10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2006

Commission File Number 0-30911

THE PBSJ CORPORATION

(Exact name of Registrant as specified in its charter)

Florida	59-1494168
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification No.)

5300 West Cypress Street, Suite 200

Tampa, Florida 33607

(Address of principal executive offices)

(813) 282-7275

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock ($.00067 Par Value)

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    ¨  Yes    x  No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    ¨  Yes    x  No

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 filings for the past 90 days.    ¨  Yes    x  No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment of this Form 10-K.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

¨  Large accelerated filer ¨  Accelerated filer x  Non-accelerated filer

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Act).    ¨  Yes    x  No

The number of shares of Common Stock outstanding as of April 30, 2007 was 6,668,606. The aggregate value of the voting stock held by non-affiliates of the registrant based on the $28.00 price for the registrant’s Common Stock on March 31, 2006 was $74,494,924. Directors, executive officers and 10% or greater shareholders are considered affiliates for purposes of this calculation but should not necessarily be deemed affiliates for any other purpose. There is no public trading market for the registrant’s common stock.

THE PBSJ CORPORATION

Form 10-K

For the Year Ended September 30, 2006

Table of Contents

Item Number	CAPTION	PAGE
PART I:
Item 1.	Business	4
Item 1A.	Risk Factors	19
Item 1B.	Unresolved Staff Comments	23
Item 2.	Properties	23
Item 3.	Legal Proceedings	23
Item 4.	Submission of Matters to a Vote of Security Holders	26
PART II:
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	27
Item 6.	Selected Financial Data	28
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	55
Item 8.	Financial Statements and Supplementary Data	56
Item 9.	Changes in and Disagreements With Accountants on Accounting Financial Disclosure	86
Item 9A.	Controls and Procedures	86
Item 9B.	Other Information	88
PART III:
Item 10.	Directors and Executive Officers of the Registrant	89
Item 11.	Executive Compensation	94
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	102
Item 13.	Certain Relationships and Related Transactions	103
Item 14.	Principal Accountant Fees and Services	104
PART IV:
Item 15.	Exhibits and Financial Statement Schedules	106
	Signatures	107
	Exhibit Index	108

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report and the information incorporated by reference in it include and are based on “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. These statements can sometimes be identified by the fact that they do not relate strictly to historical or current facts and they frequently are accompanied by words such as “may,” “will,” “anticipate,” “estimate,” “expect,” or “intend” and similar terms and expressions. All statements regarding our expected financial position and operating results, our business strategy, our financing plans and forecasted demographic and economic trends relating to our industry, and statements relating to our ability to be awarded government contracts, the adoption of certain laws by Congress, our ability to compete effectively with other firms that provide similar services, our ability to attract and retain clients, our ability to achieve future growth and success, our expectations for the public and private sector economic growth, the outcome of our internal investigation and the various on-going government investigations, are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. We cannot promise you that our expectations in such forward-looking statements will turn out to be correct. Factors that may impact such forward-looking statements include, among others, our ability to attract additional business, the timing of projects and the potential for contract cancellation by our customers, our ability to attract and retain skilled employees, our ability to comply with new laws and regulations, our insurance coverage covering certain events, the timing and amount of the spending bills adopted by the federal government and the states, our ability to complete our internal investigation in a timely manner, the outcome of the investigations by the Department of Justice, the United States Attorney’s Office, the Securities and Exchange Commission, the Federal Bureau of Investigation, possible changes in collections of accounts receivable, risks of competition, changes in general economic conditions and interest rates, the risk that the Internal Revenue Service or the courts may not accept the amount or nature of one or more items of deduction, loss, income or gain we report for tax purposes and the possible outcome of pending litigation, legal proceedings and governmental investigations and our actions in connection with such litigation, proceedings and investigations, as well as certain other risks including those set forth under the heading “Risk Factors” and elsewhere in this Annual Report and in other reports filed by the Company with the Securities and Exchange Commission. All forward-looking statements included herein are only made as of the date such statements are made, and we do not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Subsequent written and oral forward-looking statements attributable to the Company or to persons acting on its behalf are qualified in their entirety to the cautionary statements set forth above and elsewhere in this Annual Report and in other reports filed by the Company with the Securities and Exchange Commission.

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PART I

ITEM 1. Business

General

The PBSJ Corporation (the “Company”), together with its subsidiaries, is an employee-owned professional services organization that provides a broad range of planning, design and construction services to a variety of public and private sector clients. Our four major business segments are transportation services, environmental services, civil engineering and construction management, representing 39%, 23%, 21%, and 17%, respectively, of our revenues for the fiscal year ended September 30, 2006. We utilize our expertise in engineering, planning, management, environmental, architectural and surveying disciplines to address complex problems in each of these basic service areas. We provide these services through our staff of approximately 3,900 professional, technical and support personnel. We believe our multi-disciplinary approach to problems facilitates our ability to effectively meet the needs of our clients.

Since our founding in 1960, we have grown from a small civil engineering practice with operations only in South Florida to a national design firm offering a full range of engineering, construction management, architectural and planning services throughout the United States. In 2005, Engineering News-Record ranked Post, Buckley, Schuh & Jernigan, Inc., a subsidiary of the Company, third on its list of the top 100 pure design firms (traditional design firms with no construction capability) in the United States, based on design revenue. During fiscal year 2006, we provided services to approximately 3,000 clients in the public and private sectors. In fiscal year 2006, approximately 75.0% of our net earned revenues (“NER”) were derived from the public sector and about 25.0% from the private sector.

We have built an organization composed of highly skilled professionals and top-level technical and administrative personnel with a wide variety of scientific, engineering, architectural and management resources. These resources enable us to develop and implement innovative long-term solutions to the complex problems of our clients, many of which are the subject of public concern and extensive governmental regulation. We assist our clients in responding to these concerns, in obtaining governmental permits and approvals and in complying with applicable laws and regulations.

We began operations on February 29, 1960. Our holding company, The PBSJ Corporation, was incorporated in 1973. We engage in business primarily through two wholly-owned subsidiaries: Post, Buckley, Schuh & Jernigan, Inc., a Florida corporation (through which we provide the majority of our engineering, architectural and planning services) and PBS&J Construction Services, Inc., a Florida corporation (through which we have certain large contracts for our construction management services). In addition, we have three other active subsidiaries: Seminole Development Corporation and Seminole Development II, Inc. (through which we hold title to certain of our real property); and PBS&J Caribe Engineering, C.S.P. (through which we perform certain work in Puerto Rico). In this Form 10-K, all references to “PBSJ”, the “Company”, “us”, “we” or “our” operations refer to The PBSJ Corporation and its wholly-owned subsidiaries and the activities of these entities on a consolidated basis. Our executive offices are located at 5300 West Cypress Street, Suite 200, Tampa, Florida.

Misappropriation Loss

In March 2005, subsequent to the issuance of the Company’s 2004 financial statements, we discovered misappropriations of Company funds by our former Chief Financial Officer and two former employees who worked in our information systems and treasury departments, collectively, (“the participants”). The participants colluded and circumvented controls to misappropriate funds and conceal the misappropriations possibly beginning as early as 1993 until the misappropriations were discovered.

Shortly after this discovery, an investigation sub-committee was formed comprised of the three outside members of our Corporate Audit Committee. These three outside members were subsequently appointed to the

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Board of Directors and became the three members of the Audit Committee of the Board of Directors. The Audit Committee retained independent counsel to conduct an investigation and advise the Audit Committee in connection with the investigation. The independent counsel retained forensic accountants, including accountants experienced in conducting forensic audits for companies that perform contracts for federal, state and local governments to assist with the investigation.

The investigation team discovered that at least $36.6 million was misappropriated between January 1, 1998 and the discovery of the misappropriations in March 2005. The amount misappropriated prior to January 1, 1998 could not be determined because certain data for the period prior to January 1, 1998 was unavailable. The participants in the embezzlement scheme used several methods to misappropriate the funds while engaging in conduct to conceal the misappropriated amounts. This conduct included among other things, recording and changing normal recurring journal entries and overstating accruals in prior periods to facilitate improper write-offs of misappropriated funds.

The Company determined that the misappropriation scheme led to the overstatement of overhead rates that the Company used to determine billings in connection with certain of our government contracts. As a result, some of our government clients were overcharged for the Company’s services. During the review of the overhead rate calculations, the Company identified certain instances of costs erroneously included in our overhead cost pool which were unallowable under applicable regulations and an error in our calculation of our overhead rate, which related to certain general and administrative costs. The Company determined that the unallowable costs and general and administrative errors also led to the overstatement of overhead rates which the Company used in connection with certain government contracts.

The Audit Committee, at the direction of the Corporate Board, disclosed the overstatement of our overhead rate to our clients and other appropriate government agencies, including the Department of Justice (“DOJ”). We have entered into settlement agreements with some of our clients and government agencies. We are in discussions with our remaining government clients to enter into settlement agreements in order to satisfy any refund obligations, which are in various stages of settlement.

In July 2006, we entered into a settlement agreement with the State of Texas Department of Transportation which resolves all claims that the State of Texas may have had against us for overpayments related to the restatement of overhead rates on billings on or before April 30, 2006 under contracts with that agency based on our payment of approximately $5.4 million and provides for the determination of the appropriate overhead rate for billings after April 30, 2006. In November 2006, we entered into a settlement agreement with the Florida Department of Transportation which resolves all claims that agency may have had against us for the overstatement of rates on billings through September 30, 2005 (and with respect to cost contracts through September 30, 2006) under our contracts with them based on our payment of approximately $12.5 million. This settlement agreement also provided for the determination of the appropriate overhead rate refund for fiscal year 2006 billings under fixed price contracts. The refund amount was finalized in March 2007 and totaled $425,000.

In January 2007, we reached a settlement agreement with the Department of Justice, Civil Division on behalf of it and all other federal agencies with which we have contracts to resolve all federal claims including claims under the Federal Civil False Claims Act, related to the overstatements of overhead rates on our contracts with federal agencies. The agreement requires approximately $6.5 million of reimbursement payments for all contract amounts through September 30, 2005.

The settlements described above, excluding those settlements paid during the fiscal year 2006, are included in the accrued reimbursement liability in the Company’s consolidated financial statements at September 30, 2006. We are in discussions with our remaining government clients to enter into settlement agreements in order to satisfy any refund obligations, which are in various stages of settlement.

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The United States Securities & Exchange Commission is also conducting an investigation of the accounting irregularities and misappropriations of funds. We are fully cooperating with the investigation and have produced documents and other information to the commission. At the present time, we are unable to predict the likely outcome of this investigation.

As a result of the misappropriation, the Company’s consolidated financial statements as of September 30, 2004 were restated and this report reflects the restatement.

Acquisitions

Throughout our history, we have made strategic acquisitions. Once we acquire a firm, it is integrated and consolidated into our existing operations and ceases to exist as a separate operating entity. We completed the following acquisitions during the last three fiscal years. The results of operations are included in the consolidated financial statements from the date of acquisition.

• On June 1, 2004, we acquired all of the outstanding stock of TriLine Associates, Inc. (“TriLine”) for $3.7 million in cash. The purchase price was allocated to the respective assets and liabilities based upon their estimated fair values as of the acquisition date. The allocation of the purchase price resulted in assets of $4.3 million, including approximately $960,000 of intangible assets and $2.1 million of goodwill and liabilities of $625,000. During 2005, we recorded $10,000 of additional goodwill in connection with a purchase accounting true-up payment. TriLine’s expertise includes transportation, geotechnical, and environmental services. The TriLine acquisition enhances our presence in the transportation market in the greater Pittsburgh area and the State of Pennsylvania.

• On July 1, 2004, we acquired 100% of the stock of W. Koo and Associates Structural Engineers, Inc. (“WKA”) for $2.5 million, net of cash acquired of $678,000, comprised of $413,000 in cash, $250,000 in accrued earn-out provisions and 71,429 shares of the our common stock valued at approximately $1.9 million. The purchase agreement calls for an adjustment of the number of shares issued based on the valuation of the stock price at September 30, 2004 so that the total number of shares issued is valued at approximately $1.9 million.

The purchase agreement also called for an additional purchase amount of $500,000, contingent upon the satisfaction of certain conditions, to be paid in two installments of $250,000 on July 1, 2005 and July 1, 2006. The purchase price was allocated to the respective assets and liabilities based on their estimated fair values as of the acquisition date. The allocation of the purchase price resulted in assets of $3.3 million, including approximately $850,000 of intangible assets and $913,000 of goodwill and liabilities of $795,000.

During 2005, we issued an additional 1,021 shares in connection with the purchase agreement adjustment and we recorded an additional $6,000 of goodwill in connection with the July 1, 2005 installment payment. In 2006, we recorded additional goodwill of $389,000 in connection with the July 1, 2006 installment payment. WKA’s expertise includes infrastructure improvements for public, municipal, transit, port authorities and private sector projects with a primary focus on transportation structures in California. The WKA acquisition strengthens our technical capabilities in bridge design and structural project management, particularly in the West.

During fiscal year 2006, we recorded approximately $272,000 of additional goodwill for performance earn-out payments and purchase price adjustments. The additional goodwill was comprised of earn-out payments of approximately $389,000, of which $250,000 was previously accrued and purchase price adjustments of $133,000. The weighted average amortization period for the identifiable intangible assets is 2.8 years. WKA specializes in infrastructure improvements for public, municipal, transit, port authorities and private sector projects with a primary focus on transportation structures in California.

• On October 1, 2004, we acquired 100% of the stock of Croslin Associates, Inc. (“Croslin”) for a purchase price of $786,000, net of cash acquired of $153,000, comprised of $456,000 in cash, $30,000

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held in escrow and 11,111 shares of our common stock valued at approximately $300,000. The purchase price was allocated to the respective assets and liabilities based upon their estimated fair values as of the acquisition date. The allocation of the purchase price resulted in assets of $1.2 million, including approximately $40,000 of intangible assets and $454,000 of goodwill and liabilities of $330,000. Croslin is an architectural services firm. The Croslin acquisition contributes to the Company’s goal of developing technical and production resources to extend its successful architectural practice into additional markets in the Central and Western U.S.

• On February 1, 2005, we acquired 100% of the stock of Land and Water Consulting, Inc. (“LWC”) for a purchase price of $1.3 million, net of cash acquired of $13,000, comprised of $323,000 in cash, $100,000 held in escrow and 33,862 shares of our common stock valued at approximately $914,000. The purchase price was allocated to the respective assets and liabilities based upon their estimated fair values as of the acquisition date. The allocation of the purchase price resulted in assets of $2.5 million, including approximately $63,000 of intangible assets and $1.1 million of goodwill and liabilities of $1.2 million. LWC is an environmental consulting firm in Montana. The LWC acquisition enhances our technical capabilities in the environmental services market in the Northwest and West.

• On April 30, 2006, we acquired 100% of the stock of EIP Associates (“EIP”) for $6.0 million, net of cash acquired of $15,000, comprised of $5.5 million in cash, $334,000 accrued additional purchase price and $200,000 held in escrow. The purchase price was allocated to the respective assets and liabilities based on their estimated fair values as of the acquisition date. The allocation of the purchase price resulted in assets of $9.0 million, including approximately $1.5 million of intangible assets and $3.7 million of goodwill and liabilities of $3.9 million. EIP specializes in environmental, urban planning, water resource planning and natural resources in California. The EIP acquisition greatly enhances our technical strength in the California environmental, water and planning markets and enhances our general presence in California.

Business Segments

The following table sets forth our revenues, in thousands, from each of our four business segments for each of the three years ended September 30, 2006, 2005, and 2004, and the approximate percentage of our total revenues attributable to each business segment:

	2006			2005			2004
(Dollars in thousands)	Revenues		%	Revenues		%	Revenues		%
Transportation Services	$	206,876	39	$	199,490	39	$	179,743	40
Environmental Services		128,641	23		113,821	22		109,198	25
Civil Engineering		112,526	21		111,312	22		81,841	18
Construction Management		89,199	17		87,314	17		77,465	17
Totals	$	537,242		$	511,937		$	448,247

Additional information concerning segment results of operations and financial information is set forth in Item 7 under the caption entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Item 8, Note 15 of “Notes to Consolidated Financial Statements” which are included herein.

Transportation Services

Industry Overview

During fiscal year 2006, the transportation industry rebounded slightly from some of the sluggishness it experienced in fiscal year 2005. Many state departments of transportation continued to experience funding shortfalls in conjunction with escalating prices in the construction arena. The industry experienced a slight upturn

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in aviation and transit funding while user-fee (toll road) projects continued its strong growth nationally. Privatization continued to gain national focus with the news of several highly visible deals in Chicago and Texas

Our Services

Our consulting services in transportation include planning, traffic engineering, intelligent transportation systems (“ITS”), corridor planning, highway design, structural design, alternate project delivery, program management, toll facility design, aviation services, multi-modal/transit systems and right-of-way.

We currently serve transportation departments in 18 states (Alabama, Arizona, Arkansas, Colorado, Florida, Georgia, Idaho, Kansas, Mississippi, Montana, North Carolina, Nevada, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, and Washington). In addition, we currently perform toll services in 9 states (Washington, California, Colorado, Texas, North Carolina, Georgia, Florida, Arkansas, and Pennsylvania) for both public and private toll clients.

During fiscal year 2006, projects in Transportation included:

• A planning services contract for the Texas Department of Transportation (“TxDOT”), primarily to determine toll feasibility for potential roadway improvements throughout the State. All disciplines (highway design, drainage, construction, environmental services, ITS, traffic engineering, and structure design) were necessary to perform the work.

• The Florida Department of Transportation’s (“FDOT”) statewide intelligent transportation systems general consulting six-year contract, pursuant to which we are providing services related to the planning, architecture, standards development, and integration of ITS.

• The I-4/Crosstown Connector Interchange project is the construction of a new interchange between the I-4 freeway and the Lee Roy Selmon Crosstown Expressway. The project will greatly improve truck access into the Port of Tampa and give commuter traffic an alternative means to access the downtown area. This design is extremely complex and represents one of the largest construction projects ever undertaken in FDOT’s District Seven.

• The Virginia Department of Transportation’s (“VDOT”) statewide 511 traveler information contract, pursuant to which we are providing multi-year services related to the planning, design, deployment, operations, and maintenance.

• The North Carolina Department of Transportation’s (“NCDOT”) statewide 511 traveler information contract, pursuant to which we are providing services related to the planning, design, deployment, operations, and maintenance.

• Completed the design and construction of the 5^th Parallel Runway at the Hartsfield-Jackson International Airport, the world’s busiest airport.

• Selected to provide airside design for a new Air Carrier airport at St. George, Utah.

• Continuing to provide design for Runway 9-27 reconstruction at George Bush Intercontinental Airport in Houston, Texas.

• Continuing to provide airside design services at McCarran International Airport in Las Vegas, Nevada.

• Continuing to provide construction management for in-line baggage system at Los Angeles World Airport

• Draft environmental impact statements for highway improvements along the I-70 corridor and new commuter rail service from downtown Denver to the Denver International Airport. The projects include alternatives analysis, environmental resource studies, preliminary engineering, traffic modeling and

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analysis, an FTA New Starts application, and a comprehensive public and agency involvement process. The successful public involvement process was recently highlighted by the US Department of Transportation in their 2006 publication How to Engage Low-Literacy and Limited-English-Proficiency Populations in Transportation Decision making that documents “best practices” as identified through a nationwide scan of national experts from Federal, state, county, and city governments.

• Providing general engineering consulting services to a number of toll-road agencies including:

• Florida’s Turnpike Enterprise

• Orlando Orange County Expressway Authority

• Texas Turnpike Authority

• Transportation Corridor Agencies

• Central Texas Regional Mobility Authority

• Northeast Texas Regional Mobility Authority

• As a significant sub-consultant to Parsons Brinckerhoff Quade and Douglas, a seven year program management contract with Miami-Dade Transit providing project management services in support of the implementation of the People’s Transportation Plan (PTP) for Miami-Dade County. Specific services include but are not limited to transit design, corridor planning, and project and cost control.

• Multi-year full service Indefinite Deliver/Indefinite Quantity contracts for engineering services for the Federal Highway Administration Western and Central Federal Lands. The contracts provide for the engineering, design, and development of roads and bridges located on federal or locally owned roads on or leading to federal lands in the western United States.

• San Diego Association of Governments (“SANDAG”) On Call: TransNet program planning, management, and technical support for SANDAG. We serve as an extension of SANDAG staff providing on-call engineering services as well as design for the next five years for the TransNet program in San Diego, California. This program is a large scale, long term transportation improvement program funded by a ¹/2 cent county sales tax for a total of approximately $40 billion over 40 years. SANDAG identified some early action highway and transit transportation improvement projects on Routes 5, 15, 52, 76, 805 including Mid-Coast Light Rail with a 10-year completion timeline.

• SR 22 HOV project - Orange County Transportation Authority (OCTA) through special California State Legislatures awarded a $400 million contract to Granite, Myers and Rados, JV (GMR) using an alternative delivery method. PBS&J was teamed with URS as design engineers for the State Route 22 project. PBS&J was tasked to manage the structural design and construction of nearly $200 million worth of structure construction, consisting of bridge modifications, widening, replacement and over 120 retaining walls and sound walls along the 12 mile freeway corridor. California Department of Transportation (Caltrans) has the overall responsibility of program oversight. To assist in the review, OCTA has retained the service of a program management consultant to oversee the overall design and construction programs. The total time line in the contractor’s bid was 800 days from the Notice to Proceed. The completed project will provide numerous safety and operational improvements as well as adding one High Occupancy Vehicle (HOV) lane in each direction from I-405 to SR-55.

• On-call Bridge Engineering Services: Caltrans Districts 11 and 12. We are providing bridge engineering on-call services for Caltrans Districts 11 (San Diego County) and 12 (Orange County) as a sub-consultant.

Environmental Services

Industry Overview

Over the past thirty years, significant environmental laws at the federal, state and local levels have been enacted in response to public concern over the health of the nation’s air, water, and natural resources. Those laws

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and their implementation through regulation affect numerous industrial and governmental actions and form a key market driver for the services of our Environmental engineering and science business segment.

Two significant federal environmental laws, The Safe Drinking Water Act of 1974 and the Clean Water Act of 1972, continue to drive this segment of our business. Pursuant to these laws, Congress has allocated funds to assist state and local governments. According to the Environmental Protection Agency, as much as $23 billion a year will be needed for construction and upgrade of water and wastewater treatment facilities over the next 20 years.

Our Services

Our Environmental business segment focuses on the delivery of planning, design and construction management services for private and public sector clients related to:

Air Quality Management	Flood Insurance Studies
Energy Planning	Hazardous and Solid Waste Management
Cultural Resources Assessments	Information Solutions
Ecological Studies	Wastewater Treatment
Environmental Toxicology Analysis	Water Resources
Aquatic Treatment Systems Biosolids Management	Water Supply Water Treatment: Distribution

During fiscal year 2006, some significant projects in our Environmental business segment included:

• In 2006, completed a two-year study for the Minerals Management Service of fourteen potential archaeological sites submerged on the Gulf of Mexico Outer Continental Shelf. The study was designed to evaluate unidentified side-scan sonar targets that had been previously detected by industry surveys and subsequently recommended for avoidance by petroleum industry construction projects. Project objectives included: assessing the adequacy of current MMS archaeological site-avoidance criteria; assessing industry compliance with government protective measures; and refining analytical methods used for selecting sites for avoidance. The project resulted in the recommendation of refinements to MMS’s site avoidance criteria and methodology requirements for industry surveys, and also the recommendation of National Register of Historic Places eligibility for three significant shipwrecks, including a U.S. Navy gunboat and two World War II-era U.S. Merchant Marine tankers destroyed by German u-boats.

• As part of a long-term comprehensive contract, conducted all required cultural resources investigations at each of the TXU surface mines located across north, north-central and northeast Texas. This work has included Phase I archaeological surveys, Phase II National Register testing, and Phase III mitigation. The work has been conducted to satisfy the requirements of Section 106 of the National Historic Preservation Act and the Coal Mining Regulations of the Railroad Commission of Texas.

• A five-year assignment with the Washington Suburban Sanitary Commission to improve and expand the 288 million gallon per day Potomac Water Filtration Plant that provides drinking water for more than 1 million people in Montgomery and Prince Georges Counties, Maryland. We have been retained to design the improvements necessary to enhance water quality, increase process reliability, and expand plant capacity. Included in these improvements are: ultraviolet disinfection, pump stations, improved rapid mix and flow split facilities, flocculation equipment upgrades, hydraulic improvements and various electrical system enhancements. The design was completed in 2006. Construction is expected to be completed in 2009.

• A multi-year joint venture with the U.S. Army Corps of Engineers with respect to program management support activities on the federal portion of the Comprehensive Everglades Restoration Project (“CERP”). The joint venture contract is budgeted for up to $6 million per year and the contract

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is for 3 years with provisions for up to 5 renewal periods. The CERP is budgeted to cost over $8 billion and the cost is to be shared equally between the federal government and state and local agencies.

• A significant project for the City of San Diego, California to provide policy and master planning services for recycled water. The City directed that the study evaluate all aspects of a viable increased water reuse program, including but not limited to groundwater storage, expansion of the distribution system, reservoirs for reclaimed water, live stream discharge, wetlands development, and reservoir augmentation.

• Pinewood Mitigation Bank (PMB) is a $600,000 wetland mitigation bank project that will restore, enhance, and protect approximately 19,000 acres of wetlands, upland long-leaf pine forests, and mixed pine-hardwood forests. Located in East Texas along the Neches River, the project spans Angelina, Polk, and Tyler counties and will create a protected corridor between the Davy Crockett National Forest and the Angelina National Forest. Coordination with two USACE district Mitigation Banking Review Teams makes this project unique and one-of a kind. Another unique quality of the project is that the private sponsor will donate all the land to the Texas Parks and Wildlife Department. To date, a wetlands mitigation project of this magnitude has not been completed in the United States.

• A comprehensive contract with the San Antonio River Authority to provide system design, development and deployment for the creation of the Regional Watershed Modeling System (“RWMS”). The RWMS development is the result of a historic agreement between three government entities, the San Antonio River Authority, the City of San Antonio and Bexar County to form the Bexar Regional Watershed Management partnership. The inter-local agreement that formed this partnership has subsequently been expanded to include several of the suburban San Antonio municipalities and may eventually include many of the other cities and counties within the river basin. The RWMS provides a comprehensive regional watershed management system that will act as a single repository of spatial and modeling data to be used by all partners.

• A five-year contract with the Federal Emergency Management Agency Region V, to perform all aspects of the federal government’s Map Modernization Program. This assignment includes engineering modeling and floodplain mapping for the States of Michigan, Minnesota, Wisconsin, Illinois, Ohio, and Indiana, which represent some of the most active and sophisticated floodplain managers in the United States. Efforts will also include assisting states in working with local floodplain administrators to understand the impacts of flood maps, and communicating these to residents impacted by the updated information.

• A three year assignment with the California Department of Water Resources to provide floodplain mapping support services. Activities under this contract include a host of actions designed to improve or create floodplain management throughout California. Specific task orders include:

• Levee Database: location and ownership of more than 8,000 miles of levees within the State. This task includes GIS map development, database, and application development, and extensive contact with levee districts to update information.

• Statewide Mapping Plan: detailed and approximate floodplain mapping throughout the state. Stage one is to identify the costs and products necessary to map the Central Valley in 2-5 years, followed, by a full statewide plan.

• Post Disaster Mitigation Grant Application: preparing and submitting a Post Disaster Mitigation Grant request.

• Awareness Mapping: reprioritizing the planned production of Awareness Mapping statewide and performing mapping for approximately 1,000 miles of stream.

• Executive Order: updating the Governor’s floodplain management task order.

• Levee Certification (Procedure Memo #34) Outreach: aiding in the development of an outreach program to inform levee districts of the requirement relating to levee certification.

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• Design services for the expansion of the Cherokee County Water and Sewerage Authority’s Etowah River Water Treatment Facility to double the daily processing capacity. The work involved in the Etowah River WTF Expansion includes new raw water intake screens, two new raw water pumps, a new rapid mix basin, eight new flocculation basins, eight new sedimentation basins, fourteen new filters, two new clear wells, and a new high service pump station.

Civil Engineering

Industry Overview

During fiscal year 2006, the U.S. Economy inflated residential housing market entered a period of decline. This decline was especially intensive in the third and fourth quarters. In addition during fiscal year 2006, there were no major hurricane events that resulted in land fall in the United States. These two conditions lead to a significant decline in related project opportunities in these high impact markets. The commercial development market remains strong. Federal spending remained strong, especially in the area of national defense, which increased the opportunity and fortified our strategy for greater balance between the public and private sectors. Military planning increased substantially due to requirements in anticipation of Base Realignment and Closure (“BRAC”) and U.S. Army Transformation objectives. Also, new opportunities began to emerge in Design/Build alternative project delivery contracting at Department of Defense facilities and other public institutions. State and local government markets remained stable.

Other primary market outlooks remain stable with the exception of private sector residential housing. The Federal Department of Defense will continue to be fueled by BRAC implementation and the advancement of U.S. Army transformation. Also, facilities related asset management is emerging as an area of opportunity. Although the private sector residential market can be expected to remain depressed through the remainder of fiscal year 2007, military housing renewal and privatization and expansion will create new opportunities.

Our Services

Our civil engineering business provides architectural engineering and general civil engineering as well as specialized services to public and private clients. Included in these services are: site engineering and surveys, infrastructure engineering, master planning, disaster mitigation planning and response, infrastructure protection, asset management, emergency management and architectural and landscape architecture design.

Our civil engineering business will continue to focus its portfolio strategy to balance the public and private sectors with emphasis on specialized Federal National Defense markets and disaster mitigation, response and emergency management markets for federal, state and local governments. We will continue our commitment to customers in the private sector corporate real estate development, leisure time and residential housing markets. We will rely on advanced technologies for competitive advantages and to distinguish us from our competition. These technologies include Geodata/Geographic Information Systems, database design and development, Global Positioning Systems (GPS), High Definition Survey technology and advanced data collection systems including Laser based imaging and measurement, 3D imaging, and application of web collaboration tools.

