September 28, 2003, September 29, 2002 and September 30, 2001
II – Valuation and Qualifying Accounts	F-26

All other schedules are omitted because they are not applicable or the required

information is shown in the consolidated financial statements or notes thereto.

F-1

Report of Independent Auditors

To the Board of Directors and Shareholders

of RemedyTemp, Inc.

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of RemedyTemp, Inc. and its subsidiaries at September 28, 2003 and September 29, 2002, and the results of their operations and their cash flows for each of the three years in the period ended September 28, 2003 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the index appearing under Item 15(a)(2) present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedules are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 1 to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.

PricewaterhouseCoopers LLP

Orange County, California

November 19, 2003

F-2

RemedyTemp, Inc.

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except per share amounts)

	September 28, 2003			September 29, 2002
ASSETS
Current assets:
Cash and cash equivalents	$	13,236		$	26,101
Investments (Note 1)		18,384			22,955
Accounts receivable, net of allowance for doubtful accounts of $2,627 and $1,913, respectively		60,594			61,724
Prepaid expenses and other current assets		6,679			5,745
Deferred and current income taxes (Note 5)		330			5,256
Total current assets		99,223			121,781
Fixed assets, net (Note 2)		12,337			16,268
Restricted cash and investments		21,615			—
Other assets		1,334			2,035
Intangible assets, net of accumulated amortization of $219 and $24, respectively		1,655			10
Deferred income taxes (Note 5)		—			2,167
Goodwill, net of accumulated amortization of $33 and $922, respectively (Note 1)		3,030			4,283
Total Assets	$	139,194		$	146,544
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,790		$	3,151
Accrued workers’ compensation, current portion (Note 3)		15,263			14,534
Accrued payroll, benefits and related costs		17,530			13,787
Accrued licensees’ share of gross profit		2,231			2,866
Other accrued expenses		3,335			3,621
Total current liabilities		43,149			37,959
Accrued workers’ compensation, non-current portion		20,681			5,601
Total liabilities		63,830			43,560
Commitments and contingent liabilities (Note 8)
Shareholders’ equity (Note 11):
Preferred Stock, $0.01 par value; authorized 5,000 shares; none outstanding		—			—
Class A Common Stock, $0.01 par value; authorized 50,000 shares; 8,769 and 8,142 issued and outstanding at September 28, 2003 and September 29, 2002, respectively		88			82
Class B Non-Voting Common Stock, $0.01 par value; authorized 4,530 shares; 894 and 1,253 issued and outstanding at September 28, 2003 and September 29, 2002, respectively		9			13
Additional paid-in capital		42,674			39,923
Unearned compensation		(6,031	)		(4,728	)
Accumulated other comprehensive income (loss)		134			(39	)
Retained earnings		38,490			67,733
Total shareholders’ equity		75,364			102,984
Total Liabilities and Shareholders’ Equity	$	139,194		$	146,544

See accompanying notes to consolidated financial statements.

F-3

RemedyTemp, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except per share amounts)

	September 28, 2003			September 29, 2002			September 30, 2001
Direct sales	$	300,070		$	267,207		$	288,396
Licensed franchise sales		180,262			195,588			228,236
Franchise royalties		1,614			1,732			2,531
Initial franchise fees		19			11			60
Total revenues		481,965			464,538			519,223
Cost of direct sales		261,628			219,418			229,000
Cost of licensed sales		143,577			153,113			172,643
Licensees’ share of gross profit		24,431			28,741			38,385
Selling and administrative expenses		65,418			57,012			63,020
Depreciation and amortization		6,748			5,371			5,714
(Loss) income from operations		(19,837	)		883			10,461
Other income and expense:
Interest expense		(434	)		(187	)		(178	)
Interest income		998			1,006			956
Other, net		731			812			1,117
(Loss) income before provision for income taxes and cumulative effect of adoption of a new accounting standard		(18,542	)		2,514			12,356
Provision for income taxes (Note 5)		8,280			377			3,960
(Loss) income before cumulative effect of adoption of a new accounting standard		(26,822	)		2,137			8,396
Cumulative effect of adoption of a new accounting standard, net of income taxes of $1,634		2,421			—			—
Net (loss) income	$	(29,243	)	$	2,137		$	8,396
Earnings per share—basic:
(Loss) income before cumulative effect of adoption of a new accounting standard	$	(2.98	)	$	0.24		$	0.94
Cumulative effect of adoption of a new accounting standard, net of income taxes		(0.27	)		—			—
Net (loss) income—basic	$	(3.25	)	$	0.24		$	0.94
Earnings per share—diluted:
(Loss) income before cumulative effect of adoption of a new accounting standard	$	(2.98	)	$	0.24		$	0.94
Cumulative effect of adoption of a new accounting standard, net of income taxes		(0.27	)		—			—
Net (loss) income—diluted	$	(3.25	)	$	0.24		$	0.94
Weighted average shares:
Basic		9,010			8,973			8,917
Diluted		9,010			9,076			8,940

See accompanying notes to consolidated financial statements.

F-4

RemedyTemp, Inc.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(amounts in thousands)

	Class A Common Stock					Class B Common Stock					Additional Paid-In Capital			Unearned Compensation			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Total
	Shares		Amount			Shares		Amount
Balance at October 1, 2000	7,246		$	72		1,657		$	17		$	33,182					$	57,200					$	90,471
Activity of Employee Stock Purchase Plan	11											113												113
Stock option activity	42			1								580												581
Conversion upon transfer to non-affiliates	92			1		(92	)		(1	)														—
Tax benefits from option activity												14												14
Net income and comprehensive income																		8,396						8,396
Balance at September 30, 2001	7,391		$	74		1,565		$	16		$	33,889					$	65,596					$	99,575
Activity of Employee Stock Purchase Plan	6											58												58
Stock option activity	33			1								422												423
Conversion upon transfer to non-affiliates	312			3		(312	)		(3	)														—
Restricted stock grants	425			4								5,900			(5,904	)								—
Forfeiture of restricted stock	(25	)										(347	)		327									(20	)
Amortization of unearned compensation															850									850
Comprehensive income:
Other comprehensive loss:
Unrealized loss on marketable securities (net of tax of $27)																					(39	)		(39	)
Net income																		2,137						2,137
Comprehensive income																								2,098
Balance at September 29, 2002	8,142		$	82		1,253		$	13		$	39,923		$	(4,728	)	$	67,733		$	(39	)	$	102,984
Activity of Employee Stock Purchase Plan	11											112												112
Stock option activity																								—
Conversion upon transfer to non-affiliates	359			4		(359	)		(4	)														—
Restricted stock grants	320			3								3,474			(3,477	)								—
Forfeiture of restricted stock	(63	)		(1	)							(835	)		836									—
Amortization of unearned compensation															1,338									1,338
Comprehensive income:
Other comprehensive loss:
Unrealized loss on marketable securities																					152			152
Translation adjustment																					21			21
Net loss																		(29,243	)					(29,243	)
Comprehensive loss																								(29,070	)
Balance at September 28, 2003	8,769		$	88		894		$	9		$	42,674		$	(6,031	)	$	38,490		$	134		$	75,364

See accompanying notes to consolidated financial statements.

F-5

RemedyTemp, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

	September 28, 2003			September 29, 2002			September 30, 2001
Cash flows from operating activities:
Net (loss) income	$	(29,243	)	$	2,137		$	8,396
Adjustments to reconcile net (loss) income to net cash from operating activities:
Cumulative effect of adoption of a new accounting standard, net of income taxes		2,421			—			—
Loss on disposal of fixed assets		30			—			—
Depreciation and amortization		6,748			5,371			5,714
Provision for losses on accounts receivable		1,357			1,333			2,902
Restricted stock compensation expense		1,338			830			—
Deferred taxes		7,080			(253	)		(5,268	)
Other		725			—			—
Changes in assets and liabilities:
Trading investments		(862	)		(84	)		252
Accounts receivable		(227	)		(85	)		12,682
Prepaid expenses and other current assets		(934	)		(2,611	)		5,487
Other assets		701			607			(151	)
Accounts payable		1,639			756			(660	)
Accrued workers’ compensation		15,809			8,202			7,251
Accrued payroll, benefits and related costs		3,743			1,235			(1,252	)
Accrued licensees’ share of gross profit		(635	)		(336	)		(455	)
Other accrued expenses		(286	)		(784	)		2,032
Income taxes payable		13			(1,748	)		1,814
Net cash provided by operating activities		9,417			14,570			38,744
Cash flows from investing activities:
Purchase of fixed assets		(2,622	)		(3,548	)		(2,953	)
Purchase of available-for-sale investments		(26,258	)		(28,513	)		—
Proceeds from maturity of available-for-sale investments		17,228			7,311			—
Increase in restricted cash		(7,000	)		—			—
Purchase of franchises, net of assets acquired		(3,763	)		(1,562	)		(207	)
Net cash used in investing activities		(22,415	)		(26,312	)		(3,160	)
Cash flows from financing activities:
Proceeds from stock option activity		—			423			633
Proceeds from Employee Stock Purchase Plan activity		112			58			61
Net cash provided by financing activities		112			481			694
Effect of exchange rate changes in cash		21			—			—
Net (decrease) increase in cash and cash equivalents		(12,865	)		(11,261	)		36,278
Cash and cash equivalents at beginning of period		26,101			37,362			1,084
Cash and cash equivalents at end of period	$	13,236		$	26,101		$	37,362
Other cash flow information:
Cash paid during the period for interest	$	348		$	217		$	246
Cash paid during the period for income taxes	$	445		$	2,173		$	6,353

See accompanying notes to consolidated financial statements.

F-6

RemedyTemp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except per share amounts)

1.    Description of business and summary of significant accounting policies

Basis of presentation

The consolidated financial statements include the accounts of RemedyTemp, Inc. and its wholly-owned subsidiaries, (collectively referred to herein as the “Company” or “Remedy”). All significant intercompany transactions and balances have been eliminated.

Description of business

The Company’s principal business is providing temporary personnel to industrial, service and technology companies, professional organizations and governmental agencies nationwide.

The Company has two classes of Common Stock outstanding: Class A Common Stock, which has all voting and other rights normally associated with Common Stock; and Class B Common Stock, which is identical to the Class A Common Stock in all respects except that the Class B Common Stock has no voting rights except with respect to certain amendments of the Company’s Amended and Restated Articles of Incorporation, certain mergers and as otherwise required by law. The Class B Common Stock automatically converts into Class A Common Stock on a share-for-share basis upon the earlier of (i) a transfer to a non-affiliate of the holder thereof in a public offering pursuant to an effective registration statement or Rule 144 promulgated under the Securities Act of 1933, as amended, (ii) the death or legal incapacity of Robert E. McDonough, Sr., or (iii) the tenth anniversary of the completion of the Company’s initial public offering on July 16, 1996.

Summary of significant accounting policies

Fiscal year

The Company’s fiscal year includes 52 or 53 weeks, ending on the Sunday closest to September 30. Fiscal years 2003, 2002 and 2001 consisted of 52 weeks. The fiscal year ending October 3, 2004 will consist of 53 weeks.

Revenue recognition

The Company generates revenue from the sale of temporary staffing and permanent placement services by its Company-owned and licensed franchise operations and from royalties on sales of such services by its traditional franchise operations. Temporary staffing revenues and the related labor costs and payroll taxes are recorded in the period in which the services are performed. Permanent placement revenues are recognized when the permanent placement candidate begins full-time employment. Sales allowances are established to estimate losses due to placed candidates not remaining employed for the Company’s permanent placement guarantee period, typically 30-100 days and have historically been insignificant to the Company’s overall results of operations.

The Company follows the guidance of Emerging Issues Task Force (“EITF”) 99-19, “Recording Revenue Gross as a Principal Agent versus Net as an Agent” in the presentation of revenues and direct costs of revenues. This guidance requires the Company to assess whether it acts as a principal in the transaction or as an agent acting on behalf of others. Where the Company is the principal in the transaction and has the risks and rewards of ownership, the transactions are recorded gross in the income statement.

The Company utilizes two types of franchise agreements referred to as “traditional” and “licensed.” Under the Company’s traditional franchised agreement, the franchisee has the direct contractual relationship with the customers, holds title to the related customer receivables and is the legal employer of the temporary employees.

F-7

RemedyTemp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(amounts in thousands, except per share amounts)

Accordingly, sales and cost of sales generated by the traditional franchise operations are not included in the Company’s consolidated financial statements. The Company earns and records continuing franchise fees, based upon the contractual percentage of franchise gross sales, in the period in which the traditional franchisee provides the services. Such fees are recorded by the Company as “Franchise royalties. “

Under the Company’s licensed franchise agreement, revenues generated by the franchised operation and the related costs of services are included in the Company’s consolidated financial statements and are reported as “Licensed franchise sales” and “Cost of licensed sales,” respectively. The Company has the direct contractual relationship with the customer, holds title to the related customer receivables and is the legal employer of the temporary employees. Thus, certain risks associated with the licensed franchise operations remain with the Company. The net distribution paid to the licensed franchisee for the services rendered is based on a percentage of the gross profit generated by the licensed operation and is reflected as “Licensees’ share of gross profit” in the consolidated statements of operations. The Company’s share of the licensees’ gross profit represents the continuing franchise fee as outlined in the licensed franchise agreement and is recorded when earned in connection with the related licensed franchise sales.

Both traditional and licensed franchisees remit an initial franchise fee (currently $10-$18) for their affiliation with the Company. Generally, this fee is recognized as revenue when substantially all of the initial services required of the Company have been performed, and is reported by the Company as “Initial franchise fees.” However, for franchise agreements entered into after December 31, 2001, a portion of the initial franchise fee is deferred and payable over two years. The Company defers revenue recognition on this portion of the fee until payment is received. Initial services provided to traditional and licensed franchisees consist primarily of training and assistance with opening publicity, both of which are completed prior to the commencement of the franchised operations. Ongoing services provided to traditional franchisees consist primarily of payroll processing, customer billing and operation guidance, as considered necessary. Ongoing services provided to licensed franchisees include employment of temporary employees, payroll processing, customer billing, accounts receivable collection and operation guidance.

Concentrations of credit risk and allowance for doubtful accounts

The Company’s financial instruments that potentially subject the Company to concentrations of credit risk consist principally of trade receivables. The Company performs on-going credit evaluations of its customers and generally does not require collateral. Concentrations of credit risk are limited due to the large number of customers comprising the Company’s customer base and their dispersion across different business and geographic areas. Accounts receivable are carried at the amount estimated to be collectible. The Company maintains an allowance for potential losses based upon management’s analysis of historical write-off levels, current economic trends, routine assessment of its customers’ financial strength and any other known factors impacting collectibility. Recoveries are recognized in the period they are received. The ultimate amount of accounts receivable that become uncollectible could differ from those estimated; however, such losses have generally been within management’s expectations. The provision for losses on accounts receivable was $1.4, $1.3 and $2.9 million for the fiscal years ended September 28, 2003, September 29, 2002 and September 30, 2001, respectively, and is included in selling and administrative expenses in the accompanying consolidated statements of operations.

Use of estimates in the preparation of consolidated financial statements

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

F-8

RemedyTemp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(amounts in thousands, except per share amounts)

Fair value of financial instruments

The carrying amounts of cash, investments, accounts receivable, accounts payable and all other accrued expenses approximate fair value because of the short maturity of these items. The Company’s investments in equity securities are carried at fair value based upon available market information.

Foreign currency

The reporting currency of the Company is the United States dollar. The functional currency of the Company’s subsidiary in Canada is the Canadian dollar. Balance sheet accounts denominated in the Canadian dollar (which are not material) are translated at exchange rates as of the date of the balance sheet and statement of operations accounts are translated at average exchange rates for the period. Translation gains and losses are accumulated as a separate component of accumulated other comprehensive income (loss) within shareholders’ equity.

Cash and cash equivalents

For purposes of financial reporting, cash equivalents represent highly liquid short-term investments with original maturities of less than 90 days.

Investments

The Company accounts for its investments in accordance with Statement of Financial Accounting Standard (“SFAS”) No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” The Company’s portfolio consists of commercial paper, fixed income securities and other mutual funds classified as available-for-sale and total $30.3 million (of which $14.6 million is included in restricted cash and investments) and $21.2 million for fiscal 2003 and 2002, respectively. The Company’s portfolio of fixed income securities have various maturity dates throughout fiscal 2006. Unrealized gains and losses from available-for-sale securities are included in accumulated other comprehensive income within shareholders’ equity. The net unrealized gains (losses) for available-for-sale securities, net of tax, was $152 and $(39) for fiscal 2003 and 2002, respectively. The net realized losses related to the Company’s available-for-sale securities were immaterial for fiscal years 2003 and fiscal 2002, respectively. There were no available-for-sale securities at September 29, 2001.

Investments related to the Company’s deferred compensation program (Note 9) are classified as trading and total $2.7 and $1.8 million for fiscal 2003 and 2002, respectively. The realized and unrealized gains and losses for trading securities are recorded in other income and expense and generally offset the change in the deferred compensation liability, which is also included in other income and expense. Net unrealized gains (losses) for trading securities were $0.5, $(0.3) and $(0.5) million for fiscal 2003, 2002, and 2001, respectively. All investments are carried at fair value. The following table presents the classification of the Company’s investments:

	September 28, 2003		September 29, 2002
Current
Available-for-sale securities	$	15,730	$	21,163
Trading securities		2,654		1,792
Total investments	$	18,384	$	22,955
Long-term Restricted
Cash	$	7,000	$	—
Available-for-sale securities		14,615		—
Total restricted cash and investments	$	21,615	$	—

F-9

RemedyTemp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(amounts in thousands, except per share amounts)

Fixed assets

Fixed assets are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which are three to five years for furniture and fixtures and computer equipment. Major improvements to leased office space are capitalized and amortized over the shorter of their useful lives or the term of the lease.

In August 2001, the Financial Accounting Standards Board issued SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144, effective for the Company as of September 30, 2002, supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,” and the accounting and reporting provisions of Accounting Principles Board (“APB”) Opinion No. 30, “Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions,” for the disposal of a segment of a business (as previously defined in that opinion). SFAS No. 144 requires that one accounting model be used for long lived assets to be disposed of by sale, whether previously held and used or newly acquired, and broadens the presentation of discontinued operations to include more disposal transactions than were included under the previous standards. The impact of adopting SFAS No. 144 was immaterial to the Company’s financial position and results of operations.

The Company capitalizes the costs of purchased software or internal and external development costs for its internal-use information system, in accordance with Statement of Position 98-1, “Accounting for the Cost of Computer Software Developed or Obtained for Internal Use” (“SOP 98-1”). In accordance with SOP 98-1, the Company commences amortization at the time the software is ready for its intended use. Amortization is determined using the straight-line method over the expected useful life of the software, usually between three and five years. These capitalized costs are included in fixed assets in the accompanying consolidated balance sheets. During the second quarter of fiscal 2003, the Company wrote off approximately $0.3 million of capitalized software that could no longer be utilized. This charge is included in selling and administrative expenses in the accompanying consolidated statements of operations. During the fourth quarter of fiscal 2003, the Company changed the estimated useful life of the capitalized software used to manage sales and track client activities. The primary factor contributing to the change in the estimated useful life was that the software’s function was no longer consistent with the Company’s strategic plan and its offices were not fully utilizing the system. The Company discontinued use of the software in November 2003. The change in accounting estimate resulted in an additional amortization charge of approximately $1.0 million and is included in depreciation and amortization expense in the accompanying consolidated statements of operations.

Additionally, during the fourth quarter of fiscal 2003, certain impairment indicators were present and the Company performed a review for impairment and determined that the estimated future cash flows from certain capitalized software development costs were less than their carrying amount and wrote-off approximately $0.5 million. The primary impairment indicator was the change in the Company’s strategic focus to higher margin business. The impairment charge is included in depreciation and amortization expense in the accompanying consolidated statements of operations.

Goodwill and other intangible assets

Goodwill represents the excess of purchase price over the estimated fair value of net assets acquired. Effective September 30, 2002, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 142 addresses the recognition and measurement of goodwill and other intangible assets acquired in a business combination. SFAS No. 142 requires goodwill to no longer be amortized but instead be subject to an impairment

F-10

RemedyTemp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(amounts in thousands, except per share amounts)

test at least annually. Intangible assets with finite lives will continue to be amortized over their estimated useful lives. The impairment test for goodwill is comprised of two parts. The first step compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount exceeds the fair value of the reporting unit, the second step of the goodwill impairment test must be performed. The second step compares the implied fair value of the reporting unit’s goodwill with the respective carrying amount in order to determine the amount of impairment loss, if any.

