Section 1 - Registrant’s Business and Operations

ITEM 1.01.          ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

          At its meeting on May 5, 2006, the Compensation Committee of the Company’s Board of Directors (the “Committee”) approved bonuses for the Company’s executive officers with respect to fiscal 2006 performance, and set bonus objectives and base salaries for certain executive officers for fiscal 2007.  The Committee also approved certain long term cash incentive awards and stock option grants.

          For fiscal 2006, each executive officer was eligible to receive a potential cash bonus.  These potential cash awards are established at the beginning of the fiscal year.  Employees, who are bonus eligible, including executives, may not receive any of the potential cash awards unless the Company reaches a certain minimum stated earnings per share result for the fiscal year. Bonus payouts are determined by the Company’s performance to specified targets for revenue, operating income and earnings per share for the fiscal year.  If the specified targets for revenue, operating income or earnings per share for the fiscal year are over achieved, the potential cash bonus is increased to certain specified levels.  A portion of all employees’ bonus is also dependent upon their performance to their own individual performance objectives, such as a business unit’s financial performance, business development goals and cost savings initiatives.  For all executives, 70% of their stated potential cash bonus was solely dependent upon the achievement of the stated corporate financial performance targets for revenue, operating income and earnings per share for the fiscal year, and 30% was dependent upon the achievement of their individual performance objectives.  In reaching its decisions with respect to bonuses for fiscal 2006, the Committee considered the Company’s performance to its stated financial performance targets, and the bonuses associated with such performance in accordance with the payout schedule established by the Committee at the beginning of the fiscal year were approved.  In the case of the portion of the fiscal 2006 bonuses associated with the achievement of individual goals, the Committee approved these bonuses after considering the achievement of the individual performance objectives.

          The following table sets forth actual annual base salary and bonus amounts for fiscal 2006 and annual salary and stated potential bonus awards for fiscal 2007 for the executive officers who will be included as named executive officers in the Company’s proxy statement for its August 2006 annual meeting.

The annual salary and potential bonus award for Fiscal 2007 for Brad Nutter, Chief Executive Officer, have not yet been determined by the Committee.

          For fiscal 2007, the Committee approved the stated potential bonus opportunities for executive officers.  With the exception of Ron Ryan, 70% of each executive officer’s bonus opportunity is tied to the achievement of predetermined corporate and business unit financial performance targets for revenue and/or operating income and 30% to the achievement of predetermined individual performance objectives.  For Ron Ryan, the Committee approved an annual bonus target of $154,600 which is tied solely to Mr. Ryan’s individual performance targets, and will be paid on a pro-rata basis for the percentage of the year worked by him. 

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