VOLT INFORMATION SCIENCES, INC. (Exact name of registrant as specified in its charter)

Transcription

1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C FORM 10-Q x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended May 1, 2016 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: VOLT INFORMATION SCIENCES, INC. (Exact name of registrant as specified in its charter) New York (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 1133 Avenue of Americas, New York, New York (Address of principal executive offices) Registrant s telephone number, including area code: (212) (Zip Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. x Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T ( of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. Large accelerated filer Accelerated filer x Non-accelerated filer Smaller reporting company (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No x As of June 3, 2016, there were 20,832,503 shares of common stock outstanding.

2 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (In thousands, except per share amounts) (unaudited) Three Months Ended Six Months Ended May 1, 2016 May 3, 2015 May 1, 2016 May 3, 2015 REVENUE: Staffing services revenue $ 317,247 $ 362,277 $ 625,928 $ 723,098 Other revenue 18,192 22,912 36,341 45,157 NET REVENUE 335, , , ,255 EXPENSES: Direct cost of staffing services revenue 267, , , ,355 Cost of other revenue 15,887 19,909 32,675 39,514 Selling, administrative and other operating costs 51,382 59, , ,202 Restructuring and severance costs ,601 1,226 Impairment charges 5,374 5,374 Gain on sale of building (1,663) (1,663) TOTAL EXPENSES 334, , , ,671 OPERATING INCOME (LOSS) 1,167 (4,094) (8,649) (11,416) OTHER INCOME (EXPENSE), NET: Interest income (expense), net (862) (730) (1,520) (1,364) Foreign exchange gain (loss), net (579) (1,600) (235) (1,163) Other income (expense), net (420) 43 (699) 141 TOTAL OTHER INCOME (EXPENSE), NET (1,861) (2,287) (2,454) (2,386) LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (694) (6,381) (11,103) (13,802) Income tax provision 1, ,644 1,911 LOSS FROM CONTINUING OPERATIONS (1,785) (6,913) (12,747) (15,713) DISCONTINUED OPERATIONS Loss from discontinued operations net of income taxes (including loss on disposal of $1.2 million) (4,519) NET LOSS $ (1,785) $ (6,913) $ (12,747) $ (20,232) PER SHARE DATA: Basic: Loss from continuing operations $ (0.09) $ (0.33) $ (0.61) $ (0.75) Loss from discontinued operations (0.22) Net loss $ (0.09) $ (0.33) $ (0.61) $ (0.97) Weighted average number of shares 20,814 20,793 20,813 20,861 Diluted: Loss from continuing operations $ (0.09) $ (0.33) $ (0.61) $ (0.75) Loss from discontinued operations (0.22) Net loss $ (0.09) $ (0.33) $ (0.61) $ (0.97) Weighted average number of shares 20,814 20,793 20,813 20,861 See accompanying Notes to Condensed Consolidated Financial Statements. 1

3 VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Comprehensive Income (Loss) (In thousands) (unaudited) Three Months Ended Six Months Ended May 1, 2016 May 3, 2015 May 1, 2016 May 3, 2015 NET LOSS $ (1,785) $ (6,913) $ (12,747) $ (20,232) Other comprehensive income (loss): Foreign currency translation adjustments, net of taxes of $0, respectively 2,819 1, Unrealized gain (loss) on marketable securities, net of taxes of $0, respectively (2) 12 (2) 16 Total other comprehensive income 2,817 1, COMPREHENSIVE INCOME (LOSS) $ 1,032 $ (5,386) $ (12,445) $ (19,850) See accompanying Notes to Condensed Consolidated Financial Statements. 2

4 VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands, except share amounts) May 1, 2016 November 1, 2015 (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 23,171 $ 10,188 Restricted cash and short-term investments 11,647 14,977 Trade accounts receivable, net of allowances of $749 and $960, respectively 177, ,385 Recoverable income taxes 17,762 17,583 Prepaid insurance and other current assets 17,724 15,865 Assets held for sale 21,572 22,943 TOTAL CURRENT ASSETS 269, ,941 Other assets, excluding current portion 24,695 22,790 Property, equipment and software, net 24,186 24,095 TOTAL ASSETS $ 317,935 $ 326,826 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accrued compensation $ 28,601 $ 29,548 Accounts payable 31,312 39,164 Accrued taxes other than income taxes 26,205 22,719 Accrued insurance and other 34,327 34,391 Short-term borrowings, including current portion of long-term debt 92, Income taxes payable 1,658 Liabilities held for sale 6,119 7,345 TOTAL CURRENT LIABILITIES 218, ,807 Accrued insurance and other, excluding current portion 10,116 10,474 Deferred gain on sale of real estate, excluding current portion 27,080 Income taxes payable, excluding current portion 6,585 6,516 Deferred income taxes 3,490 3,225 Long-term debt, excluding current portion 106,313 TOTAL LIABILITIES 265, ,335 Commitments and contingencies STOCKHOLDERS' EQUITY: Preferred stock, par value $1.00; Authorized - 500,000 shares; Issued - none Common stock, par value $0.10; Authorized - 120,000,000 shares; Issued - 23,738,003 and 23,738,003, respectively; Outstanding - 20,832,503 and 20,801,080, respectively 2,374 2,374 Paid-in capital 75,480 75,803 Retained earnings 24,569 38,034 Accumulated other comprehensive loss (7,692) (7,994) Treasury stock, at cost; 2,905,500 and 2,936,923 shares, respectively (42,631) (43,726) TOTAL STOCKHOLDERS' EQUITY 52,100 64,491 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 317,935 $ 326,826 See accompanying Notes to Condensed Consolidated Financial Statements. 3

5 VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (In thousands) (unaudited) Six Months Ended May 1, 2016 May 3, 2015 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (12,747 ) $ (20,232 ) Loss from discontinued operations, net of income taxes (4,519 ) Loss from continuing operations (12,747 ) (15,713 ) Adjustment to reconcile net loss to cash provided by operating activities: Depreciation and amortization 3,057 3,410 Provision (release) of doubtful accounts and sales allowances (211 ) 151 Impairment charges 5,374 Unrealized foreign currency exchange loss 1, Gain on dispositions of property and equipment (1,842 ) (111 ) Deferred income tax benefit (79) Share-based compensation expense Accretion of convertible note discount (77) (199 ) Change in operating assets and liabilities: Trade accounts receivable 21,480 20,411 Restricted cash 2,355 4,062 Prepaid insurance and other assets (3,752 ) (166 ) Net assets held for sale (95) 4,533 Accounts payable (7,876 ) (9,013 ) Accrued expenses and other liabilities 2,364 (13,283 ) Income taxes (1,757 ) 715 Net cash provided by operating activities 2, CASH FLOWS FROM INVESTING ACTIVITIES: Sales of investments Purchases of investments (291 ) (501 ) Purchase of minority interest (1,446 ) Proceeds from sale of property and equipment 36, Purchases of property, equipment and software (8,464 ) (3,276 ) Net cash provided by (used in) investing activities 27,553 (2,754 ) CASH FLOWS FROM FINANCING ACTIVITIES: Decrease in cash restricted as collateral for borrowings 10,352 Repayment of borrowings (10,000 ) (28,506 ) Draw-down of borrowings 2,000 30,000 Repayment of long-term debt (7,295 ) (446 ) Debt issuance costs (445 ) (232 ) Proceeds from exercise of stock options Purchases of common stock under repurchase program (4,262 ) Withholding tax payment on vesting of restricted stock awards (116 ) Net cash provided by (used in) financing activities (15,831 ) 7,344 Effect of exchange rate changes on cash and cash equivalents (1,228 ) (1,958 ) CASH FLOWS FROM DISCONTINUED OPERATIONS: Cash flow from operating activities (56) Cash flow from investing activities (4,000 ) Net cash used in discontinued operations Net increase (decrease) in cash and cash equivalents (4,056 ) 12,983 (442 ) Cash and cash equivalents, beginning of period 10,188 6,723 Change in cash from discontinued operations (211 ) Cash and cash equivalents, end of period $ 23,171 $ 6,070 Cash paid during the period: Interest $ 1,662 $ 1,690 Income taxes $ 2,473 $ 634 Supplemental disclosure of non-cash investing and financing activities: Note receivable in exchange for Computer Systems segment net assets sold $ $ 8,363 See accompanying Notes to Condensed Consolidated Financial Statements. 4

6

7 VOLT INFORMATION SCIENCES, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements For the Fiscal Periods Ended May 1, 2016 and May 3, 2015 (Unaudited) NOTE 1: Basis of Presentation Basis of Presentation The accompanying interim condensed consolidated financial statements of Volt Information Sciences, Inc. ("Volt" or the "Company") have been prepared in conformity with generally accepted accounting principles, consistent in all material respects with those applied in the Annual Report on Form 10-K for the year ended November 1, The Company makes estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates and changes in estimates are reflected in the period in which they become known. Accounting for certain expenses, including income taxes, are based on full year assumptions, and the financial statements reflect all normal adjustments that, in the opinion of management, are necessary for fair presentation of the interim periods presented. The interim information is unaudited and is prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the "SEC"), which provides for omission of certain information and footnote disclosures. This interim financial information should be read in conjunction with the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended November 1, Certain reclassifications have been made to the prior year financial statements in order to conform to the current year's presentation. NOTE 2: Recently Issued Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board ("FASB") or other standard setting bodies. Unless otherwise discussed, the Company believes that the adoption of recently issued standards that are not yet effective will not have a material impact on its consolidated financial position or results of operations upon adoption. In March 2016, the FASB issued Accounting Standards Update ( ASU ) , Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This ASU simplifies several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public business entities, the amendments in this update are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any entity in any interim or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The Company is in the process of assessing the impact that the adoption of this ASU will have on its consolidated financial statements. In February 2016, the FASB issued ASU , Leases (Topic 842). This ASU requires that lessees recognize assets and liabilities for leases with lease terms greater than twelve months in the statement of financial position and also requires improved disclosures to help users of financial statements better understand the amount, timing and uncertainty of cash flows arising from leases. This update is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within those fiscal years. Early adoption is permitted. The Company is in the process of assessing the impact that the adoption of this ASU will have on its consolidated financial statements. In April 2015, the FASB issued ASU No , Simplifying the Presentation of Debt Issuance Costs. The ASU requires that debt issuance costs related to a recognized liability be presented on the balance sheet as a direct reduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected. In August 2015, the FASB issued ASU , Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements. ASU clarifies the guidance in ASU regarding presentation and subsequent measurement of debt issuance costs related to line-of-credit arrangements. The SEC Staff announced they would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. These ASUs are effective for reporting periods beginning after December 15, In August 2014, the FASB issued ASU , Presentation of Financial Statements - Going Concern (Subtopic ): Disclosure of Uncertainties about an Entity s Ability to Continue as a Going Concern. This update provides guidance about management s responsibility to evaluate whether there is substantial doubt about an entity s ability to continue as a going concern. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management s plans, (5) require an express statement and other 5

8 disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). This ASU is effective for the annual period ending after December 15, 2016, with early adoption permitted. In May 2014, the FASB issued ASU No , Revenue from Contracts with Customers (Topic 606). The core principle of this amendment is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. This standard is effective for fiscal years and interim reporting periods beginning after December 15, In August 2015, the FASB issued ASU , Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. The amendments in this update deferred the effective date for implementation of ASU by one year and is now effective for annual reporting periods beginning after December 15, Early application is permitted only as of annual reporting periods beginning after December 15, 2016 including interim reporting periods within that period. The Company is currently assessing the impact that the adoption of this standard will have on its consolidated financial statements and related disclosures upon implementation in the first quarter of fiscal From March through May 2016, the FASB issued ASU No , Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU No , Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, ASU No , Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates and Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting and ASU No , Revenue from Contracts with Customers (Topic 606): Narrow- Scope Improvements and Practical Expedients. These amendments are intended to improve and clarify the implementation guidance of Topic 606. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements of ASU No and ASU No Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on our consolidated financial statements and related disclosures. Recently Adopted Accounting Standards In November 2015, the FASB issued Accounting Standards Update ASU , Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The amendments in this update simplify the presentation of deferred income taxes and require that deferred tax liabilities and assets be classified as non-current in a classified statement of financial position. The Company has early adopted ASU prospectively beginning in the first quarter of fiscal Other than the revised balance sheet presentation of deferred taxes from current to non-current, the adoption of this ASU did not have a material impact to our consolidated financial statements. NOTE 3: Discontinued Operations On December 1, 2014, the Company completed the sale of its Computer Systems segment to NewNet Communication Technologies, LLC ("NewNet"), a Skyview Capital, LLC, portfolio company. The results of the Computer Systems segment are presented as discontinued operations and excluded from continuing operations and from segment results for all periods presented. The proceeds of the transaction are a $10.0 million note bearing interest at one half percent (0.5 percent) per year due in four years and convertible into a capital interest of up to 20% in NewNet. The Company may convert the note at any time and is entitled to receive early repayment in the event of certain events such as a change in control of NewNet. The proceeds are in exchange for the ownership of Volt Delta Resources, LLC and its operating subsidiaries, which comprise the Company's Computer Systems segment, and payment of $4.0 million by the Company during the first 45 days following the transaction. An additional payment will be made between the parties based on the comparison of the actual transaction date working capital amount to an expected working capital amount of $6.0 million (the contractually agreed upon working capital). The note was initially valued at $8.4 million which approximated its fair value. The resulting discount will be amortized over four years with an effective interest rate of 5.1%. As of May 1, 2016, the unamortized discount for the note was $1.1 million. The parties are currently in active discussions to finalize the closing balance sheet working capital amounts. The Company recognized a loss on disposal of $1.2 million from the sale transaction in the first quarter of The total related costs associated with this transaction were $2.2 million comprised of $0.9 million in severance costs, $0.9 million of professional fees and $0.4 million of lease obligation costs. These costs are recorded in Discontinued operations in the Condensed Consolidated Statements of Operations. As of May 1, 2016, $2.0 million has been paid and $0.2 million remains payable and is included in Accrued insurance and other in the Condensed Consolidated Balance Sheets. 6

9 The following table reconciles the major line items in the Condensed Consolidated Statements of Operations for discontinued operations (in thousands): Six Months Ended May 3, 2015 Loss from discontinued operations Net revenue $ 4,708 Cost of revenue 5,730 Selling, administrative and other operating costs 1,388 Restructuring and other related costs 1,709 Other (income) expense, net (978 ) Loss from discontinued operations (3,141 ) Loss on disposal of discontinued operations (1,187 ) Loss from discontinued operations before income taxes (4,328 ) Income tax provision 191 Loss from discontinued operations that is presented in the Condensed Consolidated Statements of Operations $ (4,519 ) NOTE 4: Assets and Liabilities Held for Sale In October 2015, the Company's Board of Directors approved a plan to sell the Company s information technology infrastructure services business ( Maintech ) and staffing services business in Uruguay ("Lakyfor, S.A."). Maintech met all of the criteria to classify its assets and liabilities as held for sale in the fourth quarter of fiscal The potential disposal of Maintech did not represent a strategic shift that will have a major effect on the Company s operations and financial results and is, therefore, not classified as discontinued operations in accordance with ASU , Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360), ("ASU "). As part of the required evaluation under the held for sale guidance, the Company determined that the approximate fair value less costs to sell the operations exceeded the carrying value of the net assets and no impairment charge was recorded. The timeline to complete a transaction could extend beyond the third quarter of fiscal Lakyfor, S.A. met all of the criteria to classify its assets and liabilities as held for sale in the fourth quarter of fiscal The disposal of Lakyfor, S.A. did not represent a strategic shift that would have a major effect on the Company s operations and financial results and was, therefore, not classified as discontinued operations in accordance with ASU As part of the required evaluation under the held for sale guidance, the Company determined that the approximate fair value less costs to sell the operations was significantly lower than the carrying value of the net assets and an impairment charge of $0.7 million was recorded in the fourth quarter of fiscal The sale occurred in December 2015 for nominal proceeds and the Company recognized a loss on disposal of $0.1 million from the sale transaction in the first quarter of fiscal

10 The following table reconciles the major classes of assets and liabilities classified as held for sale as part of continuing operations in the Condensed Consolidated Balance Sheets (in thousands): May 1, 2016 November 1, 2015 Assets included as part of continuing operations Cash and cash equivalents $ 3,773 $ 1,537 Trade accounts receivable, net 12,939 15,671 Recoverable income taxes Prepaid insurance and other assets 4,208 4,886 Property, equipment and software, net Purchased intangible assets Total major classes of assets as part of continuing operations - Maintech and Lakyfor, S.A. (1) $ 21,572 $ 22,943 Liabilities included as part of continuing operations Accrued compensation $ 2,478 $ 3,509 Accounts payable 816 1,387 Accrued taxes other than income taxes 924 1,165 Accrued insurance and other Deferred revenue 1, Total major classes of liabilities as part of continuing operations - Maintech and Lakyfor, S.A. (1) $ 6,119 $ 7,345 (1) The Balance Sheet as of May 1, 2016 only includes Maintech. 8

11 Note 5: Accumulated Other Comprehensive Loss The changes in accumulated other comprehensive loss for the three and six months ended May 1, 2016 were (in thousands): Three Months Ended Six Months Ended May 1, 2016 May 1, 2016 Foreign Currency Translation Unrealized Loss on Marketable Securities Foreign Currency Translation Unrealized Loss on Marketable Securities Accumulated other comprehensive loss at beginning of the period $ (10,486) $ (23) $ (7,971) $ (23) Other comprehensive income (loss) before reclassifications 2,819 (2) 304 (2) Accumulated other comprehensive loss at May 1, 2016 $ (7,667) $ (25) $ (7,667) $ (25) Reclassifications from accumulated other comprehensive loss for the three and six months ended May 1, 2016 and May 3, 2015 were (in thousands): Three Months Ended Six Months Ended May 1, 2016 May 3, 2015 May 1, 2016 May 3, 2015 Foreign currency translation Sale of foreign subsidiaries, net of tax $ $ $ $ (3,181) Amount reclassified from accumulated other comprehensive loss for the six months ended May 3, 2015 were (in thousands): Details about Accumulated Other Comprehensive Loss Components Amount Reclassified Affected Line Item in the Statement Where Net Loss is Presented Foreign currency translation Sale of foreign subsidiaries $ 3,181 Discontinued operations 9