In accordance with SFAS No. 142, the Company performed the two-step goodwill impairment test process and obtained assistance from a third-party in performing the valuations of its individual reporting units. The valuation methodologies considered included analyses of discounted cash flows at the reporting unit level, guidelines for publicly traded company multiples and comparable transactions. As a result of these impairment tests, the Company recorded a non-cash charge of $2.4 million, net of income taxes of $1.6 million, to reduce the carrying value of the goodwill to its implied fair value. This charge is reflected as a cumulative effect of adoption of a new accounting standard in the Company’s consolidated statements of operations.

In accordance with SFAS No. 142, no amortization of goodwill was recorded for fiscal 2003. During fiscal 2002 and 2001, the Company recorded goodwill amortization of $256 and $253, respectively. Excluding this amortization expense and the related tax impact, net income for fiscal 2002 and 2001 would have been $2,289, or $0.25 per diluted share, and $8,547 or $0.96 per diluted share, respectively. The change in the carrying amount of goodwill for the fiscal year ended September 28, 2003 is as follows:

	September 28, 2003
Beginning of year	$	4,283
Additions		2,833
Impairments		(4,086	)
End of year	$	3,030

Other intangible assets with finite lives include franchise rights, client relationships, and non-competition agreements and are amortized over their respective useful lives of three to six years. Amortization expense related to other intangible assets was $195, $15 and $15 for fiscal years 2003, 2002 and 2001, respectively. The following table presents the details of the Company’s other intangible assets that are subject to amortization:

	September 28, 2003			September 29, 2002
Franchise rights	$	1,480		$	—
Client relationships		100			—
Non-competition agreements		294			34
		1,874			34
Less accumulated amortization		(219	)		(24	)
Total	$	1,655		$	10

Estimated amortization expense is $322, $320, $318, $292 and $262 for fiscal years 2004 through fiscal 2008, respectively.

F-11

RemedyTemp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(amounts in thousands, except per share amounts)

Other income

Other income consists primarily of late fees collected from customers on past due accounts receivable balances in the amounts of $0.7, $0.9 and $1.2 million, for the fiscal years 2003, 2002 and 2001, respectively.

Income taxes

The Company records income taxes in accordance with the provisions of SFAS No. 109, “Accounting for Income Taxes.” SFAS No. 109 is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns. In estimating future tax consequences, SFAS No. 109 generally considers all expected future events including enactments of changes in the tax law or rates.

Accounting for stock-based compensation

The Company follows the disclosure-only provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”, as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure”, and, accordingly, accounts for its stock-based compensation plans using the intrinsic value method under APB No. 25, “Accounting for Stock Issued to Employees” and related interpretations.

The following table illustrates the effect on net (loss) income and net (loss) income per share, had compensation expense for the employee stock-based plans been recorded based on the fair value method under SFAS No. 123, as amended:

	For the Fiscal Year Ended
	September 28, 2003			September 29, 2002		September 30, 2001
Net (loss) income, as reported	$	(29,243	)	$	2,137	$	8,396
Deduct: total stock-based employee compensation expense determined under fair value based method, net of related tax effects		425			686		1,515
Net (loss) income, as adjusted	$	(29,668	)	$	1,451	$	6,881
Basic net (loss) income per share:
As reported	$	(3.25	)	$	0.24	$	0.94
As adjusted	$	(3.29	)	$	0.16	$	0.77
Diluted net (loss) income per share:
As reported	$	(3.25	)	$	0.24	$	0.94
As adjusted	$	(3.29	)	$	0.16	$	0.77

Reclassifications

Certain amounts in the prior years consolidated financial statements have been reclassified to conform to the current year presentation.

New Accounting Standards

In May 2003, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” This statement establishes standards for

F-12

RemedyTemp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(amounts in thousands, except per share amounts)

how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. The statement requires an issuer to classify a financial instrument issued in the form of shares that are mandatorily redeemable (embodies an unconditional obligation requiring the issuer to redeem them by transferring its assets at a specified or determinable date) as a liability. SFAS No. 150 was effective immediately for all financial instruments entered into or modified after May 31, 2003. For all other instruments, SFAS No. 150 was effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have an impact on the Company’s consolidated financial condition or results of operations.

In January 2003, the FASB issued FASB Interpretation No. 46, “Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin (“ARB”) No. 51,” (“FIN 46”). FIN 46 provides guidance on identifying variable interest entities (“VIE”) and assessing whether or not a VIE should be consolidated. The provisions of FIN 46 are to be applied immediately to VIEs created after January 31, 2003, to the first reporting period ending after December 15, 2003. For all VIEs created prior to February 1, 2003, public companies will be required to apply the provisions of FIN 46 at the end of the first interim or annual reporting period ending after March 15, 2004. The Company is currently evaluating the implication of FIN 46 on certain franchisee and licensee relationships. The Company plans to adopt the provisions of FIN 46 during the second quarter of fiscal 2004 and is currently evaluating the impact, if any, on its consolidated results of operations and financial position.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure.” This statement amends SFAS No. 123, “Accounting for Stock-Based Compensation,” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and of the effect of the method used on reported results. The provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002. The disclosure provisions of SFAS No. 148 have been adopted by the Company, however, the Company has elected not to change to the fair value based method of accounting for stock-based employee compensation but rather to continue to apply the intrinsic value method as prescribed by APB Opinion No. 25, “Accounting for Stock Issued to Employees,” under which no compensation cost is generally recognized by the Company.

2.    Fixed assets

	September 28, 2003			September 29, 2002
Computer equipment and software	$	26,565		$	24,019
Furniture and fixtures		5,558			5,192
Leasehold improvements		2,327			3,102
Construction in progress		151			1,839
		34,601			34,152
Less accumulated depreciation		(22,264	)		(17,884	)
Fixed assets, net	$	12,337		$	16,268

Construction in process primarily relates to software development and implementation costs for various internal-use information systems.

F-13

RemedyTemp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(amounts in thousands, except per share amounts)

3.    Workers’ compensation

Remedy provides workers’ compensation insurance to its temporary associates and colleagues. Effective April 1, 2001 and for workers’ compensation claims originating in the majority of states (referred to as non-monopolistic states), the Company has contracted with independent, third-party carriers for workers’ compensation insurance and claims administration. Each annual contract covers all workers’ compensation claim costs greater than a specified deductible amount, on a “per occurrence” basis. The Company is self-insured for its deductible liability ($250 per individual claim incurred from April 1, 2001 to March 31, 2002 and $500 for all subsequent claims). The insurance carrier is responsible for incremental losses in excess of the applicable deductible amount.

Remedy establishes a reserve for the estimated remaining deductible portion of its workers’ compensation claims, representing the estimated ultimate cost of claims and related expenses that have been reported but not settled, and that have been incurred but not reported. The estimated ultimate cost of a claim is determined by applying actuarially determined loss development factors to current claims information. These development factors are determined based upon a detailed actuarial analysis of historical claims experience of both the Company and the staffing industry. The Company periodically updates the actuarial analysis supporting the development factors utilized and revises those development factors, as necessary. Adjustments to the claims reserve are charged or credited to expense in the periods in which they occur. The estimated remaining deductible liability under the aforementioned contracts as of September 28, 2003 is approximately $30.6 million.

The Company is contractually required to collateralize its remaining obligation under each of these workers’ compensation insurance contracts through use of irrevocable letters of credit, pledged cash and securities or a combination thereof. The level and type of collateral required for each policy year is determined by the insurance carrier at the inception of the policy year and may be modified periodically. As of September 28, 2003, the Company has outstanding letters of credit and pledged cash and securities totaling $21.9 and $21.6 million, respectively. The pledged securities are restricted while the Company’s remaining obligations under the workers’ compensation program are outstanding and cannot be used for general corporate purposes. Accordingly, the Company has classified these pledged securities as restricted in the accompanying consolidated balance sheets.

The Company also has an aggregate $5.3 million liability recorded at September 28, 2003 for additional premiums due under previous guaranteed cost policies and for premiums due under current policies in states where the Company is statutorily required to participate in the state managed workers’ compensation fund.

From July 22, 1997 through March 31, 2001, the Company had a fully insured workers’ compensation program with Reliance National Insurance Company (“Reliance”). The annual premium for this program was based upon actual payroll costs multiplied by a fixed rate. Each year, the Company prepaid the premium based upon estimated payroll levels and an adjustment was subsequently made for differences between the estimated and actual amounts. Subsequent to March 31, 2001 (the end of Company’s final policy year with Reliance), Reliance became insolvent and was subsequently liquidated. The Company is currently in litigation with the California Insurance Guaranty Association regarding financial responsibility for all remaining open claims under the Reliance workers’ compensation program as discussed in Note 8.

4.    Line of credit

The Company has a joint credit agreement with Bank of America and Union Bank of California providing for aggregate borrowings of $40.0 million, including $35.0 million in available letters of credit. The line of credit is collateralized by certain assets of the Company and interest on outstanding borrowings is generally payable quarterly. The interest rate is the higher of the bank’s prime rate or the federal funds rate plus 50 basis points or, at

F-14

RemedyTemp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(amounts in thousands, except per share amounts)

the Company’s discretion, the eurodollar rate plus 1.125% to 1.375% based upon specified financial covenants. The Company is required to pay administrative fees on the outstanding letters of credit and the aggregate unused portion of the credit facility. This credit agreement required the Company to maintain certain financial ratios and comply with certain restrictive covenants. As of September 28, 2003, the Company was in compliance with all restrictive covenants and required ratios, with the exception of its fixed charge coverage ratio and its consolidated EBITDA requirements. The Company executed the First Amendment and Waiver to the credit agreement, dated November 14, 2003. The non-compliance with the fixed charge coverage ratio and consolidated EBITDA requirements have been waived through January 15, 2004. The Company is in the process of negotiating a new credit facility and anticipates it will be executed and in place prior to January 15, 2004.

The Company has no borrowings outstanding as of each of the three fiscal years ended September 28, 2003. The Company had outstanding letters of credit totaling $21.9, $31.1 and $17.3 million as of fiscal year end 2003, 2002 and 2001, respectively, to collaterize its remaining workers’ compensation deductible liability discussed in Note 3.

5.    Income taxes

The Company’s provision for income taxes consists of the following:

	For the Fiscal Year Ended
	September 28, 2003			September 29, 2002			September 30, 2001
Current tax expense:
Federal	$	(241	)	$	(42	)	$	7,124
State		518			303			2,104
Foreign		40			—			—
Total current		317			261			9,228
Deferred tax expense:
Federal		5,537			155			(4,581	)
State		792			(39	)		(687	)
Total deferred		6,329			116			(5,268	)
Total provision for income taxes	$	6,646		$	377		$	3,960

Deferred tax assets and liabilities are determined based on temporary differences between income and expenses reported for financial reporting and tax reporting. The Company is required to record a valuation allowance to reduce its deferred tax assets to the amount that it believes is more likely than not to be realized. In assessing the need for a valuation allowance, the Company considered all positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial performance. The Company had been profitable through the first fiscal quarter of 2003, however, continued market softness and significant increases in workers’ compensation costs resulted in significant losses in the remainder of the fiscal year.

The accounting guidance states that forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as cumulative losses in recent years. As a result of this guidance, and the Company’s recent cumulative losses, management concluded that a full valuation allowance of $16.9 million against the deferred tax assets was appropriate. While the Company hopes to be profitable in fiscal 2004 and

F-15

RemedyTemp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(amounts in thousands, except per share amounts)

beyond, in view of the recent losses, there is no assurance that there will be sufficient future taxable income to realize the benefit of the deferred tax asset. If, after future assessments of the realizability of the deferred tax assets, the Company determines a lesser allowance is required, it would record a reduction to income tax expense and the valuation allowance in the period of such determination.

The composition of the deferred tax assets (liabilities) is as follows:

	September 28, 2003			September 29, 2002
Deferred income tax assets:
Deferred compensation	$	2,015		$	430
Accrued workers’ compensation		13,332			7,832
Bad debt expense		1,031			771
Job tax credits		1,437			—
Other, net		1,297			1,465
Total deferred income tax asset	$	19,112		$	10,498
Prepaid expenses	$	(697	)	$	(499	)
Depreciation and amortization		(1,536	)		(2,919	)
Total deferred income tax liability	$	(2,233	)	$	(3,418	)
Net deferred income tax asset before valuation allowance	$	16,879		$	7,080
Valuation allowance		(16,879	)		—
Net deferred income tax asset	$	—		$	7,080

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory income tax rates to income before taxes as a result of the following differences:

	For the Fiscal Year Ended
	September 28, 2003		September 29, 2002		September 30, 2001
Federal tax computed at statutory rate	(35.0	)%	35.0	%	35.0	%
State taxes, net of federal benefit	(4.4	)%	5.9	%	5.6	%
Federal tax credits	(6.7	)%	(29.1	)%	(9.6	)%
Meals and entertainment	0.6	%	2.9	%	0.8	%
Change in valuation allowance	75.2	%	0.0	%	0.0	%
Other	(0.3	)%	0.3	%	0.3	%
Total provision for income taxes	29.4	%	15.0	%	32.1	%

During fiscal 2003, the Company filed amended returns to claim additional job tax credits applicable to fiscal years 2002, 2001, and 2000 and recorded a credit to income tax expense of $0.9 million representing the net refund.

6.    Purchase of franchised operations

From time to time, the Company may selectively purchase traditional and licensed operations for strategic reasons, including to facilitate its expansion plans of increased market presence in identified geographic regions.

F-16

RemedyTemp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(amounts in thousands, except per share amounts)

During March and April of fiscal 2003, the Company acquired a large licensed franchise operation in Tennessee consisting of several offices and a smaller franchise in Texas consisting of one office, respectively. During fiscal years 2002 and 2001, the Company acquired two and five license offices, respectively. The consolidated financial statements include the results of operations of these offices commencing as of their respective acquisition dates. Additionally, the Company made an earnout payment during fiscal 2002 relating to a previous licensed franchise acquisition in accordance with the provisions of the purchase agreement. Results of operations for the acquired licensed operations are recorded in accordance with the Company’s related revenue recognition policy (see Note 1) until the acquisition date. Subsequent to the acquisition date, the direct office revenue recognition policy is utilized. Prior to the acquisitions, the revenues and related costs of sales are recognized as licensed franchise sales and cost of licensed sales in the Consolidated Statement of Operations. Subsequent to the acquisitions, the revenues and related costs of sales are recognized as direct sales and cost of sales in the Consolidated Statement of Operations. Had the results of operations for the licensed franchise operations been shown as of the beginning of the current and preceding fiscal years, the consolidated financial information would not be significantly different (see pro forma information below). These acquisitions were accounted for under the purchase method of accounting. The combined purchase prices were $3,763, $70 and $214 for the fiscal 2003, 2002 and 2001 acquisitions, respectively. In connection with these acquisitions, the Company recorded goodwill totaling $2,833, $70 and $104 for fiscal years 2003, 2002 and 2001, respectively. Additionally, related to the fiscal 2003 Tennessee acquisition, $1,840 of the purchase price was allocated to amortizable intangible assets consisting of franchise rights ($1,480), client relationships ($100) and non-competition agreements ($260) with a weighted average amortization period of approximately six years. Additionally, the Stock Purchase Agreement for the Tennessee acquisition includes a provision for contingent payments for the two years subsequent to December 29, 2002. The contingent payments are based upon an increase in earnings before interest, taxes, depreciation and amortization over the prior year. The Company does not anticipate a payment for the twelve months ended December 29, 2003.

The unaudited pro forma information set forth below gives effect to the acquisitions completed during fiscal 2003 as if they had occurred at the beginning of fiscal 2002 and includes amortization of the purchased intangibles as described above.

	For the Fiscal Years Ended
	(unaudited)
	September 28, 2003			September 29, 2002
Direct sales	$	312,168		$	295,461
Licensed franchise sales		168,164			167,334
Franchise royalties		1,614			1,732
Initial franchise fees		19			11
Total revenue	$	481,965		$	464,538
(Loss) income before cumulative effect of adoption of a new accounting standard	$	(26,866	)	$	2,091
Cumulative effect of adoption of a new accounting standard, net of tax		2,421			—
Net (loss) income	$	(29,287	)	$	2,091
Earnings per share—basic and diluted:
(Loss) income before cumulative effect of adoption of a new accounting standard	$	(2.98	)	$	0.23
Cumulative effect of adoption of a new accounting standard, net of tax		(0.27	)		—
Net (loss) income—basic and diluted	$	(3.25	)	$	0.23

F-17

RemedyTemp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(amounts in thousands, except per share amounts)

The following table presents the condensed balance sheets of the acquired entities at the acquisition dates.

	(unaudited)
	March 1, 2003		April 1, 2003
	Tennessee Acquisition		Texas Acquisition
Cash and cash equivalents	$	65	$	—
Accounts receivable		9		—
Prepaid expenses and other current assets		19		—
Fixed assets		113		9
Intangible assets		1,840		—
Goodwill		2,074		34
Total assets	$	4,120	$	43
Accounts payable		56		—
Accrued payroll, benefits and related costs		77		—
Income tax payable		174		—
Other accrued expenses		28		—
Total liabilities		335		—
Additional paid-in capital		3,785		43
Total shareholders’ equity		3,785		43
Total Liabilities and Shareholders’ Equity	$	4,120	$	43

7. Office closures

The Company’s strategic plan focuses on increasing the percentage of business from higher margin service lines, increasing sales through targeted sales force and distribution channel expansion and enhancing operating margins through continuous productivity improvements. As a result, and given overall industry and market conditions, the Company is continually reassessing its current operating structure. Consequently, during the third quarter of fiscal 2003, the Company implemented plans to close or consolidate certain Company-owned offices, specifically those that were under-performing or primarily dedicated to recruiting activities. During the third and fourth quarters of fiscal 2003, the Company recorded a $992 charge for costs in connection with these plans, including $689 related to contractual lease obligations and $303 for severance benefits, fixed asset disposals and other costs associated with these office closures. The $992 charge is included in selling and administrative expenses in the Company’s consolidated statements of operations. At September 28, 2003, the remaining liability resulting from this charge is $464 and relates to estimated losses on subleases and the remaining net lease payments on closed locations that will be paid out through fiscal 2006.

8. Commitments and contingent liabilities

The Company leases its corporate facility, Company-owned offices and certain equipment under operating leases. The leases typically require the Company to pay taxes, insurance and certain other operating expenses applicable to the leased property. Total rent expense was approximately $6,362, $5,512 and $4,903 for the years ended September 28, 2003, September 29, 2002 and September 30, 2001, respectively. Total sublease income was $182, $80 and $54 for fiscal years 2003, 2002 and 2001, respectively.

F-18

RemedyTemp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(amounts in thousands, except per share amounts)

Future minimum lease commitments under all noncancellable operating leases as of September 28, 2003 are as follows:

Fiscal Year
2004	$	4,678
2005		3,850
2006		2,766
2007		2,217
2008		1,558
Thereafter		2,439
		17,508
Less sublease		(204	)
Total	$	17,304

On October 16, 2001, GLF Holding Company, Inc. and Fredrick S. Pallas filed a complaint in the Superior Court of the State of California, County of Los Angeles, against RemedyTemp, Inc., its wholly-owned subsidiaries (Remedy Intelligent Staffing, Inc. and Remedy Temporary Services, Inc.), Karin Somogyi, Paul W. Mikos and Greg Palmer (the “Complaint”). The Complaint purports to be a class action brought by the individual plaintiffs on behalf of all of Remedy’s traditional and licensed franchisees. The Complaint alleges claims for fraud and deceit, negligent misrepresentation, negligence, breach of contract, breach of warranty, conversion and accounting, unfair and deceptive practices, and plaintiffs seek restitution and equitable relief. The plaintiffs claim that Remedy wrongfully induced its franchisees into signing franchise agreements and breached the agreements, thus causing the franchisees damage. Remedy has sought to compel arbitration with the plaintiffs in accordance with its franchise agreement with each of them and to deny class certification. Remedy believes it has meritorious defenses to the allegations contained in this complaint and intends to defend this action with vigor. Remedy has filed a counterclaim in arbitration with the American Arbitration Association alleging, among other things, breach of contract. At this time management is unable to give an estimate as to the amount or range of potential loss, if any, which might result to the Company if the outcome in this matter were unfavorable.

