According to the Company’s Form 10-K for the fiscal year ended June 30, 2004, on October 9, 2003, the Company and all other parties signed a Stipulation and Agreement of Settlement and filed a Joint Motion for Preliminary Approval of Settlement of the lawsuit. On November 6, 2003, a hearing was held on the joint motion. The court entered a preliminary order approving the settlement and scheduled a final fairness hearing for April 16, 2004. On April 16, 2004, a fairness hearing was held before the magistrate judge. There were no objections raised to the proposed settlement. On April 19, 2004, the magistrate judge issued a Report and Recommendation to the district judge recommending that the settlement be approved. On May 7, 2004, the district judge entered an Order and Final Judgment approving the settlement. No one has appealed the Order and Final Judgment and the time for appeal has expired.

Certain shareholders, owning approximately 40,000 shares, who had opted out of the settlement, reconsidered their decision and opted back into the settlement. A settlement with these shareholders was approved by the district court on August 11, 2004. A shareholder who owns approximately 2,000 shares opted out of the settlement. To date, this shareholder has not asserted a claim against the Company.

Earlier, on July 11, 2003, the Company announced that it entered into a memorandum of understanding to settle the class-action lawsuit against the company and certain of its former officers. The settlement resolves the lawsuit initiated in 1998 and will become effective upon final approval by the court. The settlement amount of $10 million will require the company to incur a onetime charge of approximately $4.3 million in the fourth quarter of fiscal year 2003 for the amount in excess of the insurance coverage and related costs. The company's portion of the settlement will be made up of cash or cash and equity, at the company's option.

The original complaint alleges, among other things, that as a result of accounting irregularities relating to the Company's revenue recognition policies, the Company's previously issued financial statements were materially false and misleading and that the defendants knowingly or recklessly published these financial statements which caused the Company's common stock prices to rise artificially. The action alleges violations of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and SEC Rule 10b-5 promulgated thereunder and Section 20(a) of the Exchange Act.