12 NOTE 6: Restricted Cash and Short-Term Investments Restricted cash primarily includes amounts related to requirements under certain contracts with managed service program customers for whom the Company manages the customers contingent staffing requirements, including processing of associate vendor billings into single, combined customer billings and distribution of payments to associate vendors on behalf of customers, as well as minimum cash deposits required to be maintained as collateral. Distribution of payments to associate vendors are generally made shortly after receipt of payment from customers, with undistributed amounts included in restricted cash and accounts payable between receipt and distribution of these amounts. Changes in restricted cash collateral are classified as an operating activity, as this cash is directly related to the operations of this business. At May 1, 2016 and November 1, 2015, restricted cash included $5.8 million and $9.3 million, respectively, restricted for payment to associate vendors and $2.0 million and $0.9 million, respectively, restricted for other collateral accounts. At May 1, 2016 and November 1, 2015, short-term investments were $3.8 million and $4.8 million, respectively. These short-term investments consisted primarily of the fair value of deferred compensation investments corresponding to employees selections, primarily in mutual funds, based on quoted prices in active markets. NOTE 7: Income Taxes The income tax provision reflects the geographic mix of earnings in various federal, state and foreign tax jurisdictions and their applicable rates resulting in a composite effective tax rate. The Company s cumulative results for substantially all United States and certain non- United States jurisdictions for the most recent three-year period is a loss. Accordingly, a valuation allowance has been established for substantially all loss carryforwards and other net deferred tax assets for these jurisdictions, resulting in an effective tax rate that is significantly different than the statutory rate. The Company's provision for income taxes primarily includes foreign jurisdictions and state taxes. The provision for income taxes in the second quarter of fiscal 2016 and 2015 was $1.1 million and $0.5 million, respectively, and for the six months ended May 1, 2016 and May 3, 2015 was $1.6 million and $1.9 million, respectively. The Company's quarterly provision for income taxes is measured using an estimated annual effective tax rate, adjusted for discrete items that occur within the periods presented. The Company adjusts its effective tax rate for each quarter to be consistent with the estimated annual effective tax rate, consistent with Accounting Standards Codification ("ASC") 270, Interim Reporting, and ASC , Income Taxes Intra Period Tax Allocation. Jurisdictions with a projected loss for the full year where no tax benefit can be recognized are excluded from the calculation of the estimated annual effective tax rate. The Company's future effective tax rates could be affected by earnings being different than anticipated in countries with differing statutory rates, increases in recorded valuation allowances of tax assets, or changes in tax laws. NOTE 8: Real Estate Transactions Orange, CA In March 2016, Volt Orangeca Real Estate Corp., an indirect wholly-owned subsidiary of the Company completed the sale of real property comprised of land and buildings with office space of approximately 191,000 square feet in Orange, California for a purchase price of $35.9 million. The Company entered concurrently into a Purchase and Sale Agreement (the PSA ) and a Lease Agreement (the Lease ) with Glassell Grand Avenue Partners, LLC (the Buyer ), a limited liability company formed by Hines, a real estate investment and management firm, and funds managed by Oaktree Capital Management L.P., an investment management firm. The Buyer assigned the PSA and the Lease to Glassell Acquisitions Partners LLC, an affiliate, prior to the closing. The transaction was accounted for as a sale-leaseback transaction and as an operating lease. The initial lease term is 15 years plus renewal options for two terms of five years each based on the greater of fair market value at the time of the renewal or the base annual rent payable during the last month of the then-current term immediately preceding the extended period. The annual base rent will be $2.9 million for the first year of the initial term and increase on each adjustment date by 3.0% of the then-current annual base rent. A security deposit of $2.1 million is required for the first year of the lease term which is secured by a letter of credit under the Company's existing Financing Program with PNC Bank National Association ("PNC") and will subsequently be reduced if certain conditions are met. Accordingly, the gain on sale of $29.4 million will be deferred and recognized in proportion to the related gross rental charges to expense over the lease term. For the quarter ended May 1, 2016, the amortization was $0.3 million. San Diego, CA In March 2016, Volt Opportunity Road Realty Corp., an indirect wholly-owned subsidiary of the Company, completed the sale with a private commercial real estate investor of real property comprised of land and building with office space of approximately 19,000 10

13 square feet in San Diego, California for a purchase price of $2.2 million. The Company recognized a gain of $1.7 million from the transaction during the second quarter of NOTE 9: Debt In January 2016, the Company amended its $150.0 million Financing Program with PNC to (1) extend the termination date to January 31, 2017; (2) eliminate the interest coverage ratio and modify the liquidity level requirement; (3) reduce the minimum funding threshold, as defined, from 60% to 40%; and (4) revise pricing from a LIBOR based rate plus 1.75% per the prior agreement, to a LIBOR based rate plus 1.90% on outstanding borrowings, and to increase the facility fee from 0.65% to 0.70%. The Financing Program is secured by receivables from certain Staffing Services businesses in the United States, Europe and Canada that are sold to a wholly-owned, consolidated, bankruptcy remote subsidiary. The bankruptcy remote subsidiary's sole business consists of the purchase of the receivables and subsequent granting of a security interest to PNC under the program, and its assets are available first to satisfy obligations to PNC and are not available to pay creditors of the Company's other legal entities. Borrowing capacity under the Financing Program is directly impacted by the level of accounts receivable. At May 1, 2016, the accounts receivable borrowing base was $147.1 million. As of November 1, 2015, the Financing Program was classified as long-term debt on the Condensed Consolidated Balance Sheets, however, as of the end of the Company's first quarter of fiscal 2016, the Financing Program was classified as short-term as the termination date is within twelve months of the Company s first quarter of fiscal 2016 balance sheet date. In addition to customary representations, warranties and affirmative and negative covenants, the program is subject to a minimum liquidity covenant which increased under the aforementioned amendment from $20.0 million in cash and cash equivalents and borrowing availability under the Financing Program, to $35.0 million effective January 31, 2016, which increases to $50.0 million effective July 31, The program is subject to termination under standard events of default including change of control, failure to pay principal or interest, breach of the liquidity covenant, triggering of portfolio ratio limits, or other material adverse events as defined. As of May 1, 2016, the Company was in compliance with all debt covenant requirements. The Financing Program has a feature under which the facility limit can be increased from $150.0 million up to $250.0 million subject to credit approval from PNC. Borrowings are priced based upon a fixed program rate plus the daily adjusted one-month LIBOR index, as defined. The program also contains a revolving credit provision under which proceeds can be drawn for a definitive tranche period of 30, 60, 90 or 180 days priced at the adjusted LIBOR index rate in effect for that period. In addition to United States dollars, drawings can be denominated in Canadian dollars, subject to a Canadian dollar $30.0 million limit, and British Pounds Sterling, subject to a 20.0 million limit. The program also includes a letter of credit sublimit of $50.0 million and minimum borrowing requirements. As of May 1, 2016, there were no foreign currency denominated borrowings, and the letter of credit participation was $31.0 million inclusive of $28.9 million for the Company's casualty insurance program and $2.1 million for the security deposit required under the Orange facility lease agreement. At May 1, 2016 and November 1, 2015, the Company had outstanding borrowing under this program of $90.0 million and $100.0 million, respectively, and bore a weighted average annual interest rate of 2.3% and 1.8% during the second quarter of fiscal 2016 and 2015, respectively, and 2.2% and 1.7% during the first six months of fiscal 2016 and 2015, respectively, which is inclusive of all facility fees. At May 1, 2016, there was $26.1 million additional availability under this program. In February 2016, Maintech, Incorporated, an indirect wholly-owned subsidiary of the Company, as borrower, entered into a $10.0 million 364-day secured revolving credit agreement with Bank of America, N.A. The credit agreement provides for revolving loans as well as a $0.1 million sub-line for letters of credit and is subject to borrowing base and availability restrictions and requirements. The credit agreement is secured by assets of the borrower, including accounts receivable, and the Company has guaranteed the obligations of the borrower under the agreement not to exceed $3.0 million. The credit agreement contains certain customary representations and warranties, events of default and affirmative and negative covenants, including minimum interest on $2.0 million which was the outstanding amount under this facility at May 1, At May 1, 2016, there was $3.1 million additional availability under this program. The borrower may optionally terminate the credit agreement and repay the borrowings prior to the expiration date, without premium or penalty at any time by the delivery of a notice to that effect as provided under the credit agreement. It is anticipated that the credit agreement will be terminated before a sale of the borrower. Borrowings will be used for working capital and general corporate purposes. Interest under the credit agreement is one month LIBOR plus 2.75% on drawn amounts and a fixed rate of 0.375% on undrawn amounts. In February 2016, Volt Orangeca Real Estate Corp., an indirect wholly-owned subsidiary of the Company, entered into a PSA for the sale of real property comprised of land and buildings with office space of approximately 191,000 square feet in Orange, California (the Property ) for a purchase price of $35.9 million. The transaction closed in March 2016 with terms consistent with the PSA and the mortgage on the Property was repaid. At November 1, 2015, the Company had $7.3 million of a long-term term loan on this Property, of which $1.0 million was current at the period end date. 11

14 NOTE 10: Earnings (Loss) Per Share Basic and diluted net income (loss) per share is calculated as follows (in thousands, except per share amounts): Three Months Ended Six Months Ended May 1, 2016 May 3, 2015 May 1, 2016 May 3, 2015 Numerator Loss from continuing operations $ (1,785) $ (6,913) $ (12,747) $ (15,713) Loss from discontinued operations, net of income taxes (4,519) Net loss $ (1,785) $ (6,913) $ (12,747) $ (20,232) Denominator Basic weighted average number of shares 20,814 20,793 20,813 20,861 Diluted weighted average number of shares 20,814 20,793 20,813 20,861 Basic: Loss from continuing operations $ (0.09) $ (0.33) $ (0.61) $ (0.75) Loss from discontinued operations, net of income taxes (0.22) Net loss $ (0.09) $ (0.33) $ (0.61) $ (0.97) Diluted: Loss from continuing operations $ (0.09) $ (0.33) $ (0.61) $ (0.75) Loss from discontinued operations, net of income taxes (0.22) Net loss $ (0.09) $ (0.33) $ (0.61) $ (0.97) Options to purchase 943,098 and 661,650 shares of the Company s common stock were outstanding at May 1, 2016 and May 3, 2015, respectively. Additionally, there were 41,240 unvested restricted shares outstanding at May 1, The options and restricted shares were not included in the computation of diluted earnings (loss) per share in the three and six months of fiscal 2016 and 2015 because the effect of their inclusion would have been anti-dilutive as a result of the Company s net loss position in those periods. Note 11: Restructuring and Severance Costs In November 2015, the Company implemented a cost reduction plan and estimates that it will incur restructuring charges of approximately $4.0 million in fiscal 2016, primarily resulting from a reduction in workforce, facility consolidation and lease termination costs. 12

15 The Company incurred total restructuring and severance costs of $0.8 million for the three months ended May 1, 2016 and $3.6 million for the six months ended May 1, The following table presents the restructuring and severance costs for the three and six months ended May 1, 2016 (in thousands): Three Months Ended Six Months Ended May 1, 2016 May 1, 2016 Staffing Services segment Severance and benefit costs $ 4 $ 1,350 Other ,512 Other segment Severance and benefit costs Corporate Severance and benefit costs 218 1,201 Total restructuring and severance costs $ 840 $ 3,601 Consolidated Severance and benefit costs $ 817 $ 3,439 Other Total restructuring and severance costs $ 840 $ 3,601 Accrued restructuring and severance costs are included in Accrued compensation and Accrued insurance and other in the Condensed Consolidated Balance Sheets. Activity for the six months ended May 1, 2016 are summarized as follows (in thousands): Balance at November 1, 2015 $ Charged to expense 3,601 Cash payments (2,890) Balance at May 1, 2016 $ 711 The remaining charges as of May 1, 2016 for the Staffing Services and Other segments as well as Corporate of $0.4 million, $0.1 million and $0.2 million, respectively, are expected to be paid during fiscal 2016 and NOTE 12: Commitments and Contingencies (a) Legal Proceedings The Company is involved in various claims and legal actions arising in the ordinary course of business. The Company s loss contingencies not discussed elsewhere consist primarily of claims and legal actions arising in the normal course of business related to contingent worker employment matters in the Staffing Services segment. These matters are at varying stages of investigation, arbitration or adjudication. The Company has accrued for losses on individual matters that are both probable and reasonably estimable. Estimates are based on currently available information and assumptions. Significant judgment is required in both the determination of probability and the determination of whether a matter is reasonably estimable. The Company s estimates may change and actual expenses could differ in the future as additional information becomes available. NOTE 13: Segment Data The Company s operating segments are determined in accordance with the Company s internal management structure, which is based on operating activities. The Company is currently assessing potential changes to its reportable segments in fiscal 2016 based on the new management organization and the changes anticipated by implementing new business strategies, including the initiatives to exit nonstrategic and non-core operations. Segment operating income (loss) is comprised of segment net revenues less direct cost of staffing services revenue or cost of other revenue, selling, administrative and other operating costs and restructuring and severance costs. The Company allocates all operating 13

16 costs to the segments except for costs not directly relating to operating activities such as corporate-wide general and administrative costs. These costs are not allocated because doing so would not enhance the understanding of segment operating performance and they are not used by management to measure segment performance. Commencing in the first quarter of fiscal 2016, the Company changed its methodology for the allocation of costs to more effectively reflect and measure the individual businesses' financial and operational efficiency. Prior period segment results have been revised for these changes. Financial data concerning the Company s revenue and segment operating income (loss) by reportable operating segment in the second quarter of fiscal 2016 and 2015 and for the first six months of fiscal 2016 and 2015 are summarized in the following tables (in thousands): Three Months Ended May 1, 2016 Total Staffing Services Other Net revenue $ 335,439 $ 317,247 $ 18,192 Expenses Direct cost of staffing services revenue 267, ,826 Cost of other revenue 15,887 15,887 Selling, administrative and other operating costs 42,946 41,460 1,486 Restructuring and severance costs Segment operating income 8,158 7, Corporate general and administrative 8,436 Corporate restructuring and severance costs 218 Gain on sale of building (1,663) Operating income $ 1,167 Three Months Ended May 3, 2015 Total Staffing Services Other Net revenue $ 385,189 $ 362,277 $ 22,912 Expenses Direct cost of staffing services revenue 303, ,837 Cost of other revenue 19,909 19,909 Selling, administrative and other operating costs 50,806 46,851 3,955 Restructuring and severance costs (24) Impairment charges 5, ,397 Segment operating income (loss) 5,012 10,337 (5,325) Corporate general and administrative 9,106 Operating loss $ (4,094) 14

17 Six Months Ended May 1, 2016 Total Staffing Services Other Net revenue $ 662,269 $ 625,928 $ 36,341 Expenses Direct cost of staffing services revenue 531, ,998 Cost of other revenue 32,675 32,675 Selling, administrative and other operating costs 85,675 82,750 2,925 Restructuring and severance costs 2,400 1, Segment operating income (loss) 9,521 9,668 (147) Corporate general and administrative 18,632 Corporate restructuring and severance costs 1,201 Gain on sale of building (1,663) Operating loss $ (8,649) Six Months Ended May 3, 2015 Total Staffing Services Other Net revenue $ 768,255 $ 723,098 $ 45,157 Expenses Direct cost of staffing services revenue 613, ,355 Cost of other revenue 39,514 39,514 Selling, administrative and other operating costs 101,404 94,524 6,880 Restructuring and severance costs (24) Impairment charges 5, ,397 Segment operating income (loss) 8,357 13,967 (5,610) Corporate general and administrative 18,798 Corporate restructuring and severance costs 975 Operating loss $ (11,416) 15

18 ITEM 2. MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management s discussion and analysis ("MD&A") of financial condition and results of operations is provided as a supplement to and should be read in conjunction with the unaudited condensed consolidated financial statements and related notes to enhance the understanding of our results of operations, financial condition and cash flows. This MD&A should be read in conjunction with the MD&A included in our Form 10-K for the fiscal year ended November 1, 2015, as filed with the SEC on January 13, 2016 (the 2015 Form 10- K ). References in this document to Volt, Company, we, us and our mean Volt Information Sciences, Inc. and our consolidated subsidiaries, unless the context requires otherwise. The statements below should also be read in conjunction with the description of the risks and uncertainties set forth from time to time in our reports and other filings made with the SEC, including under Part I, Item 1A. Risk Factors of the 2015 Form 10-K. Note Regarding the Use of Non-GAAP Financial Measures We have provided certain Non-GAAP financial information, which includes adjustments for special items, as additional information for our consolidated income (loss) from continuing operations and segment operating income (loss). These measures are not in accordance with, or an alternative for, generally accepted accounting principles ( GAAP ) and may be different from Non-GAAP measures reported by other companies. We believe that the presentation of Non-GAAP measures provides useful information to management and investors regarding certain financial and business trends relating to our financial condition and results of operations because it permits evaluation of the results of our continuing operations without the effect of special items that management believes make it more difficult to understand and evaluate our results of operations. Overview We are a global provider of staffing services (traditional time and materials-based as well as project-based), and information technology infrastructure services. Our staffing services consist of workforce solutions that include providing contingent workers, personnel recruitment services, and managed staffing services programs supporting primarily light industrial, professional administration, technical, information technology and engineering positions. Our project-based staffing assists with individual customer assignments as well as customer care call centers and gaming industry quality assurance testing services. Our managed service programs consist of managing the procurement and on-boarding of contingent workers from multiple providers. Our information technology infrastructure services ("Maintech") provide server, storage, network and desktop IT hardware maintenance, data center and network monitoring and operations. As of May 1, 2016, we employed approximately 24,700 people, including 22,300 contingent workers. Contingent workers are on our payroll for the length of their assignment. We operate from 110 locations worldwide with approximately 85% of our revenues generated in the United States. Our principal international markets include Canada, Europe and several Asia Pacific locations. The industry is highly fragmented and very competitive in all of the markets we serve. Results of Continuing Operations The following discussion and analysis of operating results is presented at the reporting segment level. Since this discussion would be substantially the same at the consolidated level, we have therefore not included a redundant discussion. 16