In early 2002, the California Insurance Guarantee Association (“CIGA”) began making efforts to join some of the Company’s customers and their workers’ compensation insurance carriers (collectively, “Customers”), in pending workers’ compensation claims filed by Remedy’s employees as a result of the liquidation of Remedy’s former carrier, Reliance. At the time of these injuries, from July 22, 1997 through March 31, 2001, Remedy was covered by workers’ compensation policies issued by Reliance. The Company believes that, under California law, CIGA is responsible for Reliance’s outstanding liabilities. Remedy initiated legal proceedings against CIGA in both Superior Court for the State of California, County of Los Angeles and the California Workers’ Compensation Appeals Board (“WCAB”) on February 15, 2002 and February 26, 2002, respectively. On April 5, 2002, the WCAB granted Remedy’s motion and consolidated the various workers’ compensation claims in which CIGA tried to join Remedy’s Customers. The WCAB also granted Remedy’s motion to stay CIGA’s efforts to join Remedy’s Customers in those claims. The WCAB selected a single test case from the consolidated pending cases to review and decide on the legal issues involved (i.e., whether it is proper for CIGA to join Remedy’s Customers in the pending claims). The trial occurred on September 20, 2002. The WCAB Administrative Law Judge ruled in favor of CIGA and dismissed it from the lawsuit, thus allowing the pending workers’ compensation matters to proceed against the Company’s Customers and their insurance carriers. Remedy then filed a motion for reconsideration of the decision by the WCAB Administrative Law Judge to the entire WCAB. On March 28, 2003, the entire WCAB affirmed the ruling of the Administrative Law Judge and as a result, the Company filed an appeal of this matter to the California Court of Appeals in May 2003.

F-19

RemedyTemp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(amounts in thousands, except per share amounts)

The WCAB continued the “stay” in effect since April 5, 2002, thus preventing CIGA from proceeding until the appeals process has been exhausted. Management believes, based upon the advice from outside counsel, that its position on this issue will ultimately prevail and, accordingly, the Company will suffer no loss.

Despite the Company’s determination to pursue the review process, there can be no assurance that further review will be granted, or of ultimate success in the overturning the WCAB decision. In the event of an unfavorable outcome, Remedy may be obligated to reimburse certain clients and believes that it would consider reimbursement of its other clients for actual losses incurred as a result of an unfavorable ruling in this matter. If CIGA is permitted to join Remedy’s Customers, thus triggering the client’s insurance carriers obligation to pay for the claims, the exposure to Remedy becomes a function of the ultimate claims’ losses and the impact of such claims, if any, on the clients’ insurance coverage. Presently, the Company is unable to ascertain the specific details regarding the insurance coverage of its affected clients and the impact of an unfavorable ruling on such coverage. The Company has received data from the trustee for Reliance regarding outstanding claims that CIGA has attempted to pursue against the Company’s current and former clients. The information indicates incurred losses, as of September 28, 2003, for the claims in question amount to $38.7 million. The losses incurred to date represent amounts paid to date by the trustee and the remaining claim reserves on open files. At this time, the Company believes that it is unable to ascertain if the remaining reserves on the claims are appropriate or adequate since the Company has not been able to gain access to the files due to pending litigation. Further, as stated above, the Company cautions that: (i) it believes the Company’s exposure in this matter is not the remaining claims liability, but rather a function of the impact of such claims, if any, on the client’s insurance costs; and (ii) it expects to ultimately prevail in this matter and that it will suffer no loss.

From time to time, the Company becomes a party to other litigation incidental to its business and operations. The Company maintains insurance coverage that management believes is reasonable and prudent for the business risks that the Company faces. Based on current available information, management does not believe the Company is party to any legal proceedings that are likely to have a material adverse effect on its business, financial condition, cash flows or results of operations.

9.    Employee benefit plans

401(k) Plan

The Company has an employee savings plan which permits participants to make contributions by salary reduction pursuant to section 401(k) of the Internal Revenue Code. The plan is open to qualified full-time and temporary employees who earn less than $80 per year. The annual amount of employer contributions to the plan is determined at the discretion of the Board of Directors, subject to certain limitations. Eligible participants may make voluntary contributions to the plan and become fully vested in the Company’s contributions over a five-year period. The Company made $38 in contributions during fiscal 2003. The Company made no contributions for fiscal years 2002 and 2001.

Deferred Compensation Plan

The Company maintains a nonqualified deferred compensation plan (the “Deferred Compensation Plan”) for certain executives of the Company. Under the Deferred Compensation Plan, eligible participants may defer receipt of up to 100% of their base compensation and bonuses on a pretax basis until specified future dates, upon retirement or death. The deferred amounts are placed in trust and invested by the Company. Participants recommend investment vehicles for the funds, subject to approval by the trustees. The balance due each participant increases or decreases as a result of the related investment gains and losses. The trust and the investments therein are assets of the Company and the participants of the Deferred Compensation Plan are general creditors of the Company with

F-20

RemedyTemp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(amounts in thousands, except per share amounts)

respect to benefits due. For each of the three fiscal years ended September 28, 2003, the amounts charged to expense relating to the Deferred Compensation Plan were $880, $481 and $117, respectively. Included in accrued payroll, benefits and related costs in the accompanying consolidated balance sheets at September 28, 2003 and September 29, 2002 was $2,730 and $1,590, respectively, relating to amounts owed by the Company to the plan participants.

10.    Accumulated other comprehensive income

At September 28, 2003, accumulated other comprehensive income is comprised of net unrealized foreign currency translation gains of $21 and net unrealized gains on marketable securities of $113. At September 29, 2002, accumulated other comprehensive loss was comprised of net unrealized loss on marketable securities of $39 (net of tax of $27). There was no tax effect on the other comprehensive income recorded in fiscal 2003, due to the full valuation allowance provided for the deferred tax assets.

F-21

RemedyTemp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(amounts in thousands, except per share amounts)

11.    Shareholders’ equity

Earnings per share calculation

The Company is required to disclose basic and diluted earnings per share (“EPS”) in accordance with SFAS No. 128 “Earnings Per Share.” Basic EPS is calculated using income divided by the weighted average number of common shares outstanding during the period. Diluted EPS is calculated similar to basic EPS except that the weighted average number of common shares is increased to include the number of additional common shares that would have been outstanding if the potential dilutive common shares, such as options, had been issued and restricted shares had vested.

The table below sets forth the computation of basic and diluted earnings per share:

	For the Fiscal Years Ended
	September 28, 2003			September 29, 2002		September 30, 2001
Numerator:
(Loss) income before cumulative effect of adoption of a new accounting standard	$	(26,822	)	$	2,137	$	8,396
Cumulative effect of adoption of a new accounting standard, net of income taxes		2,421			—		—
Net (loss) income	$	(29,243	)	$	2,137	$	8,396
Denominator:
Weighted-average number of shares, basic		9,010			8,973		8,917
Effect of dilutive securities: Stock options		—			103		23
Weighted-average number of shares—assuming dilution		9,010			9,076		8,940
Earnings per share—Basic:
(Loss) income before cumulative effect of adoption of a new accounting standard	$	(2.98	)	$	0.24	$	0.94
Cumulative effect of adoption of a new accounting standard, net of income taxes		(0.27	)		—		—
Net (loss) income—basic	$	(3.25	)	$	0.24	$	0.94
Earnings per share—Diluted:
(Loss) income before cumulative effect of adoption of a new accounting standard	$	(2.98	)	$	0.24	$	0.94
Cumulative effect of adoption of a new accounting standard, net of income taxes		(0.27	)		—		—
Net (loss) income—diluted	$	(3.25	)	$	0.24	$	0.94

Potential common shares of 565, 381 and 1,194 for fiscal years 2003, 2002 and 2001, respectively, have been excluded from the calculation of diluted shares because the effect of their inclusion would be antidilutive.

F-22

RemedyTemp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(amounts in thousands, except per share amounts)

Employee Stock Purchase Plan

In connection with the Company’s initial public offering in July 1996 (the “Offering”), the Company implemented its 1996 Employee Stock Purchase Plan (the “Purchase Plan”). Under the terms of the Purchase Plan, as amended, eligible employees may purchase shares of the Company’s Common Stock based on payroll deductions. A total of 250 shares were reserved for issuance under the Purchase Plan. On August 16, 1999, the Purchase Plan was amended to enable employees of the Company’s subsidiaries to participate in the Purchase Plan. The purchase price for shares granted is the lower of 85% of the market price of the stock on the first or last day of each six month purchase period. The Purchase Plan commenced on October 1, 1996. During fiscal 2003, 11 shares were purchased at prices between $10.23 and $10.65 per share, during fiscal 2002, 6 shares were purchased at $9.55 per share, and during fiscal 2001, 11 shares were purchased at $9.88 per share.

Stock Ownership Plan for Outside Directors

Directors who are also employees or officers of the Company receive no extra compensation for their service on the Board. Pursuant to the Non-Employee Director Plan, effective March 16, 1998, and amended by the Board on October 1, 2003, independent directors receive an annual retainer in the form of cash or shares of Common Stock valued at $25 on the date of their election or re-election to the Board. For those directors electing to receive their retainer in stock, the Shares that are issued under the Non-Employee Director Plan are held in trust, on a deferred basis (subject to an exception for financial hardship) until a director is no longer a director of the Company. Such shares are earned ratably over the year and are issued in trust no later than ten (10) business days after the next annual meeting of shareholders following election or re-election, provided that the director has remained a director during such time. The maximum aggregate number of shares that have been authorized for issuance under the Non-Employee Director Plan is 75 shares, subject to adjustment upon recapitalization, stock dividends, stock splits and similar changes in the Company’s capitalization as provided in the plan. As of September 28, 2003, 42 shares of Common Stock were available for issuance under the Non-Employee Director Plan. In February 2003, 2002 and 2001, a total of 9, 9 and 5 shares, respectively, were issued to the trust for services rendered. As the trust belongs to the Company, all shares issued to the trust are treated as treasury stock for financial reporting purposes. All shares issued and earned are included in the diluted shares outstanding calculation.

Stock Incentive Plan

The Company’s 1996 Stock Incentive Plan, as amended, (the “Incentive Plan”) provides for the grant of stock based awards, including incentive stock options, non-qualified stock options, restricted stock and stock appreciation rights, among others, to key employees and members of the Company’s Board of Directors. A total of 1,800 shares have been reserved for issuance under the Incentive Plan, and as of September 28, 2003, approximately 220 shares are available for future grants. Options granted to employees typically may be exercised within ten years from the grant date and are exercisable in installments determined by the Leadership, Development and Compensation Committee of the Board of Directors. Options granted to non-employee, non-officer directors prior to the Offering were immediately exercisable. Options granted to non-employee, non-officer directors subsequent to the Offering are typically 50% exercisable immediately and 50% exercisable upon the date of the next annual shareholders meeting. Grants for 158 shares at prices between $10.23 and $12.25 per share were made during fiscal 2003, grants for 171 shares at prices between $10.25 and $18.35 per share were made during fiscal 2002, and grants for 222 shares at prices between $11.88 and $13.63 per share were made during fiscal 2001.

During fiscal year 2003 and 2002, the Compensation Committee of the Board of Directors authorized and issued 320 and 425 shares of restricted Class A Common Stock, respectively, to certain officers of the Company (the “Restricted Stock”) under the Incentive Plan. These shares have no purchase price and cliff vest after five years. However, the Restricted Stock is subject to accelerated vesting after three years if certain performance goals are achieved. All unvested Restricted Stock shall be forfeited upon voluntary termination or termination for cause. Upon

F-23

RemedyTemp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(amounts in thousands, except per share amounts)

involuntary termination for other than cause, 20% vests one year from the grant date with the remaining unvested shares vesting at 1.66% each month thereafter. In connection with the Restricted Stock granted in fiscal 2002, the executives were required to forfeit all outstanding stock options at that time. As a result, a total of 592 stock options were forfeited and cancelled in connection with these grants. Based upon the fair market value of its Class A Common Stock on the respective grant dates, the Company recorded unearned compensation totaling $3,477 and $5,904, as a component of shareholders’ equity, in connection with the Restricted Stock grants during fiscal 2003 and 2002, respectively. The unearned compensation is being amortized and charged to operations over the vesting period. During fiscal 2003 and 2002, 63 and 25 shares of the Restricted Stock were forfeited, respectively.

The following table summarizes the activity relating to all stock and option plans, exclusive of the Restricted Stock grants previously discussed:

	Incentive Plan Options				Stock Purchase Plan				Options Outside Incentive Plan
	Shares		Weighted- Average Exercise Price		Shares		Weighted- Average Exercise Price		Shares		Weighted- Average Exercise Price
Options outstanding October 1, 2000	1,170.6		$	15.83	6.2		$	9.88	125.0		$	20.72
Options granted	221.7		$	12.26	5.2		$	9.88	—		$	—
Options cancelled	(226.5	)	$	14.82	—		$	—	—		$	—
Options exercised	(41.7	)	$	13.22	(11.4	)	$	9.88	—		$	—
Options outstanding September 30, 2001	1,124.1		$	15.42	—		$	—	125.0		$	20.72
Options granted	163.2		$	14.54	11.0		$	10.06	—		$	—
Options cancelled	(591.0	)	$	14.74	—		$	—	(125.0	)	$	20.72
Options exercised	(32.7	)	$	12.90	(6.0	)	$	9.56	—		$	—
Options outstanding September 29, 2002	663.6		$	15.95	5.0		$	10.65	—		$	—
Options granted	158.3		$	11.91	11.3		$	10.20	—		$	—
Options cancelled	(120.2	)	$	15.75	—		$	—	—		$	—
Options exercised	—		$	—	(10.6	)	$	10.42	—		$	—
Options outstanding September 28, 2003	701.7		$	15.07	5.7		$	10.17	—		$	—

The number of exercisable options outstanding for fiscal 2003, 2002 and 2001 under the plans were 485.5, 520.1 and 815.7 shares, respectively, at weighted-average prices of $16.21, $16.53 and $16.74 per share, respectively.

The fair value of each option grant has been estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions for the grants in fiscal 2003, 2002 and 2001, respectively: dividend yield of 0.0%, 0.0% and 0.0%; risk free interest rate of 3.12%, 3.98% and 5.0%; expected volatility of 49.3%, 48.5% and 44.0% and expected lives of 5.6, 4.7 and 5.7 years. The weighted-average per share estimated fair value at the date of grant for options granted during fiscal 2003, 2002 and 2001 was $5.83, $6.51 and $5.87 per share, respectively.

The following table summarizes information about stock options outstanding at September 28, 2003:

Options Outstanding				Options Exercisable
Exercise Price	Shares Outstanding	Weighted- Average Remaining Life (in years)	Weighted- Average Price	Shares Exercisable	Weighted- Average Price
$10.00 — $13.00	281.9	7.1	$12.14	107.6	$12.63
$13.01 — $16.00	262.2	6.3	$14.73	222.6	$14.86
$16.01 — $20.00	75.0	5.0	$17.48	67.0	$17.38
$20.01 — $25.00	78.3	4.7	$22.70	78.3	$22.70
$25.01 — $30.00	10.0	4.5	$26.19	10.0	$26.19

F-24

RemedyTemp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(amounts in thousands, except per share amounts)

12.    Subsequent events

On November 18, 2003, the Company was notified by the State of California Employment Development Department that the Company underpaid its state unemployment insurance by approximately $2.0 million for the period January 1, 2003 through September 30, 2003. Based on preliminary evaluations, the Company believes that this assessment is without merit. The Company believes that its methodology in calculating its state unemployment insurance is in compliance with all applicable laws and regulations and disputes this assessment. The Company has not accrued for this amount as of September 28, 2003.

The Company entered into an Asset Purchase Agreement effective December 19, 2003 to purchase the assets of two of its 13 traditional franchise offices located in Texas. Upon full satisfaction of all conditions prior to closing, $1.5 million of the $1.8 million purchase price would be payable on or before the anticipated closing in January 2004 and $0.3 million would be payable on or before January 2006.

13.    Unaudited consolidated quarterly information

	For the Three Months Ended
	December 29, 2002			March 30, 2003			June 29, 2003			September 28, 2003
Total revenues	$	120,794		$	115,835		$	118,838		$	126,498
Total cost of direct and licensed revenues	$	97,668		$	98,382		$	97,401		$	111,754
Licensees’ share of gross profit	$	6,721		$	5,640		$	6,002		$	6,068
Selling, administrative and depreciation expenses	$	16,354		$	17,668		$	17,874		$	20,270
Cumulative effect of adoption of a new accounting standard, net of income tax	$	2,421		$	—		$	—		$	—
Net loss	$	(1,971	)	$	(2,812	)	$	(435	)	$	(24,025	)
Net income (loss) per share before cumulative effect of adoption of a new accounting standard	$	0.05		$	(0.31	)	$	(0.05	)	$	(2.67	)
Cumulative effect of adoption of a new accounting standard, net of income tax		(0.27	)		—			—			—
Net loss after cumulative effect of adoption of a new accounting standard, basic and diluted	$	(0.22	)	$	(0.31	)	$	(0.05	)	$	(2.67	)

	For the Three Months Ended
	December 30, 2001		March 31, 2002		June 30, 2002		September 29, 2002
Total revenues	$	114,760	$	106,568	$	117,799	$	125,411
Total cost of direct and licensed revenues	$	90,343	$	85,150	$	95,446	$	101,592
Licensees’ share of gross profit	$	8,009	$	5,975	$	6,984	$	7,773
Selling, administrative and depreciation expenses	$	15,902	$	15,572	$	15,246	$	15,663
Net income	$	692	$	191	$	520	$	734
Net income per share, basic and diluted	$	0.08	$	0.02	$	0.06	$	0.08

Net income (loss) per share is computed independently for each of the quarters presented and the summation of quarterly amounts may not equal the total net income (loss) per share reported for the year.

F-25

RemedyTemp, Inc.

FINANCIAL STATEMENT SCHEDULE

(amounts in thousands)

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS

	Balance at beginning of period		Additions		Deductions(1)		Balance at end of period
Allowance for Doubtful Accounts Receivable
Year ended September 28, 2003	$	1,913	$	1,357	$	643	$	2,627
Year ended September 29, 2002	$	1,789	$	1,333	$	1,209	$	1,913
Year ended September 30, 2001	$	1,888	$	2,902	$	3,001	$	1,789

(1) Represents net write-offs of bad debts

F-26

EX-10.24

EXHIBIT 10.24

1998 REMEDYTEMP, INC.

AMENDED AND RESTATED DEFERRED COMPENSATION AND

STOCK OWNERSHIP PLAN

FOR OUTSIDE DIRECTORS

(Amended and Restated Effective As of October 1, 2003)

TABLE OF CONTENTS

1998 REMEDYTEMP, INC.

AMDENDED AND RESTATED DEFERRED COMPENSATION AND STOCK

OWNERSHIP PLAN

FOR OUTSIDE DIRECTORS

(Amended and Restated Effective As of October 1, 2003)

	PAGE
Article 1.    Establishment and Purpose	1
Article 2.    Administration	1
Article 3.    Participation in the Plan	2
Article 4.    Stock Subject to the Plan	2
Article 5.    Deferral of Retainer Fees	3
Article 6.    Deferral Procedures	4
Article 7.    Deferred Compensation Accounts	5
Article 8.    Rights of Participants	6
Article 9.    Securities Laws	7
Article 10.  Withholding Taxes	7
Article 11.  Amendment and Termination of the Plan	7
Article 12.  Effective Date and Duration of the Plan	8
Article 13.  Miscellaneous	8
DEFERRAL ELECTION FORM	Attached
DESIGNATION OF BENEFICIARY FORM	Attached

1998 REMEDYTEMP, INC.

AMDENDED AND RESTATED DEFERRED COMPENSATION AND

STOCK OWNERSHIP PLAN

FOR OUTSIDE DIRECTORS

(Amended and Restated Effective As of October 1, 2003)

Article 1. Establishment and Purpose.

1.1 Establishment. RemedyTemp, Inc., a California corporation (the “Company”), established, effective as of March 16, 1998 (the “Effective Date”), this director pay and deferred compensation plan, which shall be known as the 1998 RemedyTemp, Inc. Deferred Compensation and Stock Ownership Plan for Outside Directors (the “Plan”), for present and future members of the board of directors of the Company (the “Board”) who are not employees or officers of the Company. The Plan was amended, upon shareholder approval effective February 27, 2003, to increase the aggregate number of shares of the Company’s Class A Common Stock, par value $.01 per share, that may be issued under the Plan and was amended and restated, effective as of October 1, 2003, to allow participants in the Plan the option to receive all of the Retainer Fees (as defined below) in cash or Stock on a deferral basis.

1.2 Purpose. The purposes of the Plan are (i) to provide members of the Board who are not employees or officers of the Company with the opportunity to receive all or part of their Retainer Fees (as defined below) in the form of the Company’s Class A Common Stock, par value $.01 per share (“Stock”) or in cash on a deferral basis, subject to the terms of the Plan and (ii) to advance the interests of the Company and its shareholders by increasing the Stock ownership of the Company’s non-employee directors thereby aligning their interests more closely with the interests of the Company’s other shareholders. By adopting the Plan, the Company desires to enhance its ability to attract and retain members of the Board (“Directors”) of outstanding competence.