During fiscal year 2006 our projects included:

• Administration and debris removal for major hurricanes for FDOT, several Florida counties and communities as well as significant storm related engineering subcontract activities in Mississippi and Florida for the Federal Emergency Management Agency (“FEMA”). These projects continued from the fall of 2005 hurricane season.

• Site/Civil engineering for Ft. Bliss Design/Build Temporary Facilities project as a member of the Design and Construction team. We also continued work on the First Phase Land Development Engineering (“LDE”) Task Order for permanent facilities.

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• Ft. Belvoir facilities planning services with program management responsibilities in partnership with a large Architectural/Engineering firm.

• Asset Management related Real Property Inventory (“RPI”) and Asset Verification/Asset Validation studies. Notable projects include the National Guard installation at Camp Shelby and various Readiness Centers, located in the State of Mississippi.

• Providing conceptual planning and urban design for the City of Clearwater, Florida for a six-block section of Gulfview Boulevard for Clearwater Beach, a world-class beach destination, located in Pinellas County.

• Designing a utility building in a campus setting for the Bridgeway Acres Redevelopment project in Pinellas County, Florida. The project transforms a waste to energy facility into five state-of-the-art campus buildings around a central green space designed to be both energy efficient and environmentally sensitive.

• On-site beach replenishment permitting staff support, survey staff support, storm impact assessment, annual aerial oblique photography, aerial photography and other miscellaneous tasks as needed for Florida Bureau of Beaches and Coastal Systems GEC.

• Architectural design services for various Publix Market locations. This is part of a multi-year contract for on-going services.

• Providing temporary housing as a result of disaster created events to meet public temporary housing needs for the Federal Emergency Management Agency.

Construction Management

Industry Overview

The demand for our construction management services has also been fueled by the legislation and industry trends that are driving the growth in our Transportation and Environmental business segments. These trends have created a large number of infrastructure projects throughout the United States, which are subject to increasingly complex governmental regulations. The market should continue to grow as a result of the new Federal Transportation Act (TEA-Lu) that was passed in 2005. However due to the restraints placed on Federal consultants as a result of Hurricanes Katrina and Rita and the Iraq conflict it remains unclear as to whether the Federal Government will fully fund its Program Commitments. Domestic military spending should also see a significant increase beginning in 2006 through 2008. This is a result of BRAC activity.

The role of the construction manager has become increasingly important to the success of these projects, requiring a new level of versatility and a wide range of skills. Both public and private sector entities are under pressure to complete these projects at accelerated schedules, resulting in a myriad of project delivery systems. With limited in-house staff, these entities must rely on experienced construction managers to complete projects on time and within budget.

Our Services

In the area of construction management, we provide a wide range of services as an agent for our clients, including contract administration, inspection, field-testing, scheduling/estimating, instituting project controls and quality assessment. Although we do not construct or build any projects, we may act as the program director of a project whereby on behalf of the owner of the project, we provide scheduling, cost estimating and construction observation services for the project, or our services may be limited to providing construction consulting.

During fiscal year 2006, projects in our Construction Management Division included:

• Providing construction engineering and inspection services to the Departments of Transportation in Alabama, Arkansas, California, Colorado, Nevada, Texas, Florida, Georgia, North Carolina and

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Mississippi, North Texas Turnpike Authority (NTTA), the Harris County Toll Road Authority (HCTRA) as well as to various municipalities such as Cobb County Water & Sewer Department, Georgia; Collier County, Florida; Commerce City, Colorado; Douglas County, Colorado; and Fulton County, Georgia.

• Providing construction management services to Phoenix Valley Metro Rail, light rail transit project in Phoenix, Arizona.

• Providing construction administration to the Clark County, Nevada, Department of Public Works, as well as the City of Oceanside, California, and the City of Dana Pointe, California.

• Performing Construction Management Program Services to the U.S. Army Corp of Engineers in New Orleans.

• Performing Vertical Code Compliance for Miami-Dade College in Florida.

• Providing comprehensive services, including cost estimating, scheduling and construction claim reviews, to the school boards of Miami-Dade County and Broward County, Florida; Cobb County DOT in Georgia, Nevada DOT (NDOT), San Diego County Association of Governments (SANDAG) and the TxDOT.

• Providing construction-related services to AT&T throughout Florida and Georgia, including quality assurance inspections, verification of contractors’ invoices, damage inspections and responding to natural disasters.

• Providing construction inspection services nationally to the National Park Service and Federal Highway Administration’s Central Lands Division for the Hoover Dam Bypass.

Clients

Through our four national business segments, we provide our services to a broad range of clients, including state, local and municipal agencies, the federal government and private sector businesses. Our state and local government clients include approximately 18 state departments of transportation, water utilities, local power generators, waste water treatment agencies, environmental protection agencies, schools and colleges, law enforcement agencies, judiciary, hospitals and other healthcare providers. During fiscal year 2006, we provided services to federal agencies, including the Army Corps of Engineers, EPA, Navy, Air Force, Coast Guard, United States Postal Service, FEMA, National Parks Service, and Department of Energy, and local entities. Our contracts with federal, state and local entities are subject to various methods of determining fees and costs. See “Contract Pricing and Terms of Engagement” for further discussion of our pricing arrangements with governmental clients.

Our private sector clients include retail and commercial, entertainment, railroad, petro-chemical, food, telecommunications, oil and gas, power, semi-conductor, transportation, technology, public utility, mining and forest products entities. The table below indicates the revenue generated, by client type, for each of the three years ended September 30, 2006, 2005 and 2004.

	Fiscal 2006			Fiscal 2005			Fiscal 2004
(Dollars in thousands)	Revenues		%	Revenues		%	Revenues		%
State and local agencies	$	376,069	70	$	363,475	71	$	318,255	71
Federal agencies		26,862	5		30,716	6		35,860	8
Private businesses		134,311	25		117,746	23		94,132	21
Total	$	537,242		$	511,937		$	448,247

In fiscal year 2006, we derived approximately 25.0% of our engineering fees from various districts and departments of the FDOT (approximately 17.3% of total engineering fees) and the TxDOT (approximately 7.7%

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of total engineering fees) under numerous contracts. While we believe the loss of any individual contract would not have a material adverse effect on our results of operations and would not adversely impact our ability to continue work under our other contracts with these clients, the loss of all the FDOT or the TxDOT contracts would have a material adverse effect on our results of operations by causing a material decrease in our revenues and profits. We do not believe that the impact of the misappropriations and the related accrued reimbursement liability will have a material adverse effect on our existing client relationships.

Marketing

Marketing activities are conducted by key operating and executive personnel, including specifically assigned business development personnel, as well as through professional personnel who develop and maintain new and existing client relationships. Our continued ability to compete successfully in the areas in which we do business is largely dependent upon aggressive marketing, the development of information regarding client requirements, the submission of responsive cost-effective proposals and the successful completion of contracts. Information concerning private and governmental requirements is obtained, during the course of contract performance, from formal and informal briefings, from participation in activities of professional organizations, and from literature published by the government and other organizations.

Contract Pricing and Terms of Engagement

We earn our revenues for the various types of services we provide through cost-plus, time-and-materials, fixed price contracts, and contracts which combine any of these methods.

Cost-Plus Contracts. Under our cost-plus contracts, we charge clients negotiated indirect rates based on direct and indirect costs in addition to a profit component. We recognize engineering fees at the time services are performed. The amount of revenue is based on our actual labor costs incurred plus a recovery of indirect costs and a profit component. In negotiating cost-plus contracts, we estimate direct labor costs and indirect costs and then add a profit component, which is a percentage of total recoverable costs, to arrive at a total dollar value for the contract. Indirect expenses are recorded as incurred and are allocated to contracts. If the actual labor costs incurred are less than estimated, the revenues from a project will be less than estimated. If the actual labor costs incurred plus a recovery of indirect costs and profit exceed the initial negotiated total contract amount, we must obtain a contract modification to receive payment for such overage. If a contract modification or change order is not approved by our client, we may be able to pursue a claim to receive payment. Engineering fees from claims are recognized when collected. For each of fiscal year 2006 and 2005, approximately 23% and 20%, respectively, of our contracts were cost-plus contracts, primarily with state and local government agencies.

Our contracts with governmental entities, once executed, are not subject to renegotiation of profits at the election of the government; however, the governmental entity may elect to discontinue funding. If a governmental client elects to discontinue funding a project, our fees for work completed are generally protected because our contracts often provide that we receive periodic payments throughout the course of the project.

Time-and-Materials Contracts. Under our time-and-materials contracts, we negotiate hourly billing rates and charge our clients based on actual time expended. In addition, clients reimburse us for our actual out-of-pocket costs of materials and other direct incidental expenditures incurred in connection with performing the contract. Our profit margins on time-and-materials contracts fluctuate based on actual labor and overhead costs directly charged or allocated to contracts compared with negotiated billing rates. During each of fiscal year 2006 and 2005, approximately 47% and 54%, respectively, of our contracts were time-and-materials contracts, primarily with federal, state and local agencies, as well as some private sector clients.

Fixed-Price Contracts. Under our fixed-price contracts, clients pay us an agreed sum negotiated in advance for the specified scope of work. Under fixed-price contracts, there are no payment adjustments if we over-estimate or under-estimate the number of labor hours required to complete the project, unless there is a change of

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scope in the work to be performed. Accordingly, our profit margin will increase to the extent the labor hours and other costs are below the contracted amounts. The profit margin will decrease and we may realize a loss on a project if the number of labor hours required or other costs exceed the estimate. During fiscal years 2006 and 2005, approximately 30% and 26%, respectively, of our contracts were fixed-price contracts, primarily with private sector clients.

Competition

We face active competition in all areas of our business. As we provide a wide array of engineering, architectural, planning and construction management services to companies in various industries throughout the United States, we encounter a different group of competitors in each of our markets. Our competitors include (1) national and regional design firms like us that provide a wide range of design services to clients in all industries, including CH2M Hill and Parsons Brickerhoff (2) industry specific firms that provide design as well as other services to customers in a specific industry or disciplines, including Montgomery Watson, Camp Dresser and McKee, Inc., and (3) local firms that provide some or all of our services in one of our markets. Some of our competitors are larger, more diversified firms having substantially greater financial resources and larger professional and technical staffs than ours. Competition for major contracts is frequently intense and may entail public submittals and multiple presentations by numerous firms seeking to be awarded the contract. The extent of competition we will encounter in the future will vary depending on changing customer requirements in terms of types of projects and technological developments. It has been our experience that the principal competitive factors for the type of service business in which we engage are a firm’s demonstrated ability to perform certain types of projects, the client’s own previous experience with competing firms, the firm’s size and financial condition and the cost of the particular proposal.

No firm dominates a significant portion of the sectors in which we compete. Given the expanding demand for some of the services we provide, it is likely that additional competitors will emerge. At the same time, consolidation continues to occur in certain of the sub-segments of the industry in the United States, including the environmental-focused firms.

We believe that we will retain the ability to compete effectively with other firms that provide similar services by continuing to offer a broad range of high-quality consulting and environmental, transportation, and engineering and construction management services through our network of offices. Among other things, the wide range of expertise, which we possess, permits us to remain competitive in obtaining government contracts despite shifts in governmental spending emphasis. Our multi-disciplinary capabilities enable us to compete more effectively for clients whose projects require that the expertise of professionals in a number of different disciplines be utilized in the problem solving effort. We believe that our ability to offer our services over a large part of the United States is a positive factor in enabling us to attract and retain clients who have a need for our services in different parts of the country.

Backlog

Our backlog for services was estimated to be approximately $487.0 million and $466.4 million as of September 30, 2006 and 2005, respectively. We define backlog as contracted task orders less previously recognized revenue on such task orders. U.S. government agencies, and many state and local governmental agencies, operate under annual fiscal appropriations and fund various contracts only on an incremental basis. Our ability to realize revenues from our backlog depends on the availability of funding for various federal, state and local government agencies.

A majority of our customer orders or contract awards and additions to contracts previously awarded are received or occur at random during the year and may have varying periods of performance. The comparison of backlog amounts on the same date in successive years is not necessarily indicative of trends in our business or future revenues.

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The major components of our operating costs are payroll and payroll-related costs. Because our business is dependent upon the reputation and experience of our personnel and adequate staffing, a reasonable backlog is important for the scheduling of operations and for the maintenance of a fully-staffed level of operations.

The following table presents the total backlog for services by reporting segment:

	September 30,
(Dollars in thousands)	2006		2005
Transportation Services	$	241,740	$	196,025
Environmental Services		114,002		93,004
Civil Engineering		59,517		65,237
Construction Management		71,738		112,152
Totals	$	486,997	$	466,418

Regulation

Compliance with federal, state and local regulations, which have been enacted or adopted, relating to the protection of the environment, is not expected to have any material effect upon our capital expenditures, earnings and competitive position.

Personnel

We employed approximately 3,900 and 3,800 employees as of September 30, 2006 and 2005, respectively. Most of our employees are professional or technical personnel having specialized training and skills, including engineers, architects, analysts, scientists, management specialists, technical writers and skilled technicians. Although many of our personnel are highly specialized in certain areas and while there is a nationwide shortage of certain qualified technical personnel, we are not currently experiencing any significant difficulty in obtaining the personnel we require to perform under our contracts. We believe that our future growth and success will depend, in large part, upon our continued ability to attract and retain highly qualified personnel.

Liabilities and Insurance

When we perform services for our clients, we can become liable for breach of contract, personal injury, property damage and negligence. Such claims could include improper or negligent performance or design, failure to meet specifications and breaches of express or implied warranties. Our clients often require us to contractually assume liabilities for damage or personal injury to the client, third parties and their property and for fines and penalties. Because our projects are typically large enough to affect the lives of many people, the potential damages to a client or third parties are potentially large and could include punitive and consequential damages. For example, our transportation projects involve services that affect not only our client, but also many end users of those services.

We seek protection from potential liabilities by obtaining indemnification, where possible, from our public and private sector clients. However, even when we obtain such indemnification, it is generally not available if we fail to satisfy specified standards of care in performing our services or if the indemnifying person has insufficient assets to cover the liability. Therefore, we also maintain a full range of insurance coverage, including workers’ compensation, general and professional liability (including pollution liability) and property coverage. Our professional liability coverage is on a claims made basis (which means that the policy provides liability coverage for all claims made during the policy period, regardless of when the action occurred), while the rest of our insurance coverage is on an occurrence basis (which means that the policy provides liability coverage only for injury or damage arising from an action that occurs during the policy period, regardless of when the claim is actually made). Our professional liability insurance provides for annual coverage of up to $45.0 million with a

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per claim deductible of $125,000 and annual deductible of $3.0 million. Based upon our previous experience with such claims and lawsuits, we believe our insurance coverage is adequate for all of our present operational activities, although such coverage may not prove to be adequate in all cases. A successful claim or claims in excess of our insurance coverage could have a material adverse effect on our financial position and results of operation.

Available Information

This Annual Report, quarterly reports on Form 10-Q , current reports on Form 8-K and amendments to those reports are available without charge on the Security and Exchange Commission’s (“SEC”) web site, www.sec.gov, as soon as reasonably practicable after they are filed electronically. We are providing the address to the SEC’s website solely for the information of investors.

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ITEM 1A.     Risk Factors

In addition to the factors discussed elsewhere in Item 1, Item 7 and Item 7A, and the notes to the consolidated financial statements, the following risks and uncertainties could materially adversely affect our business, financial condition, and results of operations. Additional risks and uncertainties not presently known to us or that we currently deemed immaterial also may impair our business operations and financial condition.

Certain Risks Related to Our Marketplace and Our Operations

We are involved in litigation, legal proceedings and governmental investigations, which could have a material adverse effect on our profitability and financial position.

We are involved in litigation, legal proceedings and governmental investigations that are significant and described in more detail in Item 3 “Legal Proceedings”. Such litigation, proceedings and investigations could have a material adverse effect on our profitability and financial position if decided adversely.

Unpredictable downturns in the financial markets, and reduced federal, state and local government budget spending could cause our revenues to fluctuate and adversely affect our revenue and operating results.

Downturns in the financial markets can impact the capital expenditures of our clients. In particular, our private sector clients, and the markets in which we provide services, may from time to time experience periods of economic decline. Any prolonged downturn in the financial markets could negatively impact our ability to determine demand for our services. We cannot be certain that economic or political conditions will be generally favorable or that there will not be significant fluctuations adversely affecting our industry as a whole or key markets we target.

The demand for our government related services is contingent upon the level of government funding for new and existing infrastructure projects. As such, government funding is dependent upon policy objectives being in line with infrastructure needs. Any shift in policy away from these initiatives can impact our ability to secure current funding for projects and obtain new projects.

We operate in a highly competitive market. If we are unable to offer competitive services, our business may be adversely affected.

We have numerous competitors in the various marketplaces in which we operate. Our competitors range from large diversified firms having substantially greater financial resources and a larger technical staff than us, to smaller more specialized, low cost structure niche firms. It is not possible to estimate the extent of competition which our present or future activities will encounter because of changing competitive conditions, customer requirements, technological developments, political environments and other factors.

We continue to see significant price competition and customer demand for higher service completion levels. There is also significant price competition in the marketplace for federal, state and local government contracts as a result of budget issues, political pressure and other factors beyond our control. Our operating results could be negatively impacted should we be unable to achieve the necessary revenue growth to sustain profitable operating margins within our service lines.

Pending or future governmental audits could result in findings which require downward adjustments of our revenue; and, under certain circumstances, could cause us to incur significant liabilities or restrict our business activities.

We are party to numerous contracts with federal, state and other government agencies, which require strict compliance with applicable laws, regulations, standards and contractual requirements. Federal and many state agencies routinely conduct various types of audits of their contracts. In some cases, the agencies conducting these

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audits review and report instances of fraud, internal control deficiencies, and violations of regulations or provisions of the contract.

If these audits identify costs which have been incorrectly charged or billed, either directly or indirectly, to government contracts, the government agencies may not reimburse us for these costs, or if we have already been reimbursed, we may be required to refund these reimbursements.

Our internal controls may not prevent or detect specific isolated or deceitful violations of applicable laws, regulations, standards or contractual requirements. If these agencies determine that we or one of our subcontractors has engaged in illegal conduct, we may be subject to civil or criminal penalties, and this may impair our ability to obtain new work.

We derive a significant portion of our engineering fees from a few clients, and the loss of these clients could have a material adverse impact on our financial performance.

In fiscal 2006, we derived approximately 25.0% of our engineering fees from various districts and departments of the FDOT and the TxDOT under numerous contracts. While we believe the loss of any individual contract would not have a material adverse effect on our results of operations and would not adversely impact our ability to continue work under our other contracts with these clients, the loss of all the FDOT or the TxDOT contracts would have a material adverse effect on our results of operations by causing a material decrease in our engineering fees and profits.

Our backlog is subject to cancellation and unexpected adjustments, which could have a negative impact on future earnings.

Backlog represents the revenues associated with contracted task orders which are scheduled to commence in future periods, less previously recognized revenue on such task orders. Projects may remain in our backlog for prolonged periods of time prior to commencement, and our ability to realize revenues from our backlog is contingent on the availability of funding from federal, state and local government agencies. Most government agency contracts contain cancellation clauses, which if exercised, would cause a reduction in our backlog, and adversely affect future revenues. Future project cancellations and scope adjustments could further reduce the dollar amount of our backlog and the revenues and profits that we actually earn.

If we are unable to accurately estimate the revenues, costs, time and resources on our contractual commitments, we may incur a lower profit or loss on the contract.

We generally earn revenue for the services we provide through three principal types of contracts; cost-plus, time-and-materials, and fixed price contracts. Cost-plus contracts are usually subject to negotiated ceiling amounts, and limit the recovery of certain specified indirect costs. If we underestimate our costs, and our costs exceed the contract ceiling amount, we may not be reimbursed for such costs. Under time-and-materials contracts, we negotiate hourly billing rates and charge our clients based on actual time expended. If we underestimate our total contract costs, we may not recover these costs from our client, and the project may not be profitable for us. Under fixed price contracts, we receive a fixed sum negotiated in advance, regardless of actual costs incurred. If we underestimate our revenue and costs for the specified scope of work, we may experience significant over-runs and negatively impact profit margin or realize a loss on the contract. Under these types of contracts, we bear the inherent risk that actual performance cost may exceed the contract price.

If we are unable to retain and recruit highly qualified personnel to fulfill our contractual obligations, our business may be adversely affected.

Our employees are our most valuable resource. Many of our technical personnel are highly specialized in their respective disciplines. Since we derive substantially all of our engineering fees from services performed by

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our professional staff, our failure to retain and attract professional staff could negatively impact our ability complete our projects and secure new contracts.

Failure to meet the covenants of our existing revolving credit facility could result in the loss of use of our available line of credit.

Failure to meet any of the covenant terms of our existing revolving credit facility could result in an event of default. If an event of default occurs, and we are unable to receive a waiver of default, our lender may increase our borrowing costs, restrict our ability to obtain additional borrowings, accelerate all amounts outstanding or enforce their interest against all collateral pledged. In the past, we have obtained written waivers of default from our lender, but we may not be able to obtain any necessary waivers in the future. In addition, we can not declare dividends or incur additional debt without written approval from our lender, which could significantly restrict our ability to raise additional capital. Our inability to raise additional capital could lead to working capital deficits that could have a materially adverse effect on our operations in future periods.

Certain Risks Related to Owning Our Stock

Because no public market exists for our stock, the ability of our shareholders to sell their common stock is limited.

There is no public market for our common stock. In order to provide some liquidity to our shareholders, we have historically maintained a limited annual stock offering period, which we call the stock window. The stock window has permitted existing shareholders to offer their shares for sale back to us during a predetermined period at a price determined by an appraisal. Although the stock window is intended to provide some liquidity to shareholders, the aggregate number of shares offered for sale during the stock window may be greater than the aggregate number of shares sought to be purchased by authorized buyers. As a result, sell orders may be prorated, and shareholders may not be able to sell all of the shares they desire to sell during the stock window. We did not open the stock window in fiscal year 2006, and there is no guarantee the stock window will be open or will not be delayed in future periods. Shareholders who desire to sell their shares in the future will only be able to do so if there are authorized buyers willing to purchase such shares during an open stock window.

The ability of shareholders to sell or transfer their common stock is restricted.

Only our employees, directors, and The PBSJ Employee Profit Sharing and Stock Ownership Plan and Trust (“ESOP”) may own our common stock. We have incorporated significant restrictions on the transfer of our common stock which limit our shareholders’ ability to sell their stock. All shares must be initially offered for sale back to us at the price determined by an appraisal. If we decline to purchase the shares, the ESOP Plan may purchase such shares. Should the ESOP Plan decline to purchase the shares, the shareholders may offer their shares for sale to other shareholders who are employees. The other shareholders have the right to purchase such shares based on each shareholder’s proportionate ownership of all issued shares. Because our shares are subject to transfer restrictions, shareholders who desire to sell all their shares may not be able to do so.

Pursuant to the Company’s by-laws, the Company is permitted to repurchase stock by delivery of a promissory note to the employee. Because the principal payable pursuant to any such promissory note may be paid at any time prior to the five year anniversary of the date of issuance, a shareholder may not receive a cash payment for his shares until such five year anniversary.

Because we do not intend to pay dividends, our shareholders will benefit from an investment in our common stock only if our stock price appreciates.

We have never declared or paid dividends to holders of our common stock. We expect to retain all future earnings for investment in our business, and do not expect to pay any cash dividends in the near future. As a

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result, the positive return of an investment in our common stock is solely dependable on future appreciation in value of our common stock and future earnings. There is no guarantee that our stock will appreciate in value or even maintain the original price at which it was purchased.

The value of our stock may be negatively impacted by current and future governmental agency investigations.

An unfavorable resolution or outcome resulting from working with various government agencies to resolve the amount of reimbursement obligations may result in a material adverse impact to our enterprise value, and may adversely impact the future value of our share price. In addition, we are currently under investigation by the United States Attorney’s office for the Southern District of Florida and the Federal Bureau of Investigation for possible irregularities relating to past political contributions made by us and certain of our employees. In the event that criminal charges are filed against the Company, the future value of our share price may be impacted.

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ITEM 1B.     Unresolved Staff Comments

None.

ITEM 2. Properties

We lease and maintain our executive offices located at 5300 W. Cypress Street, Suite 200 Tampa, FL 33607. We own our Miami office located at 2001 N.W. 107th Avenue, Miami, Florida 33172, which consists of approximately 100,000 square feet of office space. We own our Orlando office located at 482 South Keller Road, Orlando, Florida 32810, which consists of approximately 90,000 square feet of office space. The Orlando office building is pledged as collateral under a mortgage note.

We lease an additional 77 offices in 23 states in the United States and Puerto Rico, all of which are used for our four major business segments. Aggregate lease payments during fiscal year 2006 were approximately $16.1 million.

We also had title to certain properties recovered during the investigation in fiscal year 2005 and 2006 which we have classified as held for sale in the accompanying consolidated balance sheets at September 30, 2006 and 2005 (see Note 4 for further discussion) These properties include:

• a 5,400 square foot residence located in Key Largo, Florida, which was pledged as collateral under a mortgage note. The property was sold in December 2006.

• a 2,000 square foot condominium located in Hollywood, Florida,

We believe that substantially all of our property and equipment are, in general, well maintained and in good operating condition. They are considered adequate for present needs, and as supplemented by planned construction, are expected to remain adequate for the near future.

We believe that we, or our subsidiaries, have clear title to the properties owned and used in our business, subject to liens for current taxes and easements, restrictions and other liens, which do not materially detract from the value of the properties or our interest in the properties or the use of those properties in our business.

ITEM 3. Legal Proceedings

We are party to several pending legal proceedings arising from our operations. We believe that we have sufficient professional liability insurance such that the outcome of any of these proceedings, individually and in the aggregate, will not have a material adverse effect on our financial position or results of operations. However, if our insurance company were to deny coverage for a significant judgment or if a judgment were entered against us in an amount greater than our coverage, it could adversely affect our results of operations and financial position.

We maintain a full range of insurance coverages, including workers’ compensation, commercial general liability (which includes property coverage), commercial automobile, and professional liability (which includes pollution coverage). Our professional liability coverage is on a “claims-made basis” meaning the coverage applies to claims made during a policy year regardless of when the causative action took place. All other coverages are “occurrence-basis” meaning that the policy in place when the injury or damage occurred is the policy that responds regardless of when the claim is made. Our professional liability limits per policy year are $45 million with a per claim deductible of $125,000 plus an annual aggregate of $3 million. Based on our experience with claims and lawsuits we believe that the current levels of coverage are adequate for all of our present operational activities although such coverages may not prove to be adequate in all cases. A successful catastrophic claim or aggregate of several large claims in amounts in excess of our insurance coverages in any policy year could have a material adverse effect on our financial position and results of operation.

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In July 1998, we entered into an agreement with West Frisco Development Corporation (“WFDC”) to provide various services, among which was a flood plain study to be used by WFDC, the City of Frisco and FEMA. In 2003, the City of Frisco retained the services of a third-party architecture and engineering firm in connection with the extension and widening of Teel Road which lies within the greater drainage basin included in the Company’s original flood plain study. This architecture and engineering firm’s assessment of the flood plain study determined that the Company used incorrect assumptions when calculating the size of the drainage culverts required for the increased development of the area’s transportation infrastructure. Based on this assessment, the Company has entered into negotiations with the City of Frisco to correct the drainage needs to support the Teel Road expansion project. As a result, the Company had recorded an estimated liability of $3.1 million to cover the costs associated with correcting the drainage needs of the Teel Road expansion project. Included in this estimate is the purchase of a parcel of land for $1.5 million, the remaining balance of $1.6 million is reflected in other liabilities in the accompanying consolidated balance sheets as of September 30, 2006 and 2005.

Misappropriation Loss

In March 2005, subsequent to the issuance of the Company’s 2004 financial statements, we discovered misappropriations of Company funds by our former Chief Financial Officer and two former employees who worked in our information systems and treasury departments, collectively, (“the participants”). The participants colluded and circumvented controls to misappropriate funds and conceal the misappropriations possibly beginning as early as 1993 until the misappropriations were discovered.

Shortly after this discovery, an investigation sub-committee was formed comprised of the three outside members of our Corporate Audit Committee. These three outside members were subsequently appointed to the Board of Directors and became the three members of the Audit Committee of the Board of Directors. The Audit Committee retained independent counsel to conduct an investigation and advise the Audit Committee in connection with the investigation. The independent counsel retained forensic accountants, including accountants experienced in conducting forensic audits for companies that perform contracts for federal, state and local governments to assist with the investigation.

The investigation team discovered that at least $36.6 million was misappropriated between January 1, 1998 and the discovery of the misappropriations in March 2005. The amount misappropriated prior to January 1, 1998 could not be determined because certain data for the period prior to January 1, 1998 was unavailable. The participants in the embezzlement scheme used several methods to misappropriate the funds while engaging in conduct to conceal the misappropriated amounts. This conduct included among other things, recording and changing normal recurring journal entries and overstating accruals in prior periods to facilitate improper write-offs of misappropriated funds.

The Audit Committee, at the direction of the Corporate Board, disclosed the overstatement of our overhead rate to our clients and other appropriate government agencies, including the Department of Justice (“DOJ”). We have been cooperating with our clients and such agencies to determine the amount of our reimbursement obligations and any other amounts we may be obligated to pay in order to resolve these issues. The DOJ and certain other governmental entities have been investigating the misappropriations and the overstatement of overhead rates.

In July 2006, we entered into a settlement agreement with the State of Texas Department of Transportation which resolves all claims that the State of Texas may have had against us for overpayments related to the restatement of overhead rates on billings on or before April 30, 2006 under contracts with that agency based on our payment of approximately $5.4 million and provides for the determination of the appropriate overhead rate for billings after April 30, 2006. In November 2006, we entered into a settlement agreement with the Florida Department of Transportation which resolves all claims that agency may have had against us for the overstatement of rates on billings through September 30, 2005 (and with respect to cost contracts through September 30, 2006) under our contracts with them based on our payment of approximately $12.5 million. This

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settlement agreement also provided for the determination of the appropriate overhead rate refund for fiscal year 2006 billings under fixed price contracts. The refund amount was finalized in March 2007 and totaled $400,000.