19 RESULTS OF CONTINUING OPERATIONS Consolidated Results by Segment Three Months Ended May 1, 2016 Three Months Ended May 3, 2015 Staffing Staffing (in thousands) Total Services Other Total Services Other Net revenue $ 335,439 $ 317,247 $ 18,192 $ 385,189 $ 362,277 $ 22,912 Expenses Direct cost of staffing services revenue 267, , , ,837 Cost of other revenue 15,887 15,887 19,909 19,909 Selling, administrative and other operating costs 42,946 41,460 1,486 50,806 46,851 3,955 Restructuring and severance costs (24) Impairment charges 5, ,397 Segment operating income (loss) 8,158 7, ,012 10,337 (5,325) Corporate general and administrative 8,436 9,106 Corporate restructuring and severance costs 218 Gain on sale of building (1,663) Operating income (loss) 1,167 (4,094) Other income (expense), net (1,861) (2,287) Income tax provision 1, Net loss from continuing operations $ (1,785) $ (6,913) Results of Operations (Q vs. Q2 2015) Staffing Services Net revenue: The segment s net revenue in the second quarter of fiscal 2016 decreased $45.1 million, or 12.4%, to $317.2 million from $362.3 million in fiscal The revenue decline was primarily driven by our traditional staffing, project-based and managed services programs. Traditional staffing experienced lower demand from our customers in both our technical and non-technical administrative and light industrial ("A&I") skill sets as well as a change in the overall mix from technical to A&I skill sets. Declines were most prevalent with our customers in the industrial and commercial manufacturing (primarily supporting the oil and gas industry) and utility industries, partially offset by increases in communications and transportation manufacturing industries. Project-based programs experienced decreases primarily attributed to the exit of a large customer in both our application testing and call center service offerings. Managed services programs experienced a decrease primarily due to the decision not to pursue continued business with certain customers as well as lower volume. Direct cost of staffing services revenue: Direct cost of staffing services revenue in the second quarter of 2016 decreased $36.0 million, or 11.9%, to $267.8 million from $303.8 million in The decrease was primarily the result of fewer contingent staff on assignment within our traditional staffing business as well as a reduction in revenues in our project-based and managed services programs. Direct margin of staffing services revenue as a percent of staffing revenue was 15.6% compared to 16.1% in Despite the slight increase in our traditional staffing direct margin percentage from 2015, the decline in direct margin percentage was primarily experienced in our higher margin other related staffing businesses. Selling, administrative and other operating costs: The segment s selling, administrative and other operating costs in the second quarter of 2016 decreased $5.4 million, or 11.5%, to $41.5 million from $46.9 million in 2015, primarily due to lower headcount across all businesses and the impact of the sale of our Uruguayan staffing business during the first quarter of As a percent of staffing revenue, these costs were 13.1% in the second quarter of 2016 from 12.9% in the second quarter of Impairment charges: The $1.0 million impairment charge during 2015 was a result of our annual impairment test for goodwill related to our staffing reporting unit in Uruguay. We perform our annual impairment test for goodwill during the second quarter of the fiscal year, according to ASU No , Intangibles - Goodwill and Other. We performed a Step 1 analysis of the goodwill impairment test for our European operations utilizing the same Income and Market approach as was applied in the fourth quarter of 2015 quantitative analysis to estimate the implied fair value. The results of our Step 1 analysis in the second quarter of 2016 indicated that there was no impairment of our goodwill of $6.1 million as of May 1,

20 Segment operating income: The segment s operating income in the second quarter of 2016 decreased $2.4 million to $7.9 million from $10.3 million in The decrease in operating income is primarily due to a decline in the results of our project-based programs and to a lesser extent in our traditional staffing and managed services programs due to the decline in revenue and related direct margin, partially offset by reductions in selling, administrative and other operating costs as well as impairment charges. Operating income in 2015 of $10.3 million included $1.3 million of special items related to impairment charges and restructuring and severance costs. Excluding the impact of these special items, segment operating income would have been $11.6 million on a Non-GAAP basis. Other Net revenue: The segment s net revenue in the second quarter of fiscal 2016 decreased $4.7 million, or 20.6%, to $18.2 million from $22.9 million in fiscal This decline is primarily due to the sale of substantially all of the assets of the telecommunications infrastructure and security services business ("VTG") in the fourth quarter of 2015 and the sale of our telephone directory publishing and printing business ("printing") in the third quarter of The remaining decrease was attributable to our information technology infrastructure services business due in part from lower volume from one of our aeronautical defense contractor customers resulting from decreased federal funding. Cost of other revenue: The segment s cost of other revenue in the second quarter of 2016 decreased $4.0 million, or 20.2%, to $15.9 million from $19.9 million in This decrease is primarily due to the sale of our VTG and printing businesses as discussed above as well as the decrease in our information technology infrastructure services business. Selling, administrative and other operating costs: The segment s selling, administrative and other operating costs decreased $2.5 million, or 62.4%, to $1.5 million in the second quarter of 2016 from $4.0 million in 2015, primarily in our information technology infrastructure services business in response to the decrease in revenue as well as the sales of our VTG and printing businesses as discussed above. Impairment charges: In conjunction with the initiative to exit certain non-core operations, we performed an assessment of the telephone directory publishing and printing business in Uruguay in Consequently, the net assets of the business of $4.4 million were fully impaired during the second quarter of Segment operating income (loss) : The segment s operating results in the second quarter of 2016 increased $5.5 million to operating income of $0.2 million from an operating loss of $5.3 million in 2015 primarily from the impairment charge recorded in 2015 as well as the sale of our printing business. Corporate and Other Expenses Corporate general and administrative: Corporate general and administrative costs in the second quarter of 2016 decreased $0.7 million, or 7.4%, to $8.4 million from $9.1 million in 2015 primarily from a decrease in costs incurred in connection with responding to activist shareholders and related Board of Directors' search fees as well as audit fees, partially offset in the current year for costs incurred in executive search and consulting fees on corporate-wide initiatives linked to our turn-around strategies. Gain on sale of building: Volt Opportunity Road Realty Corp., an indirect wholly-owned subsidiary of Volt, closed on the sale of real property comprised of land and building in San Diego, California during the second quarter of There was no mortgage on the property and the gain recorded on the sale was $1.7 million. Operating income (loss): Operating results in the second quarter of 2016 increased to operating income of $1.2 million from a loss of $4.1 million in This increase was primarily from decreased impairment charges, the gain on the sale of our building in San Diego, California as well as a reduction of our Corporate general and administrative costs, partially offset by a decrease in operating results from our Staffing Services segment. Other income (expense), net: Other expense in the second quarter of 2016 decreased $0.4 million to $1.9 million from $2.3 million in 2015, primarily related to non-cash foreign exchange net losses on intercompany balances, partially offset by the amortization of deferred financing fees. Income tax provision: Income tax provision was $1.1 million compared to $0.5 million in the second quarter of 2016 and 2015, respectively. The provision in both periods primarily related to locations outside of the United States. 18

21 Consolidated Results by Segment Six Months Ended May 1, 2016 Six Months Ended May 3, 2015 Staffing Staffing (in thousands) Total Services Other Total Services Other Net revenue $ 662,269 $ 625,928 $ 36,341 $ 768,255 $ 723,098 $ 45,157 Expenses Direct cost of staffing services revenue 531, , , ,355 Cost of other revenue 32,675 32,675 39,514 39,514 Selling, administrative and other operating costs 85,675 82,750 2, ,404 94,524 6,880 Restructuring and severance costs 2,400 1, (24) Impairment charges 5, ,397 Segment operating income (loss) 9,521 9,668 (147) 8,357 13,967 (5,610) Corporate general and administrative 18,632 18,798 Corporate restructuring and severance costs 1, Gain on sale of building (1,663) Operating loss (8,649) (11,416) Other income (expense), net (2,454) (2,386) Income tax provision 1,644 1,911 Net loss from continuing operations $ (12,747) $ (15,713) Results of Operations (Q YTD vs. Q YTD) Staffing Services Net revenue: The segment s net revenue in the first six months of fiscal 2016 decreased $97.2 million, or 13.4%, to $625.9 million from $723.1 million in fiscal The revenue decline is primarily driven by our traditional staffing, project-based and managed services programs. Traditional staffing experienced lower demand from our customers in both our technical and non-technical A&I skill sets as well as a change in overall mix from technical to A&I skill sets. Declines were most prevalent with our customers in the industrial and commercial manufacturing (primarily supporting the oil and gas industry) and utility industries, partially offset by increases in communications and transportation manufacturing industries. Project-based programs experienced decreases primarily attributed to the exit of a large customer in both our application testing and call center service offerings. Managed services programs experienced a decrease primarily due to the decision not to pursue continued business with certain customers as well as lower volume. Direct cost of staffing services revenue: Direct cost of staffing services revenue in the first six months of 2016 decreased $81.4 million, or 13.3%, to $532.0 million from $613.4 million in The decrease was primarily the result of fewer contingent staff on assignment within our traditional staffing business as well as a reduction in revenues in our project-based and managed services programs. Direct margin of staffing services revenue as a percent of staffing revenue in 2016 was 15.0% from 15.2% in Despite the slight increase in our traditional staffing direct margin percentage from 2015, the decline in direct margin percentage was primarily experienced in our higher margin other related staffing businesses. Selling, administrative and other operating costs: The segment s selling, administrative and other operating costs in the first six months of 2016 decreased $11.7 million, or 12.5%, to $82.8 million from $94.5 million in 2015, primarily due to lower headcount across all businesses and the impact of the sale of our Uruguayan staffing business during the first quarter of As a percent of staffing services revenue, these costs were 13.2% and 13.1% for 2016 and 2015, respectively. Restructuring and severance costs: The segment's restructuring and severance costs of $1.5 million, primarily severance, were incurred as part of our overall cost reduction plan. Impairment charges: The $1.0 million impairment charge during 2015 was a result of our annual impairment test for goodwill related to our staffing reporting unit in Uruguay. 19

22 Segment operating income: The segment s operating income in the first six months of 2016 decreased $4.3 million to $9.7 million from $14.0 million in The decrease in operating income is primarily due to a decline in the results of our project-based programs and to a lesser extent in our traditional staffing and managed services programs due to the decline in revenue and related direct margin, partially offset by reductions in selling, administrative and other operating costs as well as impairment charges. Operating income in 2016 of $9.7 million included special items related to restructuring and severance costs of $1.5 million. Excluding the impact of this special item, segment operating income would have been $11.2 million on a Non-GAAP basis. Operating income in 2015 of $14.0 million included $1.3 million of special items related to impairment charges of $1.0 million and restructuring and severance costs of $0.3 million. Excluding the impact of this special item, segment operating income would have been $15.3 million on a Non-GAAP basis. Other Net revenue: The segment s net revenue in the first six months of fiscal 2016 decreased $8.9 million, or 19.5%, to $36.3 million from $45.2 million in fiscal This decline is primarily due to the sale of substantially all of the assets of the VTG business in the fourth quarter of 2015 and the sale of our printing business in the third quarter of The remaining decrease was attributable to our information technology infrastructure services business due in part from lower volume from one of our aeronautical defense contractor customers resulting from decreased federal funding. Cost of other revenue: The segment s cost of other revenue in the first six months of 2016 decreased $6.8 million, or 17.3%, to $32.7 million from $39.5 million in The decrease is primarily due to the sale of our VTG and printing businesses as discussed above as well as the decrease in our information technology infrastructure services business. Selling, administrative and other operating costs: The segment s selling, administrative and other operating costs decreased $4.0 million, or 57.5%, to $2.9 million in the first six months of 2016 from $6.9 million in 2015, primarily from the sales of our VTG and printing businesses as discussed above as well as in our information technology infrastructure services business in response to the decrease in revenue. Impairment charges: In conjunction with the initiative to potentially exit certain non-core operations, we performed an assessment of the printing business during Consequently, the net assets of the business of $4.4 million were fully impaired during the first six months of Segment operating loss: The segment s operating loss in the first six months of 2016 decreased $5.5 million to $0.1 million from $5.6 million in 2015 primarily from the impairment charge recorded in 2015, the sale of our printing business as well as decreased results in our information technology infrastructure services business primarily from lower volume from one of our aeronautical defense contractor customers resulting from decreased federal funding. Corporate and Other Expenses Corporate general and administrative: Corporate general and administrative costs decreased $0.2 million, or 0.9%, to $18.6 million from $18.8 million in 2015 primarily from a decrease in costs incurred in connection with responding to activist shareholders and related Board of Directors' search fees as well as higher audit fees, partially offset in the current year for costs incurred in executive search and consulting fees on corporate-wide initiatives linked to our turn-around strategies. Corporate restructuring and severance costs: Corporate restructuring and severance costs in the first six months of fiscal 2016 included $1.2 million of severance costs incurred as part of our overall cost reduction plan. Corporate restructuring costs in the first six months of fiscal 2015 included $1.0 million of severance charges associated with the departure of our former Chief Financial Officer. Gain on sale of building: Volt Opportunity Road Realty Corp., an indirect wholly-owned subsidiary of Volt, closed on the sale of real property comprised of land and building in San Diego, California during the second quarter of There was no mortgage on the property and the gain recorded on the sale was $1.7 million. Operating loss: Operating loss in the first six months of 2016 decreased to $8.6 million from $11.4 million in The decrease in operating loss was primarily from impairments within our Staffing Services and Other segments in 2015, the decrease in selling, administrative and other operating costs and the gain on the sale of our building in San Diego, California. These items were partially offset by the decrease in operating results from our Staffing Services segment. Other income (expense), net: Other expense in the first six months of 2016 increased $0.1 million to $2.5 million from $2.4 million in 2015, primarily due to the amortization of deferred financing fees partially offset by non-cash foreign exchange net losses on intercompany balances. 20

23 Income tax provision: Income tax provision was $1.6 million compared to $1.9 million in the first six months of 2016 and 2015, respectively. The provision in both periods primarily related to locations outside of the United States. LIQUIDITY AND CAPITAL RESOURCES Our primary sources of liquidity are cash flows from operations and proceeds from our Financing Program. Borrowing capacity under this program is directly impacted by the level of accounts receivable which fluctuates during the year due to seasonality and other factors. Our business is subject to seasonality with fiscal first quarter billings typically the lowest due to the holiday season and generally increasing in the fiscal third and fourth quarters when our customers increase the use of contingent labor. Generally, the first and fourth quarters of our fiscal year are the strongest for operating cash flows. In February 2016, Maintech entered into a $10.0 million short-term credit facility with Bank of America, N.A. ("BofA"), which supplements our existing Financing Program and provides additional liquidity for working capital and general corporate purposes. Our operating cash flows consist primarily of collections of customer receivables offset by payments for payroll and related items for our contingent staff and in-house employees; federal, foreign, state and local taxes; and trade payables. We generally provide customers with day credit terms, with few extenuating exceptions to 60 days, while our payroll and certain taxes are paid weekly. We manage our cash flow and related liquidity on a global basis. We fund payroll, taxes and other working capital requirements using cash supplemented as needed from short-term borrowings. Our weekly payroll payments inclusive of employment related taxes and payments to vendors approximates $20.0 million. We generally target minimum global liquidity to be 1.5 to 2.0 times our average weekly requirements. We also maintain minimum effective cash balances in foreign operations and use a multi-currency netting and overdraft facility for our European entities to further minimize overseas cash requirements. While our overall liquidity continues to improve, our current Financing Program provides for a minimum liquidity covenant which is measured daily and consists of cash in banks plus undrawn amounts of the program. Prior to July 31, 2016, the required minimum liquidity covenant level is $35.0 million, and thereafter is $50.0 million. This places restrictions on our ability to utilize this cash. As of May 1, 2016, our liquidity, as defined in our debt agreement, was $58.8 million and at June 3, 2016 was $50.0 million. We believe our cash flow from operations and planned liquidity will be sufficient to meet our projected cash needs for the foreseeable future. As part of our upcoming financing negotiations, we are looking to replace or modify this covenant. Capital Allocation In addition to our planned improvements in technology and overall processes which are anticipated to increase cash flows from operations over time, we have prioritized our capital allocation strategy to strengthen our balance sheet and increase our competitiveness in the marketplace. The timing of these initiatives is highly dependent upon attaining the profitability objectives outlined in our plan and the cash flow resulting from the completion of our liquidity initiatives. We also see this as an opportunity to demonstrate our ongoing commitment to Volt shareholders as we continue to execute on our plan and return to sustainable profitability. Our capital allocation strategy includes the following elements: Maintaining appropriate levels of working capital. Our business requires a certain level of cash resources to efficiently execute operations. Consistent with similar companies in our industry and operational capabilities, we estimate this amount to be 1.5 to 2.0 times our weekly cash distributions on a global basis and must accommodate seasonality and cyclical trends; Reinvesting in our business. We are executing a company-wide initiative to reinvest in our business including new information technology systems which will support our front-end recruitment and placement capabilities as well as increase efficiencies in our back-office financial suite. We are also investing in our sales and recruiting process and resources, which will enhance our ability to win in the marketplace; Deleveraging our balance sheet. By lowering our debt level, we will strengthen our balance sheet, reduce interest costs and reduce risk going forward; Returning capital to shareholders. Part of our strategy is to return capital to our shareholders in connection with share buybacks through our existing share buyback program; and Acquiring value-added businesses. Potentially in the longer-term identifying and acquiring companies which would be accretive to our operating income and that could leverage Volt's scale, infrastructure and capabilities. Strategic acquisitions would strengthen Volt in certain industry verticals or in specific geographic locations. 21