Article 2. Administration.

2.1 Authority of the Board. The Plan shall be administered by the full Board, and to the extent permissible under Section 16 of the Securities Exchange Act of 1934, as amended, the Board may delegate ministerial duties to the Chief Human Resources Officer or any other executive or executives of the Company. The Board shall have the power to construe the Plan, to resolve all questions arising under the Plan, to adopt and amend such rules and regulations for the administration of the Plan as it may deem desirable, and otherwise to carry out the terms of the Plan. Neither the Board nor any officer or employee thereof shall be liable for any action or determination taken or made under the Plan in good faith. Notwithstanding the foregoing, the Board shall have no authority or discretion as to the persons who will participate in the Plan, the number of shares of Stock to be issued under the Plan, the time at which such grants are made, the number of shares of Stock to be granted at any particular time, or any other matters that are specifically governed by the provisions of the Plan.

2.2 Decisions Binding. The determinations, interpretations, and other actions of the Board of or under the Plan shall be final and binding for all purposes and on all persons.

2.3 Arbitration. Any individual making a claim for benefits under this Plan may contest the Board’s decision to deny such claim or appeal therefrom only by submitting the matter to binding arbitration before a single arbitrator. Any arbitration shall be held in Orange

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County, California, unless otherwise agreed to by the Board. The arbitration shall be conducted pursuant to the Commercial Arbitration Rules of the American Arbitration Association.

The arbitrator’s authority shall be limited to the affirmation or reversal of the Board’s denial of the claim or appeal, and the arbitrator shall have no power to alter, add to, or subtract from any provision of this Plan. Each party shall bear its own attorney’s fees and costs of arbitration. Judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.

2.4 Indemnification. Each person who is or shall have been a member of the Board shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a defendant, or in which he or she may be a party by reason of any act or omission by such Board member in his or her capacity as an administrator of the Plan, and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights or indemnification to which such persons may be entitled under the Company’s Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.

Article 3. Participation in the Plan.

Directors of the Company who are not employees or officers of the Company or any subsidiary of the Company (“Eligible Directors”) may participate in the Plan. Each Eligible Director may enter into an agreement with the Company in such form as the Company shall determine consistent with the provisions of the Plan for purposes of implementing the Plan or effecting its purposes. In the event of any inconsistency between the provisions of the Plan and any such agreement, the provisions of the Plan shall govern. In the event an Eligible Director no longer meets the requirements for participation in the Plan, such Eligible Director shall become an inactive Eligible Director, retaining all the rights described under the Plan, until such time that the Eligible Director again becomes an active Eligible Director.

Article 4. Stock Subject to the Plan.

4.1 Number of Shares. The shares that may be issued under the Plan shall be authorized and unissued shares of the Company’s Stock. The maximum aggregate number of shares that may be issued under the Plan shall be seventy-five thousand (75,000), subject to adjustment upon changes in capitalization of the Company as provided in Article 4.2. The maximum aggregate number of shares issuable under the Plan may be increased from time to time by approval of the Board, and by the shareholders of the Company if shareholder approval is required pursuant to the applicable rules of any stock exchange, or, in the opinion of the Company’s counsel, any other law or regulation binding upon the Company.

4.2 Adjustments. If the Company shall at any time increase or decrease the number of its issued and outstanding shares of Stock (whether by reason of reorganization, merger, consolidation, recapitalization, stock dividend, stock split, combination of shares, exchange of shares, change in corporate structure, or otherwise), then the number of shares of Stock still available for issue hereunder shall be increased or decreased appropriately and proportionately.

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Article 5. Deferral of Retainer Fees.

5.1 Payment of Fees. An Eligible Director may, upon his or her election in accordance with procedures established by the Company, elect to defer his or her annual cash retainer fees (annual amount and pro-rata portions thereof for partial years of directorship are set by the Board) paid to such Directors for serving as a member of the Board (“Retainer Fees”), under the Plan, subject to the terms and conditions set forth in this Article 5 (“Deferred Amounts”). All other fees received by Eligible Directors from the Company, including his or her fees normally paid to a Director on a per meeting basis for attending a meeting of the Board or a committee thereof (“Meeting Fees”) are not subject to the terms of this Plan.

5.2 Deemed Investment of Deferred Amounts.

5.2.1 Deemed Investments of Deferred Amounts. An Eligible Director who elects to defer Deferred Amounts under the Plan shall elect that such Deferred Amounts are deemed to be invested in one of the following investments: (i) Stock (“Stock Investment Fund”); (ii) [a mutual fund selected by the Board or its delegate that invests primarily in corporate stocks], (iii) [a mutual fund selected by the Board or its delegate that invests primarily in corporate bonds] (collectively, “InvestmentFunds”); provided that the Company shall not be required to actually invest any such amounts in the Investment Funds elected. The Board may change the available Investment Funds at any time in its discretion. The Eligible Director’s election among Investment Funds shall be in accordance with procedures established by the Company. Such amounts shall be deemed to be credited to the Eligible Director’s account under the Plan as of the date the Retainer Fees otherwise would have been payable to the Eligible Director in cash. To the extent deemed invested in the Stock Investment Fund, such Investment Fund shall be deemed to hold the number of shares of Stock determined by dividing the Deferred Amount allocated to the Stock Investment Fund by the Fair Market Value of the Stock on the date the amount is deemed to be credited to the Eligible Director’s account.

5.2.2 Fair Market Value. For the purposes of the Plan, the “Fair Market Value” of the Stock as of any issuance or deferral date shall be the mean between the highest and lowest sales price of the Stock on the New York Stock Exchange (or another national stock exchange or the NASDAQ National Market System, if the Stock trades thereon but not on the NYSE) as of such date (or, if no such shares were traded on such date, as of the next preceding day on which there was such a trade, provided that the closing price on such preceding date is not less than 100% of the fair market value of the Stock, as determined in good faith by the Company, on the date of issuance). If at any time the Stock is no longer traded on a national stock exchange or the NASDAQ National Market System, the Fair Market Value of the Stock as of any issuance date shall be as determined by the Company in good faith in the exercise of its reasonable discretion. The Fair Market Value of any Investment Fund that is not Stock shall be as determined by the Board in its reasonable discretion.

5.3 Rights of the Eligible Director. Except as otherwise provided under this Plan and that certain Trust Agreement (if any) of even date herewith entered into by and among the Company and the Trustees with respect to the Plan, an Eligible Director who elects the Stock Investment Fund shall, with respect to shares of Stock deemed to be held under such Investment Fund, have all of the rights of a holder of the Stock, including the right to receive dividends paid on such Stock and the right to vote the Stock at meetings of shareholders of the Company. Upon delivery, such Stock will be nonforfeitable.

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Article 6. Deferral Procedures.

6.1 Deferral of Retainer Fees. If an Eligible Director elects to defer Retainer Fees under the Plan, such election shall automatically remain in effect for all periods the Eligible Director remains a Director until changed by the Eligible Director pursuant to procedures established by the Committee. All Retainer Fees deferred under the Plan shall be deemed to be invested as set forth in Article 5.2 hereof.

6.2 Payment Form of Deferred Amounts. Subject to Article 6.3, Eligible Directors shall be entitled to elect to receive distribution of all the Deferred Amounts at the end of the deferral period in a single lump distribution. Such distribution shall be in the form of Stock with respect to amounts deemed invested in the Stock Investment Fund and in the form of cash with respect to amounts deemed invested in any other Investment Fund. In lieu of a lump sum distribution, the Eligible Director may elect to receive distributions under the Plan by means of installments. All Deferred Amounts under shall be paid in the same form of distribution (i.e., lump sum or installments). If no effective election is made, the Eligible Director will be paid in a single lump distribution. For all Eligible Directors as of the Effective Date, elections to receive distributions in annual installments rather than in one lump distribution, shall be made by completing a “Deferral Election Form” within thirty (30) calendar days after the Effective Date. Otherwise, those persons becoming Eligible Directors after the Effective Date shall complete a Deferral Election Form not later than thirty (30) calendar days upon becoming as Eligible Director under the Plan.

6.2.1 One Lump Distribution. Unless otherwise elected on a Deferral Election Form, all Deferred Amounts under the Plan shall be distributed in a single transaction made to the Eligible Director in January following the year in which he or she ceases to serve as a Director for any reason (a “Distribution Date”, which shall also mean the date any installment payment is paid pursuant to Article 6.2.2).

6.2.2 Installment Distributions. Eligible Directors may elect to receive the distribution of Deferred Amounts in annual installments, with a minimum number of installments of two (2), and a maximum number of installments of ten (10) by completing a Deferral Election Form as provided in Article 6.2. The initial distribution shall be made in January following the year in which he or she ceases to serve as a Director for any reason. The remaining installment distributions shall be made in January of each year thereafter until the Eligible Director’s entire deferred account has been distributed in full. The amount of each installment distribution shall be determined on an Investment Fund-by-Investment Fund basis and with respect to each Investment Fund shall equal the balance remaining in the Eligible Director’s deferred account deemed invested in such Investment Fund immediately prior to each such payment and as credited under the Investment Fund, multiplied by a fraction, the numerator of which is one (1), and the denominator of which is the number of installment payments remaining.

Subject to the following rules, Eligible Directors shall be permitted to change the form of elected deferral distribution pursuant to this Article 6 from a single distribution to installment distributions (“Permitted Change”), but not from installment distribution to a single distribution. A Permitted Change shall be made by filing a revised election form on an Deferral Election Form as described in Article 6.2 herein, specifying the new form of distribution provided that:

(1) An election to change the form of distribution must be made no later than December 31 at least one (1) full year prior to the distribution commencement date as described in Article 6.2 herein. If a new election is submitted after this date, the election shall be null and

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void, and the form of distribution shall be determined under the Eligible Director’s original election; and

(2) No further election to change a form of distribution shall be permitted with respect to Deferred Amounts already subject to a revised election submitted pursuant to this Article 6.

Notwithstanding anything to the contrary herein, the Board may elect at any time, in its sole and absolute discretion, to make distribution of the Deferred Amount to the Eligible Director in a single lump distribution, notwithstanding the Eligible Director’s election to receive such Deferred Amount in the form of installments.

6.2.3 Valuation of Investment Funds. Each Investment Fund shall be valued based on the performance of the Investment Fund beginning on the date the applicable Deferred Amounts were deemed to be credited to the Eligible Director’s account under the Plan and ending the day before the applicable Distribution Date, as determined by the Board in its reasonable discretion.

6.3 Financial Hardship. The Board shall have the authority to alter the timing or manner of payment of Deferred Amounts in the event that the Eligible Director establishes, to the satisfaction of the Board, severe financial hardship. In such event, the Board may, in its sole discretion:

(a) Authorize the cessation of deferrals by such Eligible Director under the Plan; or

(b) Provide that all, or a portion, of the shares of Deferred Amounts shall immediately be paid to the Eligible Director in a lump sum cash payment.

For purposes of this Article 6.3 “severe financial hardship” shall mean any financial hardship resulting from extraordinary and unforseeable circumstances arising as a result of one or more recent events beyond the control of the Eligible Director. In any event, payment may not be made to the extent such emergency is or may be relieved: (i) through reimbursement or compensation by insurance or otherwise; (ii) by liquidation of the Eligible Director’s assets, to the extent the liquidation of such assets would not itself cause severe financial hardship; or (iii) by cessation of deferrals under the Plan. Withdrawals of amounts because of a severe financial hardship may only be permitted to the extent reasonably necessary to satisfy the hardship, plus to pay taxes on the withdrawal. Examples of what are not considered to be severe financial hardships include the need to send an Eligible Director’s child to college or the desire to purchase a home. The Eligible Director’s account will be credited with earnings in accordance with the Plan up to the date of distribution. The severity of the financial hardship shall be judged by the Board. The Board’s decision with respect to the severity of financial hardship and the manner in which, if at all, the Eligible Director’s future deferral opportunities shall be ceased, and/or the manner in which, if at all, the payment of deferred amounts to the Eligible Director shall be altered or modified, shall be final, conclusive, and not subject to appeal.

6.4 Plan Shares. All shares of Stock issued or issuable under the Plan shall be deducted from the shares available under the Plan at the time first issued and deferred under the Stock Investment Fund, provided that shares deferred and not ultimately issued and delivered to the Eligible Director shall be returned to the pool of available shares under the Plan.

Article 7. Deferred Compensation Accounts.

7.1 Eligible Directors’ Accounts. The Company shall establish and maintain an individual bookkeeping account for the Deferred Amounts of each Eligible Director under

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Article 6 herein. Each account shall be credited as of the date the amount deferred otherwise would have become due and payable to the Eligible Director and as provided in Article 7.2. Each Eligible Director’s account shall be one hundred percent (100%) vested at all times.

7.2 Dividends on Stock. Any dividends paid on the deferred Stock under the Stock Investment Fund, if any, shall be paid to the Eligible Director in Stock (without interest) not later than ten (10) days after the date such dividend payment on the Stock was made.

7.3 Charges Against Accounts. There shall be charged against each Eligible Director’s deferred account any distributions made to the Eligible Director or to his or her beneficiary.

7.4 Designation of Beneficiary. Each Eligible Director shall designate a beneficiary or beneficiaries who, upon the Eligible Director’s death, will receive the Deferred Amount that otherwise would have been paid to the Eligible Director under the Plan. All designations shall be signed by the Eligible Director, and shall be in such form as prescribed by the Board. Each designation shall be effective as of the date delivered to the Chief Human Resources Officer of the Company prior to the Eligible Director’s death. In the event that all the beneficiaries named by an Eligible Director pursuant to this Article 7.4 predecease the Eligible Director, the Deferred Amount that would have been paid to the Eligible Director or the Eligible Director’s beneficiaries shall be paid to the Eligible Director’s estate. In the event an Eligible Director does not designate a beneficiary, or for any reason such designation is ineffective, in whole or in part, the Deferred Amount that otherwise would have been paid to the Eligible Director or the Eligible Director’s beneficiaries under the Plan shall be paid to the Eligible Director’s estate.

Article 8. Rights of Participants.

8.1 Contractual Obligation. The Plan shall create a contractual obligation on the part of the Company to make payments from the Eligible Directors’ accounts when due. Payment of account balances shall be made out of the general funds of the Company.

8.2 Unsecured Interest. No Eligible Director or party claiming an interest in deferred amounts of an Eligible Director shall have any interest whatsoever in any specific asset of the Company. To the extent that any party acquires a right to receive payments under the Plan, such right shall be equivalent to that of an unsecured general creditor of the Company. The Company shall have no duty to set aside or invest any amounts credited to Eligible Directors’ account under the Plan.

Nothing in this Plan shall create a trust of any kind or a fiduciary relationship between the Company and any Eligible Director. Nevertheless, the Company may establish one or more trusts, with such trustee as the Board may approve, for the purpose of providing for the payment of deferred amounts and earnings thereon. Such trust or trusts may be irrevocable, but the assets thereof shall be subject to the claims of the Company’s general creditors in the event of the Company’s bankruptcy or insolvency. To the extent any deferred amounts and earnings thereon under the Plan are actually paid from any such trust, the Company shall have no further obligation with respect thereto, but to the extent not so paid, such deferred amounts and earnings thereon shall remain the obligation of, and shall be paid by, the Company.

8.3 No Guarantee of Principal or Earnings. Nothing contained in the Plan shall constitute a guarantee by the Company or any other person or entity that the amounts deferred hereunder will increase or shall not decrease in value due to the deemed investment of such amounts in Investment Funds. The Investment Funds may be volatile investments and decreases in the value thereof may result in a loss of some or all of the principal amounts

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deferred hereunder. Thus, it is possible for the value of an Eligible Director’s account to decrease as a result of its investment in the Investment Funds, if the value of the Investment Funds decrease.

Article 9. Securities Laws.

9.1 Investment Representations. The Company may require any Eligible Director to whom an issuance of securities is made, or a deferred delivery obligation is undertaken, as a condition of receiving securities pursuant to such issuance or obligation, to give written assurances in substance and form satisfactory to the Company and its counsel to the effect that such person is acquiring the securities for his/her own account for investment and not with any present intention of selling or otherwise distributing the same in violation of applicable securities laws, and to such other effects as the Company deems necessary or appropriate to comply with Federal and applicable state securities laws.

9.2 Listing, Registration, and Qualification. Anything to the contrary herein notwithstanding, each issuance of securities shall be subject to the requirement that, if at any time the Company or its counsel shall determine that the listing, registration, or qualification of the securities subject to such issuance upon any securities exchange or under any state or federal law, or the consent or approval of any governmental or regulatory body, is necessary or advisable as a condition of, or in connection with, such issuance of securities, such issuance shall not occur in whole or in part unless such listing, registration, qualification, consent, or approval shall have been effected or obtained on conditions acceptable to the Company. Nothing herein shall be deemed to require the Company to apply for or to obtain such listing, registration, or qualification.

9.3 Restrictions on Transfer. The securities issued under the Plan shall be restricted by the Company as to transfer unless the grants are made under a registration statement that is effective under the Securities Act of 1933, as amended, or unless the Company receives an opinion of counsel satisfactory to the Company to the effect that registration under state or federal securities laws is not required with respect to such transfer.

Article 10. Withholding Taxes.

Whenever shares of Stock are to be issued under the Plan, the Company shall have the right prior to the delivery of any certificate or certificates for such shares to require the recipient to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements (if any) attributable to the issuance. In the absence of payment by a grantee to the Company of an amount sufficient to satisfy such withholding taxes, or an alternative arrangement with the grantee that is satisfactory to the Company, the Company may make such provisions as it deems appropriate for the withholding of any such taxes which the Company determines it is required to withhold. Whenever cash is to be paid under the Plan, the Company shall have the right to withhold an amount sufficient to satisfy federal, state and local withholding tax requirements (if any) attributable to such payments.

Article 11. Amendment and Termination of the Plan.

The Board may suspend or terminate the Plan or any portion thereof at any time, and may amend the Plan from time-to-time in any respect the Board may deem to be in the best interests of the Company; provided, however, that no such amendment shall be effective without approval of the shareholders of the Company if shareholder approval of the amendment is then required pursuant to the applicable rules of any securities exchange, or, in the opinion of the Company’s counsel, any other law or regulation binding on the Company.

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Article 12. Effective Date and Duration of the Plan.

The Plan shall become effective at the time that it is approved by the Board. The Plan shall terminate at 11:59 p.m. on December 31, 2008, unless sooner terminated or extended by action of the Board. Elections may be made under the Plan prior to its effectiveness, but no issuances under the Plan shall be made before its effectiveness or after its termination (except with respect to Deferred Amounts previously deferred under the Plan).

Article 13. Miscellaneous.

13.1 Notice. Unless otherwise prescribed by the Board, any notice or filing required or permitted to be given to the Company under the Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified mail to the Chief Human Resources Officer of the Company. Notice to the Chief Human Resources Officer of the Company, if mailed, shall be addressed to the principal executive offices of the Company. Notice mailed to an Eligible Director shall be at such address as is given in the records of the Company. Notices shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.

13.2 No Shareholder Rights Conferred. Nothing contained in the Plan or any agreement hereunder will confer upon any director any rights of a shareholder of the Company unless and until shares of Stock are issued to such Eligible Director upon the payment of Stock.

13.3 Granted Shares Have Same Status as Issued Shares. Any shares of Stock of the Company issued as a stock dividend, or as a result of stock splits, combinations, exchanges of shares, reorganizations, mergers, consolidations or otherwise with respect to shares of Stock granted pursuant to the Plan shall have the same status and be subject to the same restrictions as the shares granted.

13.4 Successors. All obligations of the Company under the Plan shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

13.5 Costs of the Plan. All costs of implementing and administering the Plan shall be borne by the Company.

13.6 Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

13.7 Applicable Law. The Plan and all rights and obligations under the Plan shall be construed in accordance with and governed by the laws of the State of California, excluding its conflicts of laws principles.

13.8 Nontransferability. Eligible Director’s rights to deferred amounts, contributions, and earnings accrued thereon under the Plan may not be sold, transferred, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution, nor shall the company make any payment under the Plan to any assignee or creditor of an Eligible Director or other person based upon community or other marital rights except in accordance with the terms of the Plan.

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1998 REMEDYTEMP, INC. DEFERRED COMPENSATION AND STOCK

OWNERSHIP PLAN FOR OUTSIDE DIRECTORS

DESIGNATION OF BENEFICIARY FORM

NOTE: If you are married on the date of your death and you have designated a primary beneficiary other than, or in addition to, your surviving spouse, your spouse must consent to that designation on the Spouse’s Consent Form attached hereto. If your surviving spouse does not consent to the payment of your death benefits to another primary beneficiary, under the law your spouse will automatically be paid your death benefits.