In January 2007, we reached a settlement agreement with the Department of Justice, Civil Division on behalf of it and all other federal agencies with which we have contracts to resolve all federal claims including claims under the Federal Civil False Claims Act, related to the overstatements of overhead rates on our contracts with federal agencies. The agreement requires approximately $6.5 million of reimbursement payments for all contract amounts through September 30, 2005.

The settlements described, excluding those settlements paid in fiscal year 2006, above are included in the accrued reimbursement liability in the Company’s consolidated financial statements at September 30, 2006. Those settlements which were settled subsequent to September 30, 2006 are included in the accrued reimbursement liability at September 30, 2006. We are in discussions with our remaining government clients to enter into settlement agreements in order to satisfy any refund obligations, which are in various stages of settlement.

Our Board of Directors, with the assistance of the CAC and the Audit Committee, instituted immediate corrective actions and began implementing long-term measures to implement new financial controls and establish procedures to safeguard assets and to establish more accurate accounting and financial reporting practices. These long-term measures are included within our new Ethics and Compliance Program.

In an effort to recover assets that were misappropriated, the Company has instituted lawsuits against certain persons who received money from one or more of the participants in the embezzlement scheme. The Company continues to incur costs associated with such lawsuits, and the Company may not prevail in these lawsuits. In the event that the Company does prevail, the Company may not actually recover assets from the persons who were sued by the Company.

In the course of our investigation of the accounting irregularities and misappropriations, it was determined that there were possible violations relating to past political contributions by us and certain of our employees. The United States Attorney’s Office for the Southern District of Florida (Miami) and the Federal Bureau of Investigation have conducted an investigation relating to improper campaign contributions including improper use of political action committees. We produced documents and other information to the government and fully cooperated with the authorities. Criminal charges have been filed against two of the Company’s former chairmen. Authorities have verbally informed the Company’s external legal counsel that unless adverse additional information is discovered they do not intend to charge the Company. Therefore, we believe it unlikely that criminal charges will be filed against us in this matter, but the authorities are not precluded from bringing charges, and circumstances may change.

The United States Securities & Exchange Commission is also conducting an investigation of the accounting irregularities and misappropriations of funds. We are fully cooperating with the investigation and have produced documents and other information to the commission. At the present time, we are unable to predict the likely outcome of this investigation.

Pursuant to the Company’s by-laws, the Company is permitted to repurchase stock by delivery of a promissory note to the employee. On February 23, 2006 the Company repurchased 46,000 shares and 3,400 shares, respectively, of the Company’s stock from Richard Wickett, our former Chairman of the Board from 2002 to February 2005 and former Chief Financial Officer from 1993 to 2004, and Kathryn Wilson in the original principal amounts of $1.2 million and $92,000, respectively. The shares were repurchased for $27.00 per share which represents the September 30, 2004 share price. At September 30, 2006, the Company had an accrual of $49,400 for the difference between the purchase price and the September 30, 2005 share value of $28.00. The notes currently bear interest at the rate of 7.5% per annum and such rate is adjusted to the then current prime rate of Bank of America on December 31^st of each year. Accrued interest and $1 of principal is due monthly on the notes with all remaining principal and accrued interest due and payable on the five year anniversary of the date of

25

issuance. The balances of the notes and the accrual for the stock price differential were approximately $1.4 million at September 30, 2006 and were included in other liabilities in the accompanying balance sheet.

On February 13, 2007, the Company repurchased an additional 46,607 shares of the Company’s stock from Richard Wickett in the original principal amount of $1.0 million. The additional shares were purchased for $22.40 per share which represents 80% of the September 30, 2005 share price, pending completion of the valuation of the Company’s stock as of September 30, 2006. In fiscal year 2007, the Company accrued for the difference between the purchase price and the September 30, 2006 share value. The 2007 note currently bears interest at the rate of 8.25% per annum and such rate is adjusted to the then current prime rate of Bank of America on December 31^st of each year. Accrued interest and $1 of principal is due monthly on the notes with all remaining principal and accrued interest due and payable on the five year anniversary of the date of issuance. The notes are subject to the Company’s right of set off, which permits the Company to set off all claims it may have against the payee against amounts due and owing under the notes.

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

No items were submitted to a vote to security holders during the fiscal year ended September 30, 2006.

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PART II

ITEM 5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

There is no established public trading market for our common stock. As of September 30, 2006 there were no shares of common stock that were subject to outstanding warrants or options to purchase, or securities convertible into, our common stock, and no shares of our common stock could be sold pursuant to Rule 144 under the Securities Act. No shares of our common stock are being, or have been, publicly offered.

As of April 30, 2007, there were 6,668,606 shares of common stock outstanding and held of record by 2,438 shareholders.

Our by-laws require that common stock held by shareholders who terminate employment with us be offered for sale at fair market value to us pursuant to a right of first refusal. Should we decline to purchase the shares, the shares must next be offered to our ESOP plan at fair market value, and then ultimately to our shareholders who are employees. Our by-laws provide that the fair market value be determined by an appraisal. Other than agreements with certain retired Directors, as of September 30, 2006 and 2005, there was no outstanding common stock held by individuals no longer employed by us.

Dividends

Each share of our common stock is entitled to share equally in any dividends declared by our Board of Directors. Pursuant to the terms of our credit agreement, we cannot declare or pay dividends in excess of 50% of our net income. We have not paid cash dividends on our common stock in the past and have no present intention of paying cash dividends on our common stock in the foreseeable future. All earnings are retained for investment in our business.

Issuer Purchases of Equity Securities by Issuer and Affiliated Purchasers

The following table provides information about repurchases of common stock during the year ended September 30, 2006:

	Total Number of Shares Repurchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares That May Be Purchased Under the Plans or Programs
October 1 to June 30	761,447	$	28.00	—	—
July 1 to July 31	23,651		28.00	—	—
August 1 to 31	44,965		28.00	—	—
September 1 to September 30	46,740		28.00	—	—
Total	876,803	$	28.00	—	—

(1) During fiscal 2006, stock repurchases totaling more than $300,000 were paid to employees at 90% of the total value in cash, and 10% of total value by delivery of a promissory note.

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ITEM 6. Selected Financial Data

The financial data for the years ended September 30, 2006, 2005, 2004, and 2003 have been derived from our audited financial statements. However, because the financial statements for the year ended September 30, 2002 and related restatement adjustments have not been reissued, the selected financial data is presented as unaudited. You should read the information set forth below in conjunction with our consolidated financial statements, including the notes thereto, and Management’s Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Annual Report.

	Years Ended September 30,
(Dollars in thousands, except per share amounts)	2006			2005		2004		2003		2002
Operating Data:
Engineering fees	$	537,242		$	511,937	$	448,247	$	383,709	$	338,236
Net earned revenues		431,607			389,951		351,875		302,016		262,668
Net income		5,405			21,075		14,690		12,721		6,703
Balance Sheet Data (at end of period):
Working capital (deficit)		(1,285	)		30,506		20,293		19,800		15,795
Total assets		244,949			251,647		204,365		168,501		149,010
Accrued reimbursement liability (1)		28,183			34,772		24,119		16,248		10,425
Long-term debt, less current portion		6,909			7,425		7,828		17,350		20,997
Capital leases obligations		1,050			853		684		505		206
Total stockholders’ equity		58,911			77,832		62,703		50,061		43,658
Net income per share:
Basic	$	0.81		$	2.92	$	2.03	$	1.71	$	0.83
Diluted	$	0.76		$	2.74	$	1.91	$	1.61	$	0.79

(1) Over-billings to our government clients resulting from the overstatement of our overhead rates resulting from the misappropriation loss and concealment entries and certain additional errors identified.

We have not paid dividends for the five years ended September 30, 2006.

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

Misappropriation Loss

In March 2005, subsequent to the issuance of the Company’s 2004 financial statements, we discovered misappropriations of Company funds by our former Chief Financial Officer and two former employees who worked in our information systems and treasury departments, collectively, (“the participants”). The participants colluded and circumvented controls to misappropriate funds and conceal the misappropriations possibly beginning as early as 1993 until the misappropriations were discovered. The investigation discovered that at least $36.6 million was misappropriated between January 1, 1998 and the discovery of the misappropriations in March 2005. The amount misappropriated prior to January 1, 1998 could not be determined because certain data for the period prior to January 1, 1998 was unavailable.

The Company determined that the misappropriation scheme led to the overstatement of overhead rates that the Company used to determine billings in connection with certain of our government contracts. As a result, some of our government clients were overcharged for the Company’s services. During the review of the overhead rate calculations, the Company identified certain instances of costs erroneously included in our overhead cost pool which were unallowable under applicable regulations and an error in our calculation of our overhead rate, which related to certain general and administrative costs. The Company determined that the unallowable costs and general and administrative errors also led to the overstatement of overhead rates which the Company used in connection with certain government contracts.

Overview

Business Overview

We provide services to both private and public sector clients, with the public sector comprising approximately 75.0% of our revenues. Our business has four segments: Transportation Services, Construction Management, Civil Engineering, and Environmental Services. During fiscal year 2006, all segments experienced growth in engineering fees. The Civil Engineering segment benefited from the addition of several large contracts with the Department of Defense, partly offset by a decrease in engineering fees from the hurricanes disaster projects. The growth in the Construction Management segment was due primarily to a large contract with the Army Corps of Engineers and several large projects with existing clients, including several state DOTs. Our Environmental Services segment experienced a 13.0% increase in engineering fees primarily as a result of the EIP acquisition and the full year impact of the LWC acquisition. The Environmental Services segment also benefited from two new significant contracts with FEMA and the State of Georgia. The increase in engineering fees for the Transportation Services segment was due to new projects and additional assignments from two states DOTs and the City of Atlanta. Two segments of our business, Transportation Services and Environmental Services, experienced increased volumes in backlog at September 30, 2006, as compared to September 30, 2005.

We earn revenue for time spent on projects, in addition to certain direct reimbursable expenses of our projects, such as travel and lodging, blueprints and sub-contractor expenses. The fluctuation in direct reimbursable expenses, specifically sub-contractor costs, including travel and lodging, will influence the fluctuation of our net earned revenue (“NER”). For instance, our Civil Engineering segment experienced a significant decrease in direct reimbursable expenses in fiscal year 2006, as compared to 2005, resulting from a reduction in subcontractors’ costs, including travel and lodging, related to the debris removal from the Florida hurricanes in calendar 2004 and 2005. As a result, our Civil Engineering segment’s NER grew at a greater rate than its engineering fees, because more work was being performed by our in-house technical professionals. During fiscal year 2006, there was a decrease in the percentage of available chargeable salaries of our employees who are primarily technical professionals, whose billable labor gets charged back to our clients, thereby negatively impacting the amount of fees we earned. This decrease was primarily due to the temporary work stoppage for new jobs with the TxDOT, the transition of new acquisitions and additional time spent on business development. As chargeability of our technical professionals’ time decreases, direct salary costs decrease

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proportionately along with it, while indirect salary costs increase, as less of the technical staff’s time worked is being charged back to our clients.

Business Environment

The need to modernize and upgrade the transportation infrastructure in the United States has been a source of continued business for us through the last ten years. Fueling the initial growth in this market was the Intermodal Surface Transportation Efficiency Act of 1991 (“ISTEA”). In 1998, ISTEA was reauthorized as the Transportation Equity Act for the 21st Century (“TEA-21”), earmarking $218 billion for highway and transit projects through 2003. Prior to the expiration of TEA-21 on September 30, 2003, the U.S. Congress and President Bush signed a five-month extension of the program. Since then, a series of additional extensions have been granted, the most recent of which occurred on July 30, 2005 and was set to expire on August 14, 2005, however, on August 10, 2005, the President signed into law the Safe, Accountable, Flexible, Efficient Transportation Act: A Legacy for Users (“SAFETEA-LU”). The SAFETEA-LU guarantees funding for highways, highway safety, and public transportation totaling $244.1 billion. SAFETEA-LU ensures that state agencies that depend largely on federal transportation funding, will continue to make investments needed to maintain and grow the vital transportation infrastructure.

The demand for our construction management services has also been fueled by the legislation and industry trends that are driving the growth in our Transportation and Environmental business segments, including ISTEA and TEA-21. These trends have created a large number of infrastructure projects throughout the United States, which are subject to increasingly complex governmental regulations. The market could level out or shrink slightly until a new Federal transportation funding bill is passed. The potential impact is currently minimal, but increases as time passes until the bill is passed. Projects/programs that depend on the Federal gas tax funding are being delayed, which may eventually lead to a temporary reduction in demand for the services we provide.

During the first quarter of fiscal year 2005, the economy continued in a period of slow recovery with improving private sector corporate profitability. Federal spending remained strong especially in the area of national defense, which increased opportunity and fortified our strategy for greater balance between the public and private sectors. The state and local government markets remained weak but the market for our specialized services in the area of risk and emergency management strengthened due in part to hurricanes and wild fires. Near term expectations are for the Federal Department of Defense and Homeland Security sectors to remain strong. As the economy expands its recovery, we expect the private sector to strengthen. We expect that state and local government markets will remain weak but will improve as increased tax revenue from private sector recovery trickles into the government sector.

In recent years, significant environmental laws at the federal, state and local levels have been enacted in response to public concern over the health of the nation’s air, water, and natural resources. Those laws and their implementation through regulation affect numerous industrial and governmental actions and form a key market driver for the services of our Environmental Services segment. Two federal environmental laws, The Safe Drinking Water Act of 1974 and the Clean Water Act of 1972, continue to drive this segment of our business. Pursuant to these laws, Congress has authorized significant monies to assist state and local governments. According to the EPA, as much as $23 billion a year will be needed for construction and upgrade of water and wastewater treatment facilities over the next 20 years.

Segment Results of Operations

Our businesses are reported as four segments, reflecting our management methodology and structure:

Activities in the Transportation Services business segment generally involve planning, design, right of way acquisition, development and design of intelligent transportation services and program construction management services for multiple transportation modes, including interstate and primary highways, toll roads, arterials,

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bridges, transit systems, airports and port facilities. The Program Management group of our Transportation segment provides many of its governmental clients the necessary resources to manage large infrastructure programs from concept through construction. Services include planning, programming, and contract support.

The Construction Management segment provides a wide range of services including planning, traffic engineering, intelligent transportation systems (“ITS”), corridor planning, highway design, structural design, alternate project delivery, program management, toll facility design, aviation services, multi-modal/transit systems and right-of-way. In fiscal year 2006, this segment added at-risk construction management projects to its services. We also may act as the program director of a project whereby on behalf of the owner of the project, we provide scheduling, cost estimating and construction observation services for the project, or our services may be limited to providing construction consulting. We currently serve transportation departments in 19 states and perform toll services in 9 states for both public and private toll clients.

The Civil Engineering segment provides architectural engineering and general civil engineering as well as specialized services to public and private clients. Included in these services are: site engineering and surveys, infrastructure engineering, master planning, disaster mitigation planning and response, infrastructure protection, asset management, emergency management, and architectural and landscape architecture design.

The Environmental Services business segment focuses on the delivery of planning, design and construction management services for private and public sector clients related to air quality management, flood insurance studies, energy planning, hazardous and solid waste management, ecological studies, wastewater treatment, water resources, environmental toxicology analysis, aquatic treatment systems and water supply and treatment.

The accounting policies of the segments are the same as those described in the notes to the accompanying consolidated financial statements. We evaluate performance based on operating income (loss) of the respective segments. The discussion that follows is a summary analysis of the primary changes in operating results by segment for fiscal year 2006 as compared to fiscal year 2005 and fiscal year 2005 as compared to fiscal year 2004.

NER represents the net effect of gross revenues less direct reimbursable expenses. Direct reimbursable expenses is primarily comprised of subcontractor costs and other direct non-payroll reimbursable charges including travel and travel related costs, blueprints and equipment where the Company is responsible for procurement and management of such cost components on behalf of the Company’s clients. These direct reimbursable expenses are principally passed through to our clients with minimal or no mark-up. Indirect salaries represent wages earned by technical personnel not assigned to client billable projects and salary from administrative and support personnel as well.

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	Years Ended September 30,
(Dollars in thousands)	2006			% of NER		2005			% of NER		2004		% of NER
Transportation Services
Engineering fees	$	206,876		130.4	%	$	199,490		133.0	%	$	179,743	133.0	%
Direct reimbursable expenses		48,210		30.4			49,469		33.0			44,632	33.0
Net earned revenues (NER)		158,666		100.0			150,021		100.0			135,111	100.0
Direct salaries and direct costs		58,283		36.7			56,420		37.6			50,714	37.6
Indirect salaries		32,739		20.6			28,924		19.3			26,706	19.8
General and administrative costs		56,106		35.4			48,974		32.6			45,051	33.3
Misappropriation loss (recoveries), net		(569	)	(0.4	)		(3,932	)	-2.6			1,819	1.3
Investigation and related costs		5,031		3.2			1,997		1.3			—	0.0
Total costs and expenses		151,590		95.5			132,383		88.2			124,290	92.0
Operating income	$	7,076		4.5	%	$	17,638		11.8	%	$	10,821	8.0	%
Construction Management
Engineering fees	$	89,199		121.1	%	$	87,314		129.0	%	$	77,465	132.9	%
Direct reimbursable expenses		15,540		21.1			19,635		29.0			19,187	32.9
Net earned revenues (NER)		73,659		100.0			67,679		100.0			58,278	100.0
Direct salaries and direct costs		29,127		39.5			28,032		41.4			24,518	42.1
Indirect salaries		13,294		18.0			11,193		16.6			8,084	13.9
General and administrative costs		26,048		35.4			22,078		32.6			18,755	32.2
Misappropriation loss (recoveries), net		(265	)	(0.4	)		(1,774	)	(2.6	)		757	1.3
Investigation and related costs		2,336		3.2			900		1.3			—	0.0
Total costs and expenses		70,540		95.8			60,429		89.3			52,114	89.5
Operating income	$	3,119		4.2	%	$	7,250		10.7	%	$	6,164	10.5	%
Civil Engineering
Engineering fees	$	112,526		118.1	%	$	111,312		139.4	%	$	81,841	117.1	%
Direct reimbursable expenses		17,223		18.1			31,446		39.4			11,924	17.1
Net earned revenues (NER)		95,303		100.0			79,866		100.0			69,917	100.0
Direct salaries and direct costs		35,233		37.0			29,725		37.2			25,850	37.0
Indirect salaries		20,313		21.3			16,107		20.2			12,086	17.3
General and administrative costs		36,883		38.7			29,509		37.0			25,423	36.4
Misappropriation loss (recoveries), net		(375	)	(0.4	)		(2,369	)	-3.0			1,027	1.5
Investigation and related costs		3,307		3.5			1,203		1.5			—	0.0
Total costs and expenses		95,361		100.1			74,175		92.9			64,386	92.2
Operating income (loss)	$	(58	)	-0.1	%	$	5,691		7.1	%	$	5,531	7.8	%
Environmental Services
Engineering fees	$	128,641		123.7	%	$	113,821		123.2	%	$	109,198	123.3	%
Direct reimbursable expenses		24,662		23.7			21,436		23.2			20,629	23.3
Net earned revenues (NER)		103,979		100.0			92,385		100.0			88,569	100.0
Direct salaries and direct costs		35,738		34.4			32,122		34.8			30,439	34.4
Indirect salaries		25,006		24.0			20,763		22.5			18,998	21.4
General and administrative costs		39,756		38.2			33,003		35.7			30,965	35.0
Misappropriation loss (recoveries), net		(404	)	(0.4	)		(2,650	)	-2.9			1,251	1.4
Investigation and related costs		3,565		3.4			1,346		1.5			—	0.0
Total costs and expenses		103,661		99.7			84,584		91.6			81,653	92.2
Operating income	$	318		0.3	%	$	7,801		8.4	%	$	6,916	7.8	%

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Year Ended September 30, 2006 Compared to Year Ended September 30, 2005

Engineering Fees

	Years Ended September 30,
(Dollars in thousands)	2006		2005		$ Change		% Change
Transportation Services	$	206,876	$	199,490	$	7,386	3.7	%
Construction Management		89,199		87,314		1,885	2.2	%
Civil Engineering		112,526		111,312		1,214	1.1	%
Environmental Services		128,641		113,821		14,820	13.0	%
Total Engineering Fees	$	537,242	$	511,937	$	25,305	4.9	%

Engineering fees for the year ended September 30, 2006, were $537.2 million compared to $511.9 million in 2005, representing a 4.9% increase. Substantially all of the increase was in the Environmental Services and Transportation Services segments.

Engineering fees from the Transportation Services segment increased 3.7% to $206.9 million in fiscal year 2006 from $199.5 million in fiscal year 2005. The increase included new projects and additional assignments on existing contracts awarded by the Texas DOT (“TxDOT”), Nevada DOT and City of Atlanta.

Our Construction Management engineering fees increased 2.2% to $89.2 million in fiscal year 2006, from $87.3 million in fiscal year 2005. The increase is due in part to a large contract with the Army Corps of Engineers in New Orleans. In addition, the Construction Management segment experienced significant growth, with existing clients, in their Construction Consulting practice in the Southeast Region, including Georgia and Florida DOTs.

In the Civil Engineering segment, engineering fees increased 1.1% to $112.5 million in fiscal year 2006 from $111.3 million in fiscal year 2005. In fiscal year 2006, the Civil Engineering segment benefited from the addition of several large lump sum contracts with the Department of Defense. This increase in engineering fees was mostly offset by a decrease in the administration and management of debris removal of the calendar years 2004 and 2005 hurricanes in Florida and a slow down in the private sector residential market in the second half of fiscal year 2006.

Engineering fees in our Environmental Services segment increased 13.0% to $128.6 million in fiscal year 2006 from $113.8 million in fiscal year 2005. The increase is primarily attributable to organic growth, including two significant new contracts with FEMA and the State of Georgia and a new contract with the California Department of Water Resources. To a lesser extent, engineering fees increased as a result of the April 30, 2006 acquisition of EIP. Engineering fees from EIP, following the acquisition, were approximately $5.3 million in fiscal year 2006. Additionally, the Environmental Services segment benefited from the full year impact of the LWC acquisition, which was acquired on February 1, 2005. The full year impact in engineering fees from the LWC acquisition was approximately $ 1.9 million.

Net Earned Revenues

	Years Ended September 30,
(Dollars in thousands)	2006		2005		$ Change		% Change
Transportation Services	$	158,666	$	150,021	$	8,645	5.8	%
Construction Management		73,659		67,679		5,980	8.8	%
Civil Engineering		95,303		79,866		15,437	19.3	%
Environmental Services		103,979		92,385		11,594	12.5	%
Total Net Earned Revenues	$	431,607	$	389,951	$	41,656	10.7	%

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Net earned revenues (“NER”) was $431.6 million during the year ended September 30, 2006 as compared to $390.0 million in the same period in 2005, representing an increase of 10.7%. This increase was directly related to the increase in engineering fees, as previously explained, and a reduction in direct reimbursable expenses, which is explained below.

	Years Ended September 30,
(Dollars in thousands)	2006		% of NER		2005		% of NER
Transportation Services	$	48,210	30.4	%	$	49,469	33.0	%
Construction Management		15,540	21.1	%		19,635	29.0	%
Civil Engineering		17,223	18.1	%		31,446	39.4	%
Environmental Services		24,662	23.7	%		21,436	23.2	%
Total Direct Reimbursable Expenses	$	105,635	24.5	%	$	121,986	31.3	%

Direct reimbursable expenses consist of out-of-pocket expenses related to the delivery of services such as blueprints, reproductions, CADD/computer charges, travel and sub-consultant expenses. As a percentage of NER, direct reimbursable expenses decreased 6.8% to 24.5% in fiscal year 2006 from 31.3% in fiscal year 2005. The decrease was driven by the Civil Engineering, Construction Management and Transportation Services segments. This decrease was partially offset by an increase experienced by the Environmental Services segment.

Direct reimbursable expenses in the Transportation Services segment experienced a decrease of 2.5 % in fiscal year 2006 when compared to fiscal year 2005. As a percentage of NER, direct reimbursable expenses decreased by 2.6% to 30.4% in fiscal year 2006 from 33.0% in fiscal year 2005. The decrease primarily resulted from decreased use of sub consultants in fiscal year 2006.

In our Construction Management segment, direct reimbursable expenses as a percentage of NER decreased by 7.9% to 21.1% in fiscal year 2006 from 29.0% in fiscal year 2005. This decrease was primarily due to a market shift from direct reimbursable projects to more lump sum and all-inclusive billing rates contracts in the Central and Southeast regions. The shift started in fiscal year 2005 and has continued into fiscal year 2006.

Direct reimbursable expenses in the Civil Engineering segment decreased as a percentage of NER by 21.3% to 18.1% in fiscal year 2006 from 39.4% in fiscal year 2005. The decrease was primarily due to a reduction in subcontractors costs related to debris removal from the Florida hurricanes in calendar years 2004 and 2005. In fiscal year 2005, the Civil Engineering segment incurred significant subcontractors’ costs and travel and lodging costs for the hundreds of employees overseeing debris removal in the areas affected by the disasters.

Our Environmental Services segment experienced an increase of 15.0% in direct reimbursable expenses in fiscal year 2006 when compared to fiscal year 2005. As a percentage of NER, direct reimbursable expenses increased slightly by 0.5% to 23.7% in fiscal year 2006 from 23.2% in fiscal year 2005. This increase was due primarily to the use of subcontractors, included with some contracts acquired with the EIP and LWC acquisitions.

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Operating Income

	Years Ended September 30,
(Dollars in thousands)	2006			% of NER		2005			% of NER
Transportation Services	$	7,076		4.5	%	$	17,638		11.8	%
Construction Management		3,119		4.2	%		7,250		10.7	%
Civil Engineering		(58	)	-0.1	%		5,691		7.1	%
Environmental Services		318		0.3	%		7,801		8.4	%
Total Operating Income		10,455		2.4	%		38,380		9.8	%
Misappropriation Loss (Recoveries) and Investigation and Related Costs, net		12,626		2.9	%		(5,279	)	-1.4	%
Total Operating Income before Misappropriation Loss and Investigation and Related Costs, net	$	23,081		5.3	%	$	33,101		8.5	%

Operating income was $10.5 million in fiscal year 2006 as compared to $38.4 million in fiscal year 2005, representing a decrease of 72.8%. The decrease in total operating income is primarily the result of an increase in investigation and related costs of $8.8 million, and a reduction in gain from recovered assets of $12.7 million, offset by a reduction in misappropriation loss of $3.6 million. Also contributing to the decrease in operating income is an increase in indirect salaries resulting from the temporary work stoppage in bidding for new jobs with the TxDOT, the transition of new acquisitions and additional time spent on business development. The Company also experienced increases in general and administrative (“G&A”) costs, which grew at a higher rate than NER. The major increases in G&A are explained below. All segments had decreases in fiscal year 2006 operating income from the prior fiscal year. Operating income, as a percentage of NER, decreased by 7.4% to 2.4% in fiscal year 2006 from 9.8% in fiscal year 2005. All segments experienced decreases in fiscal year 2006 operating income as a percentage of NER as compared to fiscal year 2005.

We believe that operating income before misappropriation loss and investigation and related costs is a useful measure in evaluating our results of operations because the misappropriation loss, recoveries and investigation and related costs are unusual items which do not reflect the costs or revenues of our provision of services in the given year. While the misappropriations occurred over a long period, the recoveries and investigation costs are realized when recovered or incurred and not in relation to the period when the misappropriations occurred. We believe this measure is helpful for us and for our investors to evaluate the results of our operations and make comparisons between periods.

Operating income before misappropriation loss and investigation and related costs, net was $23.1 million for fiscal year 2006 as compared to $33.1 million for fiscal year 2005, representing a decrease of 30.3%. Operating income before misappropriation loss and related costs, net, as a percentage of NER, decreased by 3.2% to 5.3% in fiscal year 2006 from 8.5% in fiscal year 2005. The decrease in operating income before misappropriation loss and investigation and related costs is primarily due to the increase in indirect salaries caused by the temporary stoppage in bidding for new jobs with the TxDOT, the transition of acquisitions and additional time spent on business development. The Company also experienced increases in G&A costs, which grew at a higher rate than NER. The major increases are explained below. Misappropriation loss and investigation and related costs, net are treated as corporate overhead costs, and as such, are allocated to each respective segment. The allocation is based on the segments’ proportionate share of “G&A” costs to total Company G&A costs.

As a percentage of NER, the Transportation Services segment’s operating income decreased by 7.3% to 4.5% in fiscal year 2006 from 11.8% in fiscal year 2005. This decrease is primarily due to the increase in misappropriation loss (recoveries) and investigation related costs, net. As a percentage of NER, the Transportation Services segment’s operating income before misappropriation loss and investigation and related costs, net decreased by 3.2% to 7.3% in fiscal year 2006 from 10.5% in fiscal year 2005. This decrease experienced by the Transportation Services segment was driven by lower multipliers on some contracts and a

35

decrease in chargeability resulting from the temporary stoppage on bidding for new jobs with the TxDOT during the latter part of fiscal year 2006.

The Construction Management segment experienced a decrease in operating income of 57%% in fiscal year 2006 when compared to the same fiscal year in 2005. This decrease is primarily due to the increase in misappropriation loss (recoveries) and investigation related costs, net. The Construction Management segment experienced a decrease in operating income before misappropriation loss and investigation and related costs, net, of 18.6% in fiscal year 2006 when compared to the same fiscal year in 2005. Factors contributing to the decrease included the start-up costs associated with the new at-risk construction management services initiated in fiscal year 2006 and the additional expenditures incurred in marketing and business development in the West and Southeast regions. Additional costs were also incurred in promoting safety initiatives throughout this segment.

As a percentage of NER, the Civil Engineering segment operating income decreased by 7.2% to (0.1%) in fiscal year 2006 from 7.1% in fiscal year 2005. This decrease is primarily due to the increase in misappropriation loss (recoveries) and investigation related costs, net. As a percentage of NER, the Civil Engineering segment operating income before misappropriation loss and investigation and related costs, net decreased by 2.7 % to 3.0% in fiscal year 2006 from 5.7% in fiscal year 2005. The Civil Engineering segment was impacted in fiscal year 2006 by the decline in engineering fees from the disaster response projects related to the Florida hurricanes and the slow down in the private sector residential market, as previously explained, and additional expenditures in marketing and business development.