24 Initiatives to Improve Operating Income, Cash Flows and Liquidity We continue to make progress on several initiatives undertaken to enhance our liquidity position and shareholder value. We continue to actively manage our portfolio of business units and have exited both non-core businesses that were incurring losses and core businesses that were marginally profitable. We completed a number of significant divestitures in the latter part of fiscal 2015 and the first quarter of 2016, including the sale of our printing and staffing businesses in Uruguay, and the sale of substantially all the assets of our telecommunications, infrastructure and security services business. The above transactions netted nominal proceeds, however, we expect these transactions will be accretive to future operating cash flows. We sold and simultaneously entered into a lease on our Orange, California property in March 2016 for a purchase price of $35.9 million. After the repayment of the mortgage on the property along with transaction-related expenses and fees, we received net cash proceeds of $27.1 million from the sale of the property. The lease on the property will expire in March 2031 with an annual base rent of $2.9 million for the first year with a 3.0% annual increase on the then-current base rent. The net proceeds from the sale will be used to ensure adequate levels of liquidity for working capital purposes, as well as to fund investments in technology and sales and marketing activities in support of our growth objectives. As previously disclosed, we are engaged in a sales process of Maintech. The timeline to complete a transaction could extend beyond the third quarter of fiscal In March 2016, Volt Opportunity Road Realty Corp., an indirect wholly-owned subsidiary of Volt, closed on the sale of real property comprised of land and building with office space of approximately 19,000 square feet in San Diego, California with a private commercial real estate investor. There was no mortgage on the property and net proceeds, after transaction-related expenses and fees, totaled $2.0 million. We have significant tax benefits including recoverable tax receivables of $16.0 million which, although dependent on the IRS, we expect to collect in the fourth quarter of fiscal Entering fiscal 2016 we also have federal net operating loss carryforwards, which are fully reserved with a valuation allowance of $133.6 million, capital loss carryforwards of $82.3 million and federal tax credits of $41.3 million which we will be able to utilize against future profits. We remain committed to delivering superior client service at a reasonable cost. In an effort to reduce our future operating costs, we are making a significant investment to update our business processes, back-office financial suite and information technology tools that are critical to our success and offer more functionality at a lower cost. Our estimate of $12.0 million in expensed and capitalized costs remains on target. We expect that these activities will reduce costs of service through either the consolidation and/or elimination of certain systems and processes along with other reductions in discretionary spending. Through our strategy of improving efficiency in all aspects of our operations, we believe we can realize organic growth opportunities, reduce costs and increase profitability. In the first quarter of fiscal 2016, we implemented a cost reduction plan as part of our overall initiative to become more efficient, competitive and profitable. We incurred restructuring charges of $3.6 million primarily resulting from a reduction in workforce, facility consolidation and lease termination costs. As a result of our cost reduction plan, we anticipate annual cost savings of approximately $10.0 million. Cost savings will be used consistent with our ongoing strategic efforts to strengthen our operations. 22

25 The following table sets forth our cash and available liquidity levels at the end of our last five quarters and our most recent week ended (in thousands): Global Liquidity May 3, 2015 August 2, 2015 November 1, 2015 January 31, 2016 May 1, 2016 June 3, 2016 Cash and cash equivalents (a) $ 6,070 $ 12,332 $ 10,188 $ 16,515 $ 23,171 Cash in banks (b) $ 9,015 $ 18,134 $ 13,652 $ 21,140 $ 29,626 $ 20,186 Financing Program - PNC 7,900 8,900 35,700 23,584 26,053 26,766 Short-Term Credit Facility - BofA 3,105 3,032 Available liquidity (c) $ 16,915 $ 27,034 $ 49,352 $ 44,724 $ 58,784 $ 49,984 (a) Per financial statements. (b) Amount generally includes unpresented checks. (c) Our Financing Program contains a minimum liquidity covenant of $35.0 million effective January 31, 2016, which increases to $50.0 million effective July 31, 2016 and thereafter. Cash flows from operating, investing and financing activities, as reflected in our Condensed Consolidated Statements of Cash Flows, are summarized in the following table (in thousands): Six Months Ended May 1, 2016 May 3, 2015 Net cash provided by operating activities $ 2,489 $ 982 Net cash provided by (used in) investing activities 27,553 (2,754) Net cash provided by (used in) financing activities (15,831) 7,344 Effect of exchange rate changes on cash and cash equivalents (1,228) (1,958) Net cash used in discontinued operations (4,056) Net increase (decrease) in cash and cash equivalents $ 12,983 $ (442) Cash Flows - Operating Activities The net cash provided by operating activities in the first six months ended May 1, 2016 was $2.5 million, an increase of $1.5 million from the same period in This increase resulted primarily from increased working capital relating to accrued expenses and other liabilities (accrued compensation and related taxes), partially offset by net assets held for sale and prepaid insurance and other assets. This was partially offset by an increase in our net loss when adjusted for non-cash items related to impairment charges, gain on dispositions of property and equipment and unrealized foreign currency exchange loss. Cash Flows - Investing Activities The net cash provided by investing activities in the first six months ended May 1, 2016 was $27.6 million, principally from the sale of property and equipment of $36.9 million, partially offset by the purchases of property, equipment and software of $8.5 million relating to our investment in updating our business processes, back-office financial suite and information technology tools. The net cash used in investing activities in the first six months ended May 3, 2015 was $2.8 million, principally from the purchase of property, equipment and software of $3.3 million. Cash Flows - Financing Activities The net cash used in financing activities in the first six months ended May 1, 2016 was $15.8 million principally from the net repayment of borrowings of $8.0 million and repayment of long-term debt of $7.3 million as a result of the sale-leaseback of our Orange, California facility. The net cash provided by financing activities in the first six months of 2015 was $7.3 million resulting from the elimination of cash restricted as collateral for borrowings of $10.4 million, partially offset by $4.3 million for the purchase of common stock. 23

26 Availability of Credit At May 1, 2016 and November 1, 2015, we had a financing program that provided for multi-currency borrowing and issuance of letters of credit up to an aggregate of $150.0 million, and up to $250.0 million under an accordion feature in our Financing Program, subject to bank credit review and Volt board approval. At May 1, 2016 and November 1, 2015, we had outstanding borrowings of $90.0 million and $100.0 million, respectively, under the Financing Program and bore a weighted average annual interest rate of 2.2% and 1.7%, respectively, inclusive of certain facility fees. In February 2016, Maintech entered into a $10.0 million 364-day short-term revolving credit facility with Bank of America, N.A., as lender. The provisions of the agreement will not preclude structuring and other activities required in anticipation of our sale of Maintech. As of May 1, 2016, the amount drawn under this facility was $2.0 million. Financing Program In January 2016, we amended our $150.0 million Financing Program with PNC Bank, National Association ( PNC ) to (1) extend the termination date to January 31, 2017; (2) eliminate the interest coverage ratio and modify the liquidity level requirement; (3) reduce the minimum funding threshold, as defined, from 60% to 40%, and (4) revise pricing from a LIBOR based rate plus 1.75% per the prior agreement, to a LIBOR based rate plus 1.90% on outstanding borrowings, and to increase the facility fee from 0.65% to 0.70%. The Financing Program is secured by receivables from certain Staffing Services businesses in the United States, Europe and Canada that are sold to a wholly-owned, consolidated, bankruptcy remote subsidiary. The subsidiary's sole business consists of the purchase of the receivables and subsequent granting of a security interest to PNC under the program, and its assets are available first to satisfy obligations to PNC and are not available to pay creditors of our other legal entities. Borrowing capacity under the Financing Program is directly impacted by the level of accounts receivable. As of November 1, 2015, the Financing Program was classified as long-term debt on the Condensed Consolidated Balance Sheets, however, as of the end of our fiscal first quarter 2016, the Financing Program was classified as short-term as the termination date is within twelve months of our first quarter 2016 balance sheet date. In addition to customary representations, warranties and affirmative and negative covenants, the program is subject to a minimum liquidity covenant which increased under the aforementioned amendment from $20.0 million in cash and cash equivalents and borrowing availability under the Financing Program, to $35.0 million effective January 31, 2016, which increases to $50.0 million effective July 31, The program is subject to termination under standard events of default including change of control, failure to pay principal or interest, breach of the liquidity covenant, triggering of portfolio ratio limits, or other material adverse events as defined. As of May 1, 2016, we were in compliance with all debt covenant requirements. The Financing Program has a feature under which the facility limit can be increased from $150.0 million up to $250.0 million subject to credit approval from PNC. Borrowings are priced based upon a fixed program rate plus the daily adjusted one-month LIBOR index, as defined. The program also contains a revolving credit provision under which proceeds can be drawn for a definitive tranche period of 30, 60, 90 or 180 days priced at the adjusted LIBOR index rate in effect for that period. In addition to United States dollars, drawings can be denominated in Canadian dollars, subject to a Canadian dollar $30.0 million limit, and British Pounds Sterling, subject to a 20.0 million limit. The program also includes a letter of credit sublimit of $50.0 million and minimum borrowing requirements. As of May 1, 2016, there were no foreign currency denominated borrowings, and the letter of credit participation was $31.0 million inclusive of $28.9 million for the Company's casualty insurance program and $2.1 million for the security deposit required under the Orange facility lease agreement. Bank of America Short-Term Credit Facility In February 2016, Maintech, Incorporated, an indirect wholly-owned subsidiary of Volt, as borrower, entered into a $10.0 million 364-day secured revolving credit agreement with Bank of America, N.A. The credit agreement provides for revolving loans as well as a $0.1 million sub-line for letters of credit and is subject to borrowing base and availability restrictions and requirements. The credit agreement is secured by assets of the borrower, including accounts receivable, and the Company has guaranteed the obligations of the borrower under the agreement not to exceed $3.0 million. The credit agreement contains certain customary representations and warranties, events of default and affirmative and negative covenants. The borrower may optionally terminate the credit agreement and repay the borrowings prior to the expiration date, without premium or penalty at any time by the delivery of a notice to that effect as provided under the credit agreement. It is anticipated that the credit agreement will be terminated before a sale of the borrower. Borrowings will be used for working capital and general corporate purposes. Interest under the credit agreement is one month LIBOR plus 2.75% on drawn amounts and a fixed rate of 0.375% on undrawn amounts. 24

27 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information in this section should be read in conjunction with the information on financial market risk related to non-u.s. currency exchange rates, changes in interest rates and other financial market risks in Part II, Item 7A., Quantitative and Qualitative Disclosures About Market Risk, in our Annual Report on Form 10-K for the year ended November 1, Market risk is the potential economic gain or loss that may result from changes in market rates and prices. In the normal course of business, the Company s earnings, cash flows and financial position are exposed to market risks relating to the impact of interest rate changes, foreign currency exchange rate fluctuations and changes in the market value of financial instruments. We limit these risks through risk management policies and procedures. Interest Rate Risk We centrally manage our debt and investment portfolios considering investment opportunities and risks, tax consequences and overall financing strategies. At May 1, 2016, we had cash and cash equivalents on which interest income is earned at variable rates. At May 1, 2016, we had a $150.0 million accounts receivable securitization program, which can be increased up to $250.0 million subject to credit approval from PNC, to provide additional liquidity to meet our short-term financing needs. In addition, we have a $10.0 million secured revolving credit facility with Bank of America, N.A. which provides additional liquidity to meet our short-term financing needs. The interest rates on these borrowings and financings are variable and, therefore, interest and other expense and interest income are affected by the general level of U.S. and foreign interest rates. Based upon the current levels of cash invested, notes payable to banks and utilization of the securitization program, on a short-term basis, a hypothetical 1-percentage-point increase in interest rates would have increased net interest expense by $0.5 million and a hypothetical 1-percentage-point decrease in interest rates would have decreased net interest expense by $0.8 million in the second quarter of fiscal Foreign Currency Risk We have operations in several foreign countries and conduct business in the local currency in these countries. As a result, we have risk associated with currency fluctuations as the value of foreign currencies fluctuates against the dollar, in particular the British Pound, Euro, Canadian Dollar and Indian Rupee. These fluctuations impact reported earnings. Fluctuations in currency exchange rates also impact the U.S. dollar amount of our net investment in foreign operations. The assets and liabilities of our foreign subsidiaries are translated into U.S. dollars at the exchange rates in effect at the fiscal period-end balance sheet date. Income and expense accounts are translated at an average exchange rate during the year which approximates the rates in effect at the transaction dates. The resulting translation adjustments are recorded in stockholders equity as a component of accumulated other comprehensive loss. The U.S. dollar weakened relative to many foreign currencies as of May 1, 2016 compared to November 1, Consequently, stockholders equity increased by $2.8 million as a result of the foreign currency translation as of May 1, Based upon the current levels of net foreign assets, a hypothetical 10% devaluation of the U.S. dollar as compared to these currencies as of May 1, 2016 would result in an approximate $1.4 million positive translation adjustment recorded in other comprehensive loss within stockholders equity. Conversely, a hypothetical 10% appreciation of the U.S. dollar as compared to these currencies as of May 1, 2016 would result in an approximate $1.4 million negative translation adjustment recorded in other comprehensive loss within stockholders equity. We do not use derivative instruments for trading or other speculative purposes. Equity Risk Our investments are exposed to market risk as they relate to changes in market value. We hold investments primarily in mutual funds for the benefit of participants in our non-qualified deferred compensation plan. Changes in the market value of these investments result in offsetting changes in our liability under the non-qualified deferred compensation plans as the employees realize the rewards and bear the risks of their investment selections. At May 1, 2016, the total market value of these investments was approximately $3.8 million. 25

28 ITEM 4. CONTROLS AND PROCEDURES Volt maintains disclosure controls and procedures, as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the Exchange Act ), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, Volt s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and Volt s management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Volt has carried out an evaluation, as of the end of the period covered by this report, under the supervision and with the participation of Volt s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Volt s disclosure controls and procedures. Based upon their evaluation and subject to the foregoing, the Chief Executive Officer and Chief Financial Officer concluded that Volt s disclosure controls and procedures were effective. There have been no significant changes in Volt s internal controls over financial reporting that occurred during the fiscal quarter ended May 1, 2016 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. ITEM 1. LEGAL PROCEEDINGS PART II OTHER INFORMATION From time to time, the Company is subject to claims in legal proceedings arising in the ordinary course of its business, including payrollrelated and various employment-related matters. All litigation currently pending against the Company relates to matters that have arisen in the ordinary course of business and the Company believes that such matters will not have a material adverse effect on its consolidated financial condition, results of operations or cash flows. Since our 2015 Form 10-K, there have been no material developments in the material legal proceedings in which we are involved. ITEM 1A. RISK FACTORS In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our K, which could materially affect our business, financial position and results of operations. There are no material changes from the risk factors set forth in Part I, Item 1A. Risk Factors in our K. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None 26

29 ITEM 4. MINE SAFETY DISCLOSURE Not applicable ITEM 5. OTHER INFORMATION On June 8, 2016, the Company s Board of Directors (the Board ) adopted an amended and restated Volt Information Sciences, Inc. Deferred Compensation and Supplemental Savings Plan (the Plan ). The Plan, to be effective as of June 8, 2016, was amended to allow non-employee directors to participate in the Plan and to allow deferral of equity compensation for all participants. The Administrative Committee for Retirement Programs, under the supervision of the Board, administers the Plan and determines participation eligibility. Each participant in the Plan will have the opportunity to defer a percentage of his or her compensation pursuant to the terms of the Plan as follows: employee participants may elect to defer (i) up to 20% of his or her base salary; (ii) up to 50% of his or her annual cash commission, cash incentive, or other bonus award (deferrals under (i) and (ii) subject to an aggregate cap as specified in the Plan); and (iii) all or any portion of Company restricted stock units ("Company RSUs ) granted to the employee participant. Non-employee director participants may elect to defer (i) all or any portion of cash compensation paid for services the director participant performed as a member of the Board; and (ii) all or any portion of Company RSUs granted to the director participant. Compensation deferred under the Plan is not required to be contributed to the Plan, but will in any event become a liability of the Company and will be paid to participants pursuant to the terms of the Plan. The Board may amend or terminate the Plan at any time. However, if an amendment would adversely affect a participant s existing accrued benefits under the Plan, then the Company must first obtain that participant s written consent. 27

30 ITEM 6. EXHIBITS The following exhibits are filed as part of, or incorporated by reference into, this Report: Exhibits Description 3.1 Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company s Annual Report on Form 10-K filed January 30, 1997; File No ) 3.2 Certificate of Amendment to Certificate of Incorporation of the Company (incorporated by reference to Exhibit 99.1 to the Company s Current Report on Form 8-K filed April 11, 2007; File No ) 3.3 Amended and Restated By-Laws of the Company, as amended through October 30, 2015 (incorporated by reference to Exhibit 3.2 to the Company s Current Report on Form 8-K filed November 4, 2015; File No ) 10.1 Volt Information Sciences, Inc. Deferred Compensation and Supplemental Savings Plan, amended and restated effective June 8, Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of Certification of Chief Executive Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section Certification of Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document 28

31 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. VOLT INFORMATION SCIENCES, INC. Date: June 8, 2016 Date: June 8, 2016 Date: June 8, 2016 By: By: By: /s/ Michael Dean Michael Dean President and Chief Executive Officer (Principal Executive Officer) /s/ Paul Tomkins Paul Tomkins Senior Vice President and Chief Financial Officer (Principal Financial Officer) /s/ Bryan Berndt Bryan Berndt Controller and Chief Accounting Officer (Principal Accounting Officer) 29

32 # VOLT INFORMATION SCIENCES, INC. DEFERRED COMPENSATION AND SUPPLEMENTAL SAVINGS PLAN (Amended and Restated Effective June 8, 2016) PLAN DOCUMENT

33 # i VOLT INFORMATION SCIENCES, INC. DEFERRED COMPENSATION AND SUPPLEMENTAL SAVINGS PLAN TABLE OF CONTENTS Page ARTICLE I ESTABLISHMENT AND PURPOSE Establishment and Restatement Purpose Application of Plan...2 ARTICLE II DEFINITIONS AND CONSTRUCTION Definitions S6.1 everability...9 ARTIC6.8 LE III PARTICIPATION Eligibility Participation...9 ARTICLE IV SUPPLEMENTAL SAVINGS BENEFITS Supplemental Savings Amount Determination of Supplemental Savings Amount Complete Discretion of the Committee...10 ARTICLE V DEFERRAL AMOUNTS; DEFERRAL ELECTIONS Types of Deferral Amounts Salary Deferral Election Bonus Deferral Election Director Fees Deferral Election RSU Deferral Election Deferral and Payment Elections Employment Taxes Automatic Cancellation of Deferral Elections upon Receipt of Unforeseen Emergency or Hardship Withdrawal...15 ARTICLE VI PAYMENT OF BENEFITS Time of Payment of Deferral Amounts...16