Marital Status:         ¨ Married         ¨  Single

I hereby designate the following person as my primary beneficiary for any benefit payable on my behalf after my death under the 1998 RemedyTemp, Inc. Deferred Compensation and Stock Ownership Plan for Outside Directors. If I am married and this beneficiary is other than my legal spouse, I understand that this beneficiary designation is not valid unless my spouse consents in writing on the Spouse’s Consent Form attached hereto.

Primary Beneficiary:

Social Security Number:

Relationship to Me:

Address:

If the above-named primary beneficiary is not living as of the date of my death, I request that payment be made to the following contingent beneficiary:

Contingent Beneficiary:

Social Security Number:

Relationship to Me:

Address:

I hereby certify that the foregoing information is correct and I understand that any misstatement of fact or any subsequent change in my marital status may cause my beneficiary designation to be ineffective. I understand that I can change my designation of beneficiary at any time by filing a new form, but that the spousal consent rules described above will continue to apply to any new designation.

Date:
	Participant’s Signature
	Print Name:

1998 REMEDYTEMP, INC. DEFERRED COMPENSATION AND STOCK

OWNERSHIP PLAN FOR OUTSIDE DIRECTORS

SPOUSE’S CONSENT FORM

NOTE: The participant’s spouse must complete this form if the participant is married and is designating a primary beneficiary other than his/her surviving spouse.

I hereby consent to the election by my spouse to name a beneficiary other than myself for his/her benefit under the 1998 RemedyTemp, Inc. Deferred Compensation and Stock Ownership Plan for Outside Directors.

I agree to the designation of                                                           as my spouse’s primary beneficiary and                                               as my spouse’s contingent beneficiary. I understand that the effect of such beneficiary designation is to eliminate any death benefit I would otherwise receive under the 1998 RemedyTemp, Inc. Deferred Compensation and Stock Ownership Plan for Outside Directors in the event my spouse’s death occurs before Awards made to my spouse under the Plan are exercised. I understand further that my spouse must have my consent to designate someone other than myself as his primary beneficiary and that once I give my consent it cannot be revoked.

Date:
	Spouse’s Signature
	Print Name:
Witnessed by:

Notary Public

1998 REMEDYTEMP, INC. DEFERRED COMPENSATION AND STOCK

OWNERSHIP PLAN FOR OUTSIDE DIRECTORS

DEFERRAL ELECTION FORM

    Name: Social Security Number:

Deferral Election:

Pursuant to the terms of the 1998 RemedyTemp, Inc. Deferred Compensation and Stock Ownership Plan for Outside Directors (the “Plan”), I hereby elect to defer     % (enter any whole percentage in increments of 10% from 0% to 100%; enter 0% if you do not wish to participate) of all retainer fees payable to me for service as a member of RemedyTemp’s Board of Directors.

I wish to have the amount deferred allocated to the following deemed Investment Funds in my account as follows (enter any whole percentage in increments of 10% from 0% to 100%):

RemedyTemp Stock Fund	%
Stock Mutual Fund	%
Bond Mutual Fund	%
Total	100%

Please indicate below whether you wish to receive common stock or Phantom Share Units beginning January 1, 2004:

¨ I elect to receive Avnet Common Stock.

¨ I elect to receive Phantom Share Units.

The election is to be effective January 1, 2004 and will remain in effect through December 31, 2004 and for future years until superseded by another election form. Any new elections will not be effective until the beginning of the next calendar year, provided that they are received by the November 30^th preceding such calendar year. Deferral elections, once made for a calendar year, are irrevocable except in the event of Financial Hardship (as defined in the Plan).

Election for Payment of Account Balance:

All amounts payable under the RemedyTemp Stock Investment Fund will be paid in the form of RemedyTemp stock. All amounts deemed to be invested in the other Investment Funds will be credited with gains (or losses) of the underlying funds and will be distributed in the form of cash. All payments, regardless of option selected, will commence in January of the calendar year following your ceasing to be a member of the Board of Directors for any reason. An election to change the form of payout will not be effective unless received at least 1 year prior to your retirement or other termination of director status.

¨ Pay in one lump sum.

¨ Pay in              annual installments (less than 10).

By signing below, I confirm my above elections, and acknowledge receiving and reading the Plan’s Prospectus.

Signature Date

EX-10.34

EXHIBIT 10.34

SECOND AMENDMENT TO LEASE

This Second Amendment to Lease (the “Amendment”) is made and entered into as of October 1, 2003 by and between OTR, an Ohio general partnership, as nominee of the State Teachers Retirement Board of Ohio, a statutory organization created by the laws of the State of Ohio (“Landlord”), and REMEDYTEMP, INC., a California corporation (“Tenant”), with reference to the following facts, each of which the parties agree is true:

A.    Landlord’s predecessor-in-interest, Parker-Summit, LLC, a California limited liability company, and Tenant entered into a Lease dated as of March 21, 1997 pursuant to which Tenant leased that certain premises described as approximately 52,741 rentable square feet of space located on the first (1^st) and second (2^nd) floors, known as Suite 100 (the “Original Premises”) in the office building owned by Landlord located at 101 Enterprise, Aliso Viejo, California (the “Building”), the commencement date of which was September 14, 1998, as such Lease has been amended by that certain Letter Amendment thereto entered into between Landlord and Tenant dated as of February 4, 1999 (collectively, the “Lease”).

B.    Tenant now desires to modify the Original Premises to reduce the Tenant’s rentable area located on the first (1^st) floor, Suite 100 of the Building by approximately 1,539 rentable square feet, thereby reducing the Original Premises to the areas on the first (1^st) and second (2^nd) floors that are delineated on Exhibit A attached hereto and made a part hereof (the “New Premises”), and to make other modifications to the Lease, and in connection therewith, Landlord and Tenant desire to amend the Lease as hereinafter provided.

C.    Capitalized terms used herein without definition shall have the meanings given to them in the Lease.

NOW, THEREFORE, FOR VALUABLE CONSIDERATION, the receipt and adequacy of which are hereby acknowledged, Landlord and Tenant agree as follows:

1.    New Premises.    Commencing on October 1, 2003 (the “New Premises Commencement Date”), the Original Premises shall be reduced by approximately 1,539 rentable square feet (the “Reduction Space”) thereby reducing the Original Premises to the areas on the first (1^st) and second (2^nd) floors that are delineated on Exhibit A attached hereto. Therefore, for purposes of the Lease and this Amendment, effective as of the New Premises Commencement Date, the “Premises” shall mean the New Premises. The parties hereby stipulate that the New Premises contain 51,202 rentable square feet. Notwithstanding the foregoing, Tenant shall have the right to continue to occupy the Reduction Space in accordance with the terms and conditions of the Lease (except for the payment of Rent) until March 31, 2004, whereupon Tenant shall surrender the Reduction Space in accordance with the terms of the Lease. If Tenant fails to so surrender the Reduction Space on or before March 31, 2004, then the holdover provisions of the Lease shall apply to such continued occupancy of the Reduction Space.

2.    Extension of Term.    The Expiration Date of the Lease is hereby changed to September 30, 2010.

3.    Construction of Tenant Improvements; Landlord’s Work.    Subject to and in accordance with the provisions of Articles 12 and 13 of the Lease, Tenant shall have the right to construct certain tenant improvements, including any necessary cabling, re-configuration and/or re-assembly of furniture systems (“Tenant’s Improvements”) to the interior of the New Premises in accordance with those specifications and drawings prepared by Tenant and approved by Landlord in its reasonable discretion, including fully engineered working drawings (“Tenant’s Plans”). Tenant shall have the right to engage a space planner of its choice to prepare Tenant’s Plans, and Landlord shall provide Tenant an allowance of $0.12 per rentable square foot of the New Premises for the creation of Tenant’s Plans. In addition, Tenant shall be entitled to a one-time tenant improvement allowance for such improvements in an amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000.00) (“Maximum Tenant Improvement Allowance”). All costs, expenses, fees or other expenses, directly or indirectly allocable or attributable to the construction contemplated under Tenant’s Plans in excess of the Maximum Tenant Improvement Allowance shall be the sole liability and responsibility of Tenant. Any portion of the Maximum Tenant Improvement Allowance that is not used by Tenant by September 30, 2005 for the installation and construction of the Tenant Improvements shall be retained by Landlord. Tenant shall not be required to perform Restoration (as defined in Section 2.3 of the Work Letter attached as Exhibit C to the Original Lease (the “Work Letter”)) of the kitchen area on the ground floor of the New Premises upon the termination of the Lease. Any construction work required to convert the ground floor of the Building from single-tenant occupancy to a multi-tenant occupancy, including and fire or life safety requirements, shall be performed by Landlord at Landlord’s sole cost and expense. Notwithstanding anything to the contrary in the Lease or herein, there shall be no supervision or construction and management review fee charged by Landlord or deducted from the Maximum Tenant Improvement Allowance relative to the construction of Tenant’s Improvements.

4.    Payment of Base Rent.    Commencing on the New Premises Commencement Date, the annual Base Rent payable by Tenant to Landlord for the New Premises shall be as follows:

For the Period	Base Rent/RSF/Month
10/1/03 – 2/29/04	$	1.80
3/1/04 – 9/30/07	$	1.80
10/1/07 – 9/30/10	$	2.05

Provided that Tenant is not in default under the Lease, Tenant’s obligation to pay Base Rent for the period 10/1/03 – 2/29/04 (the “Abatement Period”) shall be abated.

5.    Additional Rent.    Commencing on the New Premises Commencement Date, (a) “Tenant’s Proportionate Share” shall be 63.73% (based on 80,348 rentable square feet in the Building), (b) the Base Year shall be calendar year 2004, and (c) the amount of increase in Controllable Operating Costs (as defined below) payable by Tenant over Controllable Operating

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Costs for any prior year (other than the Base Year) shall not exceed 4% per annum. The phrase “Controllable Operating Costs” as used herein shall mean all Operating Costs for which the amount of increase is within Landlord’s reasonable direct control (e.g., excluding Operating Costs such as utilities, real estate taxes, insurance premiums and increases due to union related labor costs). Furthermore, Landlord shall not pass through any increased costs resulting from a Real Estate Tax increase due to a change of ownership in the Building or Project.

6.    Option to Terminate.    Provided that Tenant is not in default of any terms or conditions of the Lease, Tenant shall have a one-time right to terminate the Lease effective September 30, 2008 (“Termination Date”), provided that (a) Tenant delivers to Landlord written notice of its intent to exercise its option to terminate not later than nine (9) months prior to the Termination Date and (b) on or before the Termination Date, Tenant pays to Landlord a termination fee equal to the sum of $197,128, plus the unamortized portion of all leasing commissions paid by Landlord in connection with this Amendment pursuant to Paragraph 20 below, plus the unamortized portion of the Maximum Tenant Improvement Allowance paid by Landlord pursuant to Paragraph 3 above.

7.    Option to Extend.    Tenant shall have one option (“Extension Option”) to extend the Term for a period of sixty (60) months (“Option Term”). The Extension Option must be exercised by irrevocable notice in writing of such exercise, delivered by Tenant to Landlord, not later than nine (9) months prior to the end of the Term. The Base Rent for the Option Term shall be the lesser of (i) the Base Rent then being paid or (ii) ninety-five percent (95%) of the then Fair Market Value (determined in accordance with Section 38.2 of the Lease). Upon exercise of the Extension Option, the Base Year for determination of Operating Costs during the Option Term shall be the first (1^st) year of the Option Term. Tenant shall have no other right to extend the Term. The Extension Option is personal to Tenant and shall only be transferable to a permitted assignee under Article 16 of the Lease to which Tenant assigns its entire interest in the Lease.

8.    Signage.    In addition to Tenant’s signage rights provided under Section 36.1 of the Lease, Tenant shall have a one-time right, at Tenant’s sole cost and expense, to relocate one of Tenant’s exclusive building top signs to a different location on the Building as mutually approved by Landlord and Tenant, subject to all governmental codes, city guidelines and the Project sign criteria. Tenant’s signage rights under the Lease are personal to Tenant and may not be assigned, voluntarily or involuntarily, by or to any person or entity other than the original Tenant.

9.    Parking.    Tenant shall be entitled to parking spaces as provided in Section 2.12 of the Lease. All parking allocated to Tenant, including reserved parking spaces, shall be free for the Term and for the Option Term (if Tenant exercises its Extension Option pursuant to Paragraph 7 of this Amendment).

10.    Services and Utilities.    The first sentence of Section 9.4 of the Lease is revised in full to read as follows: “Normal hours of operation for the Project are 7:00 a.m. to 7:00 p.m. Monday through Friday and 8:00 a.m. to 2:00 p.m. on Saturday, excluding the following

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holidays: New Years Day, Presidents Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.”

11.    Non-Disturbance Agreements.    Landlord hereby represents that, as of the date of execution and delivery of this Amendment, there is no Encumbrance (as defined in Article 24 of the Lease) currently encumbering the Project, the Building or the Premises or any part thereof. Tenant’s obligation under Article 24 of the Lease to subordinate the Lease to any future Encumbrance shall be subject to Tenant receiving a commercially reasonable non-disturbance agreement from the applicable Lender with respect to such Encumbrance.

12.    Interruption of Services.    In the event Tenant’s use of all or a part of the Premises is materially impaired such that Tenant does not and cannot operate for business from such affected part of the Premises for four (4) or more consecutive business days due to (a) the interruption of utility or mechanical services to the Premises to be provided by Landlord under the Lease or (b) Tenant being denied entry into the Premises, and such denial is (i) caused by Landlord, its invitees, vendors or contractors or (ii) a covered peril under Landlord’s insurance policy, then Tenant’s obligation to pay Base Rent and additional rent charges payable shall be proportionately abated or reduced, as the case may be, for such part of the Premises from the commencement of the fifth (5^th) business day of the impairment until the applicable impairment is cured.

13.    Building Generator.    Tenant shall have the right to install, at grade level or below grade, in the area shown on Exhibit B hereto (the “Unit Area”) the following improvements (collectively “Generator Unit”): (a) a fully enclosed generator (“Generator”); (b) an above-ground storage tank (“AST”) which shall not exceed one thousand (1,000) gallons in capacity, shall be double-walled, shall contain diesel fuel only (to only power the Generator), and which shall employ at a minimum a double containment system whereby if the first containment system fails, a second containment system shall be present to prevent releases of Hazardous Material (which may be a sealed, un-cracked concrete slab containment area without drains which is sufficient to constitute the second containment system, provided it is large enough to completely contain a release of the maximum volume of diesel fuel which could be present in the AST); and (c) other associated improvements and conduits pre-approved by Landlord and reasonably necessary to operate the Generator and distribute the power therefrom. In connection with the installation of the Generator Unit, Tenant shall have the right to furnish and install empty conduits from the Unit Area to the Premises.

        a.    Generator License.    Landlord hereby grants Tenant a license (the “Generator License”) to use the Unit Area for the purpose of installing, operating and maintaining the Generator Unit at Tenant’s sole cost and expense.

        b.    Use Restrictions.    The Generator shall be used only for periodic testing, maintenance and for emergency power to the Premises and/or other spaces within the Project that may be leased by Tenant or affiliates of Tenant. Tenant covenants that the Generator Unit and the storage, removal, transportation and disposal of all fuels consumed thereby shall comply with

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all applicable laws (including, without limitation, Hazardous Materials Laws, as defined below) and code requirements, the cost of which compliance shall be entirely borne by Tenant.

        For purposes of the Lease, diesel fuel constitutes a “Hazardous Material”; however, Tenant is permitted to transport to, maintain in, and use from the AST diesel fuel; provided all such activities are performed in strict accordance with all applicable laws including without limitation Hazardous Material Laws (defined below). Tenant shall be solely responsible for complying with any and all federal, state, and local laws, statutes, zoning restrictions, ordinances, rules, regulations, guidelines, permits, licenses, governmental actions, orders, decrees, judgments, and rulings now or hereafter in force relating to the use of any Hazardous Material used or consumed by the Generator Unit and any requirements relating to the use of any Hazardous Material used or consumed by the Generator Unit of any duly constituted public authors having jurisdiction over the Project, including, without limitation, all permitting obligations (collectively, “Hazardous Material Laws”). For purposes of the Hazardous Material Laws, Tenant shall be the owner and operator of the AST. Any acknowledgment, consent or approval by Landlord of Tenant’s use or operation of the Generator Unit shall not constitute an assumption of risk respecting the same nor a warranty or certification by Landlord that Tenant’s proposed use and operation is safe or reasonable or in compliance with Hazardous Material Laws. All handling, use, storage and disposal of Hazardous Material relating to the Generator Unit shall be accomplished by Tenant at its sole cost and expense. From time to time during the Lease Term and for up to thirty (30) days thereafter, Landlord may retain a registered environmental consultant to conduct an investigation of the Generator Unit, the Unit Area and/or other portions of the Project which may be affected by any leakage, contamination or release of or by Hazardous Materials from the Generator Unit or in connection with any transportation, removal or disposal of Hazardous Materials to, from or relating to the Generator Unit: (i) for Hazardous Material contamination originating from the Generator Unit, and (ii) to assess the activities of Tenant for compliance with Hazardous Material Laws relative to the Generator Unit and to recommend the use of procedures intended to reasonably reduce the risk of a release of Hazardous Material (“Environmental Assessment”). If the Environmental Assessment discloses any material breach of Hazardous Material Laws by Tenant or any of its agents, contractors, servants, employees or licensees, then the cost thereof shall be the sole responsibility of Tenant payable upon demand as additional rent under the Lease. Otherwise, the costs of the Environmental Assessment shall be the responsibility of Landlord. If the Environmental Assessment discloses any breach of Hazardous Material Laws by Tenant or any of its agents, contractors, servants, employees or licensees relative to the Generator Unit, the cost and expenses of all cleanup and remediation thereof shall be the sole responsibility of Tenant payable upon demand by Landlord. If Landlord so requires, Tenant shall, at its sole cost and expenses, perform all Hazardous Materials cleanup and remediation required or reasonably recommended in the Environmental Assessment, and comply with all reasonable recommendations contained in the Environmental Assessment, including any reasonable recommendations with respect to precautions which should be taken with respect to Tenant’s activities at the Project relative to the Generator Unit or any reasonable recommendations for additional testing and studies to detect the presence of Hazardous Material relative to the Generator Unit. If any monitoring procedure, cleanup or remediation is required as a consequence of any Hazardous Material contamination

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by the Generator Unit, and the same is not completed (to the reasonable satisfaction of Landlord) prior to the expiration or earlier termination of the Lease, then Tenant shall perform and complete the same notwithstanding any such expiration or earlier termination. The foregoing obligations of Tenant are not intended to, and do not liquidate, limit or waive Tenant’s defense and indemnity obligations set forth in the immediately following paragraph or elsewhere under the Lease.

        c.    Removal of Generator Unit.    On or before the expiration or earlier termination of the Lease, at its own cost and expense, the Generator Unit and all related facilities in the Unit Area, and return the Unit Area to its condition existing prior to Tenant’s installation of the Generator Unit. If Tenant fails to complete such removal or fails to repair any damage caused by such removal, Landlord may complete such removal and repair such damage and charge the reasonable cost thereof to Tenant, which amounts shall be immediately payable by Tenant.

        d.    Rent.    Tenant shall pay all costs incurred by Landlord or Tenant for Tenant’s use of Building utilities in connection with the Generator Unit (including the cost of any separate metering requested by Landlord). In addition, Tenant shall pay for all costs in connection with the operation, maintenance, and repair of the Generator Unit and the Unit Area, and for all insurance required to be carried by Tenant therefor.

        e.    Approvals and Permits.    During the Term of the Lease and subject to the terms of Subsection f below, Tenant may install and operate the Generator Unit in the Unit Area, provided that: (i) Tenant has obtained Landlord’s prior written approval of the plans and specifications for the Generator Unit and all working drawings for the installation of the Generator Unit (collectively, the “Drawings”); (ii) Tenant has obtained all required permits and governmental or quasi-governmental approvals to install and operate the Generator Unit; and (iii) Tenant complies with all applicable governmental and quasi-governmental laws, regulations and building codes in connection with the Unit Area and the Generator Unit. Once Landlord has given its requisite approval, Tenant may not alter or modify the Drawings, or the actual installation of the Generator Unit without Landlord’s prior written consent.

        f.    Compatibility with Building Systems and Operations.    The Generator Unit shall be compatible with the Building systems and equipment and shall not impair or interfere with the use or operation of any other equipment, device or other improvement located at, in, on or about the Project or any portion thereof. If the installation, maintenance, repair, operation or removal of the Generator Unit requires any changes or modifications to any structural systems or components of the Building or any of the Building’s systems or equipment, Landlord shall have the right to either (i) perform such changes or modifications and Tenant shall pay for the reasonable costs thereof upon demand or (ii) require Tenant to perform such changes or modifications at Tenant’s sole cost and expense. If required by Landlord, in its sole discretion, or any governmental agency or authority, Tenant shall fully enclose the Unit Area with suitable fencing or other required enclosures, subject to the terms of Subsection e above. Landlord shall have the right to post notices of non-responsibility in connection with any work performed by

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Tenant or its agents or contractors in connection with the Generator Unit. The terms and conditions of Article 12 of the Lease shall specifically be applicable in connection with any work performed by Tenant or its agents or contractors in connection with the Generator Unit.

        g.    Use of Unit Area.    Except as expressly set forth in this Paragraph 13, Tenant will not store any materials in the Unit Area. Tenant shall use the Unit Area solely for the Generator Unit and not for any other purpose. Landlord and its agents may enter and inspect the Unit Area at any time. Concurrently with Tenant’s installation of any locks for the Unit Area, Tenant shall deliver to Landlord a key for any such lock.

        h.    Indemnification and Insurance.    Tenant agrees and acknowledges that it shall use the Unit Area at its sole risk, and Tenant absolves and fully releases Landlord and its directors, officers, agents, servants, employees, and independent contractors (collectively, “Landlord Parties”) (i) from any and all claims, loss, cost, damage, expense and liability (including without limitation court costs and reasonable attorneys’ fees) (“Liabilities”) that Tenant may suffer to its personal property located in the Unit Area, or (ii) that the Landlord Parties may suffer as a direct or indirect consequence of Tenant’s use of the Unit Area, the Generator Unit or access to the Unit Area including without limitation, the use or misuse thereof; the operation or failure thereof; any violation of Hazardous Materials Laws or other law; personal injury; property damage; and any release of Hazardous Materials, or (iii) any other Liabilities arising from or related to the Lease. In addition, Tenant agrees to indemnify, defend, protect, and hold the Landlord Parties harmless from and against any Liabilities resulting as a direct or indirect consequence of Tenant’s use of the Unit Area, the Generator Unit or access areas to the Unit Area. In addition, Tenant shall procure and maintain, at Tenant’s sole expense, insurance in connection with the Unit Area, the Generator Unit and the obligations assumed by Tenant under this Paragraph 13, in the same amounts and with the same types of coverage as required to be procured by Tenant under the Lease. The provisions of this Subsection h shall survive the expiration or earlier termination of the Lease

        i.    Termination of Generator License.    If Tenant fails to cure the breach of any covenants set forth in this Paragraph 13 within fifteen (15) days following notice from Landlord, Landlord shall have the right to terminate the Generator License upon notice to Tenant.

        j.    No Warranty.    Landlord has made no warranty or representation that the Generator Unit is permitted by law and Tenant assumes all liability and risk in obtaining all permits and approvals necessary for the installation and use of the Generator Unit.

        k.    Generator License Personal.    The Generator License is personal to the original Tenant and may not be assigned, voluntarily or involuntarily, by or to any person or entity other than the original Tenant.