The Environmental Services segment experienced a decrease in operating income of 95.9% in fiscal year 2006 when compared to the same fiscal year in 2005. This decrease is primarily due to the increase in misappropriation loss (recoveries) and investigation related costs, net. The Environmental Services segment experienced a decrease in operating income before misappropriation loss and investigation and related costs, net of 46.5% in fiscal year 2006 when compared to the same fiscal year in 2005. However, as a percentage of NER, the Environmental Services segment had a decrease of 3.7% to 3.3% in fiscal year 2006 compared to 7.0% in fiscal year 2005. This decrease was primarily due to decreased chargeability, partially due to the transition of the EIP acquisition and expenditures for marketing and business development.

Costs

Costs consist principally of direct salaries and direct costs that are chargeable to clients and overhead and general and administrative expenses.

Direct Salaries and Direct Costs

	Years Ended September 30,
(Dollars in thousands)	2006		% of NER		2005		% of NER
Transportation Services	$	58,283	36.7	%	$	56,420	37.6	%
Construction Management		29,127	39.5	%		28,032	41.4	%
Civil Engineering		35,233	37.0	%		29,725	37.2	%
Environmental Services		35,738	34.4	%		32,122	34.8	%
Direct Salaries and Direct Costs	$	158,381	36.7	%	$	146,299	37.5	%

Direct salaries and direct costs primarily includes direct salaries and to a lesser extent unreimburseable direct costs. Direct costs totaled $1.7 million and $881,000 in fiscal year 2006 and 2005, respectively. Direct salaries and direct costs were $158.4 million in fiscal year 2006, as compared to $146.3 million in fiscal year 2005, representing an increase of 8.3%. This increase is directly related to the increase in engineering fees. As a percentage of NER, all segments experienced a decrease from a year ago. On a Company basis, direct salaries and direct costs as a percentage of NER decreased by 0.8% to 36.7% in fiscal year 2006 from 37.5% in fiscal year 2005.

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The Transportation Services segment experienced an increase in direct salaries and direct costs of 3.3% to $58.3 million in fiscal year 2006 compared to $56.4 million in fiscal year 2005. However, as a percentage of NER, direct salaries and direct costs decreased by 0.9% to 36.7% in fiscal year 2006 from 37.6% in fiscal year 2005, reflecting improvements in capturing labor billable costs to clients.

Direct salaries and direct costs in the Construction Management segment increased to $29.1 million in fiscal year 2006, or a 3.9% increase from $28.0 million in fiscal year 2005. As a percentage of NER, direct salaries and direct costs decreased 1.9% to 39.5% in fiscal year 2006 from 41.4% in fiscal year 2005. This decrease is due to increased chargeability and higher profitability resulting from the shifting of direct reimbursable projects to lump sum and all-inclusive billing rates contracts in the Central and Southeast regions, as previously explained.

For the Civil Engineering segment, direct salaries and direct costs increased by 18.5% to $35.2 million in fiscal year 2006 versus $29.7 million in fiscal year 2005. This increase was directly related to the addition of several large lump sum contracts with the Department of Defense, which required the use of our professional staff. As a percentage of NER, direct salaries and direct costs decreased by 0.2% to 37.0% in fiscal year 2006 from 37.2% in fiscal year 2005. This decrease was primarily due to the increase in NER for this segment resulting from the significant decrease in direct reimbursable expenses, as previously explained. For fiscal 2006, NER for the Civil Engineering segment grew at a higher rate (19.3%) than the increase in direct salaries and direct costs.

For our Environmental Services segment, direct salaries and direct costs increased to $35.7 million in fiscal year 2006 from $32.1 million in fiscal year 2005, representing an increase of 11.3%. This increase was due primarily to the professional staff added with the acquisitions of EIP and LWC, as previously explained. As a percentage of NER, direct salaries and direct costs stayed proportionately in line with NER in fiscal year 2006 as compared to fiscal year 2005.

General and Administrative Costs, including Indirect Salaries

The other component of costs is indirect costs, which include indirect salaries, and general and administrative costs.

	Years Ended September 30,
(Dollars in thousands)	2006		% of NER		2005		% of NER
Transportation Services	$	32,739	20.6	%	$	28,924	19.3	%
Construction Management		13,294	18.0	%		11,193	16.5	%
Civil Engineering		20,313	21.3	%		16,107	20.2	%
Environmental Services		25,006	24.0	%		20,763	22.5	%
Total Indirect Salaries	$	91,352	21.2	%	$	76,987	19.7	%

Indirect salaries increased 18.7%, to $91.4 million in fiscal year 2006 from $77.0 million in fiscal year 2005. Indirect salaries as a percentage of NER increased 1.5% to 21.2% in fiscal year 2006 compared to 19.7% in fiscal year 2005.

Transportation Services experienced an increase in indirect salaries as a percentage of NER of 1.3% from 19.3% in fiscal year 2005 to 20.6% in fiscal year 2006 resulting from decreased chargeability. The Transportation Services segment was impacted by the temporary stoppage on bidding for new jobs with the TxDOT during the latter part of fiscal year 2006, as previously explained.

Indirect salaries in our Construction Management segment increased 18.8% to $13.3 million in fiscal year 2006 from $11.2 million in fiscal year 2005. As a percentage of NER, indirect salaries increased by 1.5% to 18.0% in fiscal year 2006 from 16.5% in fiscal year 2005. The increase in indirect salaries was due primarily to

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the start-up costs incurred with the new at-risk construction management services and the additional expenditure incurred in marketing and business development in the West and Southeast regions, as previously explained.

Civil Engineering experienced an increase in indirect salaries as a percentage of NER of 1.1% to 21.3% in fiscal year 2006 from 20.2% in fiscal year 2005. This increase resulted from the winding down of work related to the hurricanes response projects and adjusting to the slow down in the private sector residential market and additional time spent on business development.

Environmental Services segment experienced an increase in indirect salaries of 20.4% in fiscal year 2006 when compared to the same fiscal year in 2005. As a percentage of NER, indirect salaries increased by 1.5% to 24.0% in fiscal year 2006 from 22.5% in fiscal year 2005. The increase in indirect salaries was primarily due to decreased chargeability partially due to the transition of the EIP acquisition and additional focus on marketing and business development.

	Years Ended September 30,
(Dollars in thousands)	2006		% of NER		2005		% of NER
Transportation Services	$	56,106	35.4	%	$	48,974	32.6	%
Construction Management		26,048	35.4	%		22,078	32.6	%
Civil Engineering		36,883	38.7	%		29,509	37.0	%
Environmental Services		39,756	38.2	%		33,003	35.7	%
Total General & Administrative Costs	$	158,793	36.8	%	$	133,564	34.3	%

General and administrative (“G&A”) costs increased 18.9%, to $158.8 million in fiscal year 2006 from $133.6 million in fiscal year 2005. The majority of the increase is primarily related to increased medical insurance premiums and flex benefits resulting from rising costs of $6.4 million, professional fees of $1.2 million, legal settlements and fees of $4.9 million, travel and related expenses of $2.4 million, rent expense for real estate of $2.2 million, payroll taxes of $2.3 million, insurance of $1.2 million, deferred compensation of $1.3 million and vehicle and equipment leases and related expenses of $1.2 million. We also incurred additional expenses for depreciation and amortization, business development, communication and computer software and supplies. The increase in G&A in fiscal year 2006 over fiscal year 2005 was partly offset by a decrease in incentive compensation of $2.5 million. These costs are generally considered corporate costs which benefit all segments and are allocated to the respective segments based on the individual segments’ proportionate share of G&A costs as compared to total Company G&A costs.

Misappropriation loss (recoveries) and Investigation and Related Costs

As described elsewhere in this Annual Report, we have recorded a $3.6 million misappropriation loss for the year ended September 30, 2005. During fiscal year 2005, we also recorded a gain from recovered assets totaling $14.3 million, resulting in a net misappropriation gain of $10.7 million for fiscal year 2005. During fiscal year 2006, we recorded a gain from recovered assets totaling $1.6 million. Additionally, in fiscal year 2006 and 2005, we incurred $14.2 million and $5.4 million, respectively, in costs to investigate and quantify the impact of the embezzlement, and in costs related to the recovery and maintenance of certain assets. The recorded gain from recovered assets and the investigation and related costs have been allocated to our segments based on the individual segments’ proportionate share of G&A costs to total Company G&A costs.

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The following table sets forth the components of the misappropriation loss for the years ended September 30, 2006, 2005, 2004 and prior and related investigation expenses:

	Years Ended September 30,
(Dollars in thousands)	Cumulative Total			2006			2005			2004		2003 and Prior
Misappropriation loss	$	36,600		$	—		$	3,636		$	4,854	$	28,110
Less: gain from recovered assets		(15,974	)		(1,613	)		(14,361	)		—		—
Misappropriation loss (recoveries), net		20,626			(1,613	)		(10,725	)		4,854		28,110
Legal fees		7,614			5,270			2,344			—		—
Forensic accounting fees and related costs		10,734			7,885			2,849			—		—
Other		1,337			1,084			253			—		—
Investigation and related costs		19,685			14,239			5,446			—		—
Total	$	40,311		$	12,626		$	(5,279	)	$	4,854	$	28,110

During fiscal year 2007, we incurred additional costs in connection with the investigation and with the restatement of our previously issued consolidated financial statements. We have incurred an additional $3.7 million in investigation related legal expenses and approximately $800,000 in overhead rate and financial statement audit related expenses during fiscal year 2007.

Year Ended September 30, 2005 Compared to Year Ended September 30, 2004

Engineering Fees

	Years Ended September 30,
(Dollars in thousands)	2005		2004		$ Change		% Change
Transportation Services	$	199,490	$	179,743	$	19,747	11.0	%
Construction Management		87,314		77,465		9,849	12.7	%
Civil Engineering		111,312		81,841		29,471	36.0	%
Environmental Services		113,821		109,198		4,623	4.2	%
Total Engineering Fees	$	511,937	$	448,247	$	63,690	14.2	%

Engineering fees for the year ended September 30, 2005, were $511.9 million compared to $448.2 million in 2004, representing a 14.2% increase. Substantially all of the increase was in the Civil Engineering, Construction Management and Transportation Services segments.

Engineering fees from Civil Engineering services increased 36.0% to $111.3 million in fiscal year 2005 from $81.8 million in fiscal year 2004. This segment greatly benefited from large response projects related to the calendar year 2004 hurricanes in Florida, and to a lesser extent, from hurricane Katrina in late August of 2005. Engineering fees in the Civil Engineering segment also increased due to the Croslin acquisition on October 1, 2004. Engineering fees from Croslin, following the acquisition were approximately $2.7 million for the fiscal year ended September 30, 2005. This segment also experienced modest growth from our homeland security program and Southern California economic growth.

Our Construction Management engineering fees increased 12.7% to $87.3 million in fiscal year 2005, from $77.5 million in fiscal year 2004. The increase relates primarily to several large projects with existing clients including several state departments of transportation. The biggest growth arose out of an acceleration of Texas Turnpike Authority (“TTA”) projects and projects with Arkansas Department of Transportation (“DOT”). The later stages of construction management work typically require a full technical staff, plus temporary technical help, as well as a significant amount of overtime. This resulted in a continued growth in the year over year

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engineering fees for this segment’s operations in Arkansas and Texas. Lastly, our construction management segment benefited from the disaster response projects that resulted from the hurricanes that hit Florida in the third quarter of 2004 and to a lesser extent to hurricane Katrina which hit the Gulf States in late August 2005.

In the Transportation Services segment, engineering fees increased 11.0% to $199.5 million in fiscal year 2005 from $179.7 million in fiscal year 2004. The increase was primarily due to increase in new projects awarded by the Texas DOT (“TxDOT”) and to the TriLine and WKA acquisitions. Engineering fees from TriLine and WKA, following the acquisitions, were $5.2 million and $6.7 million, respectively, for the fiscal year ended September 30, 2005.

Engineering fees have remained relatively stable in our Environmental Services segment with engineering fees increasing 4.2% to $113.8 million in fiscal year 2005 from $109.2 million in fiscal year 2004. The increase is primarily attributable to the acquisition of LWC, acquired in March 2005. Engineering fees from the LWC acquisition were approximately $3.5 million in fiscal year 2005. In addition, our Environmental Services’ engineering fees were negatively impacted by the winding down of a large FEMA project, offset by increased organic growth to replace these engineering fees. This organic growth was primarily driven by the segment’s increased focus on marketing and business development.

Net Earned Revenues

	Years Ended September 30,
(Dollars in thousands)	2005		2004		$ Change		% Change
Transportation Services	$	150,021	$	135,111	$	14,910	11.0	%
Construction Management		67,679		58,278		9,401	16.1	%
Civil Engineering		79,866		69,917		9,949	14.2	%
Environmental Services		92,385		88,569		3,816	4.3	%
Total Net Earned Revenues	$	389,951	$	351,875	$	38,076	10.8	%

Net earned revenues (“NER”) was $390.0 million during the year ended September 30, 2005 as compared to $351.9 million in the same period in 2004, representing an increase of 10.8%. This increase was directly related to the increase in engineering fees, as previously explained.

	Years Ended September 30,
(Dollars in thousands)	2005		% of  NER		2004		% of  NER
					(Restated)
Transportation Services	$	49,469	33.0	%	$	44,632	33.0	%
Construction Management		19,635	29.0	%		19,187	32.9	%
Civil Engineering		31,446	39.4	%		11,924	17.1	%
Environmental Services		21,436	23.2	%		20,629	23.3	%
Total Direct Reimbursable Expenses	$	121,986	31.3	%	$	96,372	27.4	%

In addition, the change in our NER is affected by the fluctuation in our direct reimbursable expenses. Direct reimbursable expenses consist of out-of-pocket expenses related to the delivery of services such as blueprints, reproductions, CADD/computer charges, travel and sub-consultant expenses. As a percentage of NER, direct reimbursable expenses increased 3.9% to 31.3% in fiscal year 2005 from 27.4% in fiscal year 2004. The increase was driven by the Civil Engineering segment.

Direct reimbursable expenses in the Civil Engineering segment increased as a percentage of NER by 22.3% to 39.4% in fiscal year 2005 from 17.1% in fiscal year 2004. The increase was due to the disaster response projects related to the Florida hurricanes in the third quarter of 2004 and the Southern California fires and to a

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lesser extent, to hurricane Katrina which hit the Gulf States in late August of 2005. These disasters required significant travel and lodging costs for the hundreds of employees overseeing debris removal in the areas affected by the disasters. In addition, sub-consultants were hired to perform some of the work, adding to the direct reimbursable expenses.

In our Construction Management segment, direct reimbursable expenses as a percentage of NER decreased by 3.9% to 29.0% in fiscal year 2005 from 32.9% in fiscal year 2004. This decrease was primarily due to several projects shifting from direct reimbursable projects to cost plus projects, reducing the total direct reimbursable expenses. Also, an increase in lump sum contracts in the Southeast region has reduced direct reimbursable expenses.

Our Environmental Services segment showed a slight decrease of 0.1% in direct reimbursable expenses as a percentage of NER to 23.2% in fiscal year 2005 from 23.3% in fiscal year 2004. The decrease was due primarily to a return to normal direct reimbursable expense spending in fiscal year 2005, as compared to 2004. In 2004, direct reimbursable expenses were larger than normal due to a video inspection sub-consultant that we utilized to assist us with the beginning stages of a job in California. Since then, the volume of video work has decreased, thereby reducing our direct reimbursable expenses in this segment.

Direct reimbursable expenses for the Transportation Services segment as a percentage of NER remained constant at 33.0% in fiscal year 2005 and fiscal year 2004.

Operating Income

	Years Ended September 30,
(Dollars in thousands)	2005			% of NER		2004		% of NER
Transportation Services	$	17,638		11.8	%	$	10,821	8.0	%
Construction Management		7,250		10.7	%		6,164	10.6	%
Civil Engineering		5,691		7.1	%		5,531	7.9	%
Environmental Services		7,801		8.4	%		6,916	7.8	%
Total Operating Income		38,380		9.8	%		29,432	8.4	%
Misappropriation Loss		(5,279	)	-1.4	%		4,854	1.4	%
Total Operating Income before Misappropriation Loss	$	33,101		8.5	%	$	34,286	9.7	%

Operating income was $38.4 million in fiscal year 2005 as compared to $29.4 million in fiscal year 2004, representing an increase of 30.4%. The increase in total operating income is primarily the result of a $14.3 million gain from recovered assets, offset by $3.6 million misappropriation loss and $5.4 million in investigation related costs. All segments had increases in fiscal year 2005 operating income from the prior fiscal year. Operating income, as a percentage of NER, increased by 1.4% to 9.8% in fiscal year 2005 from 8.4% in fiscal year 2004. All the segments, except Civil Engineering, experienced increases in fiscal year 2005 operating income as a percentage of NER as compared to fiscal year 2004.

We believe that operating income before misappropriation loss and investigation and related costs is a useful measure in evaluating our results of operations because the misappropriation loss, recoveries and investigation and related costs are unusual items which do not reflect the costs or revenues of our provision of services in the given year. While the misappropriations occurred over a long period, the recoveries and investigation costs are realized when recovered or incurred and not in relation to the period when the misappropriations occurred. We believe this measure is helpful for us and for our investors to evaluate the results of our operations and make comparisons between periods.

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Operating income before misappropriation loss and investigation and related costs, net was $33.1 million for fiscal year 2005 as compared to $34.3 million for fiscal year 2004, representing a decrease of 3.5%. Operating income before misappropriation loss and related costs, net, as a percentage of NER, decreased by 1.2% to 8.5% in fiscal year 2005 from 9.7% in fiscal year 2004. Misappropriation loss and investigation and related costs, net are treated as corporate overhead costs, and as such, are allocated to each respective segment. The allocation is based on the segments’ proportionate share of general and administrative (“G&A”) costs to total Company G&A costs.

As a percentage of NER, the Transportation Services segment’s operating income increased by 3.8% to 11.8% in fiscal year 2005 from 8.0% in fiscal year 2004. This increase is primarily driven by the decrease in misappropriation loss in fiscal 2005 compared to fiscal 2004. As a percentage of NER, the Transportation Services segment’s operating income before misappropriation loss and investigation and related costs, net, increased by 1.1% to 10.5% in fiscal year 2005 from 9.4% in fiscal year 2004. This increase experienced by the Transportation Services segment was driven by improvements in engineering fees and chargeability, due largely to the large disaster response projects and significant increases in work volume with DOTs as a result of increased funding sources available to the states. As explained previously, as chargeability improves or increases, we are able to bill more of our labor costs to clients, thereby improving our profit margin. The other three segments experienced decreases in operating income before misappropriation loss and related costs, net, as a percentage of NER. These decreases were primarily due to decreased chargeability. When we experience a decrease in chargeability, we are billing less to our customers, thereby reducing our profit.

Costs

Costs consist principally of direct salaries and direct costs that are chargeable to clients and overhead and general and administrative expenses.

Direct Salaries and Direct Costs

	Years Ended September 30,
(Dollars in thousands)	2005		% of NER		2004		% of NER
Transportation Services	$	56,420	37.6	%	$	50,714	37.5	%
Construction Management		28,032	41.4	%		24,518	42.1	%
Civil Engineering		29,725	37.2	%		25,850	37.0	%
Environmental Services		32,122	34.8	%		30,439	34.4	%
Direct Salaries and Direct Costs	$	146,299	37.5	%	$	131,521	37.4	%

Direct salaries and direct costs primarily includes direct salaries and to a lesser extent unreimburseable direct costs. Direct costs totaled $881,000 and $1.6 million in fiscal year 2005 and 2004, respectively.

Direct salaries and direct costs were $146.3 million in fiscal year 2005, as compared to $131.5 million in fiscal year 2004, representing an increase of 11.2%. This increase is directly related to the increase in engineering fees and chargeability. As a percentage of NER, all segments except Construction Management experienced an increase from a year ago. On a Company basis, direct salaries and direct costs as a percentage of NER increased slightly to 37.5% in fiscal year 2005 from 37.4% in fiscal year 2004.

For the Civil Engineering segment, direct salaries and direct costs increased by 15.0% to $29.7 million in fiscal year 2005 versus $25.9 million in fiscal year 2004. Direct salaries and direct costs as a percentage of NER increased slightly to 37.2% in fiscal year 2005 from 37.0% in fiscal year 2004.

Direct salaries and direct costs in the Construction Management segment increased to $28.0 million in fiscal year 2005, or a 14.3% increase from $24.5 million in fiscal year 2004. As a percentage of NER, direct salaries

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and direct costs decreased 0.7% to 41.4% in fiscal year 2005 from 42.1% in fiscal year 2004. This decrease is due to increased chargeability and increased profitability from an acceleration of TxDOT projects and various transportation projects in Florida. The latter stages of these projects required full technical staff, plus temporary technical help as well as significant amounts of overtime.

The Transportation Services segment experienced an increase in direct salaries and direct costs of 11.3% to $56.4 million in fiscal year 2005 compared to $50.7 million in fiscal year 2004. As a percentage of NER, direct salaries and direct costs increased slightly to 37.6% in fiscal year 2005 from 37.5% in fiscal year 2004.

For our Environmental Services segment, direct salaries and direct costs increased to $32.1 million in fiscal year 2005 from $30.4 million in fiscal year 2004, a 5.5% increase. As a percentage of NER, direct salaries and direct costs increased by 0.4% from 34.4% in fiscal year 2004 to 34.8% in fiscal year 2005. The slight increase in direct salaries and direct costs as a percentage of NER is due primarily to a larger proportional increase in direct salaries and direct costs of 5.5% in relation to the increase in NER of 4.2%.

General and Administrative Costs, including Indirect Salaries

The other component of costs is indirect costs, which include indirect salaries, and general and administrative costs.

	Years Ended September 30,
(Dollars in thousands)	2005		% of NER		2004		% of NER
Transportation Services	$	28,924	19.3	%	$	26,706	19.8	%
Construction Management		11,193	16.5	%		8,084	13.9	%
Civil Engineering		16,107	20.2	%		12,086	17.3	%
Environmental Services		20,763	22.5	%		18,998	21.4	%
Total Indirect Salaries	$	76,987	19.7	%	$	65,874	18.7	%

Indirect salaries increased 16.9%, to $77.0 million in fiscal year 2005 from $65.9 million in fiscal year 2004. Indirect salaries as a percentage of NER increased 1.0% to 19.7% in fiscal year 2005 compared to 18.7% in fiscal year 2004.

Transportation Services experienced a decrease in indirect salaries as a percentage of NER of 0.5% from 19.8% in fiscal year 2004 to 19.3% in fiscal year 2005 resulting from an increase in chargeability from new projects with the TxDOT and acquisitions, as previously explained. As chargeability increases, and as more of the technical staff’s time worked is being charged back to clients, direct salaries increases and indirect salaries decreases.

Civil Engineering and Environmental Services experienced an increase in indirect salaries as a percentage of NER of 2.9% and 1.1%, respectively, as a result of the focus on marketing and business development and an increased use of sub-consultants on certain projects.

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Indirect salaries in our Construction Management segment increased 38.5% to $11.2 million in fiscal year 2005 from $8.1 million in fiscal year 2004. As a percentage of NER, indirect salaries increased by 2.6% to 16.5% in fiscal year 2005 from 13.9% in fiscal year 2004. The primary result of this increase is attributable to delays in the commencement of certain projects and the opening of new offices to support new business initiatives in the East region.

	Years Ended September 30,
(Dollars in thousands)	2005		% of NER		2004		% of NER
					(Restated)
Transportation Services	$	48,974	32.6	%	$	45,051	33.3	%
Construction Management		22,078	32.6	%		18,755	32.2	%
Civil Engineering		29,509	36.9	%		25,423	36.4	%
Environmental Services		33,003	35.7	%		30,965	35.0	%
Total General & Administrative Costs	$	133,564	34.3	%	$	120,194	34.2	%

General and administrative (“G&A”) costs increased 11.1%, to $133.6 million in fiscal year 2005 from $120.2 million in fiscal year 2004. The majority of the increase is primarily related to increased medical insurance premiums of $3.8 million, payroll taxes of $2.1 million, professional fees of $1.7 million, incentive compensation of $1.0 million and rent expense of $1.6 million. We also incurred additional fees for information technology system upgrades and Sarbanes-Oxley readiness and documentation. These costs are generally considered corporate costs which benefit all segments and are allocated to the respective segments based on the individual segments’ proportionate share of G&A costs as compared to total Company G&A costs.

Misappropriation loss (recoveries) and Investigation and Related Costs

As described elsewhere in this Annual Report, we have recorded $3.6 million and $4.9 million of misappropriation losses during 2005 and 2004, respectively. During fiscal year 2005, we also recorded a gain from recovered assets totaling $14.3 million, resulting in a net misappropriation gain of $10.7 million for fiscal year 2005.

Additionally, in fiscal year 2005, we incurred $5.4 million in costs to investigate and quantify the impact of the embezzlement, and in costs related to the recovery and maintenance of certain assets. The recorded gain from recovered assets and the investigation and related costs have been allocated to our segments based on the individual segments’ proportionate share of G&A costs to total Company G&A costs.

Consolidated Results

Net Income:

Net income was $5.4 million, $21.1 million and $14.7 million for fiscal years 2006, 2005 and 2004, respectively. The percentage of net income to NER was 1.3%, 5.4% and 4.2% for fiscal years 2006, 2005 and 2004. The 74.4% decrease in net income in fiscal year 2006, as compared to 2005, was primarily the result of an increase in investigation and related costs of $8.8 million, and a reduction in gain from recovered assets of $12.7 million in fiscal year 2006, offset by a decrease in misappropriation loss of $3.6 million. Net income in fiscal year 2006 was also negatively impacted by an increase in indirect salaries resulting from the temporary stoppage on bidding for new jobs with the TxDOT and lower chargeability resulting from the transition of acquisitions and time spent on business development. Additionally, the increase in engineering fees was offset by an increase in G&A expenses, which increased at a greater percentage than NER. The decrease in net income was partially offset by a decrease in our effective tax rate. The decrease in the effective tax rate was due to reversal of tax reserves, partially offset by a decrease in the use of research and development tax credits generated and an increase in non-deductible expenses. The effective tax rate decreased to 37.8% in fiscal year 2006 from 42.8% in fiscal year 2005.

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The majority of the increase in G&A in fiscal year 2006 over fiscal year 2005 is primarily related to increased medical insurance premiums and flex benefits ($6.4 million), professional fees ($1.2 million), legal settlements and fees ($4.9 million), travel and related expenses ($2.4 million), rent expense for real estate ($2.2 million), payroll taxes ($2.3 million), insurance ($1.2 million), deferred compensation ($1.2 million) and vehicle and equipment leases ($1.3 million). We also incurred additional expenses for depreciation and amortization, business development communication and software and computer supplies. The increase in G&A in fiscal year 2006 over fiscal year 2005 was partly offset by a decrease in incentive compensation of $2.5 million.

Income Taxes:

The income tax provision was $3.3 million and $15.7 million, or an effective tax rate of 37.8% and 42.8%, for the years ended September 30, 2006 and 2005, respectively. The reduction in the effective tax rate in fiscal year 2006 was primarily due to a reduction in tax reserves related to research and development credits taken on the Company’s tax returns, offset by a reduction in the amount of research and development tax credits generated and an increase in non-deductible expenses.

Our effective tax rate is based on income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which we operate. Significant judgment is required in determining the effective tax rate and in evaluating our tax positions. The Company establishes reserves when, despite its belief that the tax return positions are fully supportable, it believes that certain positions, if challenged, will likely be resolved unfavorably to us. These reserves are adjusted in light of changing facts and circumstances, such as the progress of a tax audit or current developments in tax law. Our annual tax rate includes the impact of reserve provisions and changes to reserves. While it is often difficult to predict the final outcome or the timing of resolution of any particular matter, we believe that our reserves reflect the probable outcome of known tax contingencies. Resolution of the tax contingencies would be recognized as an increase or decrease to our tax rate in the period of resolution. We have recorded a tax contingency accrual of approximately $12.5 million and $13.5 million as of September 30, 2006 and 2005, respectively related to research and development tax credits taken on the Company’s tax returns. The tax accruals are presented in the accompanying consolidated balance sheets within accounts payable and accrued expenses.

For the past several years, we have generated research and development tax credits related to certain qualifying costs. The qualifying costs relate primarily to our project costs which we believe involve technical uncertainty. These research and development costs were incurred in the course of providing services generally under long-term client projects. Because we have been unable to utilize the entire amount of research and development tax credits we have generated each year, the balance sheets reflect a deferred tax asset of $5.7 million and $5.5 million at September 30, 2006 and 2005, respectively, for the unused credit carry forwards. These research and development tax credit carry-forwards will expire beginning 2017 through 2022.

Liquidity and Capital Resources

During the fiscal years ended September 30, 2006 and 2005, our primary sources of liquidity were cash flows from operations, borrowings under our credit lines, and proceeds from the sale of common stock to our employees. The proceeds from the sale of stock, received in fiscal year 2006, relate to stock sold in fiscal year 2005. In fiscal year 2006, the Company did not offer any common stock for sale to its employees. Our primary uses of cash have been to fund our working capital and capital expenditure needs, service our debt obligations, and the redemption of shares of our common stock during the year. We also anticipate additional cash flows to be generated from the sale of recovered assets classified as held for sale as of September 30, 2006. We believe, based on our past experience, that we can generate sufficient cash flows from operations and cash flows available under our credit facility to fund our operating and capital expenditure requirements, as well as to service our debt obligations, including our accrued client reimbursement liability, for fiscal year 2007 and beyond. In the event we experience a significant adverse change in our business operations or higher than expected stock redemptions,

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we would likely need to secure additional sources of financing, and we may not be able to obtain additional sources of funding at reasonable rates and terms.