34 Table of Contents (continued) Page # ii 6.2 Forms of Payment of Deferral Amounts Change in Time or Form of Payment Distribution of Vested Accounts for an Unforeseeable Emergency Need Death Benefits Withholding of Taxes Cash-Out Distribution Method of Calculation of Payments Administrative Deferral of Payments; Frequency of Payments...19 ARTICLE VII ACCOUNTS; CREDITED INCOME Participant Accounts Investment Options; Crediting of Income Nature of Account Entries Vesting Account Statements Expenses Charged to Accounts...21 ARTICLE VIII ADMINISTRATION OF THE PLAN Plan Administrator Rules; Claims for Benefits Finality of Determinations Agreement to Arbitrate Disputes Indemnification Delegation to Benefits Coordinating Committee...25 ARTICLE IX FUNDING Funding...25 ARTICLE X AMENDMENT; TERMINATION; MERGER Amendment and Termination Change of Control Automatic Payment of Taxable Benefit...27 ARTICLE XI GENERAL PROVISIONS...27

35 Table of Contents (continued) Page # iii 11.1 Beneficiary Designation Effect on Other Plans Nontransferability Plan Not an Employment or Service Contract Applicable Law...28

36 # VOLT INFORMATION SCIENCES, INC. DEFERRED COMPENSATION AND SUPPLEMENTAL SAVINGS PLAN ARTICLE I ESTABLISHMENT AND PURPOSE 1.1 Establishment and Restatement. (a) By document dated December 7, 1998, Volt Information Sciences, Inc. (the Company ) established a non-qualified deferred compensation program (the Plan ) for a select group of its highly-compensated and/or management employees. The effective date of the Plan was April 1, (b) This Plan was restated in its entirety effective as of December 31, 2008 as it relates to any compensation, benefits or other remuneration which is provided pursuant to the Plan. It was contemplated that all Plan Accounts (as defined below) will be subject to Section 409A of the Internal Revenue Code of 1986, as amended (the Code ). The effective date of this restatement of the Plan was December 31, The rights of any participants in the Plan ( Participants ) as of and from December 31, 2008 was to be governed by the Plan as restated herein, as it may be further amended and restated from time to time; provided, however, that except where contrary to Section 409A of the Code or where expressly otherwise provided in the Plan or by the Committee pursuant to the Plan in a manner consistent with Section 409A of the Code, benefit payments and payment elections in effect on December 31, 2008 were to remain in effect as elected or scheduled, as the case may be. This document shall be known as the Volt Information Sciences, Inc. Deferred Compensation and Supplemental Savings Plan. (c) Under the terms of the restated Plan, eligible employees were permitted to defer a portion of their income into the Plan. The Company also desired to enhance the security of the Plan by providing that Plan assets could be held and invested by the trustee ( Trustee ) to be appointed by the Company, pursuant to the terms of the Volt Information Sciences, Inc. Deferred Compensation and Supplemental Savings Trust (the Trust ). To the extent Plan assets are held in the Trust, the Trustee will invest the Plan s assets with the goal of achieving the hypothetical investment returns credited to Participants in accordance with Article VII hereof. Payments to the Participants shall be made first from the Trust and second by the Company to the extent that the Trust s assets are not sufficient. (d) This document now restates the Plan in its entirety effective as of June 8, Under the terms of the restated Plan (as set forth herein), non-employee directors will be permitted to defer a portion of their income into the Plan. Additionally, eligible employees and non-employee directors will be permitted to defer the receipt of common stock otherwise payable under certain equity awards that such eligible employees or non-employee directors may receive under the Company s equity incentive programs. The remaining terms of the Plan shall remain in effect to the same extent as set forth prior to this restated Plan. 1.2 Purpose. The objective and purpose of the Plan is to attract competent directors, employees and key personnel by offering flexible compensation opportunities to such directors, employees and key personnel of the Company, and to provide them an opportunity to build an

37 2 # estate or supplement income for use after retirement. The Plan is also intended to compensate certain Participants for amounts that cannot be credited to the Participant s accounts under the Volt Information Sciences, Inc. Savings Plan (the Savings Plan ) and the Volt Technical Services Savings Plan (the Technical Plan ) by reason of the provisions of Sections 401(a)(17), 401(k), 402(g), and/or 415 of the Code and the corresponding provisions of the Savings Plan and/or the Technical Plan or by reason of the Participant s election to participate hereunder. 1.3 Application of Plan. (a) The Plan shall be applicable only with respect to (i) non-employee members ( Directors ) of the Board of Directors of the Company (the Board of Directors ) and (ii) eligible key employees and key personnel of the Company. The Plan and Trust are intended to be a plan which is unfunded and is maintained by the employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, within the meaning of Sections 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement Income Security of 1974, as amended ( ERISA ), and shall be interpreted and administered accordingly. As such, the Plan shall be exempt from the participation, vesting and funding requirements of Parts 2 and 3 of Title I of ERISA and shall be subject to the limited reporting and disclosure requirements (under Part 1 of Title I of ERISA) applicable to such plans. (b) The Plan and Trust are also intended to comply with Section 409A of the Code and shall be interpreted and administered accordingly. (i) As such, any deferral of compensation and any payment provided pursuant to or in connection with the Plan shall be provided and paid in a manner, and at such time and in such form, as complies with the applicable requirements of Section 409A of the Code to avoid a plan failure described in Section 409A(a)(1) of the Code, including without limitation, deferring payment until the occurrence of a specified payment event described in Section 409A(a)(2) of the Code and deferring payment of Plan benefits to a Participant who is a specified employee at his or her separation from service for six months after his separation from service or, if earlier, his or her death and to avoid the unfavorable tax consequences provided therein for non- compliance. Notwithstanding any other provision of any plan, program or arrangement (including without limitation the Plan) or document pertaining to any compensation, benefit or other remuneration subject to the provisions of Section 409A of the Code, each provision of any plan, program or arrangement (including without limitation the Plan) or document relating to the provision of such compensation, benefit or other remuneration to or with respect to a Participant under this Plan, shall be so construed and interpreted. (ii) It is specifically intended that all elections, consents and modifications thereto under the Plan will comply with the requirements of Section 409A of the Code (including any transition or grandfather rules thereunder). The Committee (as defined below) is authorized to adopt rules or regulations deemed necessary or appropriate to anticipate and/or comply the requirements of Section 409A of the Code (including any transition or grandfather rules thereunder).

38 3 # ARTICLE II DEFINITIONS AND CONSTRUCTION 2.1 Definitions. Whenever used in the Plan, the following terms shall have the meaning set forth below unless otherwise expressly provided: (a) Accounts means the recordkeeping accounts which are maintained under the name of a Participant to account for any Salary Deferral Amounts, Bonus Deferral Amounts, Supplemental Savings Amounts, Director Fees Deferral Amounts, RSU Deferral Amounts and Credited Income thereon, which may be credited from time to time. (i) Salary Deferral Account - a separate subaccount maintained to account for a Participant s Salary Deferral amount plus Credited Income thereon. (ii) Bonus Deferral Account - a separate subaccount maintained to account for a Participant s Bonus Deferral Amount plus Credited Income thereon. (iii) Supplemental Savings Account - a separate subaccount maintained to account for a Participant s Supplemental Savings Amount plus Credited Income thereon. (iv) Director Fees Deferral Account a separate subaccount maintained to account for a Participant s Director Fees Deferral Amount plus Credited Income thereto. (v) RSU Deferral Account a separate subaccount maintained to account for a Participant s RSU Deferral Amounts plus Credited Income thereon. In its sole and exclusive discretion, the Committee may combine, aggregate or separately state all or any combination of the above Accounts or subaccounts in any manner and for any administrative purpose it may deem fit provided, however, no such combination shall impair the purposes of the Plan. (b) Affiliate means the Employer and each of the following business entities or other organizations (whether or not incorporated) which during the relevant period is treated (but only for the portion of the period so treated and for the purpose and to the extent required to be so treated) together with the Employer as a single employer pursuant to the following sections of the Code (as modified where applicable by Section 415(h) of the Code): (i) Any corporation which is a member of a controlled group of corporations (as defined in Section 414(b) of the Code) which includes the Employer, or (ii) Any trade or business (whether or not incorporated) which is under common control (as defined in Section 414(c) of the Code) with the Employer. (iii) In order to identify the group of entities described in the preceding sentences, however, the Committee shall use an ownership threshold of at least fifty percent (50%) as a substitute for the eighty percent (80%) minimum ownership threshold that appears in, and otherwise must be used when applying, the applicable provisions of (x) Section 1563 of the Code for determining a controlled group of corporations under Section 414(b) of the Code and (y) Treas.

39 4 # Reg. Section 1.414(c)-2 for determining the trades or businesses that are under common control under Section 414(c) of the Code. (c) Beneficiary means the person, persons or trust designated by a Participant as provided in Section 11.1, or designated as a beneficiary under the terms of Section (d) Benefits Coordinating Committee shall mean the Benefits Coordinating Committee that has been established in accordance with Section 8.6 by the Committee serving as the Plan Administrator of the Plan. (e) Board of Directors means the Board of Directors of the Company. (f) Bonus means any commission, incentive or other bonus award which an Eligible Employee may become eligible to receive. (g) Bonus Deferral Amount means that portion of an Eligible Employee s Bonus which he or she has elected to defer, as provided in Section 5.3. (h) Change of Control shall be deemed to have occurred if: (i) any person as such term is used in Sections 13(d) and 14(d) of the Securities and Exchange Act of 1934 (the Exchange Act ) other than the Company, any trustee or other fiduciary holding securities under any employee benefit plan of the Company, or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person) or beneficial ownership (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company s then outstanding securities; (ii) during any period of twelve (12) consecutive months individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (iii), or (iv) of this Section 2.1(g)) whose election by the Board or nomination for election by the Company s stockholders was approved by a vote of at least two- thirds of the directors then still in office who either were directors at the beginning of the twelve (12) consecutive month period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board of Directors; or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; provided, however, that a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person acquires more than 30% of the combined

40 5 # voting power of the Company s then outstanding securities shall not constitute a Change of Control of the Company. (i) Code means the Internal Revenue Code of 1986, as amended from time to time. (j) Committee means the Administrative Committee for Retirement Programs that administers the Plan in accordance with Section 8.1, as such committee of persons may be appointed by the Compensation Committee from time to time. The Committee shall serve as plan administrator, within the meaning of ERISA. (k) Common Stock means the Common Stock, $0.10 par value per share, of the Company. (l) Company means Volt Information Sciences, Inc. (m) Compensation Committee means the Company s Human Resources and Compensation Committee. (n) Credited Income means the assumed earnings credited to a Participant s Account, as provided in Sections 7.2. (o) Deferral Amounts means Salary Deferral Amounts, Supplemental Savings Amounts, Bonus Deferral Amounts, Director Fees Deferral Amounts, and/or RSU Deferral Amounts, as more fully described in Article V. (p) Deferral Payment Date means the payment date, as specified by a Participant on his or her Salary Deferral Amount, Bonus Deferral Amount, Director Fees Deferral Amount or RSU Deferral Amount election form, on which he or she elects to have his or her applicable amount paid or commence being paid. (q) Director means a member of the Board of Directors of the Company or the Board of Directors of any Affiliate, provided that (i) Director only includes a member of the Board of Directors of an Affiliate if the Board of Directors of the Company designates such members as eligible to participate in the Plan and (ii) Director may not also be an employee of the Company or any Affiliate. (r) Director Fees mean any retainer, advisory, committee or meeting fees payable to the Director by the Company or an Affiliate, before reductions for contributions to or deferrals under this or any other deferred compensation or benefit plan sponsored by the Company or any Affiliate. (s) Director Fees Deferral Amount means that portion of a Director s Director Fees which he or she has elected to defer, as provided in Section 5.4. (t) Dividend Equivalents mean the dividends paid in cash or other property on actual shares of Common Stock that are credited as assumed earnings to the Participant s RSU Deferral Account. The amount of Dividend Equivalents to be credited shall be determined by the

41 6 # Committee or its delegate based on the dividends the Participant s RSU Deferral Account would receive if it held actual shares of Common Stock equal in number to the Stock Units credited to the Participant s RSU Deferral Account on the record date of the actual dividend. The Dividend Equivalents shall constitute the right to receive additional shares of Common Stock by converting any dividends paid in cash or other property into Stock Units based upon the closing price of the Common Stock as of the date the dividends otherwise would have been paid if the RSU Deferral Account held actual shares of Common Stock equal to the Stock Units credited to the Participant s RSU Deferral Account on the record date of the actual dividend. (u) Eligible Employee means a key employee of the Company or an Affiliate whose anticipated annual earnings (or rate of annual earnings) for the year is not less than the dollar amount in effect for the year for determining highly compensated employees under Section 414(q) of the Code (or any higher amount set by the Committee) and who is a United States resident paid on a United States payroll and who has been selected by the Committee. (v) Employer(s) shall be defined as follows: (i) Except as otherwise provided in clause (ii) below, the term Employer means the Company and/or any Affiliate (now in existence or hereafter formed or acquired) which the Committee selects. (ii) For the purpose of determining whether a Participant has experienced a Separation from Service, the term Employer means: (A) The entity for which the Participant performs services and with respect to which the legally binding right to compensation deferred or contributed under this Plan arises; and (B) All other entities with which the entity described above which are its Affiliates. (w) Equity Incentive Plan means any equity-based incentive plan of the Company pursuant to which Directors and/or Eligible Employees may be awarded Restricted Stock Units. (x) Investment Options means the optional forms of determining Credited Income with respect to Participants Accounts, which the Committee, in its discretion, may elect to establish pursuant to Section 7.2. (y) Participant means (i) an Eligible Employee who has elected, under the terms and conditions of the Plan, to defer payment of all or a portion of his or her bonus, salary and/or RSUs, and/or who is credited with a Supplemental Savings Amount, and (ii) a Director who has elected, under the terms and conditions of the Plan, to defer payment of all or a portion of his or her Director Fees and/or RSUs. A Participant who is not currently an Eligible Employee or a Director but whose Account under this Plan is credited with a balance shall be referred to as an Inactive Participant. The term Participant shall include Eligible Employees, former Eligible Employees, employees other than Eligible Employees, Directors and former Directors so long as any such individual has a balance credited to his or her Account.

42 7 # (z) Performance-Based Compensation means compensation the entitlement to or amount of which is contingent on the satisfaction of pre-established organizational or individual performance criteria relating to a performance period of at least twelve (12) consecutive calendar months, as determined by the Committee in accordance with Treas. Reg. Section 1.409A-1(e). (aa) Plan means the Volt Information Sciences, Inc. Deferred Compensation and Supplemental Savings Plan as set forth herein, and as it may be amended from time to time. (bb) Plan Year means the 12-month period beginning each January 1 and ending December 31 of such year. (cc) Plan Year Quarter means the three (3) month periods in each Plan Year ending on March 31, June 30, September 30 and December 31, respectively. (dd) Qualified Plan means the Volt Information Sciences, Inc. Savings Plan (sometimes referred to as the Savings Plan), or the Volt Technical Services Savings Plan (sometimes referred to as the Technical Plan), as the case may be, as each such plan may be amended from time to time. (ee) Restricted Stock Units or RSUs means a restricted stock unit award, stated with respect to a specified number of shares of Common Stock, that entitles the Participant to receive one share of Common Stock with respect to each restricted stock unit that becomes payable under the terms and conditions of the Company s applicable Equity Incentive Plan and the applicable award agreement. (ff) RSU Deferral Amount means that portion of a Participant s Restricted Stock Units which he or she has elected to defer, as provided in Section 5.5. (gg) Salary Deferral Amount means that portion of an Eligible Employee s Base Salary which he or she has elected to defer, as provided in Section 5.2. (hh) Separation from Service or Separate from Service means a termination of services provided by a Participant to the Employer, whether voluntarily or involuntarily, other than by reason of death, as determined by the Committee in accordance with Treas. Reg. Section 1.409A-1(h). In determining whether a Participant has experienced a Separation from Service, the following provisions shall apply: (i) For a Participant who provides services to an Employer as an employee, except as otherwise provided in clause (iii) below, a Separation from Service shall occur when such Participant has experienced a termination of employment with such Employer. A Participant shall be considered to have experienced a termination of employment when the facts and circumstances indicate that the Participant and his or her Employer reasonably anticipate that either (A) no further services will be performed for the Employer after a certain date, or (B) that the level of bona fide services the Participant will perform for the Employer after such date (whether as an employee or as an independent contractor) will permanently decrease to less than 50% of the average level of bona fide services performed by such Participant (whether as an Employee or an independent contractor) over the immediately preceding thirty-six (36) month

43 8 # period (or the full period of services to the Employer if the Participant has been providing services to the Employer less than thirty-six (36) months). If a Participant is on military leave, sick leave, or other bona fide leave of absence, the employment relationship between the Participant and the Employer shall be treated as continuing intact, provided that the period of such leave does not exceed six (6) months, or if longer, so long as the Participant retains a right to reemployment with the Employer under an applicable statute or by contract. If the period of a military leave, sick leave, or other bona fide leave of absence exceeds six (6) months and the Participant does not retain a right to reemployment under an applicable statute or by contract, the employment relationship shall be considered to be terminated for purposes of this Plan as of the first day immediately following the end of such six (6)-month period. In applying the provisions hereof, a leave of absence shall be considered a bona fide leave of absence only if there is a reasonable expectation that the Participant will return to perform services for the Employer. (ii) For a Participant who provides services to an Employer as an independent contractor, except as otherwise provided in (iii) below, a Separation from Service shall occur upon the expiration of the contract (or in the case of more than one contract, all contracts) under which services are performed for such Employer, provided that the expiration of such contract(s) is determined by the Committee to constitute a good-faith and complete termination of the contractual relationship between the Participant and such Employer. (iii) For a Participant who provides services to an Employer as both an employee and an independent contractor, a Separation from Service generally shall not occur until the Participant has ceased providing services for such Employer as both as an employee and as an independent contractor, as determined in accordance with the provisions set forth in clause (i) and (ii) above, respectively. Similarly, if a Participant either (A) ceases providing services for an Employer as an independent contractor and begins providing services for such Employer as an employee, or (B) ceases providing services for an Employer as an employee and begins providing services for such Employer as an independent contractor, the Participant will not be considered to have experienced a Separation from Service until the Participant has ceased providing services for such Employer in both capacities, as determined in accordance with the applicable provisions set forth in (i) and (ii) above. Notwithstanding the foregoing provisions in this clause (iii), if a Participant provides services for an Employer as both an employee and as a member of the board of directors (a Director ), to the extent permitted by Treas. Reg. Section 1.409A-1(h)(5) the services provided by such Participant as a Director shall not be taken into account in determining whether the Participant has experienced a Separation from Service as an employee, and the services provided by such Participant as an employee shall not be taken into account in determining whether the Participant has experienced a Separation from Service as a Director. (ii) Stock Unit means a bookkeeping entry representing the equivalent of one share of Common Stock that is payable in accordance with the terms of this Plan. A Stock Unit will be credited to the Participant s RSU Deferral Account for each actual share of Common Stock deferred under the Plan at the same time as the actual shares of Common Stock otherwise would