14.    Roof Rights.    Tenant shall have the right to install up to two (2) satellite dishes (referred to collectively as the “Satellite Dish”) on the roof of the Building in accordance with this Paragraph 14.

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        a.    Satellite License.    Landlord hereby grants Tenant a license (the “Satellite License”) to use an additional area located on the roof area of the Building for the purpose of installing, operating and maintaining two (2) satellite dishes (referred to in this Work Letter collectively as the “Satellite Dish”) at Tenant’s sole cost and expense.

        b.    Roof Location.    Landlord and Tenant shall mutually agree upon an area on the roof of the Building (which shall in no event exceed the dimensions of 3 ft. by 3 ft.) (the “Roof Location”) that Tenant may use for the purpose of installing, operating and maintaining the Satellite Dish. Landlord shall have the right to use, and to grant to third parties the right to use portions of the roof of the Building other than the Roof Location.

        c.    Access to Satellite Dish.    During the Term of the Lease, Tenant during business hours shall have the right of access to the Satellite Dish and the Roof Location upon at least two (2) business days prior written notice to Landlord, or any shorter time period as Landlord may allow in its sole discretion.

        d.    Removal of Satellite Dish.    On or before the expiration or earlier termination of the Lease, Tenant shall remove, at its own cost and expense, the Satellite Dish and all related facilities in the Roof Location, and return the Roof Location to its condition existing prior to Tenant’s installation of the Satellite Dish. If Tenant fails to complete such removal or fails to repair any damage caused by such removal, Landlord may complete such removal and repair such damage and charge the reasonable cost thereof to Tenant, which amounts shall be immediately payable by Tenant.

        e.    Rent.    Tenant shall pay all costs incurred by Landlord or Tenant for Tenant’s use of Building utilities in connection with the Satellite Dish (including the cost of any separate metering requested by Landlord). In addition, Tenant shall pay for all costs in connection with the operation, maintenance, and repair of the Satellite Dish and the Roof Location, and for all insurance required to be carried by Tenant therefor.

        f.    Approvals and Permits.    During the Term of the Lease and subject to the terms of Subsection g below, Tenant may install and operate the Satellite Dish in the Roof Location, provided that: (i) Tenant has obtained Landlord’s prior written approval of the plans and specifications for the Satellite Dish and all working drawings for the installation of the Satellite Dish (collectively, the “Drawings”); (ii) Tenant has obtained all required permits and governmental or quasi-governmental approvals (including satisfying any applicable Federal Communications Commission and Federal Aviation Administration requirements) to install and operate the Satellite Dish; and (iii) Tenant complies with all applicable governmental and quasi-governmental laws, regulations and building codes in connection with the Roof Location and the Satellite Dish. Once Landlord has given its requisite approval, Tenant may not alter or modify the Drawings, or the actual installation of the Satellite Dish without Landlord’s prior written consent.

        g.    Compatibility with Building Systems and Operations. The Satellite Dish shall be compatible with the Building systems and equipment and shall not impair or interfere

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with window washing or the use or operation of any chiller units, cooling tower, emergency generator, elevators, machine rooms, helipads, ventilation shafts, communications equipment or any other equipment, device or other improvement located at, in, on or about the Project or any portion thereof. If the installation, maintenance, repair, operation or removal of the Satellite Dish requires any changes or modifications to any structural systems or components of the Building or any of the Building’s systems or equipment, Landlord shall have the right to either (i) perform such changes or modifications and Tenant shall pay for the reasonable costs thereof upon demand or (ii) require Tenant to perform such changes or modifications at Tenant’s sole cost and expense. If required by Landlord, in its sole discretion, or any governmental agency or authority, Tenant shall fully enclose the Roof Location with suitable fencing or other required enclosures, subject to the terms of Subsection f above. Landlord shall have the right to post notices of non-responsibility in connection with any work performed by Tenant or its agents or contractors in connection with the Satellite Dish. The terms and conditions of Article 12 of the Lease shall specifically be applicable in connection with any work performed by Tenant or its agents or contractors in connection with the Satellite Dish.

        h.    Use of Roof Location.    Tenant will not store any materials in the Roof Location. Tenant shall use the Roof Location solely for the Satellite Dish and not for any other purpose. Landlord and its agents may enter and inspect the Roof Location at any time. Concurrently with Tenant’s installation of any locks for the Roof Location, Tenant shall deliver to Landlord a key for any such lock. Tenant shall not interfere with the mechanical, electrical, heating, ventilation and air conditioning, or plumbing systems of the Building or the operation, reception, or transmission of any other satellite, microwave, or other broadcasting or receiving devices that are, or will be, located on the roof of, or in, the Building.

        i.    Indemnification and Insurance.    Tenant agrees and acknowledges that it shall use the Roof Location at its sole risk, and Tenant absolves and fully releases Landlord Parties (i) from any and all Liabilities that Tenant may suffer to its personal property located in the Roof Location, or (ii) that the Landlord Parties may suffer as a direct or indirect consequence of Tenant’s use of the Roof Location, the Satellite Dish or access to the Roof Location, or (iii) any other Liabilities arising from or related to the Lease. In addition, Tenant agrees to indemnify, defend, protect, and hold the Landlord Parties harmless from and against any Liabilities resulting as a direct or indirect consequence of Tenant’s use of the Roof Location, the Satellite Dish or access areas to the Roof Location. In addition, Tenant shall procure and maintain, at Tenant’s sole expense, insurance in connection with the Roof Location, the Satellite Dish and the obligations assumed by Tenant under this Paragraph 14, in the same amounts and with the same types of coverage as required to be procured by Tenant under the Lease.

        j.    Termination of Satellite License.    If Tenant fails to cure the breach of any covenants set forth in this Paragraph 14 within fifteen (15) days following notice from Landlord, Landlord shall have the right to terminate the Satellite License upon notice to Tenant.

        k.    No Warranty.    Landlord has made no warranty or representation that the Satellite Dish is permitted by law and Tenant assumes all liability and risk in obtaining all

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permits and approvals necessary for the installation and use of the Satellite Dish. Landlord does not warrant or guaranty that Tenant will receive unobstructed transmission or reception to or from the Satellite Dish and Tenant assumes the liability for the transmission and reception to and from the Satellite Dish.

        l.    Satellite License Personal.    The Satellite License is personal to the original Tenant and may not be assigned, voluntarily or involuntarily, by or to any person or entity other than the original Tenant.

15.    Janitorial Service.    Landlord shall provide janitorial services for the Premises five (5) days per week, excluding holidays, with supervision of the cleaning crew.

16.    Security.    Landlord currently provides onsite security of the Building from 7 a.m. to 11 p.m. Monday through Friday, which includes patrol of corridors and stairwells of the Common Areas and parking facilities. Tenant, at its sole cost and expense (which may be deducted from the Maximum Tenant Improvement Allowance), shall have the right to install a card access system to the Premises, subject to Landlord’s reasonable approval.

17.    Holding Over.    Notwithstanding the provisions of Section 17 of the Lease concerning holding over, the Base Rent payable by Tenant shall not be increased as provided therein during the first 90 days of any such holding over by Tenant.

18.    Security Deposit.    The provisions of Sections 2.16 and 7 of the Lease relating to the Security Deposit are hereby deleted from the Lease. Landlord shall apply the amount of the Security Deposit currently held by Landlord (i.e., $63,618.83) as partial payment of Base Rent for the first month for which Base Rent is payable pursuant to this Amendment.

19.    Notices.    Landlord’s Mailing Address as set forth in Section 2.10 of the Lease is revised to read as follows:

State Teachers’ Retirement System of Ohio

c/o CB Richard Ellis

95 Enterprise, Suite 310

Aliso Viejo, California 92656

Attn: Property Manager

With a copy to:

State Teachers Retirement System of Ohio

44 Montgomery Street, Suite 2388

San Francisco, CA 94104-4704

Attn: Executive Director, Western Region

20.    Brokers.    Landlord and Tenant hereby warrant to each other that they have no dealings with any real estate broker, agent or finder in connection with the negotiation of this Amendment, excepting only CB Richard Ellis, acting on behalf of Landlord, and Cushman &

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Wakefield, acting on behalf of Tenant (the “Brokers”), and that they know of no other real estate broker, agent or finder who is entitled to a commission in connection with this Amendment. Each party agrees to indemnify and defend the other party against and hold the other party harmless from any and all Liabilities with respect to any leasing commission or other compensation alleged to be owing on account of the indemnifying party’s dealings with any real estate broker, agent or finder other than the Brokers. Landlord shall pay any commissions owing to the Brokers as set forth in a separate agreement(s) between Landlord and Brokers pertaining thereto. The terms of this Paragraph 20 shall survive the expiration or earlier termination of this Amendment.

21.    Authorization Disclosure.    This Amendment is executed by certain employees of The State Teachers Retirement System of Ohio (“STRS”), not individually, but solely on behalf of Landlord, the authorized nominee and agent for STRS. In consideration for entering into this Amendment, Tenant hereby waives any right to bring a cause of action against the individuals executing this Amendment on behalf of Landlord (except for any cause of action based upon lack of authority or fraud), and all persons dealing with Landlord must look solely to Landlord’s assets for the enforcement of any claim against Landlord, and the obligations hereunder are not binding upon, nor may resort be had to the private property of any of the trustees, officers, directors, employees or agents of STRS.

22.    Time of Essence.    Time is of the essence with respect to the performance of every provision of this Amendment.

23.    No Further Modification.    Except as expressly modified by this Amendment, all of the terms and provisions of the Lease shall remain unmodified and in full force and effect.

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IN WITNESS WHEREOF, Landlord and Tenant have hereunto set their hands and seals as of the day, month and year first written above as to this Amendment.

LANDLORD:

OTR, an Ohio general partnership, as nominee of the STATE TEACHERS RETIREMENT BOARD OF OHIO, a statutory organization created by the laws of the State of Ohio

By:                                                                                        

Name:                                                                                 

Title:                                                                                    

TENANT:

REMEDYTEMP, INC., a California corporation

By:                                                                                        

Name:                                                                                 

Title:                                                                                    

By:                                                                                        

Name:                                                                                 

Title:                                                                                    

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EXHIBIT “A”

Depiction of New Premises

(see attached diagram)

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EXHIBIT “B”

Depiction of Unit Area

(see attached diagram)

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EX-10.35

EXHIBIT 10.35

FIRST AMENDMENT AND WAIVER TO CREDIT AGREEMENT

This First Amendment and Waiver to Credit Agreement (the “Amendment”) is effective as of November 14, 2003, among RemedyTemp, Inc. (the “Borrower”), each lender party hereto (collectively, the “Lenders” and individually a “Lender”) and Bank of America, N. A., as Administrative Agent, Swing Line Lender and L/C Issuer. Capitalized terms used herein without definition shall have the same meaning as set forth in the Credit Agreement (defined below).

RECITALS

A.    The Borrower, the Lenders and the Administrative Agent entered into that certain Credit Agreement dated as of July 31, 2002 (the “Agreement”).

B.    The Borrower, the Lenders and the Administrative Agent desire to amend certain terms and provisions of the Agreement.

C.    Borrower requests that the Administrative Agent and the Lenders temporarily waive, and such parties are willing to waive until January 15, 2004, the Borrower’s failure to comply with a certain provision of the Agreement for the period specified herein on the terms herein provided.

AGREEMENT

1.    Amendments

To induce the Administrative Agent and the Lenders to waive the covenants violations described in Section 2 below for the period specified therein, the Borrower is willing to grant to the Administrative Agent, for the benefit of the Administrative Agent and the Lenders (including the Swing Line Lender and L/C Issuer), a security interest in certain personal property of the Borrower. The Agreement is hereby amended as follows:

1.1    Section 1.01 of the Agreement is amended to add as a defined term “Security Agreement,” in the appropriate alphabetical order, to read as follows:

“Security Agreement” means the Security Agreement made by the Borrower in favor of the Administrative Agent, on behalf of the Lenders and the Administrative Agent, substantially in the form of Exhibit G.”

1.2    The definition of “Loan Documents” in Section 1.01 of the Agreement is amended in its entirety to read as follows:

“Loan Documents” means this Agreement, each Note, the Fee Letter, the Security Agreement and the Guaranty.”

1.3    Article II of the Agreement is amended to add a new Section 2.15 to read as follows:

“2.15 Collateral. All obligations of the Borrower to the Lenders and the Administrative Agent arising under the Loan Documents to which the Borrower is a party shall be secured by personal property the Borrower now owns or will own in the future as described in the Security Agreement.”

1.4    The Agreement is amended to add Exhibit G in the form attached to this Amendment.

2.    Waivers.  The Administrative Agent and the Lenders (including the Swing Line Lender and L/C Issuer) hereby waive until January 15, 2004, the failure of the Borrower to comply with the provisions of Section 7.11(c) (Fixed Charge Coverage Ratio) and Section 7.11(d) (Consolidated EBITDA) of the Agreement for the fiscal periods ending June 30, 2003 and September 28, 2003. The waiver granted herein is limited expressly as herein provided and shall not be deemed a waiver of this provision for the same period after January 15, 2004, or for any other period or a waiver of any other term, condition or provision of the Agreement. This waiver shall expire on January 15, 2004 and be of no further effect.

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3.    Waiver Fee.  The Borrower shall pay to the Administrative Agent for the benefit of the Lenders a waiver fee in the amount of Eighty Thousand Dollars ($80,000.00) (“Waiver Fee”). The Waiver Fee shall be payable as follows: (i) Twenty Thousand Dollars ($20,000.00) payable on the date of execution of this Amendment and (ii) Sixty Thousand Dollars ($60,000.00) payable on the earlier of the date of termination of the Agreement or January 15, 2004.

4.    Representations and Warranties.  When the Borrower signs this Amendment, the Borrower hereby represents and warrants to the Administrative Agent and the Lenders that: (i) except as herein provided, no default specified in the Agreement and no event which with notice or lapse of time or both would become such a default has occurred, (ii) the representations and warranties of Borrower pursuant to the Agreement are true on and as of the date hereof as if made on and as of said date, (iii) the making and performance by Borrower of this Amendment have been duly authorized by all necessary action, and (iv) no consent, approval, authorization, permit or license is required in connection with the making or performance of the Agreement as amended hereby.

5.    Conditions.  This Amendment will be effective when the Administrative Agent receives the following items, in form and content acceptable to the Administrative Agent.

5.1    This Amendment duly executed by all parties hereto.

5.2    The Security Agreement duly executed by all parties thereto.

5.3    Payment of that portion of the Waiver Fee payable on execution of this Amendment.

5.4    Payment of all out-of-pocket expenses, including attorneys’ fees, incurred by the Administrative Agent in connection with the preparation of this Amendment.

6.    Effect of Amendment.  Except as provided in this Amendment, the Agreement shall remain in full force and effect and shall be performed by the parties hereto according to its terms and provisions.

IN WITNESS WHEREOF, this Amendment has been executed by the parties hereto effective as of the date first above written.

REMEDYTEMP, INC.

By:

Name:

Title:

BANK OF AMERICA, N.A., as Administrative Agent

By:

Name:

Title:

BANK OF AMERICA, N.A., as Lender, L/C Issuer and Swing Line Lender

By:

Name:

Title:

UNION BANK OF CALIFORNIA, N. A., as a Lender

By:

Name:

Title:

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EXHIBIT G

SECURITY AGREEMENT (RECEIVABLES)

1.    BACKGROUND.  Reference is made to that certain Credit Agreement dated as of July 31, 2002, as amended from time to time (the “Credit Agreement”) among RemedyTemp, Inc. (the “Borrower”), certain lenders party thereto (collectively, the “Lenders” and individually a “Lender”) and Bank of America, N. A., in its capacity as administrative agent (the “Administrative Agent”). Capitalized terms used herein without definition shall have the same meaning as set forth in the Credit Agreement.

2.    THE SECURITY.  The Borrower hereby assigns and grants to Bank of America, N.A., as Administrative Agent, for the benefit of the Lenders and the Administrative Agent, a security interest in the following described property (“Collateral”):

A.    All of the following, whether now owned or hereafter acquired by Borrower: accounts, contract rights, chattel paper and instruments.

B.    All negotiable and nonnegotiable documents of title now owned or hereafter acquired by Borrower covering any of the above described property.

C.    All rights under contracts of insurance now owned or hereafter acquired by Borrower covering any of the above described property.

D.    All proceeds, product, rents and profits now owned or hereafter acquired by Borrower of any of the above described property.

E.    All books and records now owned or hereafter acquired by Borrower pertaining to any of the above-described property, including but not limited to any computer readable memory and any computer hardware or software necessary to process such memory (“Books and Records”).

3.    THE INDEBTEDNESS.  The Collateral secures and will secure all Indebtedness of Borrower to the Administrative Agent and the Lenders (including the Swing Line Lender and the L/C Issuer). For the purposes of this Agreement, “Indebtedness” means all loans, advances and other extensions of credit made by the Lenders (including the Swing Line Lender and L/C Issuer) and the Administrative Agent to Borrower and all other obligations and liabilities of Borrower to the Lenders (including the Swing Line Lender and L/C Issuer) and the Administrative Agent arising under the Credit Agreement whether now existing or hereafter incurred or created, whether voluntary or involuntary, whether due or not due, whether absolute or contingent, or whether incurred directly or acquired by any Lender by assignment or otherwise.

4.    BORROWER’S COVENANTS.  Borrower covenants and warrants that unless compliance is waived by the Administrative Agent and the Lenders in writing:

A.    Borrower will properly preserve the Collateral; defend the Collateral against any adverse claims and demands; and keep accurate Books and Records.