Cash Flows from Operating Activities

Net cash provided by operating activities totaled $10.9 million for fiscal year 2006 as compared to $37.5 million for fiscal year 2005. The reduction in net cash provided by operating activities in fiscal year 2006 from fiscal year 2005 was primarily the result of a significant increase in investigation and related costs, net of gains of assets recovered in connection with the misappropriation loss, as more fully explained in note 2 of our consolidated financial statements. The Company’s cash flows from projects were negatively impacted by the temporary stoppage on bidding for new jobs with the Tx DOT and lower chargeability resulting from the transition of acquisitions and time spent on business development during fiscal year 2006. Also impacting cash flows from income generated by projects were an increase in accounts receivable, offset by a decrease in unbilled fees. The Company also experienced a reduction in accounts payable and accrued expenses and accrued reimbursement liability. The reduction in accounts payable and accrued expenses reflects payments made to vendors and consultants, and the reduction in accrued reimbursement liability reflects payments made to clients in fiscal year 2006 for the overstatement of overhead rates. The decrease in net cash provided by operating activities was partly offset by the proceeds from the disposal of assets held for sale, offset by a reduction of liabilities related to assets held for sale and the change in the provision for deferred taxes in fiscal year 2006 over fiscal year 2005.

Net cash provided by operating activities totaled $37.5 million for fiscal year 2005 as compared to $32.2 million for fiscal year 2004. The net cash provided by operating activities was primarily from income generated from projects and slower payments of our accounts payable and accrued expense and other current liabilities. Cash flows from income generated by projects were partially offset by increases in accounts receivable and unbilled fees. The increases in unbilled fees and accounts receivable are attributable primarily to the increase in revenue during fiscal year 2005 compared to fiscal year 2004 due to the hurricane debris removal projects.

Approximately 80% of our revenues are billed on a monthly basis. The remaining amounts are billed when we reach certain stages of completion as specified in the contract. Payment terms for accounts receivable and unbilled fees, when billed, are net 30 days. During fiscal year 2006, unbilled fees decreased 9.9% to $62.8 million at September 30, 2006 from $69.7 million at September 30, 2005. The decrease in unbilled fees during fiscal year 2006 is principally related to the improvements in permitted billing for the work performed and earned as of the end of fiscal year 2006.

Accounts receivable, net increased 26.3%, to $85.2 million at September 30, 2006, from $67.5 million at September 30, 2005. The increase in accounts receivable is primarily related to the decrease in unbilled fees, as previously explained and growth in engineering fees. The allowance for doubtful accounts increased approximately $600,000 during fiscal year 2006. The allowance for doubtful accounts increased $102,000 during fiscal year 2005. The balance in the allowance for doubtful accounts was $1.8 million and $1.2 million at September 30, 2006 and 2005, respectively.

During fiscal year 2007, we incurred additional costs in connection with the Company’s investigations and with the restatement of our previously issued consolidated financial statements, which were completed in fiscal 2007. We have incurred, during fiscal year 2007, an additional $3.7 million in investigation related legal expenses and approximately $800,000 in overhead rate and financial statement audit related expenses. Additionally, we expect to spend approximately $22.5 million in client reimbursements during fiscal year 2007, and an additional $5.6 million thereafter. We may also incur additional fees and penalties from various government regulatory agencies as a result of the final outcome of the ongoing investigations.

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Cash Flows from Investing Activities

Net cash used in investing activities was $16.5 million, $12.3 million, and $16.0 million in fiscal years 2006, 2005 and 2004, respectively. Investing activity principally consists of purchases of property and equipment, such as survey equipment, computer system and equipment, furniture and leasehold improvements. Additionally, during fiscal years 2006, 2005 and 2004 approximately $5.9 million, $2.0 million and $5.9 million, respectively, were used in acquisitions and earn-out payments on a previous acquisition.

In fiscal year 2006, we completed one acquisition. On April 30, 2006, we acquired 100% of the stock of EIP Associates (“EIP”) for $6.0 million, net of cash acquired of $15,000, comprised of $5.5 million in cash, $334,000 accrued additional purchase price and $200,000 held in escrow.

In fiscal year 2005, we completed two acquisitions. On October 1, 2004 we acquired 100% of the stock of Croslin Associates, Inc. for $456,000 in cash and 11,111 shares of our common stock valued at approximately $300,000. On February 1, 2005 we acquired 100% of the stock of Land and Water Consulting, Inc. for $323,000 in cash and 33,862 shares of our common stock valued at approximately $914,000.

In fiscal year 2004, we also completed two acquisitions. On June 1, 2004 we acquired 100% of the stock of TriLine Associates, Inc. for $3.7 million in cash. On July 1, 2004 we acquired 100% of the stock of W. Koo and Associates for $413,000 in cash, $250,000 in accrued earn-out provisions and 71,429 shares of our common stock, for a total purchase price of $2.5 million. Additionally in fiscal year 2004, we paid an earn-out payment related to the Welker acquisition in the amount of $1.2 million.

During fiscal year 2007, we anticipate our capital expenditures to be approximately $9.0 million, including approximately $3.3 million relating to the implementation of our new Oracle enterprise resource planning system. While the Company will continue to pursue a long-term growth strategy in making strategic acquisitions, we are not expecting any acquisitions to materialize in fiscal year 2007.

Cash Flows from Financing Activities

Net cash used in financing activities for fiscal 2006 was $16.9 million, as compared to $4.5 million for fiscal year 2005. The increase in net cash used in financing activities in fiscal year 2006 from fiscal year 2005 is primarily attributable to an increase in the payments for the repurchase of common stock from employees of $6.6 million and a decrease in the proceeds from the sale of common stock to employees of $6.5 million. As explained below, the Company did not offer any common stock to its employees in fiscal year 2006, but received payment in fiscal year 2006 related to the 2005 sale of common stock to employees. The increase in net cash used in financing activities was partly offset by an increase in net borrowings under our line of credit of $762,000. Net cash used in financing activities for fiscal year 2005 was $4.5 million, as compared to net cash used in financing activities of $14.5 million in fiscal year 2004. The change in net cash used is primarily attributable to a decrease in net borrowings from our line of credit of $9.2 million and a decrease in the net purchases of common stock of $558,000.

Pursuant to the terms of our credit agreement, we cannot declare or pay dividends in excess of 50% of our net income. We have not previously paid cash dividends on our common stock and have no present intention of paying cash dividends on our common stock in the foreseeable future. All earnings are retained for investment in our business.

Capital Resources

The Company has a $58 million line of credit agreement, inclusive of $10 million in letters of credit, with Bank of America, N.A. (the “Bank”). The expiration date on the line of credit is June 30, 2008. The letters of credit reduce the maximum amount available for borrowing. As of September 30, 2006 and 2005, we had letters

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of credit totaling $4.3 million and $3.4 million, respectively. At September 30, 2006, the Company had letters of credit, which expire in fiscal year 2007, for $2.2 million to guarantee insurance payments. In addition, in the second quarter of 2006, we issued a letter of credit which expired in November 2006, for $ 2.0 million to cover risk of insolvency for the FDOT. No amounts have been drawn on any of these letters of credit. As a result of the issuance of these letters of credit, the maximum amount available for borrowing under the line of credit was $52.6 million and $54.6 million as of September 30, 2006 and 2005, respectively. Although our most significant source of cash has historically been generated from operations, in the event that cash flows from operations are insufficient to cover our working capital needs, we would access our revolving line of credit facility.

The Bank has provided us a waiver of default caused by our failure to deliver to the Bank audited financial statements for fiscal year 2006 and unaudited financial statements for the quarters ended December 31, 2006 and March 31, 2007, so long as the fiscal year 2006 financial statements are delivered to the Bank no later than May 31, 2007 and the quarterly statements are delivered no later than September 30, 2007. The bank has also provided us a waiver of the minimum net worth covenant for fiscal year 2006 and all periods in fiscal year 2007. The line of credit is collateralized by substantially all of our assets.

As of September 30, 2006 and 2005, we had $1.1 million and $0 outstanding under the line of credit, respectively. The maximum amount borrowed under our line of credit was $11.3 million and $13.8 million during fiscal 2006 and 2005, respectively. We used cash flow from operating activities to repay amounts outstanding under our line of credit.

On March 19, 2001, the Company entered into a mortgage note with an original principal amount of $9.0 million due in monthly installments starting on April 16, 2001, with interest. Interest on the mortgage is LIBOR plus the floating rate margin of not less than 65 basis points and not greater than 90 basis points. A balloon payment is due on the mortgage on March 16, 2011. The effective interest rate on the mortgage note was 5.98% and 4.51% for the fiscal years ended September 30, 2006 and 2005, respectively. The mortgage note is collateralized by our office building located in Orlando, Florida. We used an interest rate swap (“the Swap”) agreement in order to minimize the adverse impact of the floating interest rate characteristics of our long term debt obligations. The swap effectively converted the floating interest rate on the note payable to a fixed rate of 6.28%. On March 16, 2006, our swap expired and was not renewed. Our adjustable rate mortgage calls for an interest rate based on the 30-day LIBOR plus a margin of .065%. We do not anticipate entering into any additional swap agreements.

Our capital expenditures are generally for purchases of property and equipment. We spent $11.4 million, $10.3 million and $9.6 million on such expenditures in fiscal years 2006, 2005 and 2004, respectively. Our capital expenditures primarily consist of computer systems and equipment, furniture and leasehold improvement purchases.

A stock offering usually takes place on an annual basis for a one week period during the month of March. The Company suspended the stock offering window for March 2006 until the final impact of the restatement of the Company’s consolidated financial statements was determined. The Company is planning to open the stock window for fiscal year 2007 in June 2007. During this offering, shares of the Company’s common stock will be available for sale to employees of the Company, pursuant to The PBSJ Corporation Stock Ownership Plan.

The stock window will also allow existing shareholders to offer shares of common stock for sale to the Company. Under the corporate by-laws, the Company has the first right of refusal to purchase these shares. If the Company declines to purchase the offered shares, they are offered to the Employee Profit Sharing and Stock Ownership Plan and Trust (ESOP) and then to all shareholders. The Company believes it will be able to fund purchases it chooses to execute using cash from operations and accessing the revolving credit line facility, if necessary. Should the number of shares offered for sale potentially cause the Company to violate its debt covenants, the Company would restrict the purchase of shares until compliance is achieved. As of April 30, 2007 there were 6,668,606 shares held by employees with a total value of approximately $162.3 million.

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We believe that our existing financial resources, together with our cash flow from operations and availability under our line of credit, will provide sufficient capital to fund our operations for fiscal year 2007 and beyond.

Inflation

The rate of inflation has not had a material impact on our operations. Moreover, if inflation remains at its recent levels, it is not expected to have a material impact on our operations for the foreseeable future.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements other than operating leases for most of our office facilities and certain equipment. Minimum operating lease obligations payable in future years are presented below in Contractual Obligations.

Related Party Transactions

We lease office space in a building which houses our Marietta, Georgia operations from BCE Properties, which is owned and controlled by James Belk. Mr. Belk is a former owner of Welker and a Vice-President and Project Director of ours. The lease was assumed in connection with our acquisition of Welker in March 2003. The rental cost of the space is $17,600 per month. On May 31, 2006, the lease expired and was not renewed. In June 2006, we moved our Marietta, Georgia operations to a new location.

We lease office space in a building which houses our Missoula, Montana operations from Cedar Enterprises, which is owned and controlled by Charlie K. Vandam. Mr. Vandam is a former owner of LWC and a Senior Program Manager of ours. The lease was assumed in connection with our acquisition of LWC in February 2005. The rental cost of the space is $9,500 per month.

We lease office space in a building which houses our Helena, Montana operations from Prickly Pear Enterprises, which is owned and controlled by Paul Callahan. Mr. Callahan is a former owner of LWC and a Vice-President and Senior Division Manager of ours. The lease was assumed in connection with our acquisition of LWC in February 2005. The rental cost of the space is $1,800 per month.

Pursuant to the Company’s by-laws, the Company is permitted to repurchase stock by delivery of a promissory note to the employee. On February 23, 2006 the Company repurchased 46,000 shares and 3,400 shares, respectively, of the Company’s stock from Richard Wickett, our former Chairman of the Board from 2002 to February 2005 and former Chief Financial Officer from 1993 to 2004, and Kathryn Wilson in the original principal amounts of $1.2 million and $92,000, respectively. The shares were repurchased for $27.00 per share which represents the September 30, 2004 share price. At September 30, 2006, the Company had an accrual of $49,400 for the difference between the purchase price and the September 30, 2005 share value of $28.00. The notes currently bear interest at the rate of 7.5% per annum and such rate is adjusted to the then current prime rate of Bank of America on December 31^st of each year. Accrued interest and $1 of principal is due monthly on the notes with all remaining principal and accrued interest due and payable on the five year anniversary of the date of issuance. The balances of the notes and the accrual for the stock price differential were approximately $1.4 million at September 30, 2006 and were included in other liabilities in the accompanying balance sheet.

On February 13, 2007, the Company repurchased an additional 46,607 shares of the Company’s stock from Richard Wickett in the original principal amount of $1.0 million. The additional shares were purchased for $22.40 per share which represents 80% of the September 30, 2005 share price, pending completion of the valuation of the Company’s stock as of September 30, 2006. In fiscal year 2007, the Company accrued for the difference between the purchase price and the September 30, 2006 share value. The 2007 note currently bears

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interest at the rate of 8.25% per annum and such rate is adjusted to the then current prime rate of Bank of America on December 31^st of each year. Accrued interest and $1 of principal is due monthly on the notes with all remaining principal and accrued interest due and payable on the five year anniversary of the date of issuance. The notes are subject to the Company’s right of set off, which permits the Company to set off all claims it may have against the payee against amounts due and owing under the notes.

Recent Accounting Pronouncements

On February 15, 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159 (“SFAS 159”), “The Fair Value Option for Financial Assets and Financial Liabilities,” which allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis. Subsequent changes in fair value of these financial assets and liabilities would be recognized in earnings when they occur. SFAS 159 further establishes certain additional disclosure requirements. SFAS 159 is effective for the Company’s financial statements for the fiscal year ending September 30, 2009, with earlier adoption permitted. Management is currently evaluating the impact and timing of the adoption of SFAS 159 on the Company’s consolidated financial statements.

In September 2006, FASB issued SFAS No. 158 (“SFAS 158”), “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans”. This standard requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. The Company is required to adopt the recognition and related disclosure provisions of SFAS 158 for the fiscal year ending September 30, 2007. The Company is also required to adopt the measurement provisions of SFAS 158 for the fiscal year ending September 30, 2009. The Company is still evaluating the impact of this standard on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157 (“SFAS 157”), “Fair Value Measurements”. SFAS 157 prescribes a single definition of fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The accounting provisions of SFAS 157 will be effective for the Company for the fiscal year ending September 30, 2009. The Company does not believe the adoption of SFAS 157 will have a material impact on its consolidated financial statements.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (“SAB 108”). SAB 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB 108 requires companies to quantify misstatements using a balance sheet and income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. When the effect of initial adoption is material, companies will record the effect as a cumulative effect adjustment to beginning of year retained earnings. SAB 108 will be effective for the Company for the fiscal year ending September 30, 2008. The Company does not believe the adoption of SAB 108 will have a material impact on its consolidated financial statements.

In July 2006, the FASB issued Interpretation (“FIN”) No. 48 “Accounting for Uncertainty in Income Taxes—an interpretation of FASB No. 109” (“FIN 48”). This interpretation establishes guidelines and thresholds that must be met for the recognition and measurement of a tax position taken or expected to be taken in a tax return. The provisions of FIN 48 are effective for fiscal years beginning after December 31, 2006. The Company is currently evaluating the impact of adopting FIN 48 on its consolidated financial statements.

In November 2005, the FASB issued FASB Staff Position (“FSP”) FAS 115-1 and FAS 124-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments,” (“ FSP 115-1 and 124-1”) which address the determination as to when an investment is impaired, whether that impairment is other than temporary, and the measurement of an impairment loss. FSP 115-1 and 124-1 also includes accounting

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considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The guidance in FSP 115-1 and 124-1 amends FASB Statement No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and Accounting Principles Board (“APB”) Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock.” FSP 115-1 and 124-1 is effective for reporting periods beginning after December 15, 2005. The adoption of FSP 115-1 and 124-1 did not have a material impact on our consolidated financial statements.

In May 2005, the FASB issued SFAS No. 154 (“SFAS 154”), “Accounting Changes and Error Corrections” (“SFAS 154”), which replaces APB Opinion No. 20 “Accounting Changes” and SFAS No. 3 “Reporting Accounting Changes in Interim Financial Statements.” SFAS 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle. SFAS 154 also requires that a change in method of depreciating or amortizing a long-lived non-financial asset be accounted for prospectively as a change in estimate, and correction of errors in previously issued financial statements should be termed a restatement. SFAS 154 is effective for accounting changes and correction of errors made in the first annual reporting period beginning after December 15, 2005. We early adopted SFAS 154 and have reported and disclosed the correction of errors in our previously reported consolidated financial statements in accordance with SFAS 154. The other reporting and disclosure requirements of SFAS 154 did not have a material impact on our consolidated financial statements.

In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”), which is a revision of SFAS 123, “Accounting for Stock-Based Compensation.” SFAS 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values, beginning with the first annual period beginning after December 2005, with early adoption encouraged. We are required to adopt SFAS 123(R) in our first quarter of fiscal year 2007, beginning October 1, 2006. The Company is currently evaluating the impact of adopting SFAS 123(R) on our consolidated financial statements.

In December 2003, the FASB issued Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities” (“FIN 46R”), which replaced FIN 46. FIN 46R addresses how a business enterprise should evaluate whether it has a controlling interest in an entity through means other than voting rights. This interpretation requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or is entitled to receive a majority of the entity’s residual returns or both. The interpretation also requires disclosures about variable interest entities that the company is not required to consolidate but in which it has a significant variable interest. We are required to adopt FIN 46R immediately for entities created after December 31, 2003 and at the beginning of fiscal year 2006 for all other entities. The adoption of FIN 46R did not have a material impact on our consolidated financial statements.

Critical Accounting Policies

In the ordinary course of business, we make a number of estimates and assumptions relating to the reporting of results of operations and financial position in the preparation of financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ significantly from those estimates under different assumptions and conditions. We believe the following discussion addresses our most critical accounting policies. These policies require management to exercise judgments that are often difficult, subjective and complex due to the necessity of estimating the effect of matters that are inherently uncertain.

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Revenue Recognition

We recognize engineering fees from different types of services under a variety of different types of contracts. In recognizing engineering fees, we evaluate each contractual arrangement to determine the applicable authoritative accounting methodology to apply to each contract.

In the course of providing services, we principally use three types of contracts: Cost-plus contracts, Time and Materials contracts and Fixed Price contracts.

Cost-plus Contracts. We recognize engineering fees from cost-plus contracts at the time services are performed. The amount of revenue recognized is based on our actual labor costs incurred, plus non-labor costs and the portion of the fixed negotiated fee earned to date. Included in non-labor costs are pass-through costs for client-reimbursable materials, equipment and subcontractor costs where we are responsible for engineering specifications, procurement and management of such cost components on behalf of our clients. These direct reimbursable expenses are principally passed through to our clients with minimal or no mark-up and are included in our engineering fees. Indirect expenses are recorded as incurred and are allocated to contracts.

Time and Materials Contracts. We recognize engineering fees from Time and Materials contracts at the time services are performed. The amount of revenue recognized is based on the actual number of hours we spend on the projects, multiplied by contractual rates or multipliers. In addition, our clients reimburse us for our actual out-of-pocket costs of materials and other direct reimbursable expenses that we incur in connection with our performance under these contracts. The amount of NER on a time and materials contract fluctuates based on the proportion of the actual labor spent and reimbursable costs that are incurred for each contract.

Fixed Price Contracts. We recognize engineering fees from fixed price contracts based on the percentage of completion method where fees are recognized based on the ratio of estimated costs incurred to total estimated contract costs. At the time a loss on a contract becomes known, we record the entire amount of the estimated loss.

Change orders that result from modification of an original contract are taken into consideration for revenue recognition when they result in a change of total contract value and are approved by our clients. Engineering fees relating to unapproved change orders are recognized when collected.

The Company’s federal government contracts are subject to the Federal Acquisition Regulations (“FAR”). These regulations are partially incorporated into many local and state agency contracts. The FAR limits the recovery of certain specified indirect costs on contracts subject to such regulations. In accordance with industry practice, most of the Company’s federal government contracts are subject to termination at the discretion of the client. Contracts typically provide for reimbursement of costs incurred and payment of fees earned through the termination date.

Contracts that fall under the FAR are subject to audit by the government, primarily the Defense Contract Audit Agency (“DCAA”), which reviews our overhead rates, operating systems and costs proposals. As a result of its audits, the DCAA may disallow costs if it determines that we have incorrectly or improperly accounted for such costs in a manner inconsistent with generally accepted government accounting standards.

Accrued Reimbursement Liability

The accrued reimbursement liability is an estimate related to the total impact of the overstated overhead rates billed under certain government contracts, primarily as a result of an error with respect to general and administrative expenses and the misappropriations previously described. This liability represents estimates of our future payment obligations associated with reimbursing clients for such overstated overhead rates. The estimate was developed through a detailed analysis, reimbursement settlements and discussions with various government

52

client representatives and is dependent on assumptions made by management, which include the impact of the misappropriations and other items on the overhead rates, the government clients subject to reimbursement, the percentage of contracts with these identified government clients subject to reimbursement, the extent to which overhead rates used to bill these identified government contracts varied from the overhead rates, the profit earned on these identified government contracts and the assumed interest rate on the reimbursement amounts. A significant change in one or more of these assumptions could potentially have a material effect on the financial statements. Although false claims actions by certain state government agencies are possible under various State False Claims Acts (“State FCA”), the Company currently believes these actions are unlikely and has not accrued a liability for these actions. The State FCA allow for state and certain local government entities to recover damages from the presentation of certain false or fraudulent claims by entities in which they contract with. If false claims actions are initiated in the future by one or more of these state governmental agencies, such actions could have a material affect on the Company’s financial statements.

The Company has entered into reimbursement settlement agreements with the Florida Department of Transportation and the Texas Department of Transportation, its two largest clients, for $12.9 million and $5.4 million, respectively for all contract amounts through September 30, 2006. Such amounts were paid in fiscal year 2006 and 2007. In addition, it has reached a reimbursement settlement agreement with the Department of Justice on behalf of all of the Company’s federal clients for $6.5 million for all contract amounts through September 30, 2006.

The Company has started discussions with several of its other government clients, which are in various stages of settlement. As of April 30, 2007, the Company has settled $25.8 million of the liability with clients, which represents approximately 61% of the estimated total refund amount.

Deferred Compensation

Estimated liabilities related to defined benefit pension and postretirement programs are included in deferred compensation. These liabilities represent actuarially determined estimates of our future obligations associated with providing these benefit programs to some of our employees. The actuarial studies and estimates are dependent on assumptions made by management, which include discount rates, life expectancy of participants and rates of increase in compensation levels. These assumptions are determined based on the current economic environment at year-end.

Income Taxes

In determining net income for financial statement purposes, we must make estimates and judgments in the calculation of tax assets and liabilities and in the determination of the recoverability of deferred tax assets. Tax assets and liabilities arise from temporary differences between the tax return and the financial statement recognition of revenues and expenses.

For the past several years, we have generated research and development tax credits related to certain qualifying costs. The qualifying costs relate primarily to the Company’s project costs which management believes involved technical uncertainty. These research and development costs were incurred by the Company in the course of providing services generally under long-term client projects. Because the Company has been unable to utilize the entire amount of research and development tax credits it has generated each year, the balance sheets reflect a deferred tax asset of $5.7 million and $5.5 million at September 30, 2006 and 2005, respectively, primarily, for the unused research and development tax credit carry forwards. The credits will expire beginning 2017 through 2022.

The Company’s effective tax rate is based on income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which the Company operates. Significant judgment is required in determining the effective tax rate and in evaluating the Company’s tax positions. The Company establishes reserves when, despite its belief that the tax return positions are fully supportable, it believes that certain

53

positions, if challenged, will likely be resolved unfavorably to us. These reserves are adjusted in light of changing facts and circumstances, such as the progress of a tax audit or current developments in tax law. The Company’s annual tax rate includes the impact of reserve provisions and changes to reserves. While it is often difficult to predict the final outcome or the timing of resolution of any particular matter, the Company believes that its reserves reflect the probable outcome of known tax contingencies. Resolution of the tax contingencies would be recognized as an increase or decrease to the Company’s tax rate in the period of resolution. The Company has recorded a tax contingency accrual of approximately $12.5 million and $13.5 million as of September 30, 2006 and 2005, respectively, related to research and development tax credits taken on the Company’s tax return. The tax accruals are presented in the consolidated balance sheets within accounts payable and accrued expenses.

Contingencies

Management estimates are inherent in the assessment of our exposure to litigation and other legal claims and contingencies. Significant management judgment is utilized in determining probable and or reasonably estimable amounts to be recorded or disclosed in our financial statements (see Accrued Reimbursement Liability above). The results of any changes in accounting estimates are reflected in the financial statements of the period in which the changes are determined.

Contractual Obligations

A summary of our contractual obligations as of September 30, 2006 is as follows:

(Dollars in thousands)	Payments due by period
Contractual Obligations	Total		Less than 1 year		2-3 years		4-5 years		More than 5 years
Long-term debt obligations (1)	$	8,553	$	1,644	$	1,024	$	1,024	$	4,861
Operating lease obligations		55,826		19,829		26,290		9,085		622
Capital lease obligations		1,505		575		840		90		—
Purchase obligations		2,149		1,678		471		—		—
Expected retirement benefit payments		13,926		933		1,936		2,397		8,660
Accrued client reimbursement payments		28,183		22,546		5,637		—		—
Total	$	110,107	$	46,486	$	36,420	$	13,058	$	14,143

(1) Excludes interest which is based on a variable rate.

We are obligated under various non-cancelable leases for office facilities, furniture and equipment. Certain leases contain renewal options, escalation clauses and certain other operating expenses of the properties. In the normal course of business, leases that expire are expected to be renewed or replaced by leases for other properties.

In July 2004, the Company entered into a two year Microsoft Enterprise Agreement with Microsoft Licensing, GP covering all of the Company’s Microsoft based application licenses. At September 30, 2006, we had outstanding under this agreement the remaining payment of approximately $728,000, all of which is included in contractual purchase obligations above. In fiscal year 2007, we entered into a new three year agreement for a total of $1.8 million.

In February 2006, the Company entered into a one year Oracle License and Services Agreement with Oracle relating to the implementation of our new Oracle enterprise resource planning system. At September 30, 2006, we have outstanding under this agreement a purchase commitment of approximately $1.4 million, all of which is included in contractual purchase obligations above.

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ITEM 7A.     Quantitative and Qualitative Disclosures about Market Risk

We are subject to interest rate risk through outstanding balances on our variable rate debt. We may mitigate this risk by paying down additional outstanding balances on our variable rate loans, refinancing with fixed rate permanent debt or obtaining cash flow hedges. We do not hold market-risk sensitive instruments for trading purposes. We entered into one derivative financial instrument, a swap agreement, to hedge cash flows related to the LIBOR interest rate risk. On March 10, 2006, our swap expired. We hold no other financial instruments or derivative instruments to hedge any market risk, nor do we currently plan to employ them in the near future. Our adjustable rate mortgage calls for an interest rate based on the 30-day LIBOR plus a margin of .065%. We do not anticipate entering into any additional swap agreements.

The interest rate (5.82% and 5.98% at September 30, 2006, respectively) on our revolving line of credit and mortgage note ranges from LIBOR plus 50 basis points to prime minus 125 basis points if our funded debt coverage ratio is less than 2.5. The range increases to LIBOR plus 75 basis points to prime minus 100 basis points if our funded debt coverage ratio is between 2.5 to 3.0. We mitigate interest rate risk by continually monitoring interest rates and electing the lower of the LIBOR or prime rate option available under the line of credit or mortgage note. As of September 30, 2006, the fair value of the debt approximates the outstanding principal balance due to the variable rate nature of such instruments.

The interest rates under our revolving line of credit and mortgage note are variable and accordingly we have exposure to market risk. To the extent that we have borrowings outstanding, there is market risk relating to the amount of such borrowings. We estimate that a one-percentage point increase in interest rates for debt outstanding of $8.6 million as of September 30, 2006 would have resulted in additional annualized interest costs of approximately $86,000. This analysis did not consider the impact of the swap since it expired in March 2006. As of April 30, 2007, debt outstanding has increased to $28.2 million primarily due to payments made for client reimbursements under our line of credit. We estimate that a one-percentage point increase in interest rates for this debt would result in additional annualized interest costs of approximately $282,000.

The sensitivity analysis, described above, contains certain simplifying assumptions (for example, it does not consider the impact of changes in prepayment risk or credit spread risk). Therefore, although it gives an indication of our exposure to changes in interest rates, it is not intended to predict future results and our actual results will likely vary.

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ITEM 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of The PBSJ Corporation:

We have audited the accompanying consolidated balance sheets of The PBSJ Corporation and subsidiaries (the “Company”) as of September 30, 2006 and 2005, and the related consolidated statements of operations, of stockholders’ equity and comprehensive income, and of cash flows for each of the three years in the period ended September 30, 2006. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of The PBSJ Corporation and subsidiaries as of September 30, 2006 and 2005, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2006, in conformity with accounting principles generally accepted in the United States of America.