44 9 # have been paid to the Participant in connection with the Participant s Restricted Stock Units absent the deferral election. (jj) Supplemental Savings Amount means the amount creditable to the Supplemental Savings Account of an Eligible Employee pursuant to Sections 4.2 and 4.3. (kk) Trust means the trust, if any, established in connection with the Plan. (ll) Trustee means the trustee of the Trust. 2.2 Severability. In the event any provision of the Plan shall be held invalid or illegal for any reason, any illegality or invalidity shall not affect the remaining parts of the Plan, but the Plan shall be construed and enforced as if the illegal or invalid provision had never been inserted, and the Company shall have the privilege and opportunity to correct and remedy such questions of illegality or invalidity by amendment as provided in the Plan. ARTICLE III PARTICIPATION 3.1 Eligibility. The Committee shall provide each Director and Eligible Employee with notice of his or her status as a Participant, so as to permit such Director or Eligible Employee the opportunity to make the elections provided for under Article V, if applicable. Subject to the limitations of the Plan, such notice may be given at such time and in such manner as the Committee may determine from time to time, and shall advise the Director and Eligible Employee of the time and manner for filing his or her election for which he or she qualifies. Each Director and Eligible Employee shall be eligible to participate in all features of the Plan for which he or she qualifies. In addition, Eligible Employees (but not Directors) shall be eligible (subject to the complete discretion of the Committee) to receive credit for a Supplemental Savings Amount for Plan Years that they are Eligible Employees. 3.2 Participation. (a) In General. Subject to the limitations of the Plan, a Director or Eligible Employee shall become a Participant in this Plan for the calendar year for which: (i) the Committee timely receives his or her deferral election pursuant to Article V or (ii) with respect to an Eligible Employee, the Committee credits the Eligible Employee with a Supplemental Savings Amount. (b) Cessation of Status as Director or Eligible Employee. If an Eligible Employee with a Salary Deferral Amount, Bonus Deferral Amount and/or RSU Deferral Amount election in effect for a particular calendar year, or a Director with a Director Fees Deferral Amount and/or RSU Deferral Amount election in effect for a particular calendar year, terminates employment or service or otherwise ceases to be an Eligible Employee or Director, as applicable, during such Plan Year, his or her election shall continue in effect with respect to any Salary Deferral Amount, Bonus Deferral Amount and RSU Deferral Amount previously elected for an Eligible Employee and any Director Fees Deferral Amount and RSU Deferral Amount previously elected for a Director (including on rehire or otherwise re-commencing service in the same calendar year).

45 10 # ARTICLE IV SUPPLEMENTAL SAVINGS BENEFITS 4.1 Supplemental Savings Amount. Each Eligible Employee shall be credited with a Supplemental Savings Amount as provided in Sections 4.2 and 4.3. Directors shall not be eligible to be credited with Supplemental Savings Amounts. 4.2 Determination of Supplemental Savings Amount. Each Eligible Employee may be credited with a Supplemental Savings Amount on the last day of each Plan Year Quarter in the sole discretion of the Committee with approval of the Board of Directors. The amount (or the method or formula for determining the amount) of each Supplemental Savings Amount shall be set forth in writing in one or more documents, which shall be deemed to be incorporated into the Plan, no later than the date on which such Supplemental Savings Amount is credited to the Participant s Supplemental Savings Account. 4.3 Complete Discretion of the Committee. The Committee shall be under no obligation to make any Supplemental Savings Amount awards and in the event that such awards are made the Committee shall be under no obligation to make similar award to similarly-situated Eligible Employees. No party shall have any claim or cause of action as a result of having not received a Supplemental Savings Amount. ARTICLE V DEFERRAL AMOUNTS; DEFERRAL ELECTIONS 5.1 Types of Deferral Amounts. There are three types of Deferral Amounts which may be applicable to a Participant under the Plan who is an Eligible Employee: Salary Deferral Amounts as described in Section 5.2, Bonus Deferral Amounts as described in Section 5.3 and RSU Deferral Amounts as described in Section 5.5. There are two types of Deferral Amounts which may be applicable to a Participant under the Plan who is a Director: Director Fees Deferral Amounts as described in Section 5.4 and RSU Deferral Amounts as described in Section Salary Deferral Election. (a) Salary Deferral Amount. An Eligible Employee may elect to defer all or any portion of 20% of his or her Base Salary (as hereinafter defined) which he or she may be entitled to receive from the Company. For purposes of this Section 5.2, Base Salary is a Participant s regular gross salary that is subject to Social Security Tax pursuant to Internal Revenue Code Section 3100 et. seq. Notwithstanding anything contained herein to the contrary, if a deferral hereunder would otherwise result in the Participant s Base Salary not equaling or exceeding the Social Security Contribution and Benefit Base as defined in Section 230 of the Social Security Act, then only the regular gross salary exceeding the Social Security Contribution and Benefit Base as defined in Section 230 of the Social Security Act shall be deferred pursuant to this Section. The amount to be so deferred shall be specified in such manner as shall be determined by the Committee. (b) Election of Salary Deferral Amount. To make an election of a Salary Deferral Amount for any calendar year, the Eligible Employee must file a deferral election form with the Committee in accordance with such rules as are set by the Committee, but in no event later than the last business day of the calendar year preceding the calendar year for which the

46 11 # election is made. Each such election shall be made with respect to a specific calendar year and all payroll periods applicable to the Eligible Employee which begin within such calendar year. An election filed for a calendar year shall only be applicable for such calendar year. (c) Treatment of New Eligible Employees Who Are New Hires. Notwithstanding the foregoing, if an individual first becomes an Eligible Employee on or after the first day of a calendar year that is both the individual s first year of eligibility to participate in the Plan and the calendar year in which the individual is first hired by an Affiliate (excluding for this purpose any rehire or transfer among Affiliates after the year of first hire), such Eligible Employee may make a Salary Deferral Amount election for the remaining payroll periods of such calendar year prior to the beginning of the payroll period for which the employment services are performed so long as deferral election is filed with the Committee no later than thirty (30) days after the effective date of coverage under the Plan and only defers compensation for services performed in pay periods after the pay period in which the election is effective and irrevocable. For this purpose: (i) An Eligible Employee s first year of eligibility is the year in which he first becomes eligible to participate in any account balance type deferred compensation plan within the meaning of Section 409A of the Code maintained by the Employer or any Affiliate. (ii) Even though otherwise permitted by Section 409A, if all amounts owed to the Eligible Employee from all account balance plans maintained by the Employer and its Affiliates subject to Section 409A of the Code have been paid to the Eligible Employee and if the Eligible Employee has become ineligible to accrue further benefits, then if he thereafter becomes an Eligible Employee, the year in which he again becomes an Eligible Employee shall not be treated as his first year of eligibility. (iii) Even though otherwise permitted by Section 409A, if a Participant is not an Eligible Employee for at least twenty-four (24) consecutive months, then if he thereafter becomes an Eligible Employee, the year in which he again becomes an Eligible Employee shall not be treated as his first year of eligibility. 5.3 Bonus Deferral Election. (a) Bonus Deferral Amount. An Eligible Employee may elect to defer up to 50% of any Bonus he or she may be awarded by the Company, provided, however that the total amount deferred in any Plan Year may not exceed 20% of his or her combined Base Salary and Bonus. The amount to be so deferred shall be specified in such manner as shall be determined by the Committee. However, in no event may an Eligible Employee elect to defer any portion of any Bonus unless the aggregate compensation payments made by the Company to him after such deferral during the calendar year will equal or exceed the Social Security Contribution and Benefit base as defined in Section 230 of the Social Security Act. (b) Election of Bonus Deferral Amount. To make an election of a Bonus Deferral Amount, the Eligible Employee must file a deferral election form with the Committee. Each such election shall be made with respect to a calendar year and shall apply to all Bonus awards made by the Company which are made with respect to services performed within such calendar year. To make an effective Bonus Deferral Amount election for a calendar year, the Eligible

47 12 # Employee must file the appropriate deferral election form with the Committee in accordance with such rules as are set by the Committee, but in no event later than the last business day of the calendar year preceding the Plan Year for which the election is made. (c) Treatment of New Eligible Employee Who Are New Hires. Notwithstanding the foregoing, if an individual first becomes an Eligible Employee on or after the first day of a calendar year that is both the individual s first year of eligibility to participate in the Plan and the calendar year in which the individual is first hired by an Affiliate (excluding for this purpose any rehire or transfer among Affiliates after the year of first hire), such Eligible Employee may make a Bonus Deferral Amount election for such calendar year only prior to the beginning of the payroll period for which the employment services are performed so long as deferral election is filed with the Committee no later than thirty (30) days after the effective date of coverage under the Plan and only defers compensation for services performed in pay periods after the pay period in which the election becomes effective and irrevocable. For this purpose: (i) An Eligible Employee s first year of eligibility is determined in the same manner as provided in Section 5.2(c). (ii) Bonus compensation based on a performance period (such as an annual bonus) is deemed earned ratably throughout the period for which earned. 5.4 Director Fees Deferral Election. (a) Director Fees Deferral Amount. A Director may elect to defer all or any portion of his or her Director Fees which he or she may be entitled to receive from the Company. The amount to be so deferred shall be specified in such manner as shall be determined by the Committee. (b) Election of Director Fees Deferral Amount. To make an election of a Director Fees Deferral Amount for any calendar year, the Director must file a deferral election form with the Committee in accordance with such rules as are set by the Committee, but in no event later than the last business day of the calendar year preceding the calendar year for which the election is made. Each such election shall be made with respect to a specific calendar year and all periods or events applicable to the Director which provide for the payment of such Director Fees and begin within such calendar year. An election filed for a calendar year shall only be applicable for such calendar year. (c) Treatment of New Directors. Notwithstanding the foregoing, if a Director becomes newly eligible to participate in the Plan on or after the first day of a calendar year that is both the individual s first year of eligibility to participate in the Plan and the calendar year in which the individual is first elected as a Director (excluding for this purpose any re-election after the year first elected), such Director may make a Directors Fees Deferral Amount election with respect to any Director Fees that are payable for services performed in the calendar year following the date on which the Director Fees Deferral Amount election is effective and irrevocable so long as the deferral election is filed with the Committee no later than thirty (30) days after the effective date of coverage under the Plan and only defers compensation for services performed in periods after the period in which the election becomes effective and irrevocable. For this purpose:

48 13 # (i) Director s first year of eligibility is the year in which he first becomes eligible to participate in any account balance type deferred compensation plan within the meaning of Section 409A of the Code maintained by the Employer or any Affiliate. (ii) Even though otherwise permitted by Section 409A, if all amounts owed to the Director from all account balance plans maintained by the Employer and its Affiliates subject to Section 409A of the Code have been paid to the Director and if the Director has become ineligible to accrue further benefits, then if he thereafter becomes a Director, the year in which he again becomes a Director shall not be treated as his first year of eligibility. (iii) Even though otherwise permitted by Section 409A, if a Participant is not a Director for at least twenty-four (24) consecutive months, then if he thereafter becomes a Director, the year in which he again becomes a Director shall not be treated as his first year of eligibility. (iv) An individual serving as a Director on the effective date of the Plan shall be eligible to participate in the Plan as if the individual was first elected as a Director and became newly-eligible under the Plan as of the effective date of the Plan. 5.5 RSU Deferral Election. (a) RSU Deferral Amount. Both Directors and Eligible Employees may elect to defer all or any portion of any Common Stock he or she otherwise might receive under his or her Restricted Stock Units. The amount to be so deferred shall be specified in such manner as shall be determined by the Committee. (b) Election of RSU Deferral Amount. To make an election of an RSU Deferral Amount, the Director or Eligible Employee must file a deferral election form with the Committee in accordance with such rules as are set by the Committee, but in no event later than the last business day of the calendar year preceding the calendar year in which the RSUs are granted and the related period of service commences. Each such election shall be made with respect to the Restricted Stock Units granted in such specific calendar year and all periods of service applicable to the Director or Eligible Employee which begin with such calendar year. An election filed for a calendar year shall only be applicable for such calendar year. (c) Treatment of Performance-Based Compensation. Notwithstanding the foregoing, subject to the limitations described below, the Committee may determine that an irrevocable deferral election for an amount that qualifies as Performance-Based Compensation may be made by submitting an election on or before the deadline established by the Committee, which in no event shall be later than six (6) months before the end of the performance period. In order for the Eligible Employee or Director to be eligible to make a deferral election for Performance-Based Compensation, the Participant must have performed services continuously from the later of (i) the beginning of the performance period for such compensation, or (ii) the date upon which the performance criteria for such compensation are established, through the date upon which the Participant makes the deferral election for such compensation. In no event shall a deferral election hereunder be permitted to apply to any amount of Performance-Based Compensation that has become readily ascertainable.

49 14 # (d) Treatment of Compensation Subject to Risk of Forfeiture. Notwithstanding the foregoing, with respect to compensation (i) to which a Participant has a legally binding right to payment in a subsequent year, and (ii) that is subject to a forfeiture condition requiring the Participant's continued services for a period of at least twelve (12) months from the date the Participant obtains the legally binding right, the Committee may determine that an irrevocable deferral election for such compensation may be made by timely delivering an election to the Committee in accordance with its rules and procedures, no later than the 30th day after the Participant obtains the legally binding right to the compensation, provided that the election is made and becomes irrevocable at least twelve (12) months in advance of the earliest date at which the forfeiture condition could lapse, as determined in accordance with Treas. Reg. Section 1.409A-2(a)(5). Any deferral election(s) made in accordance with this Section 5.5(d) shall become irrevocable no later than the 30th day after the Participant obtains the legally binding right to the compensation subject to such deferral election(s). (e) Deferral of Dividends. An election under this Section 5.5 to defer Restricted Stock Units shall also be considered an election to defer any Dividend Equivalents that are payable in connection with such Restricted Stock Units and upon any related Stock Units credited to the Participant s RSU Deferral Account (except to the extent the deferral election is not timely under Section 409A of the Code with respect to such Dividend Equivalents, in which case such Dividend Equivalents will not be deferred and credited to the Participant s RSU Deferral Account but will be paid as set forth in the applicable award agreement). The Dividend Equivalents to be deferred shall be awarded in the form of Stock Units (dividends awarded in cash or other property shall be converted by the Company to Stock Units) and allocated to the Participant s RSU Deferral Account at the same time as such applicable dividend is payable to shareholders generally. The Dividend Equivalents will be treated consistently with the deferral election for the Restricted Stock Units with respect to which the Dividend Equivalents relate. 5.6 Deferral and Payment Elections. All deferral elections, as provided under Section 5.2, 5.3, 5.4 and 5.5, respectively, shall be made on such deferral election forms as are prescribed by the Committee. Each election form shall specify the nature of the Deferral Amount, the form of payment which is to be applicable with respect to such designated Deferral Amount, as provided in Article VI, the Beneficiary or Beneficiaries to receive any death benefit applicable to the subject amount and form of payment thereof, as provided in Sections 6.5 and 11.1 and the Deferral Payment Date on which payment is to commence with respect to such Deferral Amount, as provided in Article VI. Except as otherwise provided in this Article V, all such Salary Deferral Amount, Bonus Deferral Amount, Director Fees Deferral Amount and RSU Deferral Amount elections shall become irrevocable for the subject calendar year once the immediately prior calendar year has ended or as otherwise provided by the Committee. An Eligible Employee may change or revoke his or her Salary Deferral Election under Section 5.2, his or her Bonus Deferral Election under Section 5.3, and his or her RSU Deferral Election under Section 5.5, and a Director may change or revoke his or her Director Fees Deferral Election under Section 5.4 and his or her RSU Deferral Election under Section 5.5, pursuant to such rules as are set by the Committee but in no event may any such election be amended or revoked after the last business day of the calendar year preceding the Plan Year for which the election is made or as otherwise provided above. Only Eligible Employees may file deferral election forms as provided for in this Section 5.6 and Sections 5.2, 5.3 and 5.5 and only Directors may file deferral election forms as provided for in this Section 5.6 and Sections 5.4 and 5.5. Inactive Participants are not eligible to file such forms.