B.    Borrower has notified the Administrative Agent in writing of, and will notify the Administrative Agent in writing prior to any change in the locations of (i) Borrower’s place of business or Borrower’s chief executive office if Borrower has more than one place of business and (ii) any Collateral, including the Books and Records.

C.    Borrower will notify the Administrative Agent in writing prior to any change in Borrower’s name, identity or business structure.

D.    Borrower will maintain and keep in force insurance covering Collateral designated by the Administrative Agent against fire and extended coverages.

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E.    Borrower has not granted and will not grant any security interest in any of the Collateral except to the Administrative Agent and except for Permitted Encumbrances, and will keep the Collateral free of all liens, claims, security interests and encumbrances of any kind or nature, except the security interest of the Administrative Agency and except for Permitted Encumbrances.

F.    Borrower will promptly notify the Administrative Agent in writing of any event which affects the value of any Collateral by more than five percent (5%), the ability of Borrower or the Administrative Agent to dispose of any Collateral, or the rights and remedies of the Administrative Agent in relation thereto, including, but not limited to, the levy of any legal process against any Collateral and the adoption of any marketing order, arrangement or procedure affecting the Collateral, whether governmental or otherwise.

G.    Until the Administrative Agent exercises its rights to make collection, Borrower will diligently collect all Collateral.

5.    ADDITIONAL OPTIONAL REQUIREMENTS.  Borrower agrees that the Administrative Agent may at its option at any time, whether or not Borrower is in default:

A.    Require Borrower to segregate all collections and proceeds of the Collateral so that they are capable of identification and deliver daily such collections and proceeds to the Administrative Agent in kind.

B.    Require Borrower to deliver to the Administrative Agent (i) copies of or extracts from the Books and Records, and (ii) information on any contracts or other matters affecting the Collateral.

C.    Examine the Collateral, including the Books and Records, and make copies of or extracts from the Books and Records, and for such purposes enter at any reasonable time upon the property where any Collateral or any Books and Records are located.

D.    Require Borrower to deliver to the Administrative Agent any instruments or chattel paper.

E.    Notify any account debtors, any buyers of the Collateral, or any other persons of the Administrative Agent’s interest in the Collateral.

F.    Require Borrower to direct all account debtors to forward all payments and proceeds of the Collateral to a post office box under the Administrative Agent’s exclusive control.

G.    Demand and collect any payments and proceeds of the Collateral. In connection therewith Borrower irrevocably authorizes the Administrative Agent to endorse or sign Borrower’s name on all checks, drafts, collections, receipts and other documents, and to take possession of and open the mail addressed to Borrower and remove therefrom any payments and proceeds of the Collateral.

6.    DEFAULTS.  Any one or more of the following shall be a default hereunder:

A.    The occurrence of any Event of Default under the Credit Agreement.

B.    Borrower breaches any term, provision, warranty or representation under this Agreement.

C.    Any involuntary lien of any kind or character attaches to any Collateral.

D.    Any financial statements, certificates, schedules or other information now or hereafter furnished by Borrower to the Administrative Agent proves false or incorrect in any material respect.

7.    ADMINISTRATIVE AGENT REMEDIES AFTER DEFAULT.  In the event of any default the Administrative Agent may do any one or more of the following:

A.    Declare any Indebtedness immediately due and payable, without notice or demand.

B.    Enforce the security interest given hereunder pursuant to the Uniform Commercial Code and any other applicable law.

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C.    Enforce the security interest of the Administrative Agent in any deposit account of Borrower maintained with the Administrative Agent or any Lender by applying such account to the Indebtedness.

D.    Require Borrower to assemble the Collateral, including the Books and Records, and make them available to the Administrative Agent at a place designated by the Administrative Agent.

E.    Enter upon the property where any Collateral, including any Books and Records are located and take possession of such Collateral and such Books and Records, and use such property (including any buildings and facilities) and any of Borrower’s equipment, if the Administrative Agent deems such use necessary or advisable in order to take possession of, hold, preserve, process, assemble, prepare for sale or lease, market for sale or lease, sell or lease, or otherwise dispose of, any Collateral.

F.    Grant extensions and compromise or settle claims with respect to the Collateral for less than face value, all without prior notice to Borrower.

G.    Have a receiver appointed by any court of competent jurisdiction to take possession of the Collateral.

H.    Take such measures as the Administrative Agent may deem necessary or advisable to take possession of, hold, preserve, process, assemble, insure, prepare for sale or lease, market for sale or lease, sell or lease, or otherwise dispose of, any Collateral, and Borrower hereby irrevocably constitutes and appoints the Administrative Agent as Borrower’s attorney in fact to perform all acts and execute all documents in connection therewith.

8.    MISCELLANEOUS.

A.    Any waiver, express or implied, of any provision hereunder and any delay or failure by the Administrative Agent to enforce any provision shall not preclude the Administrative Agent from enforcing any such provision thereafter.

B.    Borrower shall, at the request of the Administrative Agent, execute such other agreements, documents, instruments, or financing statements in connection with this Agreement as the Administrative Agent may reasonably deem necessary.

C.    All notes, security agreements, subordination agreements and other documents executed by Borrower or furnished to the Administrative Agent in connection with this Agreement must be in form and substance satisfactory to the Administrative Agent and the Lenders.

D.    This Agreement shall be governed by and construed according to the laws of the State of California, to the jurisdiction of which the parties hereto submit.

E.    All rights and remedies herein provided are cumulative and not exclusive of any rights or remedies otherwise provided by law. Any single or partial exercise of any right or remedy shall not preclude the further exercise thereof or the exercise of any other right or remedy.

F.    All terms not defined herein are used as set forth in the Uniform Commercial Code.

G.    In the event of any action by the Administrative Agent to enforce this Agreement or to protect the security interest of the Administrative Agent in the Collateral, or to take possession of, hold, preserve, process, assemble, insure, prepare for sale or lease, market for sale or lease, sell or lease, or otherwise dispose of, any Collateral, Borrower agrees to pay immediately the costs and expenses thereof, together with reasonable attorney’s fees and allocated costs for in-house legal services.

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This Security Agreement is effective as of November 14, 2003.

Bank of America, N.A., as Administrative Agent	RemedyTemp, Inc.
By:	By:
Name:	Name:
Title:	Title:

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EX-14.1

Exhibit 14.1

RemedyTemp, Inc.

CODE OF BUSINESS CONDUCT AND ETHICS

A Message About the Code from the President and CEO

To All Officers, Directors and Employees:

One of Remedy’s most valuable assets is its integrity. Protecting this asset is the job of everyone in the Company. To that end, we have established a Code of Business Conduct and Ethics to help our employees comply with the law and maintain the highest standards of ethical conduct. The Code does not cover every issue that may arise, but it sets out basic principles and a methodology to help guide all employees in the attainment of this common goal. The Code should be provided to and followed by the Company’s employees, franchisees, licensees, agents and representatives, including consultants (collectively, for purposes of this document only, “employees”).

All of the Company’s employees must carry out their duties in accordance with the policies set forth in this Code and with applicable laws and regulations. To the extent that other Company policies and procedures conflict with this Code, employees should follow this Code. Any violation of applicable law or any deviation from the standards embodied in this Code will result in disciplinary action up to and including termination. Disciplinary action also may apply to an employee’s supervisor who directs or approves the employee’s improper actions, or is aware of those actions but does not act appropriately to correct them. In addition to imposing its own discipline, the Company may also bring suspected violations of law to the attention of the appropriate law enforcement personnel. If you are in a situation which you believe may violate or lead to a violation of this Code, follow the procedures described in Section 24 of the Code.

Thank you for your strict adherence to our Code of Business Conduct and Ethics.

Greg Palmer

President and Chief Executive Officer

[LOGO]

RemedyTemp, Inc.

(and wholly-owned business entities)

Code of Business Conduct and Ethics

PURPOSE AND APPLICABILITY

To establish policy of Remedy regarding the standards of business ethics for conducting its business.

POLICY STATEMENT

Remedy’s policy is to conduct its business in accordance with high standards of ethics, morality and legality in all areas where business is carried out. Although Remedy strives to increase its revenues and profits, such increases are not sought at the expense of honesty and fair dealing. The observance of this Code is necessary in order for Remedy to remain a responsible member of the various communities in which it does business and to assure the welfare of those dependent upon the continuation of Remedy’s good health; namely, its employees and clients.

Without limiting the generality of the above, the following presents Remedy’s policy on specific topics concerning business ethics.

1. Compliance with Laws, Rules and Regulations

Remedy seeks to comply with both the letter and spirit of the laws and regulations in all states and countries in which it operates.

Remedy is committed to full compliance with the laws of the cities, states and countries in which it operates. This includes, for example, those relating to antitrust and promoting fair competition, preventing bribery, illicit payments and corruption, insider trading laws, and labor laws and practices, among others. When faced with situations that require some knowledge of the law or if there is any question whatsoever regarding compliance issues, employees should seek advice from Remedy’s Human Resources Department.

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2. Corporate Opportunities

Employees owe a duty to the Company to advance its legitimate interests when the opportunity to do so arises.

Examples of prohibited conduct by employees with respect to corporate opportunities include, but are not limited to:

• Taking for themselves opportunities that are discovered through the use of corporate property, information or position;

• Using corporate property, information, or position for personal gain; or

• Competing with the Company.

If an employee has any doubt concerning his or her obligations with respect to any opportunity that presents itself to the employee, the employee should seek advice from Remedy’s Vice President of Human Resources.

3. Fair Dealing/General Integrity

Our goal is to be regarded as a company that does business with integrity.

Each employee should endeavor to deal fairly with Remedy’s customers, suppliers, competitors, and employees. Under federal and state laws, Remedy is prohibited from engaging in unfair methods of competition, and unfair or deceptive acts and practices. No employee should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other unfair-dealing practice.

Examples of prohibited conduct include, but are not limited to:

• Bribery or payoffs to induce business or breaches of contracts by others;

• Acquiring a competitor’s trade secrets through bribery or theft;

• Making false, deceptive or disparaging claims or comparisons about competitors or their products or services;

• Mislabeling products or services; or

• Making affirmative claims about Remedy’s products and services without having a reasonable basis for doing so.

In addition, any public statements by or on behalf of Remedy should always be accurate, have a reasonable basis in fact, and not be misleading. Public statements may include such things as advertising, promotional activities and sales presentations.

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4. Political Contributions

Remedy will not directly or indirectly contribute to political parties or candidates for political office whether in cash, property or services, except as allowed by Federal and State law.

5. Illegal or Unethical Payments

Remedy does not permit illegal, improper, corrupt or unethical payments to be made in cash, property or services by or on behalf of Remedy in order to secure or retain business or other advantages. Such payments are generally made to influence the action of a person with respect to his employer’s business. Such payments constitute a crime in most U.S. jurisdictions. In jurisdictions where they are not so considered, they are regarded by Remedy as unethical payments.

1. Public Officials

No employee of Remedy may give or transfer anything of value to, or for the benefit, directly or indirectly, of any official or agent of any government (U.S. or non-U.S.) or subdivision thereof for the purpose of inducing such person to assist Remedy in obtaining or retaining business. Reasonable business entertainment, such as lunch, dinner, or occasional athletic or cultural events may be extended to government officials, but only where permitted by law. Note that in the United States this activity may be prohibited under applicable “gratuity laws” [18 U.S. Code 201(e)]. Payments in nominal amounts to employees of foreign governments or subdivisions thereof whose duties are essentially clerical or ministerial in nature may, in some instances, be customary and not in violation of the laws, as enforced, of the country involved. Such payments, if required, are not prohibited by this Code; however, accurate records of the nature and purpose of such payments should be maintained.

2. Sales Agents and Representatives

Sales agents and other representatives of Remedy are required to follow the provisions of this Code in their dealings on behalf of Remedy.

3. Customers and Others

With the exception of reasonable business entertainment and gifts of modest value (i.e., less than $25 value), no employee of Remedy may give or transfer anything of value to, or for the benefit, directly or indirectly, of an employee or agent of another person with whom Remedy does business including any customer, supplier or union representative.

Business entertainment that is reasonable in nature, frequency and cost is permitted, as is the presentation of modest gifts in instances where such are customary. Because there are no clear guidelines that define the point at which social courtesies escalate to, and may be regarded as, improper or unethical payments, extreme care must be taken in this regard.

4. Payments to Non-Involved Third Parties

No payment from Company funds shall be made to a person or organization with whom Remedy is not doing business except for legally required tax and license payments to government agencies and specifically authorized charitable and minor gifts that are permitted by law. The following are examples of prohibited transactions.

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a) The making of a payment to an agent, distributor or other person who has not performed a lawful service in connection with the sale.

b) The making of a payment that violates, or may assist in the violation of, foreign exchange controls, tax laws, customs duties, etc.

All payments for commissions or other similar obligations are to be paid by a Company check or draft, bank wire transfer, or other properly documented means, and shall, in each case, be made payable to the order of the recipient or his authorized agent. The use of currency or other forms of “cash” payment is not acceptable.

5. Secret Accounts

Secret bank accounts shall not be maintained by or on behalf of Remedy, in the United States or in any other country, nor shall any bank or other account be maintained which is not fully accounted for and accurately described in Remedy’s records. The purpose of, and source of moneys for, all accounts or funds shall be properly and completely described in Remedy’s books and records.

6. Receiving of Gifts

The holidays are a time of year when employees of Remedy may be sent gifts from vendors or others wishing to do business with us or seek benefits from Remedy in other ways.

We should remember that business gifts should be neither given nor accepted by our employees. It is understood however, that accepted customs, practices, and business etiquette may, on occasion, make this policy impractical. On such occasions, gifts of modest cost (i.e. less than $25 value) may be received. If gifts are received from vendors that can be shared, the gift should not be taken home and should be shared where possible.

For personal gifts received that have a value of greater than $25, employees must report, in writing, the type of gift and value to the Human Resources Department. Human Resources will then determine the appropriate action to be taken with the gift.

7. Government Regulations

Questions regarding government regulations should always be addressed formally and should utilize established Company procedures.

In the event such questions arise, they should immediately be directed to Remedy management. Our duty and responsibility is to comply with these regulations both in letter and in spirit.

Any Remedy employee responsible for business transactions involving parties outside of the United States should become thoroughly familiar with the Foreign Corrupt Practices Act of 1977 as amended in 1988. Strict compliance with its provisions, which prohibit the contribution of gifts and monies to government or political officials, is mandatory.

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8. Insider Trading

Employees should never trade securities on the basis of confidential information acquired through their employment relationship.

Occasionally, Remedy employees receive information about Remedy that has not been shared with the invested public, such as plans, pending acquisitions, problems, and prospects for sales or profitability. If this inside information is “material,” that is, if the market price of Remedy’s stock is likely to be affected when the information becomes public, then the Remedy employee has responsibilities under U.S. Securities and Exchange Commission (SEC) rules. Federal law and Company policy prohibit employees, directly or indirectly, from purchasing or selling Company stock through the use of confidential information concerning the Company. All non-public information about the Company should be considered confidential information. This same prohibition applies to trading in the stock of other publicly held companies, such as existing or potential customers or suppliers, on the basis of confidential information. The “tipping” of others who might make an investment decision on the basis of this information is also illegal. Remedy has implemented a Policy Regarding Material Non-Public Information and Insider Trading which each employee must sign upon commencement of his/her employment with Remedy. This policy sets forth in detail the responsibilities and obligations of each employee with respect to insider trading, including, but not limited to the following:

1. An employee cannot buy or sell Remedy stock any time he/she has material information about Remedy that is not known to the investing public.

2. An employee cannot advise others to buy or sell Remedy stock on the basis of his/her material information.

Information received regarding the Company is never to be used for personal gain and may never prompt stock market transactions unless such information is plainly known to the investing public.

If a Remedy employee becomes aware of material information regarding the Company, he/she must wait until the information becomes public knowledge before buying or selling Remedy stock or advising others to do so.

Strict compliance with the Policy Regarding Material Non-Public Information and Insider Trading is extremely important. Violation of this policy will be viewed as a very serious matter and may constitute grounds for termination. Questions about the Policy should be directed to the General Counsel or Chief Financial Officer. ¹

9. International Trade Practices

United States law prohibits Remedy and its foreign offices from participation in or encouraging restrictive trade practices, including boycotts, instituted by foreign countries against United States organizations. Any such request must be immediately reported to Remedy’s Vice President of Human Resources.

¹ A copy of Remedy’s insider trading compliance policy can be obtained from the Human Resources Department.

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10. Public Disclosure

Any employee asked for Company information or the position of the Company regarding a particular matter by an individual outside the Company (i.e. investors, government agencies, media representatives, general public, etc.) may not respond unless previously authorized to do so in writing.

Such questions should be directed to the appropriate Vice President or Human Resources.

11. Environmental Matters

All necessary action must be taken to prevent the improper discharge and disposal of hazardous or toxic material into the environment. All federal, state and local environmental laws must be observed. Existing or potential violations of these laws should be disclosed to the Vice President of Human Resources.

12. Fair Competition—Pricing

Remedy believes in fair, lawful and open competition. Remedy will not enter into any agreement or arrangement with third parties that could, directly or indirectly, unlawfully affect the price or terms of sales of Remedy’s products or services or those of others. Under no circumstances shall an employee discuss or enter into any arrangement with competitors, distributors or others that might directly or indirectly result in price fixing, or affect pricing or marketing policies or practices, or otherwise result in conduct in violation of the Antitrust Laws.

13. In the Marketplace

Remedy policy concerning practices in the market place are as follows:

1. Accurate Invoicing and Payment—Invoices submitted for payment must accurately reflect the true prices of products sold or services rendered as well as the terms of sale. In addition, payments due must be made to Remedy customers, representatives, consultants and suppliers in accordance with contract stipulations unless otherwise approved by the Company’s Vice President of Human Resources.

Practices and procedures that might facilitate wrongdoing, bribery and kickbacks, as well as any illegal or improper payments or receipts, are strictly forbidden.

2. Statements in Sales, Advertising and Publicity—The truth must be the objective of all of our promotional efforts. A momentary advantage gained through the slightest misrepresentation or exaggeration can jeopardize Remedy’s future success. This applies equally to our discussions with others.

3. Competition—It is unlawful in the United States and elsewhere to collaborate with competitors or their representatives for the purpose of establishing or maintaining prices at a particular level.

It is Remedy’s policy not to discuss client service rates with competitors at any time. Employees must never reveal information that might affect client service rates to any individual outside Remedy’s employ. Within Remedy, such information must be limited to those with a “need to know.”

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14. Candor Towards Management and in Dealing with Auditors

Senior management must be informed at all times of matters that might be considered sensitive in preserving the reputation of Remedy. Accordingly, there shall be full communication with senior management even when it might appear that less candor is desirable to protect the individuals involved. Similarly, there shall be no concealment of information from Remedy’s internal or independent auditors.

15. Communication

It is Remedy’s practice that every effort be made to disseminate information in a timely manner to all employees, the general public, shareholders, government authorities, claimants, applicants and all others who may have a need or interest. The information disseminated will be accurate and complete to the best of the Company’s knowledge.

16. Accounting Records and Controls

Certain legal requirements in effect in the United States, as well as those in the countries in which Remedy operates, require that the Company maintain accurate records and accounts that fairly reflect the Company’s transactions.

The Company is required, further, to maintain a system of internal accounting controls to ensure that:

1. Transactions are executed and access to Company assets is permitted only in accordance with the appropriate management authorization, consistent with policy; and

2. Transactions are recorded so that the Company may maintain accountability for its assets and prepare financial statements in accordance with generally accepted accounting principles.

Each employee must fulfill his/her responsibilities to ensure that the Company’s records and accounts are accurate and that they are supported by the appropriate documents. All vouchers, bills, invoices and other business records must be prepared with care and complete candor. False or misleading documents, accounting entries, bank accounts, funds or other assets which are not properly recorded in the Company’s books will not be permitted. No payment shall be made with the intent or understanding that such payment, or any part thereof, is to be used for purposes other than those described in the documents supporting the payment.

17. Equal Employment Opportunity

Remedy is committed to equal employment opportunity. The Company maintains policies and procedures which prevent discrimination against any qualified employee or applicant on the basis of race, color, religion, ancestry, national origin, sex, sexual orientation, age, marital status, physical handicap or medical condition to the extent protected by law.

This policy of nondiscrimination applies to all employment practices, including benefits, compensation, discipline, hiring, promotion, separation and training.

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18. Conflicts of Interest

An employee should avoid any situation in which his or her personal interests conflict or would appear to conflict with the Company’s interests.