/s/ DELOITTE & TOUCHE LLP

Certified Public Accountants

Miami, Florida

May 25, 2007

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THE PBSJ CORPORATION

Consolidated Balance Sheets

	September 30,
(Amounts in thousands, except shares and per share amounts)	2006			2005
Assets
Current Assets:
Cash and cash equivalents	$	10		$	22,556
Marketable securities at fair value		—			636
Accounts receivable, net		85,210			67,493
Unbilled fees		62,770			69,658
Assets held for sale		4,235			9,289
Shareholder subscription receivable		—			4,276
Other current assets		3,609			2,039
Total current assets		155,834			175,947
Property and equipment, net		40,238			36,741
Cash surrender value of life insurance		10,055			9,602
Deferred income taxes		10,022			4,817
Goodwill		21,692			17,736
Intangible assets, net		1,678			1,820
Other assets		5,430			4,984
Total assets	$	244,949		$	251,647
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable and accrued expenses	$	88,352		$	84,223
Liabilities related to assets held for sale		2,099			4,627
Accrued reimbursement liability		28,183			34,772
Current portion of long-term debt		1,644			408
Current portion of capital leases		274			341
Accrued vacation		12,173			10,163
Billings in excess of costs		4,654			3,339
Deferred income taxes		19,740			7,568
Total current liabilities		157,119			145,441
Long-term debt, less current portion		6,909			7,425
Capital leases, less current portion		776			512
Deferred compensation		12,780			11,994
Other liabilities		8,454			8,443
Total liabilities		186,038			173,815
Stockholders’ Equity:
Common stock, par value $0.00067, 15,000,000 shares authorized, 6,849,214 and 7,720,527 shares issued and outstanding at September 30, 2006 and 2005, respectively		5			5
Retained earnings		64,052			82,991
Accumulated other comprehensive loss		(1,914	)		(1,957	)
Unearned compensation and other		(3,232	)		(3,207	)
Total stockholders’ equity		58,911			77,832
Total liabilities and stockholders’ equity	$	244,949		$	251,647

The accompanying notes are an integral part of these consolidated financial statements

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THE PBSJ CORPORATION

Consolidated Statements of Operations

	Years Ended September 30,
(Amounts in thousands, except per share amounts)	2006			2005			2004
Earned revenues:
Engineering fees	$	537,242		$	511,937		$	448,247
Direct reimbursable expenses		105,635			121,986			96,372
Net earned revenues		431,607			389,951			351,875
Costs and expenses:
Direct salaries and direct costs		158,381			146,299			131,521
General and administrative expenses, including indirect salaries		250,145			210,551			186,068
Misappropriation loss (recoveries), net		(1,613	)		(10,725	)		4,854
Investigation and related costs		14,239			5,446			—
Total costs and expenses		421,152			351,571			322,443
Operating income		10,455			38,380			29,432
Other income (expenses):
Interest expense		(2,066	)		(1,824	)		(1,625	)
Other, net		302			260			617
Total other expenses:		(1,764	)		(1,564	)		(1,008	)
Income before income taxes		8,691			36,816			28,424
Provision for income taxes		3,286			15,741			13,734
Net income	$	5,405		$	21,075		$	14,690
Net income per share:
Basic	$	0.81		$	2.92		$	2.03
Diluted	$	0.76		$	2.74		$	1.91
Weighted average shares outstanding:
Basic		6,651			7,208			7,249
Diluted		7,118			7,685			7,692

The accompanying notes are an integral part of these consolidated financial statements

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THE PBSJ CORPORATION

Consolidated Statements of Stockholders’ Equity and Comprehensive Income

For the years ended September 30, 2006, 2005 and 2004

					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Unearned Compensation and Other			Total Stockholders’ Equity
	Common Stock
(Amounts in thousands, except share data)	Shares		Amount
Balance at September 30, 2003	7,969,780		$	5	$	—		$	53,471		$	(1,223	)	$	(2,192	)	$	50,061
Comprehensive income:
Net income (As Restated See Note 2)	—			—		—			14,690			—			—			14,690
Unrealized gain on marketable securities, net of tax of $ 52	—			—		—			—			62			—			62
Unrealized loss on derivative, net of tax of $ 31	—			—		—			—			233			—			233
Minimum pension liability adjustment, net of tax of $ 96	—			—		—			—			(1,125	)		—			(1,125	)
Total comprehensive income (As Restated See Note 2)																		13,860
Sale of stock	442,848			—		9,964			—			—			—			9,964
Stock issued in acquisitions	71,429			—		1,875			—			—			—			1,875
Shares purchased and retired	(597,086	)		—		(12,510	)		(1,095	)		—			—			(13,605	)
Issuance of restricted stock, net of cancellations	26,709			—		671			—			—			(672	)		(1	)
Amortization of deferred compensation	—			—		—			—			—			549			549
Balance at September 30, 2004	7,913,680			5		—			67,066			(2,053	)		(2,315	)		62,703
Comprehensive income:
Net income	—			—		—			21,075			—			—			21,075
Unrealized gain on marketable securities, net of tax of $ 39	—			—		—			—			38			—			38
Unrealized loss on derivative, net of tax of $146	—			—		—			—			226			—			226
Minimum pension liability adjustment, net of tax benefit of $ 696	—			—		—			—			(168	)		—			(168	)
Total comprehensive income																		21,171
Sale of stock	413,641			—		11,168			—			—			—			11,168
Stock issued in acquisitions	45,995			—		1,214			—			—			—			1,214
Shares purchased and retired	(538,565	)		—		(13,543	)		(998	)		—			—			(14,541	)
Shares recovered from investigation	(174,261	)		—		(554	)		(4,152	)		—			—			(4,706	)
Issuance of restricted stock, net of cancellations	60,037			—		1,715			—			—			(1,715	)		—
Amortization of deferred compensation	—			—		—			—			—			806			806
Other	—			—		—			—			—			17			17
Balance at September 30, 2005	7,720,527			5		—			82,991			(1,957	)		(3,207	)		77,832
Comprehensive income:
Net income	—			—		—			5,405			—			—			5,405
Unrealized gain on marketable securities, net of tax of $ 9	—			—		—			—			14			—			14
Realized gain on marketable securities, net of tax of $ 28	—			—		—			—			(242	)		—			(242	)
Unrealized loss on derivative, net of tax of $ 22	—			—		—			—			35			—			35
Minimum pension liability adjustment, net of tax of $ 158	—			—		—			—			236			—			236
Total comprehensive income																		5,448
Shares recovered from investigation	(19,180	)		—		(11	)		(526	)		—			—			(537	)
Shares purchased and retired	(876,803	)		—		(804	)		(23,818	)		—			—			(24,622	)
Issuance of restricted stock, net of cancellations	24,670			—		815			—			—			(815	)		—
Amortization of deferred compensation	—			—		—			—			—			790			790
Balance at September 30, 2006	6,849,214		$	5	$	—		$	64,052		$	(1,914	)	$	(3,232	)	$	58,911

The accompanying notes are an integral part of these consolidated financial statements

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THE PBSJ CORPORATION

Consolidated Statements of Cash Flows

	Years Ended September 30,
(Dollars in thousands)	2006			2005			2004
Cash flows from operating activities:
Net income	$	5,405		$	21,075		$	14,690
Adjustments to reconcile net income to net cash provided by operating activities:
(Increase) decrease in cash surrender value of life insurance		88			(835	)		(220	)
Depreciation and amortization		11,013			9,980			9,261
Gain on sale of property		(517	)		(426	)		(85	)
Gain from shares recovered		(537	)		(4,706	)		—
Gain from sale of marketable securities		(271	)		—			—
Provision for bad debt and unbillable amounts		617			486			217
Provision (benefit) for deferred income taxes		5,302			(2,912	)		7,180
Provision for and amortization of deferred compensation and other		1,971			1,834			998
Change in operating assets and liabilities, net of acquisitions:
Increase in accounts receivable		(14,614	)		(6,691	)		(7,801	)
(Increase) decrease in unbilled fees and billings in excess of cost		8,424			(2,227	)		(15,228	)
(Increase) decrease in assets held for sale		8,612			(6,526	)		—
(Increase) decrease in other current assets		(1,003	)		(423	)		2,470
(Increase) decrease in other assets		(3,984	)		(211	)		82
(Decrease) increase in accounts payable and accrued expenses		(1,172	)		17,274			10,176
Decrease in liabilities of assets held for sale		(4,627	)		—			—
(Decrease) increase in accrued reimbursement liability		(6,589	)		10,653			7,871
Increase in accrued vacation		2,010			1,499			871
(Decrease) increase in other liabilities		784			(371	)		1,760
Net cash provided by operating activities		10,912			37,473			32,242
Cash flows from investing activities:
Investment in life insurance policies		(541	)		(539	)		(524	)
Acquisitions and purchase price adjustments, net of cash acquired		(5,876	)		(1,984	)		(5,921	)
Dividends reinvested in marketable securities		(21	)		(15	)		—
Proceeds from the sale of property and equipment		656			510			102
Proceeds from the sale of marketable securities		680			—			—
Purchases of property and equipment		(11,416	)		(10,269	)		(9,636	)
Net cash used in investing activities		(16,518	)		(12,297	)		(15,979	)
Cash flows from financing activities:
Borrowings under line of credit		100,662			75,352			150,014
Payments under line of credit		(99,900	)		(75,352	)		(159,248	)
Principal payments under notes and mortgage payable		(412	)		(506	)		(818	)
Principal payments under capital lease obligations		(412	)		(304	)		(189	)
Common stock:
Proceeds from sale		4,276			10,821			9,327
Payments for repurchase		(21,154	)		(14,541	)		(13,605	)
Net cash used in financing activities		(16,940	)		(4,530	)		(14,519	)
Net increase (decrease) in cash and cash equivalents		(22,546	)		20,646			1,744
Cash and cash equivalents at beginning of period		22,556			1,910			166
Cash and cash equivalents at end of period	$	10		$	22,556		$	1,910

The accompanying notes are an integral part of these consolidated financial statements.

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The PBSJ Corporation

Notes to the Consolidated Financial Statements

1. Organization and Summary of Significant Accounting Policies

Organization and Principles of Consolidation

The consolidated financial statements include the accounts of The PBSJ Corporation and its wholly-owned subsidiaries, Post, Buckley, Schuh & Jernigan, Inc., a Florida corporation (“PBS&J”), PBS&J Construction Services, Inc., PBS&J Constructors, Inc., Post, Buckley International, Inc., Post Buckley de Mexico, S.A. de C.V., PBS&J Caribe Engineering, C.S.P., Seminole Development Corporation and Seminole Development II, Inc. (collectively, the “Company”). All material inter-company transactions and accounts have been eliminated in the accompanying consolidated financial statements. In these notes to our consolidated financial statements, the words “Company”, “we”, “our” and “us” refer to The PBSJ Corporation and its subsidiaries.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates in these consolidated financial statements include estimated cost to complete long-term fixed price contracts, allowance for doubtful accounts and unbilled fees, accruals for litigation, estimated liabilities for self-insurance, accrued reimbursement liability, valuation allowance on deferred income tax assets and tax contingencies, estimates of useful lives of intangible assets and the allocation of purchase price paid for acquired companies. Actual results could differ from those estimates.

Revenue Recognition

The Company recognizes engineering fees from different types of services under a variety of different types of contracts. In recognizing engineering fees, the Company evaluates each contractual arrangement to determine the applicable authoritative accounting methodology to apply to each contract. Net earned revenue represents engineering fees less direct reimbursable expenses.

In the course of providing its services, the Company principally has three types of contracts from which it earns revenue: cost-plus contract, time and materials contract and fixed price contract.

Cost-plus Contracts. Under Cost-plus contracts, the Company charges clients negotiated indirect rates based on direct and indirect costs in addition to a profit component. The Company generally recognizes engineering fees at the time services are performed. The amount of revenue is based on its actual labor costs incurred plus a recovery of indirect costs and a profit component. In negotiating cost-plus contracts, the Company estimates direct labor costs and indirect costs and then adds a profit component, which is a percentage of total recoverable costs, to arrive at a total dollar value for the contract. Indirect expenses are recorded as incurred and are allocated to contracts. If the actual labor costs incurred are less than estimated, the revenues from a project will be less than estimated. If the actual labor costs incurred plus a recovery of indirect costs and profit exceed the initial negotiated total contract amount, the Company must obtain a contract modification to receive payment for such overage. If a contract modification or change order is not approved by our client, the Company may be able to pursue a claim to receive payment. Engineering fees, from claims are recognized when collected.

Time and Materials Contracts. The Company recognizes engineering fees for Time and Materials contracts at the time services are performed. The amount of revenue is based on the actual number of hours it spends on the projects, multiplied by contractual rates or multipliers. In addition, the Company’s clients reimburse it for its

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actual out-of-pocket costs of materials and other direct reimbursable expenses that it incurs in connection with its performance under these contracts.

Fixed Price Contracts. For Fixed Price Contracts, the Company recognizes engineering fees based on the percentage-of-completion method whereby fees are recognized based on the ratio of actual cost of work performed to date to the current total estimated contract costs (generally using the cost-to-cost method). In making such estimates, judgments are required to determine potential delays or changes in schedules, the costs of materials and labor, liability claims, contract disputes, or achievement of specified performance goals. At the time a loss on a contract becomes evident and estimable, the Company records the entire amount of the estimated loss.

Change orders that result from modification of an original contract are taken into consideration for revenue recognition when it results in a change of total contract value and is approved by our clients. Engineering fees relating to unapproved change orders are recognized when collected.

The Company’s federal government contracts are subject to the Federal Acquisition Regulations (“FAR”). These regulations are partially incorporated into many local and state agency contracts. The FAR limits the recovery of certain specified indirect costs on contracts subject to such regulations. In accordance with industry practice, most of the Company’s federal government contracts are subject to termination at the discretion of the client. Contracts typically provide for reimbursement of costs incurred and payment of fees earned through the termination date.

Contracts that fall under FAR are generally cost-plus contracts, and are subject to audit by the government, primarily the Defense Contract Audit Agency (“DCAA”), which reviews the Company’s overhead rates, operating systems and costs proposals. As a result of its audits, the DCAA may disallow costs if it determines that the Company has accounted for such costs in a manner inconsistent with generally accepted cost accounting standards.

Direct Reimbursable Expenses

Direct reimbursable expenses are primarily comprised of subcontractor costs and other direct non-payroll reimbursable charges including travel and travel related costs, blueprints and equipment where the Company is responsible for procurement and management of such cost components on behalf of the Company’s clients. These direct reimbursable expenses are principally passed through to our clients with minimal or no mark-up.

Capital Structure

The by-laws of the Company require that common stock held by employee shareholders who terminate employment with the Company be offered for sale at fair market value to the Company, which has right of first refusal. Should the Company decline to purchase the shares, the shares must next be offered to the Company’s profit sharing and employee stock ownership plans at fair market value, and then ultimately to other shareholders who are employees of the Company. The by-laws of the Company provide that the fair market value be determined by an appraisal. During fiscal year 2006, the Company repurchased stock held by employee shareholders who terminated employment with the Company at a price ranging from $24.00 to $27.00, pending completion of the September 30, 2005 valuation. The September 30, 2005 valuation established the price per share at $28.00. At September 30, 2006, the Company had an accrual of approximately $2.1 million for the stock price differential, included in accounts payable and accrued expenses in the accompanying balance sheet. Other than agreements with certain retired Directors, as of September 30, 2006 and 2005, there was no outstanding common stock held by individuals no longer employed by the Company.

Pursuant to the terms of our credit agreement, we cannot declare or pay dividends in excess of 50% of our net income. We have not previously paid cash dividends on our common stock and have no present intention of

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paying cash dividends on our common stock in the foreseeable future. All earnings are retained for investment in our business.

Cash and Cash Equivalents

Cash equivalents consist of all highly liquid investments with an original maturity of three months or less from their dates of purchase. Cash equivalents consist primarily of money market accounts.

Income Taxes

The Company uses the asset and liability method in accounting for income taxes. Under this method the Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between tax bases and financial reporting carrying values of assets and liabilities based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is established when it is more likely than not that any of the deferred tax assets will not be realized.

Basic and Diluted Earnings Per Share

Basic net income per share has been computed by dividing net income by the weighted average number of common shares outstanding. Diluted net income per share reflects the potential dilution that could occur assuming the inclusion of dilutive potential common shares and has been computed by dividing net income by the weighted average number of common shares and dilutive potential common shares outstanding. Dilutive potential common shares include all outstanding restricted stock awards.

A reconciliation of the number of shares used in computing basic and diluted earnings per share follows:

(Shares in thousands)	Years Ended September 30,
	2006	2005	2004
Weighted average shares outstanding—Basic	6,651	7,208	7,249
Effect of dilutive unvested restricted stock	467	477	443
Weighted average shares outstanding—Diluted	7,118	7,685	7,692

Marketable Securities

Marketable securities consist of mutual funds that are considered available-for-sale and are recorded at fair value. Changes in unrealized gains and losses for available-for-sale securities are charged or credited as a component of accumulated other comprehensive income (loss), net of tax. A decline in the fair value of an available-for-sale security below cost that is deemed other than temporary is charged to earnings. Investment security transactions are recorded on a trade date basis. The cost basis of investments sold is determined by the specific identification method.

Accounts Receivable

Accounts receivable is presented net of allowance for doubtful accounts of $1.8 million and $1.2 million at September 30, 2006 and 2005, respectively. The Company estimates the allowance for doubtful accounts based on management’s evaluation of the contracts involved and the financial condition of its clients. The Company regularly evaluates the adequacy of the allowance for doubtful accounts by taking into consideration such factors as the type of client—governmental agencies or private sector, trends in actual and forecasted credit quality of the client, including delinquency and payment history, general economic and particular industry conditions that

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may affect a client’s ability to pay, and contract performance and the change order and claim analysis. Retainer amounts were not significant as of September 30, 2006 and 2005.

Unbilled Fees and Billings in Excess of Cost

Unbilled fees represent the excess of contract revenue recognized over billings to date on contracts in process. These amounts become billable according to the contract terms, which usually consider the passage of time, achievement of certain milestones or completion of the project. Management expects that substantially all unbilled amounts will be billed and collected within one year.

Billings in excess of cost represent the excess of billings to date, per the contract terms, over revenue recognized on contracts in process.

Fair Value of Financial Instruments

The fair value of the Company’s cash equivalents, accounts receivables, unbilled fees and trade accounts payable approximates book value due to the short-term maturities of these instruments. The carrying amounts of the Company’s marketable securities, cash surrender value of life insurance plans and interest rate swap are based on quoted market values or cash surrender value at the reporting date. The fair value of the Company’s debt approximates the carrying value, as such instruments are based on variable rates of interest.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price over the estimated fair value of the net tangible and identifiable intangible assets of businesses acquired and accounted for under the purchase method. The Company accounts for its goodwill in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible Assets, which requires the Company to test for goodwill impairment annually (or more frequently under certain conditions). The Company performed its annual impairment test as of September 30, 2006 and 2005 and determined that goodwill was not impaired.

We amortize the cost of other intangible assets over their estimated useful lives unless such lives are deemed indefinite. Amortizable intangible assets are reviewed for impairment whenever events or changes in business circumstances indicate the carrying value of the assets may not be recoverable. If assets are determined to be impaired, they are written down to the estimated fair value as required. No impairment was recorded during the years ended September 30, 2006, 2005, or 2004.

Stock Based Compensation and Stock Sales to Employees

Unvested restricted stock awarded to certain employees is measured at the estimated fair value of the stock at the grant date. The restricted stock award is recorded as compensation expense in general and administrative expenses, and reported as a separate line item in stockholders’ equity. The issuance of unvested restricted stock gives rise to unearned compensation that is amortized on a straight-line basis over the vesting period.

Eligible employees are allowed to purchase Company stock once a year, during a specified timeframe. With the exception of those considered to be insiders, as defined, employees who receive bonuses each year are allowed to use their bonus payments received in December following the Company’s fiscal year end to make their final payment for their stock purchase. The annual stock offering is usually for a one week period during the month of March. The Company suspended the stock offering window for March 2006 until the final impact of the restatement of the Company’s consolidated financial statements was determined. The Company is planning to open the stock window in June 2007. During this offering period, shares of the Company’s common stock will be available for sale to all full time employees of the Company, pursuant to The PBSJ Corporation Stock Ownership Plan. At September 30, 2005, the Company had a receivable from certain of its employees, for the March 2005

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annual stock offering, in the amount of approximately $4.3 million; the receivable was paid in the subsequent quarter. There was no stock sold to employees for fiscal year 2006.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Certain equipment held under capital leases are classified as furniture and equipment and the related obligations are recorded as liabilities. Major renewals and improvements are capitalized, while repairs and maintenance are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. Capital leases are amortized under the straight-line method over the lesser of the estimated useful life of the asset or the duration of the lease agreement. Capital lease amortization is included in depreciation.

Leasehold improvements are amortized over the shorter of the terms of the leases or their estimated useful lives. Cost and accumulated depreciation of property and equipment retired or sold are eliminated from the accounts at the time of retirement or sale and the resulting gain or loss is recorded in income.

Long-Lived Assets

In accordance with SFAS No. 144, long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets are reviewed whenever events or changes in business circumstances indicate the carrying value of the assets may not be recoverable. If assets are determined to be impaired, they are written down to estimated fair value as required. No impairment was recorded during the years ended September 30, 2006, 2005, or 2004.

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash, accounts receivable and unbilled fees. The Company deposits its cash with high credit quality financial institutions. At times, such deposits may be in excess of the Federal Deposit Insurance Corporation insurance limits.

Work performed for governmental entities accounted for approximately 75%, 77%, and 79% of engineering fees for the years ended September 30, 2006, 2005 and 2004, respectively. Accounts receivable and unbilled fees from governmental entities were $57.5 million and $34.9 million, respectively, at September 30, 2006, and $48.2 million and $38.1 million, respectively, at September 30, 2005. For the years ended September 30, 2006, 2005 and 2004, engineering fees of $93.1 million, $101.3 million and $79.4 million, respectively, were derived from various districts of the Florida Department of Transportation (“FDOT”) under numerous contracts. These revenues are primarily in the transportation segment. While the loss of any individual contract would not have a material adverse effect on the Company’s results of operations and would not adversely impact the Company’s ability to continue work under other contracts with the FDOT, the loss of all, or a significant number of the FDOT contracts could have a material adverse effect on the Company’s results of operations.

Ongoing credit evaluations of customers are performed and generally no collateral is required. The Company provides an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.

Derivative Instruments and Hedging Activities

In March 2001, the Company entered into an interest rate swap to convert the floating interest rate on the mortgage note payable to a fixed rate of 6.28%. On March 16, 2006, the swap expired. The Company accounted for the interest rate swap as a cash flow hedge in accordance with SFAS No. 133, “Accounting for Derivative Financial Instruments and Hedging Activities”. The underlying terms of the interest rate swap, including the

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notional amount and interest rate index, were identical to those of the associated debt and therefore the hedging relationship resulted in no ineffectiveness. Changes in fair value were included as a component of other comprehensive loss in stockholders’ equity in our consolidated balance sheets. The net amounts paid or received were included in interest expense. We do not anticipate entering into any additional swap agreements.

Estimated Liability for Self-Insurance

The Company is self-insured up to certain limits for costs associated with general liability, workers’ compensation and employee health coverage. The Company also maintains a stop loss insurance policy with a third party insurer to limit the Company’s exposure to individual and aggregate claims made. Insurance claims and reserves include accruals of estimated settlements for known claims, as well as accruals of estimates of incurred but not reported claims, net of payments made. At September 30, 2006 and 2005, we had total self-insurance accruals reflected in accounts payable and accrued expenses in our consolidated balance sheets of $8.9 million and $7.7 million, respectively. These estimates are subject to variability due to changes in trends of losses for outstanding claims and incurred but not recorded claims, including external factors such as future inflation rates, benefit level changes and claim settlement patterns.

Comprehensive Income

Comprehensive income consists of net income and other gains and losses affecting shareholders’ investment and minimum pension liability that, under generally accepted accounting principles, are excluded from net income.

The components of other comprehensive income are as follows for the years ended September 30, 2006, 2005 and 2004:

(Dollars in thousands)	Years Ended September 30,									Accumulated Other Comprehensive Loss
	2006			2005			2004
Net income	$	5,405		$	21,075		$	14,690
Other comprehensive income (loss):
Unrealized gain on available for sale marketable securities, net of tax		14			38			62		$	242
Realized gain on available for sale marketable securities, net of tax		(242	)		—			—			(242	)
Unrealized gain on derivative, net of tax		35			226			233			—
Minimum pension liability adjustment, net of tax		236			(168	)		(1,125	)		(1,914	)
Total comprehensive income	$	5,448		$	21,171		$	13,860		$	(1,914	)

Recent Accounting Pronouncements

On February 15, 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159 (“SFAS 159”), “The Fair Value Option for Financial Assets and Financial Liabilities,” which allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis. Subsequent changes in fair value of these financial assets and liabilities would be recognized in earnings when they occur. SFAS 159 further establishes certain additional disclosure requirements. SFAS 159 is effective for the Company’s financial statements for the fiscal year ending September 30, 2009, with earlier adoption permitted. Management is currently evaluating the impact and timing of the adoption of SFAS 159 on the Company’s consolidated financial statements.

In September 2006, FASB issued SFAS No. 158 (“SFAS 158”), “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans”. This standard requires an employer to recognize the

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overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. The Company is required to adopt the recognition and related disclosure provisions of SFAS 158 for the fiscal year ending September 30, 2007. The Company is also required to adopt the measurement provisions of SFAS 158 for the fiscal year ending September 30, 2009. The Company is still evaluating the impact of this standard on its consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157 (“SFAS 157”), “Fair Value Measurements”. SFAS 157 prescribes a single definition of fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The accounting provisions of SFAS 157 will be effective for the Company for the fiscal year ending September 30, 2009. The Company does not believe the adoption of SFAS 157 will have a material impact on its consolidated financial statements.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (“SAB 108”). SAB 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB 108 requires companies to quantify misstatements using a balance sheet and income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. When the effect of initial adoption is material, companies will record the effect as a cumulative effect adjustment to beginning of year retained earnings. SAB 108 will be effective for the Company for the fiscal year ending September 30, 2008. The Company does not believe the adoption of SAB 108 will have a material impact on its consolidated financial statements.

In July 2006, the FASB issued Interpretation (“FIN”) No. 48 “Accounting for Uncertainty in Income Taxes—an interpretation of FASB No. 109” (“FIN 48”). This interpretation establishes guidelines and thresholds that must be met for the recognition and measurement of a tax position taken or expected to be taken in a tax return. The provisions of FIN 48 are effective for fiscal years beginning after December 31, 2006. The Company is currently evaluating the impact of adopting FIN 48 on its consolidated financial statements.

In November 2005, the FASB issued FASB Staff Position (“FSP”) FAS 115-1 and FAS 124-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments,” (“ FSP 115-1 and 124-1”) which address the determination as to when an investment is impaired, whether that impairment is other than temporary, and the measurement of an impairment loss. FSP 115-1 and 124-1 also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The guidance in FSP 115-1 and 124-1 amends FASB Statement No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” and Accounting Principles Board (“APB”) Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock.” FSP 115-1 and 124-1 is effective for reporting periods beginning after December 15, 2005. The adoption of FSP 115-1 and 124-1 did not have a material impact on our consolidated financial statements.

In May 2005, the FASB issued SFAS No. 154 (“SFAS 154”), “Accounting Changes and Error Corrections” (“SFAS 154”), which replaces APB Opinion No. 20 “Accounting Changes” and SFAS No. 3 “Reporting Accounting Changes in Interim Financial Statements.” SFAS 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle. SFAS 154 also requires that a change in method of depreciating or amortizing a long-lived non-financial asset be accounted for prospectively as a change in estimate, and correction of errors in previously issued financial statements should be termed a restatement. SFAS 154 is effective for accounting changes and correction of errors made in the first annual reporting period beginning after December 15, 2005. We early adopted SFAS 154 and have reported and disclosed the correction of errors in our previously reported consolidated financial statements in accordance with SFAS 154. The other reporting and disclosure requirements of SFAS 154 did not have a material impact on our consolidated financial statements.

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In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”), which is a revision of SFAS 123, “Accounting for Stock-Based Compensation.” SFAS 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values, beginning with the first annual period beginning after December 2005, with early adoption encouraged. We are required to adopt SFAS 123(R) in our first quarter of fiscal year 2007, beginning October 1, 2006. The Company is currently evaluating the impact of adopting SFAS 123(R) on our consolidated financial statements.

In December 2003, the FASB issued Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities” (“FIN 46R”), which replaced FIN 46. FIN 46R addresses how a business enterprise should evaluate whether it has a controlling interest in an entity through means other than voting rights. This interpretation requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or is entitled to receive a majority of the entity’s residual returns or both. The interpretation also requires disclosures about variable interest entities that the company is not required to consolidate but in which it has a significant variable interest. We are required to adopt FIN 46R immediately for entities created after December 31, 2003 and at the beginning of fiscal year 2006 for all other entities. The adoption of FIN 46R did not have a material impact on our consolidated financial statements.

2. Misappropriations Loss

In March 2005, subsequent to the issuance of the Company’s 2004 financial statements, we discovered misappropriations of Company funds by our former Chief Financial Officer and two former employees who worked in our information systems and treasury departments, collectively, (“the participants”). The participants colluded and circumvented controls to misappropriate funds and conceal the misappropriations possibly beginning as early as 1993 until the misappropriations were discovered in March 2005.

Shortly after this discovery, an investigation sub-committee was formed comprised of the three outside members of our Corporate Audit Committee. These three outside members were subsequently appointed to the Board of Directors and became the three members of the Audit Committee of the Board of Directors. The Audit Committee retained independent counsel to conduct an investigation and advise the Audit Committee in connection with the investigation. The independent counsel retained forensic accountants, including accountants experienced in conducting forensic audits for companies that perform contracts for federal, state and local governments to assist with the investigation.

The investigation team discovered that at least $36.6 million was misappropriated between January 1, 1998 and the discovery of the misappropriations in March 2005. The amount misappropriated prior to January 1, 1998 could not be determined because certain data for the period prior to January 1, 1998 was unavailable. The participants in the embezzlement scheme used several methods to misappropriate the funds while engaging in conduct to conceal the misappropriated amounts. This conduct included among other things, recording and changing normal recurring journal entries and overstating accruals in prior periods to facilitate improper write-offs of misappropriated funds.

The misappropriation loss and concealment also resulted in the overstatement of overhead rates which the Company used in connection with certain government contracts. As a result, in these instances, some of our billings to our government clients relied on or incorporated the overstated overhead rates, and as a result revenues were overstated and we incurred refund obligations to these clients. We have also recorded an accrual for the estimated reimbursement to our clients.

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Overstatement of Amounts Billed for Overhead

The Company determined that the misappropriation scheme led to the overstatement of overhead rates that the Company used to determine billings in connection with certain of our government contracts. As a result, some of our government clients were overcharged for the Company’s services. During the review of the overhead expenses, the Company identified certain instances of costs erroneously included in our overhead cost pool which were unallowable under applicable regulations and an error in our calculation of our overhead rate, which related to certain general and administrative costs. The Company determined that the unallowable costs and general and administrative expense errors also led to the overstatement of overhead rates which the Company used in connection with certain of its government contracts. As a result, in these instances, some of our billings to our government clients relied on or incorporated the overstated overhead rates.