50 15 # Employment Taxes. Employment taxes required to be withheld on Salary, Bonus and RSU Deferral Amounts shall be withheld from Base Salary, Bonuses, RSUs or other compensation that is not being deferred in a manner determined by the Employer (with respect to RSUs only to the extent permitted by the applicable Equity Incentive Plan and Section 409A of the Code). However, if necessary the Committee may reduce a Participant s Base Salary Deferral Amount, Bonus Deferral Amount and RSU Deferral Amount, as needed to comply with applicable employment tax withholding requirements (to the extent permitted by Section 409A of the Code). 5.8 Automatic Cancellation of Deferral Elections upon Receipt of Unforeseen Emergency or Hardship Withdrawal. (a) A Participant s deferral election in effect at the time of an Unforeseen Emergency withdrawal from the Plan shall be cancelled (rather than postponed or delayed) prospectively so that no further deferrals from his or her Salary, Bonus, Director Fees and RSUs shall be made during the remainder of the calendar year in which the withdrawal occurred. (b) A Participant s deferral election in effect at the time of a 401(k) hardship withdrawal shall be cancelled (rather than postponed or delayed) prospectively so that no further deferrals from his Salary, Bonus, Director Fees and RSUs shall be made during the remainder of the calendar year in which the withdrawal occurred. Any deferral election for the succeeding calendar year shall not be effective until the 401(k) required cancellation period ends. (c) The Participant whose deferral election is cancelled pursuant to this Section must file a new deferral election pursuant to the applicable provisions of the Plan in order to commence or recommence making deferrals under the Plan from his Salary or Bonuses for any subsequent calendar year. (d) For purposes hereof, the following terms have the following meanings: (i) A 401(k) hardship withdrawal is a hardship withdrawal from the any 401(k) Plan which requires a suspension of employee contributions and elective deferrals as a result of receipt of the hardship withdrawal in order to satisfy the regulations under Section 401(k) of the Code. (ii) The 401(k) required cancellation period means a six (6) month period (or other stated period in the applicable 401(k) plan) during which employee contributions and elective deferrals must be suspended as a result of receipt of a 401(k) hardship withdrawal in order to satisfy the regulations under Section 401(k) of the Code. (iii) A 401(k) Plan means the any other deferred compensation plan intended to meet the requirements of Section 401(k) of the Code and maintained by the Employer or any other business entity or other organization (whether or not incorporated) which during the relevant period is treated (but only for the portion of the period so treated and for the purpose and to the extent required to be so treated) as a single employer with the Employer or any affiliate under Section 414(b), (c), (m) or (o) of the Code. ARTICLE VI PAYMENT OF BENEFITS

51 16 # Time of Payment of Deferral Amounts. (a) In general, payment of a Participant s vested Accounts under the Plan shall be made payable on the Deferral Payment Date which shall be on the first day of the third (3rd) Plan Year Quarter coincident with or next following the date of the Participant s Separation from Service. (b) Notwithstanding the provisions of subsection 6.1(a), on each annual deferral election for a calendar year, the Participant may designate another Deferral Payment Date (including a specified date as permitted by the Committee) for his or her vested Accounts attributable to deferrals for that calendar year by completing a form prescribed for such purpose by the Committee. In completing such form, the Participant shall specify the Deferral Payment Date on which benefit payments under the Plan are to be made or commence with respect to the Deferral Amount covered by such deferral election. In making such designation, the Participant may designate any January 1, April 1, July 1, or October 1 date of a specified year after the calendar year to which the deferral election applies as a Deferral Payment Date, provided that such Deferral Payment Date is no later than the first day of the third (3rd) Plan Year Quarter following the fifth (5th) anniversary of the Participant s Separation from Service and provided, further, that where payment is contingent on the Participant s Separation from Service, the Deferral Payment Date can be no earlier than the first day of the third (3rd) Plan Year Quarter coincident with or next following the date of the Participant s Separation from Service. Where Participant has made a designation to receive an amount in quarterly installments, as permitted under Section 6.2, his or her Deferral Payment Date shall be the date on which the first installment payment is to be paid and on the anniversary thereof in each subsequent years. Notwithstanding the above, each Participant in the Plan on or before September 1, 1997, was permitted to, and may have designated, a Deferral Payment Date no later than ten (10) years after the date of his or her Separation from Service for deferrals made prior to In addition, any payment time in effect on December 31, 2008 pursuant to a timely filed Participant s election on December 31, 2008 which is based, in whole or in part, on the Participant s age shall be given effect so long as compliant with the time of payment provisions of Section 409A of the Code. (c) If for any reason the Participant fails to make an effective Deferral Payment Date designation, his or her Deferral Payment Date for the amounts that are the subject of the deferral election shall be the first day of the third (3rd) Plan Year Quarter coincident with or next following the date of the Participant s Separation from Service as set forth in subsection 6.1(a) hereof. (d) Payments with respect to Supplemental Savings Amounts shall be made on the same dates and in the same manner as the Salary Deferral Amounts for the same subject calendar year. (e) All Deferral Amounts shall be distributable in cash or cash equivalent except with respect to Stock Units in the RSU Deferral Account which shall be distributable in shares of Common Stock from the Equity Incentive Plan pursuant to which the related RSUs were granted. Notwithstanding the foregoing, Stock Units in the RSU Deferral Account that are attributable to Dividend Equivalents may be paid in cash if there are not sufficient shares of Common Stock available under any Equity Incentive Plan to make such distributions in shares of

52 17 # Common Stock. Any of the Stock Units in the RSU Deferral Account, upon the consummation of a Change of Control (as defined in the applicable Equity Incentive Plan), may be converted into the right to receive cash, with such cash having a value equal to the value of an equal number of shares of Common Stock in connection with such Change of Control. (f) Notwithstanding anything in this Plan to the contrary, a Director shall be eligible to receive distributions on any date permitted under Section 409A of the Code, subject to the Director making a valid deferral election in accordance with the terms and conditions of this Plan specifying such date. In the event a Director is determined to be a specified employee within the meaning of Section 409A of the Code at the time of his or her Separation from Service and such Director has chosen to receive his/her distributions upon a Separation from Service, then such Director will receive his/her distribution in accordance with Section 6.1(a). 6.2 Forms of Payment of Deferral Amounts. (a) In General. On each deferral election form filed by a Participant, such Participant shall specify the form of payment for the amounts attributable to the Deferral Amount covered by such deferral election. In making such designation, the Participant may designate payment in the form of a single lump sum payment or payment in the form of quarterly installment payments payable for not less than two (2) but no more than five (5) years following the Participant s Separation from Service. Quarterly installment payments will be paid quarterly beginning on the date specified on the applicable deferral election form or the Default Payment Date, as provided in Section 6.1. Notwithstanding the above, Participants in the Plan on or before September 1, 1997 were permitted to, and may have designated that payments be made in quarterly installments for a period no less than two (2) or more than ten (10) years for deferrals made prior to (b) If for any reason the Participant fails to make an effective designation under this Section 6.2 with respect to his or her benefit attributable to his or her Deferral Amounts, payment of the amount that is the subject of the deferral election shall be made in the form of a single lump sum payment on the Default Payment Date as specified in Section 6.1. Except as otherwise provided in this Article VI, all benefit payments under the Plan with respect to a Participant s Salary Deferral Amounts, Bonus Deferral Amounts or Director Fee Deferral Amounts, shall be made to the Participant in the payment forms as specified on his or her applicable deferral election forms. (c) Payments with respect to Supplemental Savings Amounts shall be made on the same dates and in the same manner as the Salary Deferral Amounts or Director Fee Deferral Amounts as applicable for the same subject calendar year. 6.3 Change in Time or Form of Payment. No change in an elected or default time or form of payment shall be permitted except as permitted by the Committee and in compliance with Section 409A of the Code. 6.4 Distribution of Vested Accounts for an Unforeseeable Emergency Need. Notwithstanding the provisions of Sections 6.1, 6.2 and 6.3, a Participant may receive a distribution of his or her vested Accounts under the Plan in an amount which the Committee

53 18 # determines is necessary to alleviate the financial need related to an Unforeseeable Emergency. The Committee shall determine such financial hardship in its sole and complete discretion and any such distribution shall be limited to the amount necessary to meet the emergency plus amounts necessary to pay any Federal, state, local or foreign income taxes or penalties reasonably anticipated to result from the distribution. An Unforeseeable Emergency means an unforeseeable emergency as defined in Section 409A of the Code and generally means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant s spouse, the Participant s Beneficiary, or the Participant s dependent (as defined in Section 152 of the Code, without regard to Section 152(b)(1), (b)(2), and (d)(1)(b)) thereof), the loss of the Participant s or the Participant s Beneficiary s property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance, for example, not as a result of a natural disaster); or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant or Beneficiary or affected family member. Distributions because of an Unforeseeable Emergency must be limited to the amount reasonably necessary to satisfy the need (which may include amounts necessary to pay any Federal, state, local or foreign income taxes or penalties reasonably anticipated to result from the distribution), taking in to account the potential that the need is or may be relieved through reimbursement or compensation by insurance or otherwise, by liquidation of the Participant s assets, to the extent the liquidation of such assets would not cause an Unforeseeable Emergency, or by cessation of deferrals under the Plan (if the Plan provides for cancellation of a deferral election upon a payment due to an Unforeseeable Emergency). The determination of amounts reasonably necessary to satisfy the need is not required to take into account any additional compensation that, due to the Unforeseeable Emergency, is available under another nonqualified deferred compensation plan but has not actually been paid, or that is available, due to the Unforeseeable Emergency, under another plan that would provide for deferred compensation except due to the application of the effective date provisions of Section 409A of the Code. Distribution from vested Accounts shall be distributed on a pro rata basis across each of the Participant s accounts. 6.5 Death Benefits. (a) If a Participant shall die with a balance credited to his or her Accounts, such balance shall be paid to his or her applicable designated Beneficiary or Beneficiaries as provided herein. (b) With respect to all Account balances which had commenced to be paid in the form of quarterly installment payments, but all installment payments had not been completed, as of the Participant s death, the remaining unpaid quarterly installment payments shall be made to the Participant s designated Beneficiary based on the applicable payment schedule or schedules for the Participant in effect at his or her death. (c) With respect to all Account balances which had not commenced to be paid as of the Participant s death, the then current balance of each such Account balance payable shall be paid to the Participant s designated Beneficiary under the form of payment as elected for such Beneficiary, as provided for in Section 11.1, which shall be one of the same forms of payment available to the Participant. The designation of the form of payment to a Participant s designated Beneficiary shall be made at the same time as the Participant elects his or her own form of payment, may be changed only as provided in the Plan, and shall be subject to the same rules. Unless the

54 19 # Committee provides otherwise, the election of a form of payment to a Beneficiary may be made, or changed, with respect to each annual deferral election for a calendar year, provided that if the Committee requires the entire vested Account to be paid pursuant to one form of payment election, then the election for the Participant s first year of eligibility (as defined in Article V) or, if no election is made, the following default form of payment shall apply. In the absence of a timely filed designated form of payment to a Beneficiary, the Beneficiary shall be paid a lump sum. Any payment to a designated Beneficiary shall be paid in the case of a lump sum payment or commence being paid in the case of installments to the designated Beneficiary on the first day of the first Plan Year Quarter next following the death of the Participant. (d) The Account of a deceased Participant whose Beneficiary is receiving installment payments shall continue to be adjusted from time to time as provided in Section 7.2, including, without limitation, adjustments for the crediting of Credited Income thereto. The crediting of such Account balance shall be for bookkeeping purposes and shall not represent a transfer or segregation of assets for the benefit of such Beneficiary, but the Beneficiary may select such Investment Options pursuant to Section 7.2 as if the Beneficiary were a Participant. 6.6 Withholding of Taxes. The Company and/or the Trustee of the Trust shall have the right to deduct from all payments made under the Plan any federal, state, local or foreign taxes required by law to be withheld with respect to such payments. 6.7 Cash-Out Distribution. Notwithstanding the other time and form of benefit payment provisions of this Article VI, a Participant s vested Accounts may be cashed-out in the discretion of the Committee in a lump sum payment in an amount equal to his or her vested Account balance if (i) the payment will constitute a payout of the Participant s entire interest in this Plan and all similar arrangements that are treated as a single plan under Treas. Reg. Section 1.409A-1(c)(2), (ii) the payment is made on or before the later of December 31 of the calendar year in which the Participant s Separation from Service occurs or the fifteenth (15th) day of the third (3rd) month following the Participant s Separation from Service and (iii) the payment of the entire payment is not over the limit set forth in Section 402(g) of the Code applicable to the Plan Year in which the cash-out occurs. 6.8 Method of Calculation of Payments. For purposes of computing the amount of any distribution to a Participant or a Beneficiary, the balance in such Participant s or Beneficiary s vested Account (as of the date preceding the payment date) shall be multiplied by one if the payment is a lump sum payment or by a fraction if the payment is part of an series of installment payments, the numerator of which equals one and the denominator of which equals the number of installments that such Participant or Beneficiary is to receive less the number of installment payments such Participant or Beneficiary has previously received. 6.9 Administrative Deferral of Payments; Frequency of Payments. All payments hereunder shall be paid on the Deferral Payment Date or successive anniversaries thereof, as the case may be, subject to any permitted delay in payment for administrative reasons permitted under Section 409A of the Code. The delay of any payment for administrative purposes shall not affect the date upon which subsequent payments become due.

55 20 # ARTICLE VII ACCOUNTS; CREDITED INCOME 7.1 Participant Accounts. The Committee shall maintain, or cause to be maintained, bookkeeping Accounts for each Participant for the purpose of accounting for the Participant s beneficial interest under the Plan. The establishment and maintenance of separate Accounts for each Participant shall not be construed as giving any person an interest in assets of the Company or a right to payment other than as provided hereunder. Benefits hereunder shall constitute an unsecured general obligation of the Company, but the Company may have created reserves held in Trust in accordance with the terms thereof. 7.2 Investment Options; Crediting of Income. Except as otherwise set forth herein, the Committee shall credit Accounts with Credited Income at the rate of return generated by one (1) or more of the Investment Options established by the Committee and selected by the Participants. The Committee shall establish separate funds for bookkeeping purposes to measure a hypothetical rate of return over a period designated by the Committee. The Committee may, but need not, provide for such options as are substantially similar (if not identical) to those provided under one or both of the Qualified Plans. Such Investment Options and the relevant funds shall be established for bookkeeping purposes only and shall not require the establishment of actual corresponding funds by the Committee or the Company. Any establishment, addition or deletion of Investment Options shall be in the sole and absolute discretion of the Committee. The Committee shall promulgate uniform procedures applicable to all Participants for allocating and transferring amounts credited to individual Accounts based on the performances of the various Investment Options, and may, in its sole discretion, establish uniform procedures for Participant suggested direction and election amongst such funds, including the designation of an Investment Option for Participants in the absence of a Participant election. If the Participant fails to make an election among the Investment Options, the Participant s Account balance will be automatically deemed invested in the lowest-risk investment as determined by the Committee. Notwithstanding the foregoing, a Participant s RSU Deferral Amounts will be credited to an Investment Option that tracks the performance of the Common Stock (the Company Stock Unit Fund ). Any stock dividends, cash dividends or other non-cash dividends that would have been payable on the Common Stock which relates to the Stock Units credited to a Participant's Accounts shall be credited to the Participant's Accounts in the form of additional Stock Units and shall automatically be deemed to be re-invested in the Company Stock Unit Fund (irrevocably until such amounts are distributed to the Participant with respect to the related Restricted Stock Units). The number of shares credited to the Participant for a particular stock dividend shall be equal to (A) the number of shares of Common Stock credited to the Participant's Account as of the record date for such dividend in respect of each share of Common Stock, multiplied by (B) the number of additional or fractional shares of Common Stock actually paid as a dividend in respect of each share of Common Stock. The number of shares credited to the Participant for a particular cash dividend or other non-cash dividend shall be equal to (A) the number of shares of Common Stock credited to the Participant's Account as of the record date for such dividend in respect of each share of Common Stock, multiplied by (B) the fair market value of the dividend, divided by (C) the "fair market value" of the Common Stock on the payment date for such dividend. The number of Stock Units credited to the Participant's Account may be adjusted by the Committee, in its sole discretion, to prevent dilution or enlargement of Participants' rights with respect to the

56 21 # portion of his or her Account allocated to the Company Stock Unit Fund in the event of any reorganization, reclassification, stock split, or other unusual corporate transaction or event which affects the value of the Stock, provided that any such adjustment shall be made taking into account any crediting of shares of Stock to the Participant under this Section. For purposes of this Section, the fair market value of the Common Stock shall be, in the event the Common Stock is traded on a recognized securities exchange, an amount equal to the closing price of the Common Stock on such exchange on the date set for valuation or, if no sales of Common Stock were made on said exchange on that date, the closing price of the Stock on the next preceding day on which sales were made on such exchange; or, if the Stock is not so traded, the value determined, in its sole discretion, by the Committee in compliance with Code Section 409A. 7.3 Nature of Account Entries. The establishment and maintenance of Participants Accounts shall be merely bookkeeping entries and shall not be construed as giving any person an interest in any specific assets of the Company or of any Affiliate of the Company or Trust or a right to payment or other than as provided hereunder. Benefits hereunder shall constitute an unsecured general obligation of the Company, but the Company has provided for amounts to be held in trust on the Company s behalf under the Trust. 7.4 Vesting. (a) A Participant shall have a fully vested and nonforfeitable beneficial interest in the balance standing to the credit of his or her Salary Deferral, Bonus Deferral, Director Fees Deferral and RSU Deferral as of any relevant date, subject to the conditions and limitations on the payment of amounts credited to such Accounts as provided in the Plan. (b) A Participant shall have a 100% vested and nonforfeitable beneficial interest in his or her Supplemental Savings Account on the later of having attained age fifty-five (55) and the tenth (10th) anniversary of the date of the commencement of his or her employment with the Employer. In the event that the Participant dies while employed by the Employer, the Participant shall have a 100% vested interest in his or her Supplemental Savings Account. In the event that the Participant terminates employment for reasons other than death prior to having satisfied such vesting requirement set forth in the preceding sentence, he or she shall forfeit his or her entire interest in such Supplemental Savings Amount. Such forfeitures shall reduce the Company s cost of future Supplemental Savings Amount Contributions. 7.5 Account Statements. The Committee shall provide each Participant with a statement of the status of his or her Accounts under the Plan. The Committee shall provide such statement annually and at such other times as the Committee may determine from time to time, and such statement shall be in the format as presented by the Committee. 7.6 Expenses Charged to Accounts. Notwithstanding any other provision of the Plan to the contrary, expenses incurred in the administration of the Plan and the Trust may be charged to Accounts on either a pro rata basis or a per capita basis, and/or may be charged to the Account of the affected Participant(s) and Beneficiary(ies) (which term is intended to include any alternate payee(s)) on a usage basis (rather than to all Accounts), as directed by the Committee. Without