Each employee is expected to perform his/her duties in a loyal and faithful manner. Employees should avoid entering into situations in which their personal, family or financial interests may conflict with those of the Company. The following are examples of potential conflicts:

• a conflict situation can arise when an employee, officer, or director, or a member of his or her family, receives improper personal benefits as a result of his or her position in the Company;

• a conflict situation can arise when an employee, officer, or director, takes actions or has interests that make it difficult to perform his or her Company work objectively and effectively;

• it is generally a conflict of interest for a Company employee, officer or director to work simultaneously for a competitor, customer, or supplier;

• a conflict situation can arise if an employee, officer or director has a financial interest in or a family relationship with a customer, supplier, vendor, contractor, or competitor that may cause divided loyalty with the Company or the appearance of divided loyalty;

• a conflict situation can arise if an employee, officer or director acquires an interest in property (such as real estate, patent rights or securities) where the Company has, or might have, an interest;

• loans to, or guarantees of obligations of, employees and their family members may create conflicts of interest;

• it would be a conflict of interest for any employee, officer or director to divulge or use the Company’s confidential information—such as financial data, customer information, and computer programs—for his or her own personal or business purposes; or

• it would be a conflict of interest for any employee to make or attempt to influence any decision relating to any business transaction between the Company and a relative or domestic partner of such employee, or any firm of which such relative is an employee.

Conflicts are not always clear-cut. If an employee becomes aware of a conflict, potential conflict, or has a question as to a potential conflict, the employee should consult with higher levels of management or the Company’s Legal Department and/or follow the procedures described in Section 24 of the Code. If an employee becomes involved in a situation that gives rise to an actual conflict, the employee must inform higher levels of management or the Company’s Legal Department of the conflict.

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19. Confidentiality

All confidential information concerning the Company obtained by employees, officers, and directors is the property of the Company and must be protected.

Confidential information includes all non-public information that might be of use to competitors, or harmful to the Company or its customers, if disclosed. Employees must maintain the confidentiality of such information entrusted to them by the Company, its customers and its suppliers, except when disclosure is authorized by the Company or required by law. The obligation to keep this information confidential applies even to communications with family members.

Examples of confidential information include, but are not limited to: the Company’s trade secrets; business trends and projections; information about financial performance; new product or marketing plans; research and development ideas or information; manufacturing processes; information about potential acquisitions, divestitures and investments; stock splits, public or private securities offerings or changes in dividend policies or amounts; and existing or potential major contracts, orders, suppliers, customers or finance sources or the loss thereof.

The obligations of employees, officers and directors with respect to confidential information of the Company continue even after their employment relationship with the Company terminates.

An employee’s obligations with respect to the proprietary and trade secret information of Remedy are as follows:

1. This information may not be disclosed to persons outside of Remedy;

2. This information is not to be used for one’s own benefit or for the benefit of persons outside of Remedy; and

3. This information may be disclosed to other Remedy employees only on a “need to know” basis, and then only with a positive statement that the information is a Remedy trade secret.

20. Protection and Proper Use of Company Assets

All employees should endeavor to protect the Company’s assets and ensure their proper use.

Company assets are to be used only for legitimate business purposes of the Company and only by authorized employees or their designees. This includes both tangible and intangible assets. Intangible assets include, but are not limited to: intellectual property such as trade secrets, patents, trademarks and copyrights; business, marketing and service plans; engineering and manufacturing ideas; designs; databases; Company records; salary information; and any unpublished financial data and reports. Unauthorized alteration, destruction, use, disclosure or distribution of these assets violates Company policy and this Code. Any such action, as well as theft or waste of, or carelessness in using these assets have a direct adverse impact on the Company’s operations and profitability and will result in disciplinary action, up to and including termination. Resulting damages will be billed to the responsible party or to the appropriate office/department.

No employee should make copies of, or resell or transfer (externally or internally), copyrighted publications, including software, manuals, articles, books, and databases being used in the Company that were created by another entity and licensed to the Company unless he or she is authorized to do so under the applicable license agreement or by the “fair use” doctrine, such as for “backup” purposes. If you

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should have any question as to what is permitted in this regard, please consult with the Company’s Chief Information Officer.

The Company provides computers, voice mail, electronic mail (email), and Internet access to certain employees for the purpose of achieving the Company’s business objectives. As a result, the Company has the right to access, reprint, publish, or retain any information created, sent or contained in any of the Company’s computers or email systems of any Company machine. Employees may not use email, the Internet or voice mail for any illegal purpose or in any manner that is contrary to the Company’s policies or the standards embodied in this Code. Remedy’s Electronic Communications Policy is as follows:

1) Data Network and Internet

The Data Network and Internet are resources shared by all users and are intended for business use. Non-business use creates unnecessary load and affects system performance for all. The following uses of Network and Internet technologies are not acceptable:

a) Accessing, downloading, displaying, storing, or distributing offensive, discriminatory, or pornographic material.

b) Accessing, downloading, displaying, storing, or distributing games, Internet music, Internet radio and other non-business activities.

c) Sending or acquiring through electronic communications files or programs containing offensive or harassing statements or materials.

d) Using for amusement, distraction, or frivolous purposes.

e) Using or implying profanity or obscenity in your communications.

2) Company Computers

a) Only business related licensed software is to be installed on Company computer resources. Under U.S. Copyright Law, illegal reproduction/use of commercial software can subject the user and the Company to legal liability.

b) Only public domain software (i.e. software downloaded from the Internet) or drivers approved by IT should be used on Company computers.

c) Company computer are for business use only (no games, Internet music, etc).

d) The Company may, at its sole discretion, monitor and inspect any computer using the Company network.

e) Backup of locally stored documents is the responsibility of each user.

3) Email Policy

a) All electronic and telephonic communications and information transmitted by, received from, or stored in these systems are the property of the Company.

b) The Email system is made available for business purposes only. No message input into the system is a private communication.

c) The Company reserves the right to access, review, copy or delete any message or document on its Email or computer systems, including those stored on individual employee computers and related media, for any purpose, and may disclose such information to parties either inside or outside the organization as the Company deems appropriate.

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d) All Email communications are to be courteous, professional and businesslike. The use of obscenities, sarcasm, misrepresentations, libelous statements, or the disclosure of personal information about another person are against Company policy and could subject the author to disciplinary action.

e) Emails should not contain unnecessary banners, animations or fonts.

f) The maximum size for any single email and attachment is 5 megabytes. Emails and attachments larger than this will be rejected by the system. This is a generous limit and will accommodate the majority of messages. Remember emails with attachments take time and resource to transmit.

4) Voice Mail Policy

a) All telephone communication systems and all information stored in these systems are the property of the Company.

b) The Voice Mail System is made available for business purposes only. No message input into the system is a private communication.

c) The Company reserves the right to access, review, copy or delete any message on its Voice Mail system for any purpose, and may disclose such information to parties either inside or outside the organization as the Company deems appropriate.

d) All voice mail communications are to be courteous, professional and businesslike. The use of obscenities, sarcasm, misrepresentations, libelous statements, or the disclosure of personal information about another person are against Company policy and could subject the offending party to disciplinary action.

5) Confidential Computer Information

a) Employees and contractors authorized to have computer access will not use other employees’ passwords or provide their passwords to other employees or outside personnel. The use of “shared” passwords is prohibited unless approved by the Information Technology Department.

b) Employees and contractors will not make copies of computer software unless authorized by the Information Technology Department.

c) Employees and contractors will restrict their use of Company-owned computer hardware and software to Company business. Only Company-owned computer software and data files may be used on Company-owned hardware unless authorized and approved by the Information Technology Department.

d) The information derived from Company-owned department and personal data files, and the Company’s custom software designs, are considered Company property and are confidential. They may not be disclosed to anyone outside the Company without prior management authorization. It is each employee’s and contractor’s responsibility to protect Company data files and custom software designs from loss, misuse or improper disclosure.

6) Calendar Policy

a) All electronic communication systems and all information stored in these systems are the property of the Company.

b) The Calendar System is made available for business purposes only. No entry input into the system is a private communication.

c) The Company reserves the right to access, review, copy or delete any entry on its Calendar or computer systems, including those stored on individual employee computers and related media, for any purpose, and may disclose such information to parties either inside or outside the organization as the Company deems appropriate.

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21. Falsification of Documents

Employees will, to the best of their knowledge, fully and accurately complete any and all documents pertaining to the business of Remedy in the most thorough and correct manner possible. Such documents must be maintained in accordance with business protocol, legal requirements and Company policy.

22. Use of On-Duty Time

All employees have an obligation to use the time for which they are paid in a productive manner. Unauthorized selling, trading or bartering of services or merchandise to others while on Company premises is not permitted. In addition, the participation in, or solicitation of, organized commercial lotteries or other gambling activities is not permitted. Conducting personal business while on Company time is discouraged except in the case of an emergency.

23. Harassment Policy

The Company is committed to providing a workplace that is free of harassment. Harassment based on an individual’s sex, race, ethnicity, national origin, age, sexual orientation, religion, medical condition or any other legally protected characteristic will not be tolerated. All employees are expected to abide by this policy.

It is against Company policy for any officer, director, manager, supervisor or employee, male or female, to make unwelcome sexual advances, requests for sexual favors, or to practice other verbal physical conduct of a sexual nature when (1) submission to such conduct is made either explicitly or implicitly as a term of condition of employment, (2) submission to or rejection of such conduct is used as the basis for employment decisions, or (3) such conduct has the purpose or effect of unreasonably interfering with an individual’s work performance or creating an intimidating, hostile work environment.

Violations of this policy should be reported promptly to the Human Resources Department, or Remedy management. A prompt investigation will be conducted and appropriate corrective action will be taken where it is warranted. An employee engaging in improper harassment will be subject to disciplinary action, including possible termination of employment. No person will be adversely affected in employment with the Company as a result of bringing complaint of unlawful harassment. To obtain further information concerning Remedy’s strict policies prohibiting harassment, please contact the Human Resources Department.

24. Reporting Violations of Company Policies

All employees should report any violation or suspected violation of this Code to the appropriate Company personnel.

The Company’s efforts to ensure observance of, and adherence to, the goals and policies outlined in this Code mandate that employees bring any instance, occurrence or practice that they, in good faith, believe is inconsistent with or in violation of this Code to the attention of their supervisors, managers, or other appropriate personnel. The following is an approach to dealing with potential problem situations. At all times maintain a professional demeanor when dealing with such situations.

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• Discuss possible problems with a supervisor or other member of Company management. In the event you believe a violation of the Code has occurred or you have observed or become aware of conduct which appears to be contrary to the Code, immediately discuss the situation with your supervisor. If it would be inappropriate to discuss the issue with your supervisor, you should contact a member of Remedy’s Compliance Team, which is comprised of the Company’s Chief Financial Officer (Monty Houdeshell), Vice President of Human Resources and Legal Affairs (Gunnar Gooding), General Counsel (Cos Lykos), and Corporate Counsel (Jamie Ryan). Alternatively, you may phone the Company’s Confidential Compliance Hotline (1-800-643-5752). These resources will promptly listen to your concerns and assess the situation.

• Use common sense and good judgment. Every employee and manager is expected to become familiar with and to understand the requirements of the Code. If you become aware of a suspected violation, don’t try to investigate it or resolve it on your own. Prompt disclosure to the appropriate parties is vital to ensuring a thorough and timely investigation and resolution. A violation of the Code is a serious matter and could have legal implications. Allegations of such behavior are not taken lightly and should not be made to embarrass someone or put him or her in a false light. Reports of suspected violations should always be made in good faith.

• Internal investigation. When an alleged violation of the Code is reported, the Company shall take appropriate action in accordance with the compliance procedures outlined in Section 26 of the Code. Employees, officers and directors are expected to cooperate in internal investigations of misconduct.

• No fear of retaliation. It is a federal crime for anyone to intentionally retaliate against any person who provides truthful information to a law enforcement official concerning a possible violation of any federal law. In cases in which an employee reports a suspected violation in good faith and is not engaged in the questionable conduct, the Company will attempt to keep its discussions and actions confidential to the greatest extent possible. In the course of its investigation, the Company may find it necessary to share information with others on a “need to know” basis. No retaliation shall be taken against employees for reporting alleged violations while acting in good faith.

25. Publication of the Code of Business Conduct and Ethics

The most current version of the Company’s Code of Business Conduct and Ethics will be posted and maintained on the Intranet.

26. Compliance Procedures and Interpretation

The Company has established this Code of Business Conduct and Ethics as part of its overall policies and procedures. The Code applies to all Company employees in all locations. The Code is based on the Company’s core values, good business practices and applicable law. The existence of a Code, however, does not ensure that directors, officers and employees will comply with it or act in a legal and ethical manner. To achieve optimal legal and ethical behavior, the individuals subject to the Code must know and understand the Code as it applies to them and as it applies to others. All employees must champion the Code and assist others in knowing and understanding it.

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• Compliance. Every employee, officer and director is expected to become familiar with and understand the requirements of the Code. Most important, each of those persons must comply with it.

• Management Responsibility. The Company’s CEO shall be responsible for ensuring that the Code is established and effectively communicated to all employees. Although the day-to-day compliance issues will be the responsibility of the Company’s managers, the CEO has ultimate accountability with respect to the overall implementation of and successful compliance with the Code.

• Corporate Compliance Management. The CEO shall choose a team of employees who will report to the CEO and be responsible for ensuring that the Code becomes an integral part of the Company’s culture (the “Compliance Team”). The Compliance Team currently consists of Monty Houdeshell, Gunnar Gooding, Cos Lykos and Jamie Ryan. The Corporate Compliance Officer is Cos Lykos. The Compliance Team’s charter is with respect to communication, training and monitoring and overall compliance with the Code. The Compliance Team will, with the assistance and cooperation of the Company’s executives and managers, foster an atmosphere where employees are comfortable in communicating and/or reporting concerns and possible Code violations. The Company shall maintain a Confidential Compliance Hotline that will be monitored by the Compliance Team.

• Access to the Code. All employees may access the Code on the Company’s Intranet site. In addition, each current employee will be provided with a copy of the Code. New employees will receive a copy of the Code as part of their new hire information. From time to time, the Company will sponsor employee training programs in which the Code and other Company policies and procedures will be discussed.

• Monitoring. The officers of the Company shall be responsible to review the Code with all of the Company’s managers. In turn, the Company’s managers with supervisory responsibilities should review the Code with his/her direct reports. The manager is the “go to” person for employee questions and concerns, especially in the event of a potential violation. The manager will immediately report any known violations or allegations to a member of the Compliance Team. The managers will work with the Compliance Team in assessing areas of concern, potential problems and overall compliance with the Code and other related policies.

• Auditing. The Audit Committee will select an internal audit team who will be responsible for auditing the Company’s compliance with the Code.

• Internal Investigation. When an alleged violation of the Code is reported, the Company shall take prompt and appropriate action in accordance with the law and good business practice. If the suspected violation appears to involve either a potentially criminal act or an issue of significant corporate interest, then the manager or investigator should immediately notify a member of the Compliance Team, his or her Vice President (or other senior person) and any other relevant corporate officer, who, in turn, shall notify the Legal Department or CEO or Audit Committee, as applicable. If a suspected violation involves any executive officer or any Senior Financial Officer as defined in the Code for Senior Financial Officers, or if the suspected violation concerns any fraud, whether or not material, involving management or other employees who have a significant role in the Company’s internal controls, the manager or investigator should immediately report the alleged violation to the CEO, the CFO, General Counsel and/or the Chair of the Audit Committee. The Legal Department, General Counsel,

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CEO or Chair of the Audit Committee, as applicable, shall assess the situation and determine the appropriate course of investigation. Investigations shall be documented, as appropriate.

• Disciplinary Actions. A manager, after consultation with the Vice President of Human Resources or the Legal Department, shall be responsible for implementing the appropriate disciplinary action in accordance with the Company’s policies and procedures for any employee who is found to have violated the Code. If a violation has been reported to the Audit Committee or another committee of the Board, that committee shall be responsible for determining appropriate disciplinary action. Such disciplinary action may include the termination of the employee’s employment. Disciplinary action shall be documented, as appropriate. In addition, Remedy may seek restitution (reimbursement to Remedy for losses or damages as a result of the violation) and/or may refer the matter for criminal prosecution, as appropriate.

• Required Government Reporting. Whenever conduct occurs that requires a report to the government, the Legal Department and Finance Department shall be responsible for complying with such reporting requirements.

• Corrective Actions. In the event of a breach of the Code, the manager and members of the Compliance Team should assess the situation to determine whether the breach is a problem that can be resolved by corrective action. If a violation has been reported to the Audit Committee or another committee of the Board, that committee shall be responsible for determining appropriate corrective actions. Such corrective action shall be documented, as appropriate.

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ACKNOWLEDGMENT OF RECEIPT OF THE REMEDYTEMP, INC.

CODE OF BUSINESS CONDUCT AND ETHICS

My signature below acknowledges that I have received my personal copy of the RemedyTemp, Inc. and wholly-owned business entities (collectively “Remedy”) Code of Business Conduct and Ethics and that I have read and understood the contents of the Code of Business Conduct and Ethics. I understand that my failure to strictly comply with the Code of Business Conduct and Ethics could result in disciplinary action, up to and including termination. Remedy reserves the right to revise the policies set forth in the Code of Business Conduct and Ethics without notice whenever it determines that such action is warranted.

Colleague Name (print) Colleague Signature

Date

Note: Please sign and return this acknowledgement to the Human Resources Department.

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CODE OF ETHICS FOR SENIOR FINANCIAL OFFICERS

1. Application

The Code of Ethics for Senior Financial Officers applies to the Company’s senior financial officers, including the principal financial officer or CFO, and the controller or principal accounting officer or persons performing similar functions.

2. Code of Business Conduct and Ethics Applies to Senior Financial Officers

All Senior Financial Officers must comply with the Code of Business Conduct and Ethics which requires honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships.

3. Compliance with Governmental Rules and Regulations and Financial Reporting Requirements

Each Senior Financial Officer shall comply with all applicable governmental rules and regulations, including the rules relating to financial reporting. Senior Financial Officers shall provide for full, fair, accurate, timely and understandable disclosures in all financial reporting by the Company.

Senior Financial Officers will, at all times, take steps to ensure compliance with established accounting procedures, the Company’s system of internal controls and generally accepted accounting principles. In order to achieve such compliance, the Company’s books and records must accurately reflect all executed transactions and provide a full account of the Company’s assets, liabilities, revenues and expenses. Any attempts to enter inaccurate or fraudulent information into the Company’s accounting system will not be tolerated.

4. Publication of the Code of Ethics for Senior Financial Officers

The Company’s Code of Ethics for Senior Financial Officers will be posted and maintained on the Company’s website.

5. Changes or Waivers in the Code of Ethics for Senior Financial Officers

Any change or waiver in the Code of Ethics for Senior Financial Officers shall require approval of the Audit Committee and be disclosed, as required by law.

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EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-11307, 333-11277, 333-47581, 333-55823 and 333-75611) of RemedyTemp, Inc. of our report dated November 19, 2003 relating to the consolidated financial statements and financial statement schedule which appears in this Form 10-K.

/S/ PRICEWATERHOUSECOOPERS LLP

PricewaterhouseCoopers LLP

Orange County, California

December 26, 2003

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Greg Palmer, certify that:

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

2. Based on my knowledge, this annual 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 annual report;

3. Based on my knowledge, the financial statements and other financial information included in this annual 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 annual 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)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused 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 annual report is being prepared;

b) 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

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer 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 registrant’s board of directors:

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:    December 19, 2003

/s/ Greg D. Palmer

Greg D. Palmer

President and Chief Executive Officer

RemedyTemp, Inc.

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Monty A. Houdeshell, certify that:

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

2. Based on my knowledge, this annual 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 annual report;

3. Based on my knowledge, the financial statements and other financial information included in this annual 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 annual 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)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused 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 annual report is being prepared;

b) 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

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer 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 registrant’s board of directors:

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:    December 19, 2003

/s/ Monty A. Houdeshell

Monty A. Houdeshell

Senior Vice President and Chief Financial Officer

RemedyTemp, Inc.

(Principal Financial Officer)

EX-32

EXHIBIT 32

CERTIFICATION

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of RemedyTemp, Inc., a California corporation (the “Company”), does hereby certify with respect to the Annual Report of the Company on Form 10-K for the year ended September 28, 2003 as filed with the Securities and Exchange Commission (the “10-K Report”) that:

(1) the 10-K Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the Information contained in the 10-K Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

December 19, 2003                                                                          /s/ GREG D. PALMER

                                                                                                  Greg D. Palmer

                                                                                                  President and Chief Executive Officer

                                                                                                  RemedyTemp, Inc.

December 19, 2003                                                                          /s/ MONTY A. HOUDESHELL

                                                                                                  Monty A. Houdeshell

                                                                                                  Senior Vice President and Chief Financial Officer

                                                                                                  RemedyTemp, Inc.

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