The Company determined corrected overhead rates considering the impact of the misappropriations and considering the impact of additional errors identified. The Company and its advisors have been working with its government clients to finalize the refund amount (See Note 13 for further discussion). The Company estimates that the cumulative refund amount, before any payments, resulting from the overstated overhead rates is approximately $42.0 million through fiscal year 2006 ($37.1 million as of fiscal year 2005), including interest that the Company will generally be required to reimburse its government clients. At September 30, 2006 and 2005, the accrued reimbursement liability was $28.2 million and $34.8 million, respectively, in the accompanying consolidated balance sheets.

Misappropriation Loss, Investigation Related Expenses and Recovery of Assets

The misappropriation loss for fiscal year 2005 is presented net of the gain from recovered assets. All assets recovered during the investigation and not yet liquidated, are classified as assets held for sale in the accompanying consolidated balance sheets and are recorded at estimated fair value, less estimated costs to sell as of the date recovered. The recovered assets consist of personal homes, condominiums and other real estate, automobiles, funds from bank accounts, jewelry, fine-arts and cash proceeds from the liquidation of personal retirement accounts. Some of the real estate recovered was acquired subject to existing debt, liens or mortgage notes. Such debt is reported as liabilities related to assets held for sale in the accompanying consolidated balance sheets. The Company does not own any other assets held for sale other than those recovered during the investigation. Gain from recovered assets has been recognized at the estimated fair value of the assets recovered, less related debt and estimated costs to sell the assets.

Approximately 19,000 and 174,000 shares of the Company’s common stock were surrendered in fiscal years 2006 and 2005, respectively. These shares were recorded at their estimated fair values, and gains on recovery of misappropriated assets of approximately $537,000 and $4.7 million, respectively, were recognized for the years ended September 30, 2006 and 2005, respectively. The gains from recovered assets were included in misappropriation loss, net of recoveries in the accompanying consolidated statements of operations for the years ended September 30, 2006 and 2005. These shares were not included in assets held for sale, as the estimated fair value of such shares were recorded as a reduction of stockholders’ equity.

In addition to the misappropriation loss, the Company has incurred certain professional fees and other costs that relate to the investigation of the embezzlement and the recovery of assets. These expenses include legal fees, forensic audit fees and related costs, and other costs associated with the recovery of misappropriated assets. Collectively, these costs are stated as investigation and related costs in the accompanying consolidated statements of operations and are recorded in the period the costs are incurred.

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The following table sets forth the components of the misappropriation loss for the years ended September 30, 2006, 2005, and 2004 and related investigation expenses:

(Dollars in thousands)	Years Ended September 30,
	2006			2005			2004
Misappropriation loss	$	—		$	3,636		$	4,854
Less: gain from recovered assets		(1,613	)		(14,361	)		—
Misappropriation loss (recoveries), net		(1,613	)		(10,725	)		4,854
Legal fees		5,270			2,344			—
Forensic accounting fees and related costs		7,885			2,849			—
Other		1,084			253			—
Investigation and related costs		14,239			5,446			—
Total	$	12,626		$	(5,279	)	$	4,854

3. Marketable Securities

At September 30, 2005, the Company held investments in marketable securities classified as available-for-sale, which primarily consisted of growth funds, growth and income funds and bond funds. There were no unrealized losses as of September 30, 2005. In April 2006, the Company liquidated its investment in marketable securities and realized a gain of approximately $270,000.

(Dollars in thousands)	September 30, 2005
	Cost		Fair Value		Unrealized Gain
Mutual Funds	$	374	$	636	$	262

4. Assets Held for Sale

During the course of the investigation into the misappropriations (See Note 2 for further discussion), the Company identified and recovered certain assets acquired by the participants using misappropriated Company funds. Assets recovered during the investigation and not yet liquidated, are classified as assets held for sale in the accompanying consolidated balance sheets and are recorded at estimated fair value less estimated costs to sell. The recovered assets consisted of personal homes, condominiums and other real estate, automobiles, funds from bank accounts, jewelry, fine-arts and cash proceeds from the liquidation of personal retirement accounts. Some of the real estate recovered was acquired subject to existing debt, liens or mortgage notes. Such debt is reported as liabilities of assets held for sale in the accompanying consolidated balance sheets at September 30, 2006.

During fiscal year 2006, the Company recovered additional assets from the investigation with a total estimated fair value of approximately $1.4 million, excluding the gains on shares recovered, which was not subject to debt, liens or mortgage notes.

During fiscal year of 2006, the Company sold assets for a total of $10.5 million which were subject to related liabilities of $4.6 million. The Company did not recognize any additional gains or losses related to the sales of these assets since they were recorded at their fair value less estimated costs to sell.

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Assets and liabilities related to assets held for sale consisted of the following:

(Dollars in thousands)	September 30,
	2006			2005
Assets held for sale at estimated fair value	$	4,545		$	10,180
Less: estimated costs to sell		(310	)		(891	)
Adjusted fair value of assets held for sale		4,235			9,289
Outstanding mortgage liabilities assumed		(2,099	)		(4,627	)
Net fair value of assets held for sale	$	2,136		$	4,662

Additionally, at September 30, 2005, the Company classified two recovered real estate properties for a total of $4.1 million in other assets and $2.3 million of related liabilities in other liabilities in its consolidated balance sheet. These properties were not available for sale because they required renovations. In fiscal year 2006, once the renovations were completed, the Company classified these two real estate properties as assets held for sale in its consolidated balance sheet. The Company does not have any other assets held for sale other than those recovered.

During the first fiscal quarter of 2007, the Company sold assets for a total of $3.7 million which were subject to related liabilities of $2.1 million. The Company did not recognize any additional gains or losses related to the sales of these assets since they were recorded at their fair value less estimated costs to sell. The Company intends to sell the remaining assets as soon as practicable.

5. Property and Equipment

Property and equipment consisted of the following:

	Estimated Useful Lives	September 30,
(Dollars in thousands)		2006			2005
Land	—	$	2,056		$	2,097
Building and building improvements	10 – 40 years		14,062			14,204
Furniture and equipment	3 – 7 years		43,735			40,201
Computer equipment	3 years		21,951			17,192
Vehicles	3 years		2,232			2,259
Leasehold improvements	10 years		12,105			10,366
Construction in process	—		2,353			465
			98,494			86,784
Less accumulated amortization and depreciation			(58,256	)		(50,043	)
Property and equipment at cost, net		$	40,238		$	36,741

The net book value of equipment recorded under capital leases was approximately $1.0 million and $833,000 at September 30, 2006 and 2005, respectively.

Depreciation and amortization expense relating to property and equipment amounted to $9.4 million, $8.4 million, and $8.4 million for the years ended September 30, 2006, 2005 and 2004, respectively. The Company’s purchases of property and equipment amounted to $11.4 million $10.3 million, and $9.6 million during fiscal years 2006, 2005 and 2004, respectively. Capital expenditures during fiscal 2006 and 2005 consisted of fixed asset purchases, such as survey equipment, computer equipment, furniture and leasehold improvements.

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6. Acquisitions

On June 1, 2004, the Company acquired 100% of the stock of TriLine Associates, Inc. (“TriLine”) for $3.7 million in cash. The purchase price has been allocated to the respective assets and liabilities based upon their estimated fair values as of the acquisition date. The allocation of the purchase price resulted in assets of $4.3 million, including approximately $960,000 of intangible assets and $2.1 million of goodwill, none of which is deductible for tax purposes and liabilities of $625,000. During 2005, the Company recorded $10,000 of goodwill in connection with a purchase price adjustment. The weighted average amortization period for the identifiable intangible assets is 5.8 years. TriLine specializes in transportation, geotechnical, and environmental services.

On July 1, 2004, the Company acquired 100% of the stock of W. Koo and Associates Structural Engineers, Inc. (“WKA”) for $2.5 million, net of cash acquired of $678,000, comprised of $413,000 in cash, $250,000 in accrued earn-out provisions and 71,429 shares of the Company’s common stock valued at approximately $1.9 million. The value of the common stock issued was determined based on the estimated fair value of the common stock as of the date of the acquisition. The purchase agreement calls for an adjustment of the number of shares issued based on the valuation of the Company’s stock price at September 30, 2004 so that the total number of shares issued is valued at $1.9 million based on the September 30, 2004 stock value. The purchase agreement called for an additional purchase amount of $500,000, contingent upon the satisfaction of certain conditions, to be paid in two installments of $250,000 on July 1, 2005 and July 1, 2006. The purchase price has been allocated to the respective assets and liabilities based on their estimated fair values as of the acquisition date. The allocation of the purchase price resulted in assets of $3.3 million, including approximately $850,000 of intangible assets and $913,000 of goodwill, none of which is deductible for tax purposes, and liabilities of $795,000. During 2005, we issued an additional 1,021 shares in connection with the purchase agreement adjustment and the Company recorded an additional $6,000 of goodwill in connection with the July 1, 2005 installment payment. During fiscal year 2006, the Company recorded approximately $272,000 of additional goodwill for performance earn-out payments and purchase price adjustments. The additional goodwill was comprised of earn-out payments of approximately $389,000, of which $250,000 was previously accrued and purchase price adjustments of $133,000. The weighted average amortization period for the identifiable intangible assets is 2.8 years. WKA specializes in infrastructure improvements for public, municipal, transit, port authorities and private sector projects with a primary focus on transportation structures in California.

On October 1, 2004, the Company acquired 100% of the stock of Croslin Associates, Inc. (“Croslin”) for a purchase price of $786,000, net of cash acquired of $153,000, comprised of $456,000 in cash, $30,000 cash held in escrow and 11,111 shares of the Company’s common stock valued at approximately $300,000. The value of the common stock was based on the estimated fair value of the stock as of the date of acquisition. The purchase price has been allocated to the respective assets and liabilities based upon their estimated fair values as of the acquisition date. The allocation of the purchase price resulted in assets of $1.2 million, including approximately $40,000 of intangible assets and $454,000 of goodwill, none of which is deductible for tax purposes, and liabilities of $330,000. The weighted average amortization period for the identifiable intangible assets is 2.0 years. Croslin specializes in architectural services.

On February 1, 2005, the Company acquired 100% of the stock of Land and Water Consulting, Inc. (“LWC”) for a purchase price of $1.3 million, net of cash acquired of $13,000, comprised of $323,000 in cash, $100,000 cash held in escrow and 33,862 shares of the Company’s common stock valued at approximately $914,000. The value of the common stock was based on the estimated fair value of the stock as of the date of acquisition. The purchase price has been allocated to the respective assets and liabilities based upon their estimated fair values as of the acquisition date. The allocation of the purchase price resulted in assets of $2.5 million, including approximately $63,000 of intangible assets and $1.1 million of goodwill, none of which is deductible for tax purposes, and liabilities of $1.2 million. The weighted average amortization period for the identifiable intangible assets is 2.4 years. LWC is an environmental consulting firm in Montana.

On April 30, 2006, we acquired 100% of the stock of EIP Associates (“EIP”) for $6.0 million, net of cash acquired of $15,000, comprised of $5.5 million in cash, $334,000 accrued additional purchase price and

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$200,000 held in escrow. The purchase price was allocated to the respective assets and liabilities based on their estimated fair values as of the acquisition date. The allocation of the purchase price resulted in assets of $9.0 million, including approximately $1.5 million of intangible assets and $3.7 million of goodwill, none of which is deductible for tax purposes, and liabilities of $3.9 million. The weighted average amortization period for the identifiable intangible assets is 2.8 years. EIP specializes in environmental, urban planning, water resource planning and natural resources in California.

The primary factor that contributed to a purchase price that resulted in the recognition of goodwill in our acquisitions is the intellectual capital of the skilled professionals and senior technical personnel associated with the acquired entities which does not meet the criteria for recognition as an asset apart from goodwill. The results of operations of the above acquisitions are included from the date of each acquisition. The pro forma impact of these acquisitions is not material to reported historical operations.

7. Goodwill and Other Intangible Assets

The changes in the net carrying amounts of goodwill by segment are as follows:

	Year Ended September 30, 2006
	Transportation Services		Construction Management		Civil Engineering		Environmental Services		Total
Goodwill, beginning of year	$	3,650	$	—	$	2,641	$	11,445	$	17,736
Current year acquisitions:
EIP		—		—		—		3,684		3,684
Purchase price payments—prior year acquisitions		272		—		—		—		272
Goodwill, end of year	$	3,922	$	—	$	2,641	$	15,129	$	21,692
	Year Ended September 30, 2005
	Transportation Services		Construction Management		Civil Engineering		Environmental Services		Total
Goodwill, beginning of year	$	3,634	$	—	$	2,187	$	8,569	$	14,390
Current year acquisitions:
Croslin		—		—		454		—		454
LWC		—		—		—		1,136		1,136
Purchase price payments—prior year acquisitions		16		—		—		1,740		1,756
Goodwill, end of year	$	3,650	$	—	$	2,641	$	11,445	$	17,736

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The Company’s intangible assets consisted of the following:

		September 30, 2006
(Dollars in thousands)	Estimated Useful Lives	Gross Carrying Amount		Accumulated Amortization
Client list	10 years	$	1,963	$	877
Backlog	3 years		2,679		2,232
Website	7 years		200		110
Pension intangible asset	6 years		1,946		1,946
Employee agreements	3 years		67		12
		$	6,855	$	5,177
		September 30, 2005
(Dollars in thousands)	Estimated Useful Lives	Gross Carrying Amount		Accumulated Amortization
Client list	10 years	$	1,453	$	607
Client name recognition	2 years		100		100
Backlog	3 years		1,799		1,269
Website	7 years		200		81
Pension intangible asset	6 years		1,946		1,621
		$	5,498	$	3,678

Amortization expense for intangible assets amounted to $1.6 million, $1.6 million, and $947,000 for the years ended September 30, 2006, 2005 and 2004, respectively. Estimated amortization expense is $794,000 for fiscal year 2007, $325,000 for fiscal year 2008, $221,000 for fiscal year 2009, and less than $ 150,000 for each of the four succeeding fiscal years.

8. Income Taxes

The provision for income taxes consisted of the following:

	Years Ended September 30,
(Dollars in thousands)	2006			2005			2004
Current
Federal provision (benefit)	$	(1,824	)	$	16,845		$	6,107
State provision (benefit)		(192	)		1,808			447
Deferred
Federal provision (benefit)		4,797			(2,623	)		6,691
State provision (benefit)		505			(289	)		489
Total provision	$	3,286		$	15,741		$	13,734

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The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities consisted of the following:

	September 30,
(Dollars in thousands)	2006			2005
Deferred tax liabilities:
Accounts receivable	$	(32,963	)	$	(26,110	)
Unbilled fees		(22,482	)		(25,655	)
Fixed and intangible assets		(4,898	)		(3,419	)
Other		(1,025	)		(690	)
Gross deferred tax liabilities		(61,368	)		(55,874	)
Deferred tax assets:
Accounts payable and accrued expenses		24,088			24,404
Accrued vacation		4,709			3,932
Federal tax credit carry forwards		5,651			5,471
Deferred compensation		4,944			4,640
Other assets		5,532			5,494
Accrued reimbursement liability		10,903			13,451
Gross deferred tax asset		55,827			57,392
Valuation allowance		(4,177	)		(4,269	)
Net deferred tax asset		51,650			53,123
Net deferred tax liability	$	(9,718	)	$	(2,751	)

SFAS No. 109, “Accounting for Income Taxes”, requires a valuation allowance to reduce the deferred tax assets reported if it is more likely than not that some portion or all of the deferred tax assets will not be realized. At September 30, 2006 and 2005, the Company has recorded a valuation allowance against its deferred tax assets in the amount of $4.2 and $4.3 million, respectively.

For the past several years, the Company has generated research and development tax credits related to certain qualifying costs. The qualifying costs relate primarily to the Company’s project costs which management believes involved technical uncertainty. These research and development costs were incurred by the Company in the course of providing services generally under long-term client projects. Because the Company has been unable to utilize the entire amount of research and development tax credits it has generated each year, the consolidated balance sheets reflect a deferred tax asset of $5.7 million and $5.5 million as of September 30, 2006 and 2005, respectively, primarily, for the unused research and development tax credit carry forwards. The credits will expire beginning 2017 through 2022.

The deferred tax balances have been classified in the consolidated balance sheets as follows:

	September 30,
(Dollars in thousands)	2006			2005
Current assets	$	39,700		$	50,663
Current liabilities		(56,470	)		(54,463	)
Valuation allowance		(2,970	)		(3,768	)
Net current tax liabilities		(19,740	)		(7,568	)
Non-current assets		16,127			6,729
Non-current liabilities		(4,898	)		(1,411	)
Valuation allowance		(1,207	)		(501	)
Net non-current assets		10,022			4,817
Net deferred tax liabilities	$	(9,718	)	$	(2,751	)

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The Company’s effective tax rate is based on income, statutory tax rates and tax planning opportunities available in the various jurisdictions in which the Company operates. Significant judgment is required in determining the effective tax rate and in evaluating the Company’s tax positions. The Company establishes reserves when, despite its belief that the tax return positions are fully supportable, it believes that certain positions, if challenged, will likely be resolved unfavorably to us. These reserves are adjusted in light of changing facts and circumstances, such as the progress of a tax audit or current developments in tax law. The Company’s annual tax rate includes the impact of reserve provisions and changes to reserves. While it is often difficult to predict the final outcome or the timing of resolution of any particular matter, the Company believes that its reserves reflect the probable outcome of known tax contingencies. Resolution of the tax contingencies would be recognized as an increase or decrease to the Company’s tax rate in the period of resolution. The Company has recorded a tax contingency accrual of approximately $12.5 million and $13.5 million as of September 30, 2006 and 2005, respectively, related to research and development tax credits taken on the Company’s tax return. The tax accruals are presented in the consolidated balance sheets within accounts payable and accrued expenses.

A reconciliation of the income tax provision to taxes computed at the U.S. federal statutory rate is as follows:

	Years Ended September 30,
	2006		2005		2004
U.S. Statutory Rate	35.0	%	35.0	%	35.0	%
Federal tax credits	(3.4	)	(19.0	)	(7.1	)
State taxes net of federal benefit	5.2		3.9		2.8
Non-deductible expenses	14.5		2.0		2.5
Change in tax reserve	(11.9	)	18.2		11.2
Change in valuation allowance	(1.0	)	1.6		3.9
Change in statutory rate	—		0.8		—
Other	(.6	)	0.3		0.5
Effective tax rate	37.8	%	42.8	%	48.8	%

9. Retirement Plans

The Company maintains a two tiered noncontributory, unfunded, nonqualified defined benefit pension plan.

The Key Employee Supplemental Option Plan (“KESOP”) is a two tiered plan that provides key officers and employees postretirement benefits. Tier one of the KESOP, known as the Key Employee Retention Program (“KERP”), provides an annual restricted stock award equal to five percent of the participant’s annual gross salary for a period of up to ten years (see Note 10). Benefits under the KERP vest at age 56 and after ten years of continuous service with the Company. Tier two of the KESOP, known as the Supplemental Income Program (“SIP”), is an unfunded plan that provides participants with retirement income for a specified period of between 5 and 15 years upon retirement, death, or disability. The plan fixes a minimum level for retirement benefits to be paid to participants based on the participants’ position at the Company and their age and service at retirement. Certain key employee agreements include an annual retainer for consulting services for a period of up to five years.

The following are the assumptions used in the measurement of the projected benefit obligation (“PBO”) and net periodic pension expense for the SIP:

	Years Ended September 30,
	2006		2005		2004
Discount rate	5.75	%	5.50	%	5.75	%

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The discount rate is used to calculate the PBO. The rate used reflects a rate of return on high-quality fixed income investments that matches the duration of expected benefit payments. The Company has typically used the Moody’s Aa Corporate Bond rate as of September 30th of each year as a benchmark for this assumption.

The Company uses a September 30 measurement date for its plans. The following table provides a summary of the Company’s annual costs.

	Years Ended September 30,
(Dollars in thousands)	2006		2005		2004
Service benefits earned during period	$	740	$	648	$	432
Interest cost on projected benefit obligation		691		642		506
Amortization:
Prior service cost		325		325		325
Net loss from past experience		394		363		107
Net periodic pension cost	$	2,150	$	1,978	$	1,370

In 2006, 2005 and 2004, the Company recognized amortization associated with the net cumulative unrecognized losses of the plan. The loss is amortized over the average remaining service period for active plan participants and is subject to the applicable corridor that is based on 10% of the PBO.

The reconciliations of the benefit obligation based on a September 30^th measurement date are as follows:

(Dollars in thousands)	2006			2005
Change in benefit obligation:
Projected benefit obligation at beginning of year	$	12,873		$	11,497
Service cost earned during the year		740			648
Interest cost on projected benefit obligation		691			642
Loss from past experience		494			755
Benefits paid		(795	)		(669	)
Projected benefit obligation at end of year	$	14,003		$	12,873
Reconciliation of funded status:
Funded status	$	(14,003	)	$	(12,873	)
Unrecognized net actuarial loss		4,461			4,449
Unrecognized prior service cost		—			325
Net amount recognized	$	(9,542	)	$	(8,099	)
Amounts recognized in the consolidated balance sheet consists of:
Accrued benefit liability	$	(13,127	)	$	(11,994	)
Intangible asset		—			325
Accumulated other comprehensive income		3,585			3,570
Net amount recognized	$	(9,542	)	$	(8,099	)

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The Company expects plan contributions to fund benefits paid. The following table summarizes the Company’s expected benefit payments to be paid for each of the following fiscal years:

Year Ended September 30,	Scheduled Benefit Payments
(Dollars in thousands)
2007	$	933
2008		963
2009		973
2010		1,128
2011		1,269
2012 through 2016		8,660

10. Employee Benefit Plan and Special Programs

The Company maintains “The PBSJ Employee Profit Sharing and Stock Ownership Plan and Trust”, which is a qualified contributory 401(k) plan, a profit-sharing plan and an unleveraged employee stock ownership plan (“ESOP”), collectively the “Plans”. The Plans qualify as a deferred salary arrangement under Sections 401(a) and 401(k) of the Internal Revenue Code. Under the 401(k) plan, participating employees may elect to defer a portion of their pretax earnings, up to the maximum allowed by the Internal Revenue Service. The Company offers a discretionary matching contribution of up to 100% of the employees’ first 3% pre-tax contribution. Employees are eligible to participate in the 401(k) plan on the first date of hire. Participants in the 401(k) plan are at all times 100% vested in the employees’ contribution amounts. All matching contributions made by the Company generally vest ratably over five years of continued service. Under the profit-sharing plan, the Company may make a discretionary contribution to eligible employees, which is included in the participants’ retirement account, and is allocated using a ratio of the individual participant’s compensation for the year to the total compensation of all eligible participants for the year. All discretionary contributions may be made in the form of cash, stock or a combination of both.

The Company’s matching contribution to the 401(k) plan was $3.6 million, $4.0 million, and $3.5 million for the years ended September 30, 2006, 2005 and 2004, respectively. In addition, the Company recorded an additional benefit expense of $2.7 million at each of the years ending September 30, 2005 and 2004, as discretionary contributions to the profit-sharing plan. There was no discretionary contribution to the profit sharing plan for the year ended September 30, 2006. The Company’s accrued matching and discretionary contributions are included in accounts payable and accrued expenses in the accompanying consolidated balance sheets at September 30, 2006 and 2005.

The Company also maintains an additional incentive plan (“Incentive Plan”) for select employees. On an annual basis, the Company makes a discretionary cash award to fund the Incentive Plan within the Company’s limits of profitability and operating guidelines. Participation in the Incentive Plan is re-confirmed on an annual basis for all participants. The related Incentive Plan expenses for the years ended September 30, 2006, 2005 and 2004 of $10.4 million, $10.7 million, and $10.8 million, respectively, were included in general and administrative expenses in the accompanying consolidated statements of operations.

11. Restricted Stock

Restricted stock awards are offered throughout the year, including the KERP restricted stock, and are intended to provide long-term incentives to key employees. Awards of restricted stock are subject to transfer restrictions and risk of forfeiture until they are earned. Restricted stock shares become fully vested usually over a period of five years of continued employment and are subject to total forfeiture if the employee ceases to be employed prior to the restricted stock maturity date, except in certain limited circumstances described in the individual restricted stock award agreement. During the restriction period, holders have the rights of shareholders, including the right to vote, but cannot transfer ownership of their shares. Restricted stock is

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recorded at fair value on the date of issuance. Pursuant to Company guidelines, the Company may not issue restricted stock if, after issuing the shares, the total number of restricted shares outstanding would exceed ten percent of the total shares outstanding. There were 514,663 and 543,853 shares of restricted stock outstanding at September 30, 2006 and 2005. Unearned compensation is reflected as a component of stockholders’ equity and amounted to $3.2 million as of September 30 2006 and 2005.

The issuance of restricted stock gives rise to unearned compensation that is amortized over the vesting period. The total amount of compensation expense recognized under these agreements during fiscal 2006, 2005 and 2004 was $790,000 $806,000, and $549,000 respectively.

12. Long-Term Debt

The following table lists long-term debt including the respective current portions.

(Dollars in thousands)	September 30,
	2006		2005
Line of credit	$	1,132	$	—
Mortgage note payable due in monthly installments starting on April 16, 2001, with interest, collateralized by real property; unpaid principal due March 16, 2011. Interest at LIBOR plus the floating rate margin of not less than 65 basis points and not greater than 90 basis points (5.98% and 4.51% at September 30, 2006 and 2005, respectively).		7,421		7,833
Capital lease obligations		1,050		853
		9,603		8,686
Less current portion of long-term debt		1,644		408
Less current portion of capital lease obligations		274		341
Long-term debt and capital lease obligations	$	7,685	$	7,937

Scheduled maturities exclusive of capital leases are as follows:

Year Ending September 30,	Scheduled Maturities
(Dollars in thousands)
2007	$	512
2008		512
2009		512
2010		512
2011		5,373
	$	7,421

The Company has a $58 million line of credit agreement, inclusive of $10 million in letters of credit, with Bank of America, N.A. (the “Bank”). The expiration date on the line of credit is June 30, 2008. The letters of credit reduce the maximum amount available for borrowing. As of September 30, 2006 and 2005, we had letters of credit totaling $4.3 million (including $2.2 million to guarantee insurance payments) and $3.4 million, respectively. In addition, in the second quarter of 2006, we issued a letter of credit which expired in November 2006, for $2.0 million to cover risk of insolvency for the FDOT. No amounts have been drawn on any of these letters of credit. As a result of the issuance of these letters of credit, the maximum amount available for borrowing under the line of credit was $52.6 million and $54.6 million as of September 30, 2006 and 2005, respectively.

The interest rate (5.82% and 4.36% at September 30, 2006 and 2005, respectively) ranges from LIBOR plus 50 basis points to Prime minus 125 basis points if the Company’s funded debt coverage ratio is less than 2.5. The

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range increases to LIBOR plus 75 basis points to Prime minus 100 basis points if the Company’s funded debt coverage ratio is between 2.5 to 3.0. The line of credit contains clauses requiring the maintenance of various covenants and financial ratios including minimum levels of net worth, a minimum coverage ratio of certain fixed charges and a minimum leverage ratio of earnings before interest, taxes, depreciation and amortization to funded debt. The Company was in compliance with or obtained a waiver of default of the line of credit financial covenants as of September 30, 2006. The line of credit is collateralized by substantially all of the Company’s assets. We used cash flow from operating activities to repay amounts outstanding under our line of credit.

On March 19, 2001, the Company entered into a mortgage note with an original principal amount of $9.0 million due in monthly installments starting on April 16, 2001, with interest. Interest on the mortgage is LIBOR plus the floating rate margin of not less than 65 basis points and not greater than 90 basis points. A balloon payment is due on the mortgage on March 16, 2011. The effective interest rate on the mortgage note was 5.98% and 4.51% for the fiscal years ended September 30, 2006 and 2005, respectively. The mortgage agreement contains clauses requiring the maintenance of various covenants and financial ratios. The Bank has provided us a waiver of default caused by our failure to deliver to the Bank audited financial statements for fiscal year 2006 and unaudited financial statements for the quarters ended December 31, 2006 and March 31, 2007, so long as the fiscal year 2006 financial statements are delivered to the Bank no later than May 31, 2007 and the quarterly statements are delivered no later than September 30, 2007. The bank has also provided us a waiver of the minimum net worth covenant for fiscal year 2006 and all periods in fiscal year 2007. The mortgage note is collateralized by the office building located in Maitland, Florida.

The Company’s capital leases consisted primarily of equipment. The interest rates used in computing the minimum lease payments range from 2.23% to 5.23%. The leases were capitalized using the lower of the present value of the minimum lease payments or the fair market value of the equipment at the inception of the lease.

13. Commitments and Contingencies

The Company is obligated under various non-cancelable leases for office facilities, furniture and equipment. Certain leases contain renewal options, escalation clauses and payment of certain other operating expenses of the properties. In the normal course of business, leases that expire are expected to be renewed or replaced by leases for other properties. As of September 30, 2006, the future minimum annual lease commitments are as follows:

Years Ending September 30,	Operating Leases		Capital Leases
(Dollars in thousands)
2007	$	19,829	$	575
2008		14,547		495
2009		11,743		345
2010		5,898		82
2011		3,187		8
Thereafter		622		—
		55,826		1,505
Less executory and other costs		369		198
Less amount representing interest		—		257
Present value of net minimum lease payments	$	55,457	$	1,050

Total rent expense included in general and administrative expenses was approximately $20.0 million, $16.6 million, and $14.6 million for fiscal years ended 2006, 2005 and 2004, respectively.

As of September 30, 2006, there were various legal proceedings pending against the Company, where plaintiffs allege damages resulting from the Company’s engineering services. The plaintiffs’ allegations of liability in those cases seek recovery for damages caused by the Company based on various theories of

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negligence, contributory negligence or breach of contract. The Company accrues for contingencies when a loss is probable and the amounts can be reasonably estimated. As of September 30, 2006, the Company had an accrual of approximately $5.9 million for all potential and existing claims, lawsuits and pending proceedings that, in management’s opinion, are probable and can be reasonably estimated.