57 22 # limiting the foregoing, some or all of the reasonable expenses attendant to the determinations needed with respect to and making of withdrawals, the calculation of benefits payable under different Plan distribution options, the distribution of Plan benefits and the review of a domestic relations order to determine if it is a qualified domestic relations order and implementation of qualified domestic relations orders may be charged directly to the Account of the affected Participant and Beneficiary, and different rules (i.e., pro rata, per capita, or direct charge to Accounts) may apply to different groupings of Participants and Beneficiaries. ARTICLE VIII ADMINISTRATION OF THE PLAN 8.1 Plan Administrator. The Plan shall be administered by the Committee. A majority of the members of the Committee shall constitute a quorum and the acts of the majority of the members present, or acts approved in writing by a majority the members without a meeting, shall be the acts of the Committee. The Committee shall have that authority which is expressly stated in the Plan as vested in the Committee and as set forth in the Charter of Authority and Responsibilities for the Volt Information Sciences, Inc. Administrative Committee for Retirement Programs, as amended from time to time, substantially in the form attached hereto as Exhibit A, which is hereby incorporated into this Article VIII, to make rules to administer and interpret the Plan, to decide questions arising under the Plan, and to take such other action as may be appropriate to carry out the purposes of the Plan. The Committee may delegate one or more of its duties or responsibilities under the Plan to Company officer(s) or employee(s), to a third party administrator or the Benefits Coordinating Committee, as set forth herein, and any reference to the Committee in the Plan shall include such delegate(s) as appropriate. 8.2 Rules; Claims for Benefits. (a) The Committee shall adopt and establish such rules and regulations with respect to the administration of the Plan as it deems necessary and appropriate. (b) A Participant or Beneficiary (the claimant ) shall have the right to request any benefit under the Plan by filing a written claim for any such benefit with the Committee (or its delegate) on a form provided or approved by the Committee (or its delegate) for such purpose. The Committee (or its delegate), or a claims fiduciary appointed by the Committee, (the Reviewer ) shall give such claim due consideration and shall either approve or deny it in whole or in part. The following procedure shall apply: (i) The Reviewer may schedule and hold a hearing. (ii) Within ninety (90) days following receipt of such claim by the Committee (or its delegate), notice of any approval or denial thereof, in whole or in part, shall be delivered to the claimant or his duly authorized representative or such notice of denial shall be sent by mail (postage prepaid) to the claimant or his duly authorized representative at the address shown on the claim form or such individual s last known address. The aforesaid ninety (90) day response period may be extended to one hundred eighty (180) days after receipt of the claimant s claim if special circumstances exist and if written notice of the extension to one hundred eighty (180) days indicating the special circumstances involved and the date by which a decision is expected to be

58 23 # made is furnished to the claimant or his duly authorized representative within ninety (90) days after receipt of the claimant s claim. (iii) Any notice of denial shall be written in a manner calculated to be understood by the claimant and shall: (A) set forth a specific reason or reasons for the denial, (B) make reference to the specific provisions of the Plan or, if applicable, other relevant documents, records or information on which the denial is based, (C) describe any additional material or information necessary for the claimant to perfect the claim and explain why such material or information is necessary, and (D) explain the Plan s claim review procedures, including the time limits applicable to such procedures (which are generally contained in Section 8.2(c)), and provide a statement of the claimant s right to bring a civil action in state or federal court under Section 502(a) of ERISA following an adverse determination on review of the claim denial. (c) A Participant or Beneficiary whose claim filed pursuant to Section 8.2(b) has been denied, in whole or in part, may, within sixty (60) days following receipt of notice of such denial, make written application to the Committee (or its delegate) for a review of such claim, which application shall be filed with the Committee (or its delegate). For purposes of such review, the following procedure shall apply: (i) The Reviewer (which may be the same Reviewer as under Section 8.2(b) or a different Reviewer as determined by the Committee) may schedule and hold a hearing. (ii) The claimant or his duly authorized representative shall be provided the opportunity to submit written comments, documents, records, and other information relating to the claim for benefits. (iii) The claimant or his duly authorized representative shall be provided, upon request in writing and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to such claim and may submit to the Reviewer written comments, documents, records, and other information relating to such claim. (iv) The Reviewer shall make a full and fair review of any denial of a claim for benefits, which shall include taking into account all comments, documents, records, and other information submitted by the claimant or his duly authorized representative relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. (v) The decision on review shall be issued promptly, but no later than sixty (60) days after receipt by the Committee (or its delegate) of the claimant s request for review, or one hundred twenty (120) days after such receipt if a hearing is to be held or if other special circumstances exist and if written notice of the extension to one hundred twenty (120) days indicating the special circumstances involved and the date by which a decision is expected to be made on review is furnished to the claimant or his duly authorized representative within sixty (60) days after the receipt of the claimant s request for a review. (vi) The decision on review shall be in writing, shall be delivered or mailed by the Reviewer to the claimant or his duly authorized representative in the manner prescribed in Section 8.2(b) for notices of approval or denial of claims, shall be written in a manner

59 24 # calculated to be understood by the claimant and shall in the case of an adverse determination: (A) include the specific reason or reasons for the adverse determination, (B) make reference to the specific provisions of the Plan or, if applicable, other relevant documents on which the adverse determination is based, (C) include a statement that the claimant is entitled to receive, upon request in writing and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant s claim for benefits, and (D) include a statement of the claimant s right to bring a civil action in state or federal court under Section 502(a) of ERISA following the adverse determination on review. (d) The period of time within which a benefit determination initially or on review is required to be made shall begin at the time the claim or request for review is filed in accordance with the procedures of the Plan, without regard to whether all the information necessary to make a benefit determination accompanies the filing. In the event that a period of time is extended as permitted pursuant to this paragraph due to the failure of a claimant or his duly authorized representative to submit information necessary to decide a claim or review, the period for making the benefit determination shall be tolled from the date on which the notification of the extension is sent to the claimant or his duly authorized representative until the date on which the claimant or his duly authorized representative responds to the request for additional information. (e) For purposes of the Plan s claims procedure a document, record, or other information shall be considered relevant to a claimant s claim if such document, record, or other information (i) was relied upon in making the benefit determination, (ii) was submitted, considered, or generated in the course of making the benefit determination, without regard to whether such document, record, or other information was relied upon in making the benefit determination, and (iii) demonstrates compliance with the administrative processes and safeguards required in making the benefit determination. (f) The Committee (or its delegate) may establish reasonable procedures for determining whether a person has been authorized to act on behalf of a claimant. (g) To the extent required by law, completion of the claims procedures described in this Article VIII shall be a mandatory precondition that must be complied with prior to the commencement of a legal or equitable action by a person claiming rights under the Plan or the Trust. The Committee and the claimant may by mutual agreement waive these procedures as a mandatory condition to such action. 8.3 Finality of Determinations. Except as provided by law, all determinations of the Reviewer to any matter arising under the Plan, including questions of construction and interpretation shall be binding and conclusive upon all interested parties. The Committee and the Reviewer shall have the maximum permissible discretion to interpret the Plan, and to determine eligibility for participation and benefits hereunder. It is intended that determinations made by the Committee and the Reviewer shall be reviewed under a deferential arbitrary and capricious standard of review. 8.4 Agreement to Arbitrate Disputes. Any dispute, controversy or claim arising out of, involving, affecting or related in any way to this Plan, or arising out of, involving, affecting or related in any way to any employee s participation thereunder, including but not limited to

60 25 # disputes, controversies or claims arising out of or related to the actions of the Committee, the Reviewer or any of the Company s other employees, under Federal, state and/or local laws, after first having been reviewed by the Committee and then the Reviewer under the provisions of this Article VIII, shall be resolved by final and binding arbitration, in accordance with the applicable rules of the American Arbitration Association in the state where the Participant is currently or last employed by the Company or its Affiliate. The arbitrator shall be entitled to award reasonable attorney s fees and costs to the prevailing party. The award shall be in writing, signed by the arbitrator, and shall provide the reasons for the award. Any Participant in accepting participation hereunder, agrees to waive his/or her right to trial by jury in any lawsuit or cause of action involving the Plan. Judgment upon the arbitrator s award may be filed in and enforced by any court having jurisdiction. This Agreement to Arbitrate Disputes does not prevent any Participant from filing a charge or claim with any governmental administrative agency as permitted by applicable law. 8.5 Indemnification. To the extent permitted by law and the Company s bylaws, the member of the Committee and the Reviewer, their agents and delegates, and the officers, directors, and employees of the Company shall be indemnified and held harmless by the Company against and from any and all loss, cost, liability, or expense that may be imposed upon or may be reasonably incurred by them in connection with or resulting from any claim, action, suit, or proceeding to which they may be a party or in which they may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by them in settlement (with the Company s written approval) or paid by them in satisfaction of a judgment in any such action, suit or proceeding. 8.6 Delegation to Benefits Coordinating Committee. The Committee may, in its sole discretion, make a revocable delegation of its responsibilities, duties and obligations to a Benefits Coordinating Committee by naming a Benefits Coordinating Committee of not less than three (3) persons who shall be set forth in a written resolution or consent of the Committee. In the event a Benefits Coordinating Committee is so designated, it shall act on behalf of the Committee, as if each member of the Benefits Coordinating Committee was a member of the group constituting the Committee and shall have all the rights and authority attendant thereto, with respect to the responsibilities, duties and obligations delegated to such Benefits Coordinating Committee, except that the Benefits Coordinating Committee shall act on behalf of the Committee with respect to such responsibilities, duties and obligations. Any member of the Benefits Coordinating Committee may be removed at the pleasure of the Committee or may resign by written notice to the Committee. Said removal or resignation shall be effective sixty (60) days after delivery of such notice to the other party unless some other date is designated by the Committee. After such removal or resignation, the Committee shall appoint a replacement member to the Benefits Coordinating Committee. ARTICLE IX FUNDING 9.1 Funding. (a) It is intended that the Company is under a contractual obligation to make the payments when due under the Plan or as the Committee (or its delegate) or the Reviewer may

61 26 # direct. Such funds shall be paid first, from Trust assets if available, and then from the general assets of the Company. Benefits hereunder and Credited Income shall also be reflected on the accounting records of the Company, as provided for under the Plan. No Participant shall have any right, title or interest whatsoever in or to any investment reserves, trust, accounts, or funds that the Company may purchase, establish or accumulate to aid in providing the benefit payments described in the Plan except as provided for under the Trust. Participants and Beneficiaries shall not acquire any interest under the Plan greater than that of unsecured general creditors of the Company. Shortly after the end of each Plan Year the Committee (or its delegate) will calculate the total Account balances of all Participants. If such aggregate balance exceeds the total net assets of the Trust, the Company may, but shall not be obligated to contribute such excess to the Trust. If the Trust s net assets exceed the aggregate balance of the Participants Accounts, the Committee may, but shall not be obligated to credit such excess against any liabilities or other obligations of the Company to the Trust. In the event funds of the Trust are returned to the Company or paid for the benefit of its general creditors, all payment obligations under this Plan shall be due immediately and the Company hereby acknowledges that the obligations hereunder accrued not by reason of the events described in this sentence but by reason of payments that otherwise would have been paid previously, but for this Plan. (b) Notwithstanding anything to the contrary in the Plan or the Trust, no funding obligation with respect to the Trust shall be triggered or enforced, and no funding shall be effected, in connection with a change in the Company s financial health within the meaning of Section 409A(b)(2) of the Code, or under any other circumstances that would cause the Plan not to comply with Section 409A of the Code. (c) Notwithstanding anything to the contrary in the Plan or the Trust, if the Company or any Affiliate maintains a defined benefit plan within the meaning of Section 409A(b)(3)(B) of the Code, no additional deposits may be made to the Trust, the Trustee may not compel additional deposits to the Trust and no other assets may be set aside or reserved for purposes of meeting the Company s obligations under the Plan if the Plan provides benefits to any covered employees within the meaning of Section 409A(b)(3)(D) of the Code during any restricted period within the meaning of Section 409A(b)(3)(B) of the Code with respect to any such defined benefit plan. To the extent not inconsistent with Section 409A of the Code, the restricted period means any period in which (i) the defined benefit plan is in at-risk status under Section 430(i) of the Code, (ii) the plan sponsor of the defined benefit plan is a debtor in bankruptcy or (iii) the 12-month period beginning six (6) months before the termination date of the defined benefit plan if, as of the termination date, plan assets are not sufficient to pay plan liabilities. (d) Neither the Trust nor its assets shall be located or transferred outside the United States (within the meaning of Section 409A(b)(1) of the Code). ARTICLE X AMENDMENT; TERMINATION; MERGER 10.1 Amendment and Termination. Subject to the restrictions imposed by and consistent with applicable provisions of Section 409A of the Code, the Board of Directors of the Company may amend, modify, or terminate the Plan at any time but in no event shall any such

62 27 # amendment, modification or termination result in a reduction in any Participant s Accounts or postpone the time of payment thereunder as of the time of such amendment, modification or termination unless the Board of Directors of the Company or the Committee acting on behalf of the Board, and any Participant, Beneficiary or employee who suffers such a reduction or postponement by reason of such proposed amendment, modification or termination, consents in writing to such amendment, modification or termination, and such consent is filed with the Board of Directors or the Committee in the calendar year preceding the effective date of the proposed amendment, modification or termination. In the event of a termination of the Plan, subject to the restrictions imposed by and consistent with applicable provisions of Section 409A of the Code, no further deferral elections may be made under the Plan and amounts which are then payable, or which become payable under the terms of the Plan, shall be paid as scheduled in accordance with the provisions of the Plan Change of Control. In the event of a Change of Control of the Company and the Change of Control satisfies the definition of a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of its assets, within the meaning of Section 409A(a)(2)(A)(v) of the Code, all benefits hereunder shall become immediately due and payable (1) upon the consummation of such Change of Control, to the extent set forth in the Participant s election deferral form; or (2) the first day of the third (3rd) Plan Year Quarter coincident with or next following the date of the Participant s Separation from Service provided such Separation from Service occurs on or before the second (2nd) anniversary of such Change of Control, and in each such case the Participant shall receive his or her vested Accounts hereunder in a single lump sum payment Automatic Payment of Taxable Benefit. Notwithstanding anything contained herein to the contrary, but subject to the restrictions imposed by and consistent with applicable provisions of Section 409A of the Code, if it has been finally determined that funds held pursuant to this Plan and the relevant Trust or Credited Income are includible in the taxable income of a Participant or his or her Beneficiary, such funds shall be immediately distributed to such Participant or Beneficiary. For purposes of this Section, a final determination shall occur when a decision is determined by the highest court which could otherwise render a decision (or the Participant and the Internal Revenue Service have reached a final agreement) in this regard. ARTICLE XI GENERAL PROVISIONS 11.1 Beneficiary Designation. A Participant shall designate a Beneficiary or Beneficiaries who, upon his or her death, are to receive payments that otherwise would have been paid to him under the Plan. All Beneficiary designations shall be in writing and on a form prescribed by the Committee for such purpose, and any such designation shall only be effective if and when delivered to the Committee during the lifetime of the Participant. On the Beneficiary designation form, the Participant may also designate the form of payment to the designated Beneficiary. Any such designated form of payment must be a form as permitted under the Plan and must be filed in a timely manner as provided in Section 6.5. A Participant may from time to time during his or her lifetime change a designated Beneficiary or Beneficiaries (or change a designated form of payment to a Beneficiary) by filing a new Beneficiary designation form with the Committee, provided, however, that no change in the form of payment may be made except as

63 28 # provided in Section 6.3 or In the event a designated Beneficiary of a Participant predeceases the Participant, the designation of such Beneficiary shall be void. If a designated Beneficiary dies after the Participant, but before all death benefit payments relating to such Beneficiary have been paid, the remainder of such death benefit payments shall be continued to such Beneficiary s surviving spouse and if there is no surviving spouse, to his or her surviving children, per stirpes, and if there are no surviving children, to his or her estate, unless the Participant had designated on the applicable Beneficiary designation form a method of payment to a contingent Beneficiary. In the event a Participant shall fail to designate a Beneficiary or Beneficiaries with respect to any death benefit payments, or if for any reason such designation shall be ineffective, in whole or in part, any payment that otherwise would have been paid to such Participant shall be paid to his or her surviving children, per stirpes, and if there are no surviving children, to his or her estate, and in such event, his or her estate shall be his or her Beneficiary with respect to such payments Effect on Other Plans. Deferred Amounts shall not be considered as part of a Participant s compensation for the purpose of any savings or pension plan maintained by the Company except where counting such compensation is permitted by law and where the savings or pension plan provides that such deferrals shall be counted, but, in any event, such amounts shall be taken into account under all other employee benefit plans maintained by the Company in the year in which such amounts would have been payable in the absence of a deferral election; provided, however, that such amounts shall not be taken into account to the extent the inclusion thereof would jeopardize the tax-qualified status of the plan to which they relate Nontransferability. No right or interest of any Participant in the Plan shall be assignable or transferable in whole or in part, either voluntarily or by operation of law or otherwise, or be subject to payment of debts of any Participant by execution, levy, garnishment, attachment, pledge, bankruptcy, or in any other manner. Notwithstanding the foregoing, upon receipt of a copy of a decree from a court of competent jurisdiction which finally declares a Participant s spouse as having property rights to a portion of the amounts credited to such Participant s Accounts, the Committee shall segregate such portion from the Participant s Accounts and hold that portion for the benefit of the spouse. For purposes of crediting Credited Income on and determining the timing of the distribution of such segregated amounts, such segregated amounts shall be treated as if they had remained part of the Participant s Account but subject to such Investment Option elections as are made by the spouse. In receiving payment of such amount, and in designating Beneficiaries, the Spouse shall be treated as if he or she was a Participant; provided that the spouse shall not be entitled to begin receiving payments hereunder before the earliest date that the Participant could have recovered payments under this Plan Plan Not an Employment or Service Contract. The Plan is not an employment or service contract. It does not give to any person the right to be continued in employment or other service, and all Eligible Employees and employees remain subject to change of salary, transfer, change of job, discipline, layoff, discharge, or any other change of employment status and all Directors remain subject to change of service status Applicable Law. The Plan shall be governed and construed in accordance with the laws of the State of New York except to the extent such laws are preempted by any applicable Federal law.