In July 1998, we entered into an agreement with West Frisco Development Corporation (“WFDC”) to provide various services, among which was a flood plain study to be used by WFDC, the City of Frisco and FEMA. In 2003, the City of Frisco retained the services of a third-party architecture and engineering firm in connection with the extension and widening of Teel Road which lies within the greater drainage basin included in the Company’s original flood plain study. This architecture and engineering firm’s assessment of the flood plain study determined that the Company used incorrect assumptions when calculating the size of the drainage culverts required for the increased development of the area’s transportation infrastructure. Based on this assessment, the Company has entered into negotiations with the City of Frisco to correct the drainage needs to support the Teel Road expansion project. As a result, the Company had recorded an estimated liability of $3.1 million to cover the costs associated with correcting the drainage needs of the Teel Road expansion project. Included in this estimate is the purchase of a parcel of land for $1.5 million, the remaining balance of $1.6 million is reflected in other liabilities in the accompanying consolidated balance sheets as of September 30, 2006.

The Company expects to pay these liabilities over the next one to three years. Management is of the opinion that the liabilities ultimately resulting from such existing and other pending proceedings, lawsuits and claims should not materially affect the Company’s financial position, results of operations or cash flows.

The Company maintains a full range of insurance coverage, including worker’s compensation, general and professional liability (including pollution liability) and property coverage. The Company’s insurance policies may offset the amount of loss exposure from legal actions.

In July 2006, we entered into a settlement agreement with the State of Texas Department of Transportation which resolves all claims that the State of Texas may have had against us for overpayments related to the restatement of overhead rates on billings on or before April 30, 2006 under contracts with that agency based on our payment of approximately $5.4 million and provides for the determination of the appropriate overhead rate for billings after April 30, 2006. In November 2006, we entered into a settlement agreement with the Florida Department of Transportation which resolves all claims that agency may have had against us for the overstatement of rates on billings through September 30, 2005 (and with respect to cost contracts through September 30, 2006) under our contracts with them based on our payment of approximately $12.5 million. This settlement agreement also provided for the determination of the appropriate overhead rate refund for fiscal year 2006 billings under fixed price contracts. The refund amount was finalized in March 2007 and totaled $425,000.

In January 2007, we reached a settlement agreement with the Department of Justice, Civil Division on behalf of it and all other federal agencies with which we have contracts to resolve all federal claims including claims under the Federal Civil False Claims Act, related to the overstatements of overhead rates on our contracts with federal agencies. The agreement requires approximately $6.5 million of reimbursement payments for all contract amounts through September 30, 2005, which was paid in January 2007.

The settlements described above, except for those settlements paid during fiscal year 2006, are included in the accrued reimbursement liability in the Company’s consolidated financial statements at September 30, 2006. We are in discussions with our remaining government clients to enter into settlement agreements in order to satisfy any refund obligations, which are in various stages of settlement.

In the course of our investigation of the accounting irregularities and misappropriations, it was determined that there were possible violations relating to past political contributions by us and certain of our employees. The United States Attorney’s Office for the Southern District of Florida (Miami) and the Federal Bureau of Investigation have conducted an investigation relating to improper campaign contributions including improper

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use of political action committees. We produced documents and other information to the government and fully cooperated with the authorities. Criminal charges have been filed against two of the Company’s former chairmen. At the present time, we believe it unlikely that criminal charges will be filed against us in this matter, but the authorities are not precluded from bringing charges, and circumstances may change.

The United States Securities & Exchange Commission is also conducting an investigation of the accounting irregularities and misappropriations of funds. We are fully cooperating with the investigation and have produced documents and other information to the commission. At the present time, we are unable to predict the likely outcome of this investigation.

14. Supplemental Cash Flow Information

(Dollars in thousands)	Years Ended September 30,
	2006			2005			2004
Supplemental disclosures of cash flow information:
Cash paid for interest	$	2,106		$	689		$	861
Cash paid for income taxes	$	6,582		$	4,697		$	5,202
Acquisitions:
Fair market value of assets acquired	$	4,731		$	1,904		$	2,846
Goodwill and intangibles recorded		5,141			1,693			4,834
Fair market value of liabilities assumed		(3,851	)		(1,475	)		(1,421	)
Purchase Price		6,021			2,122			6,259
Less: stock issued		—			(1,214	)		(1,875	)
Less: escrow withheld		(200	)		(130	)		—
Less: accrued additional purchase price		(334	)		—			(250	)
Prior year purchase price adjustments		389			1,756			1,237
Deposits paid		—			(550	)		550
Cash paid	$	5,876		$	1,984		$	5,921
Non-cash investing and financing activities:
Prior year purchase price adjustments to goodwill	$	468		$	—		$	678
Property and equipment financed under software agreement	$	731		$	—		$	—
Property and equipment financed under capital leases	$	662		$	473		$	368
Change in fair value of marketable securities available for sale	$	23		$	35		$	62
Net change in subscription receivable for shares issued	$	—		$	347		$	622
Payable to former shareholders for repurchase of stock	$	2,133		$	—		$	—
Notes payable issued in exchange for shares	$	1,335		$	—		$	—

15. Segment Reporting

The Company is organized by the services provided to its customers. Under this organizational structure, the Company has four segments: Transportation Services, Construction Management, Civil Engineering and Environmental Services.

Activities in the Transportation Services business segment generally involve planning, design, right of way acquisition, development and design of intelligent transportation services and program construction management services for multiple transportation modes, including interstate and primary highways, toll roads, arterials, bridges, transit systems, airports and port facilities. The Program Management group of our Transportation segment provides many of its governmental clients the necessary resources to manage large infrastructure programs from concept through construction. Services include planning, programming, and contract support.

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The Construction Management segment provides a wide range of services as an agent for the Company’s clients, including contract administration, inspection, field-testing, scheduling/estimating, instituting project controls and quality assessment. The Company provides scheduling, cost estimating and construction observation services for the project, or its services may be limited to providing construction consulting.

The Civil Engineering segment provides general civil engineering as well as specialized services to public and private clients. Included in these services are: site engineering and surveys, infrastructure engineering, master planning, disaster mitigation planning and response, asset assessment and management, emergency management and architectural and landscape design.

The Environmental Services business segment focuses on the delivery of planning, design and construction management services for private and public sector clients related to air quality management, flood insurance studies, energy planning, hazardous and solid waste management, ecological studies, wastewater treatment, water resources, environmental toxicology analysis, aquatic treatment systems and water supply and treatment.

In fiscal 2006, we derived approximately 25.0% of our engineering fees from various districts and departments of the FDOT (approximately 17.3% of total engineering fees) and the Texas Department of Transportation (“TxDOT”) (approximately 7.7% of total engineering fees) under numerous contracts. The majority of these revenues were earned by our Transportation Services segment.

Segment operating income includes corporate related costs which are not generally specific to the individual segments’ operations. Such costs primarily consist of indirect salaries and general and administrative costs. The amounts are allocated to the segments based on the individual segments’ proportionate share of indirect salaries and general and administrative costs compared to total Company indirect salaries and general and administrative costs, excluding any allocable costs.

Financial information relating to the Company’s operations by segment is as follows:

(Dollars in thousands)	Transportation Services		Construction Management		Civil Engineering			Environmental Services		Total
Year Ended September 30, 2006
Engineering fees	$	206,876	$	89,199	$	112,526		$	128,641	$	537,242
Net earned revenues		158,666		73,660		95,302			103,979		431,607
Operating income		7,078		3,119		(60	)		318		10,455
Total assets (as of 9/30/06)		94,321		40,670		51,305			58,653		244,949
Depreciation and amortization		3,781		1,314		2,922			2,996		11,013
Purchases of property and equipment		4,033		1,873		2,652			2,858		11,416
Year Ended September 30, 2005
Engineering fees	$	199,490	$	87,314	$	111,312		$	113,821		511,937
Net earned revenues		150,021		67,679		79,866			92,385		389,951
Operating income		17,638		7,250		5,691			7,801		38,380
Total assets (as of 9/30/05)		98,061		42,920		54,716			55,950		251,647
Depreciation and amortization		3,630		1,191		2,454			2,705		9,980
Purchases of property and equipment		3,766		1,697		2,269			2,537		10,269
Year Ended September 30, 2004
Engineering fees	$	179,743	$	77,465	$	81,841		$	109,198	$	448,247
Net earned revenues		135,111		58,278		69,917			88,569		351,875
Operating income		10,821		6,164		5,531			6,916		29,432
Depreciation and amortization		3,401		994		2,216			2,650		9,261
Purchases of property and equipment		3,612		1,504		2,038			2,482		9,636

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16. Related Party Transactions

We lease office space in a building which houses our Marietta, Georgia operations from BCE Properties, which is owned and controlled by James Belk. Mr. Belk is a former owner of Welker & Associates, Inc., which was acquired in March 2003, and a Vice-President and Project Director of the Company. The lease was assumed in connection with our acquisition of Welker in March 2003. The rental cost of the space is $17,600 per month. On May 31, 2006, the lease expired and was not renewed. In June 2006, we moved our Marietta, Georgia operations to a new location.

We lease office space in a building which houses our Missoula, Montana operations from Cedar Enterprises, which is owned and controlled by Charlie K. Vandam. Mr. Vandam is a former owner of LWC and a Senior Program Manager of ours. The lease was assumed in connection with our acquisition of LWC in February 2005. The rental cost of the space is $9,500 per month.

We lease office space in a building which houses our Helena, Montana operations from Prickly Pear Enterprises, which is owned and controlled by Paul Callahan. Mr. Callahan is a former owner of LWC and a Vice-President and Senior Division Manager of the Company. The lease was assumed in connection with our acquisition of LWC in February 2005. The rental cost of the space is $1,800 per month.

At the annual meeting of the shareholders held on January 28, 2005, the shareholders approved a proposal to authorize the Company to execute an agreement with Richard Wickett, our former Chairman of the Board from 2002 to February 2005 and former Chief Financial Officer from 1993 to 2004, to allow him to retain his 138,607 shares of the Company’s stock, exclusive of his shares owned through the Company’s Employee Profit Sharing and Stock Ownership Plan and Trust (“ESOP”), upon retirement and offer for sale the shares, in blocks of 46,000, 46,000 and 46,607 shares in February 2005, 2006 and 2007, respectively, at a price determined at the valuation at the fiscal year end immediately preceding the redemption period.

Pursuant to the Company’s by-laws, the Company is permitted to repurchase stock by delivery of a promissory note to the employee. On February 23, 2006 the Company repurchased 46,000 shares and 3,400 shares, respectively, of the Company’s stock from Richard Wickett and Kathryn Wilson in the original principal amounts of $1.2 million and $92,000, respectively. The shares were repurchased for $27.00 per share which represents the September 30, 2004 share price. At September 30, 2006, the Company had an accrual of $49,400 for the difference between the purchase price and the September 30, 2005 share value of $28.00. The notes currently bear interest at the rate of 7.5% per annum and such rate is adjusted to the then current prime rate of Bank of America on December 31^st of each year. Accrued interest and $1 of principal is due monthly on the notes with all remaining principal and accrued interest due and payable on the five year anniversary of the date of issuance. The balances of the notes and the accrual for the stock price differential were approximately $1.4 million at September 30, 2006 and were included in other liabilities in the accompanying balance sheet.

On February 13, 2007, the Company repurchased an additional 46,607 shares of the Company’s stock from Richard Wickett in the original principal amount of $1.0 million. The additional shares were purchased for $22.40 per share which represents 80% of the September 30, 2005 share price, pending completion of the valuation of the Company’s stock as of September 30, 2006. In fiscal year 2007, the Company accrued for the difference between the purchase price and the September 30, 2006 share value. The 2007 note currently bears interest at the rate of 8.25% per annum and such rate is adjusted to the then current prime rate of Bank of America on December 31^st of each year. Accrued interest and $1 of principal is due monthly on the notes with all remaining principal and accrued interest due and payable on the five year anniversary of the date of issuance. The notes are subject to the Company’s right of set off, which permits the Company to set off all claims it may have against the payee against amounts due and owing under the notes.

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17. Allowance for Doubtful Accounts

The activity in the allowance for doubtful accounts was as follows:

(Dollars in thousands)	Years Ended September 30,
	2006			2005			2004
Balance at beginning of year	$	1,182		$	1,080		$	1,119
Additions charged to costs and expenses		633			486			217
Deductions		(16	)		(384	)		(256	)
Balance at end of year	$	1,799		$	1,182		$	1,080

18. Quarterly Financial Data (Unaudited)

(Dollars in thousands, except per share amounts)	Fiscal 2006									Fiscal 2005
	Q4			Q3		Q2		Q1		Q4		Q3		Q2		Q1
Operating Data:
Engineering fees	$	136,098		$	138,927	$	133,751	$	128,466	$	136,601	$	124,726	$	122,993	$	127,617
Net earned revenues		109,180			110,534		107,201		104,692		103,219		98,003		96,238		92,491
Operating income (loss)		(6,351	)		6,906		2,401		7,499		6,788		17,309		6,581		7,702
Net income (loss)		(3,265	)		4,136		1,006		3,528		4,218		9,223		3,489		4,145
Net income per common
Basic	$	(0.51	)	$	0.64	$	0.15	$	0.50	$	0.60	$	1.30	$	0.48	$	0.56
Diluted	$	(0.51	)	$	0.60	$	0.14	$	0.47	$	0.56	$	1.22	$	0.45	$	0.53

Note: Quarterly and year-to-date computations of per share amounts are made independently; therefore, the sum of per share amounts for the quarters may not equal per share amounts for the year.

The Company experienced a net loss in the fourth quarter of fiscal year 2006 primarily due to the temporary stoppage in work and bidding for new jobs with the TxDOT during the latter half of the third quarter and beginning of the fourth quarter which resulted in an increase in indirect salaries, increases in investigation and related costs, and an increase in legal settlements and fees.

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ITEM 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

Not applicable.

ITEM 9A.    Controls and Procedures

Attached as exhibits to this Form 10-K are certifications of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), which are required in accordance with Rule 13a-14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Evaluation of disclosure controls and procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities and Exchange Act 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 the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial disclosure.

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Audit Committee and management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e). Based upon, and as of the date of, this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective, because of the material weaknesses discussed below. In light of the material weaknesses described below, the Company performed additional procedures to ensure that the consolidated financial statements are prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Annual Report fairly present in all material respects the Company’s financial condition, results of operations and cash flows for the periods presented.

Material Weakness in Internal Control Over Financial Reporting

A material weakness (within the meaning of the Public Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 2) is a control deficiency, or combinations of control deficiencies, that results in more than a remote risk that a material misstatement in our annual or interim financial statements will not be prevented or detected. The Company identified the following material weaknesses:

1) Entity-Level Controls

The Company did not design and maintain effective entity-level controls as defined in Internal Control—Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). This deficiency relates to the risk assessment component of internal control as defined by COSO. Specifically:

The Company did not conduct a formal fraud risk assessment to consider the risk of material misstatements due to fraud, giving consideration to potential fraud schemes, or other internal or external factors such as pressures or incentives affecting the Company. A fraud risk assessment is designed to identify and evaluate fraud risk factors that could enable fraud to occur within the organization. The fraud risk assessment involves an expanded focus on considerations of where fraud risk factors may exist within the entity and the potential fraud schemes that could be perpetrated.

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This condition constitutes deficiencies in both the design and operation of entity-level controls.

2) Inadequate Controls Related to the Closing and Financial Reporting Cycles

Several significant deficiencies in the design and operating effectiveness of internal controls over the monthly close, quarterly, and year-end reporting cycles were identified which were considered material weaknesses when aggregated. Specifically, the significant deficiencies include inaccurate and untimely bank reconciliations, reconciliations of year-end journal entries to the general ledger and identification and accounting for loss contracts in progress on a timely basis. The affected accounts include cash, fixed assets, unbilled fees, accounts payable, engineering fees and direct reimbursable expenses.

Status of Remediation of Prior Year Material Weaknesses

We have implemented several changes to our internal control over financial reporting in response to the material weaknesses identified in our 2005 Form 10-K and those described above. To address the material weaknesses, we have implemented the following procedures:

• We have emphasized certain controls and improved the controls designed to safeguard our cash assets and have implemented additional segregation of duties.

• We have enhanced our expertise by hiring new accounting and finance personnel with substantial knowledge of financial accounting principles and procedures.

• We have engaged consultants with significant expertise in the areas of income tax and governmental accounting to advise and provide support in these areas.

• Controls have been enhanced to restrict access to software, operating systems and Company data along with a review of access privileges.

• We have begun hiring additional internal audit professionals who will be responsible for performing the fraud risk assessment and monitoring the Company’s internal controls.

Changes in Internal Control Over Financial Reporting

Except as described above, there have been no changes to the Company’s internal control over financial reporting that occurred during the Company’s fiscal quarter ended September 30, 2006, that have materially affected, or are reasonably likely to affect, the Company’s internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

The Company’s management, including the CEO and CFO, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by

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the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any system’s design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of a system’s control effectiveness into future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

ITEM 9B.    Other Information

None.

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PART III

ITEM 10.    Directors and Executive Officers of the Registrant

The following table sets forth certain information regarding the Company’s directors, executive officers, and certain key employees:

NAME	AGE	POSITION
John B. Zumwalt, III	56	Director, CEO and Chairman of the Board
Robert J. Paulsen	54	Director, Executive Vice President, Secretary and Vice Chairman of the Board
Todd J. Kenner	45	Director and President
John S. Shearer	55	Director and Senior Vice President
William D. Pruitt	66	Director, non-employee
Phillip E. Searcy	73	Director, non-employee
Frank A. Stasiowski	57	Director, non-employee
Donald J. Vrana	45	Senior Vice President, CFO and Treasurer
Clarence E. Anthony	47	Chief Marketing Officer
Max D. Crumit	46	National Service Director of Transportation
L. Dean Fox	56	National Business Sector Manager of Federal Strategic Programs
Cecilia R. Green	50	National Service Director – Environmental Sciences
Becky S. Schaffer	62	Corporate Counsel, Vice President and Assistant Secretary

John B. Zumwalt, III, 56, is a Director and the Chairman of the Board of Directors. He has been an officer and director of The PBSJ Corporation since 1995. He was Chief Operating Officer from 1998 to 2002, President and Chief Executive Officer from 2002 to 2005 and Chairman and Chief Executive Officer since January 2005.

Robert J. Paulsen, 54, is Vice-Chairman and Secretary of the Board of Directors, and serves as Chairman of the Board of Directors of the subsidiary company Post, Buckley, Schuh and Jernigan, Inc. (PBS&J) Prior to his appointment as Chairman, Mr. Paulsen served Chief Operating Officer of PBS&J and as PBS&J’s National Director of Transportation Services. He has been an officer of the Company since 1993 and a Director of the Corporation since 2000.

Todd J. Kenner, 45, was appointed President of the Company in January 2005 and Chief Operating Officer and President of PBS&J in January 2007. From October 1992 through January 1998, Mr. Kenner directed the firm’s subsidiary activities in the western region of the United States. From January 1998 through January 2005, he served as a Regional Director over the Company’s West Region business interests. Mr. Kenner served as the Chief Marketing Officer from January 2002 through October 2006.

John S. Shearer, 55, was elected Director of the Company in January 2001. He has also served as the National Director of Environmental Services since 1991 for PBS&J. Mr. Shearer worked for the Company from 1983 to 1987 returning in 1991.

William D. Pruitt, 66, has been a Board Member of the Company since July 2005, and has been the Chairman of the Company’s Audit Committee since 2003. Mr. Pruitt served as Chairman of the audit committee of KOS Pharmaceuticals, Inc., a fully integrated specialty pharmaceutical company, until it was acquired in 2006. He was also Chairman of the Audit Committee for Adjoined Consulting, Inc., which was a full-service management consulting firm, until it was merged into Kanbay International, a global consulting firm, in February 2006.

Phillip E. Searcy, 73, was appointed Director of the Company in July 2005, after previously serving on the Company’s Corporate Audit Committee. Mr. Searcy had previously been employed by the Company in

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November 1972 until his retirement in 1996. He now serves as Chairman of the Company’s Compensation Committee and the Governance Committee.

Frank A. Stasiowski, FAIA, 57, has been a Director of the Company since July 2005. Mr. Stasiowski is also President, Chief Executive Officer and a founding owner of PSMJ Resources, Inc., a global publishing, education, consulting and trade show company. Mr. Stasiowski is a licensed architect with degrees from the Rhode Island School of Design and a Masters’ degree in Business Administration from Bryant University.

Donald J. Vrana, 45, is the Company’s Chief Financial Officer and Treasurer. He has been an officer and director of PBS&J since his hire on October 31, 2005. From 1996 to 2005, he was employed at SITEL Corporation in various positions, most recently as Chief Accounting Officer, Controller and Treasurer.

Clarence E. Anthony, 47, joined PBS&J as Director of Government Relations and Board member in August 2004. From August 2004 through September 2006, Mr. Anthony directed the firm’s national business development organization. He was appointed Chief Marketing Officer in October 2006. Prior to joining PBS&J, Mr. Anthony was president of his own firm and provided consulting services to PBS&J involving intergovernmental coordination, community outreach, and environmental justice.

Max D. Crumit, 46, has been a PBS&J Director since 2003 and was named Executive Vice President and National Service Director for the Transportation Service in 2002. Mr. Crumit joined the company in 1990 as a senior project manager in the firm’s general consulting contract with Florida’s Turnpike and served as Program Director for this program from 1997 to 2002.

L. Dean Fox, 56 joined PBS&J in October 2006 as a Senior Vice President, a Director of PBS&J Constructors and the National Business Sector Manager of Federal Strategic Programs. He became a Director of PBS&J in January 2007. Mr. Fox joined the company following his retirement from the US Air Force after 34 years of military service to our country. He served at numerous levels in the Air Force and in a number of headquarters and command assignments.

Cecilia R. Green, 50, joined the Board of Directors of PBS&J in 2006. She has been an officer of PBS&J since 1997, when she joined the Company through the acquisition of Espey, Huston & Associates, Inc. From October 1997 through September 2006, Ms. Green directed the firm’s Central Sciences division. In October 2006, she became the National Business Sector Manager for the National Sciences and became National Service Director—Environmental Sciences in January 2007.

Becky S. Schaffer, 62, has served as Corporate Counsel, handling all legal matters for the Company and serving as Senior Vice President for PBS&J since 1994. Mrs. Schaffer also serves as Assistant Secretary for the Company.

Committees of the Board of Directors

The Board has standing Audit, Governance and Compensation Committees and a Nominating Sub-Committee of the Governance Committee.

The Audit Committee currently is comprised of three non-management directors, Mr. William Pruitt (Chairman), Mr. Phillip Searcy, and Mr. Frank Stasiowski. The primary responsibilities of the Audit Committee include the following:

• Monitoring the overall corporate “tone” for quality financial reporting, sound business risk practices and ethical behavior;

• The appointment, compensation, retention and oversight of the work of the independent registered public accountants;

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• Pre-approving all audit and non-audit services provided by the independent registered public accountants;

• Reviewing and discussing the annual audited financial statements and quarterly unaudited financial statements, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, with management and the independent registered public accounts prior to filing of the Company’s Annual Report on Form 10-K or Quarterly Report on Form 10-Q;

• Reviewing with senior management the Company’s overall anti-fraud programs and controls;

• Reviewing the Company’s compliance and ethics programs, including consideration of legal and regulatory requirements, including receiving reports from the Chief Ethics and Compliance Officer, and review with management its periodic evaluation of the effectiveness of such programs;

• Discussing the Company’s policies with respect to risk assessment and risk management, including the risk of fraud and discuss the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposure; and

• Serving as a direct line of reporting for the Company’s Internal Audit function.

The Governance Committee currently is comprised of two directors, Mr. Phillip Searcy (Chairman) and Mr. Todd Kenner, along with five senior employee members. The committee did not meet during fiscal year 2006. The primary responsibilities of the Governance Committee include the following:

• Recommending to the Board all manner of governance principles, policies and practices required to effectively govern the Company;

• Reviewing established principles, policies and practices on an annual basis and make recommendations to the Board of Directors for appropriate governance changes to keep pace with the Company’s strategic plan(s) and mission;

• Monitoring compliance with established tenets and guidelines, and periodically review and recommend appropriate revisions;

• Establishing and recommending qualifications, skills, and other desired background and selection criteria for members of the Board of Directors; and

• Identifying, reviewing, and recommending candidates for the Board.

The Compensation Committee currently is comprised of three non-management directors, Mr. Searcy (Chairman), Mr. Pruitt and Mr. Stasiowski. The committee met once during fiscal 2006. The primary responsibilities of the Compensation Committee include the following:

• Discharging the Board’s fiduciary responsibilities relating to compensation of the Company’s executives and overseeing and advising the Board on the adoption of policies that govern the Company’s executive compensation and benefit programs;

• Reviewing and assessing the reasonableness, appropriateness and competitive position of the Company’s executive compensation;

• Annually issuing a report on executive compensation for inclusion in the Company’s proxy statement; and

• Commencing in fiscal year 2007, the Compensation Committee also began to review with management our Compensation Discussion and Analysis and to consider whether to recommend that it be included in our proxy statements and other filings.

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Nominating Sub-Committee of the Governance Committee currently is comprised of three Board members, Mr. Stasiowski, Mr. Zumwalt and Mr. Paulsen, along with three shareholders. The committee did not meet in fiscal year 2006. The primary responsibilities of the Nominating Sub-Committee include the following:

• Develop a list of not more than three suggested names of potential new executive directors for any open position assigned by the Governance Committee to be filled;

• Compare the qualifications of each candidate against approved qualifications for an internal executive director for the particular board for which the nomination is being made to assure that each candidate meets all qualifications;

• Substantiate with written documentation the qualifications and background of each candidate put forth; and

• Develop and periodically review and recommend to the Governance Committee appropriate revisions to the nominating process.

Compensation Committee Interlocks and Insider Participation

During fiscal 2006, Messrs. Searcy, Pruitt and Stasiowski served on our Compensation Committee. Mr. Searcy was appointed Director of the Company in July 2005, and had previously been employed by the Company in November 1972 until his retirement in 1996. Throughout his career with the Company, Mr. Searcy served in several key positions including Director of Environmental Services, Chief Operating Officer, Corporate Secretary, and Chairman of the Board. During fiscal 2006, none of our executive officers served on the compensation committee of any other entity, any of whose respective directors or executive officers served either on our Board of Directors or on our Compensation Committee.

Performance Graph

The following graph shows a comparison of the five-year cumulative total shareholder return for our common stock with the S&P 500 Index and a weighted peer group index. The peer group index consists of other engineering firms the Company uses to benchmark its performance, specifically, CH2M Hill Companies LTD, URS Corporation, Michael Baker Corporation, Tetra Tech Inc., Jacobs Engineering Group, Inc., and TRC Companies, Inc. The graph assumes a $100 investment on September 30, 2002 in our common stock, the S&P 500 Index and the peer group index.

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Section 16(A) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors and executive officers, and persons who own more than 10% of the Company’s Common Stock, to file with the Securities and Exchange Commission reports of ownership and changes in ownership of Common Stock. Officers, directors and greater than 10% beneficial owners are required by Securities and Exchange Commission regulations to furnish the Company with copies of all Section 16(a) forms they file for review. Based on this review, we believe that during the 2006 fiscal year, there was no failure by any such person to timely file a report under Section 16(a) of the Exchange Act.

Code of Conduct

On August 14, 2006, the Board of Directors approved and adopted The PBSJ Corporation Code of Conduct, Building for the Future: Our Values, Principles, and Standards, as a statement of the Company’s core business ethics and compliance standards and values. These standards contain the Company’s core expectations as to the manner in which employees will conduct business on behalf of The PBSJ Corporation and its subsidiaries. All of our employees are required to abide by our standards of business ethics and conduct to ensure that the Company operates in a consistent legal and ethical manner. The full text of our Code of Conduct is available on our internal website. If we amend or seek a waiver of our Code of Conduct, then we would post such amendment or waiver on our internal website, as required by applicable rules.

Our employees are required to report any conduct that they believe in good faith to be an actual or apparent violation of the Code of Conduct. The Audit Committee has established procedures to receive, retain and address complaints regarding accounting, internal accounting controls or auditing matters and to allow for the confidential and anonymous submission by employees of related concerns.

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ITEM 11.     Executive Compensation

REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION FOR FISCAL YEAR 2006

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this Annual Report on Form 10-K and, based on such review and discussion, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K for the fiscal year ended September 30, 2006.

Respectfully Submitted,

THE COMPENSATION COMMITTEE

Phillip E. Searcy, Chairman

William D. Pruitt

Frank A. Stasiowski

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EXECUTIVE COMPENSATION

COMPENSATION DISCLOSURE AND ANALYSIS

General Statement of Compensation Philosophy

The PBSJ Corporation adheres to a compensation philosophy wherein compensation is contingent upon an individual’s successful performance of primary duties and responsibilities within the context of his/her job; employees are expected to demonstrate the highest degree of personal integrity and ethics, and to exhibit the highest levels of professional competence in the execution of those duties and responsibilities.

With respect to executive compensation, the Company has adopted a philosophy whereby an individual’s annual salary is competitive but on the conservative side as compared to industry peers, with performance-based incentives of as much as 100% of an executive’s annual salary.

Components of Executive Compensation

Compensation of the Company’s Named Executives can include the following:

Base Salary: Salary is typically the largest component of executive compensation. Efforts are made to ensure that our executives are paid competitively based on industry benchmarks by way of our executive compensation process. Annually, salaries for the named executive officers are reviewed and may be adjusted by the Compensation Committee, a three-member committee composed of non-management Directors of the firm.

Annual Bonus Plan: Executive Bonuses are determined by the Compensation Committee in November and December of each year. Bonuses are based on a review of executive and firm performance over the fiscal year ended the preceding September 30.

Key Employee Supplemental Option Plan (KESOP): The KESOP is a non-qualified deferred compensation program for the benefit of executives and key management positions and is divided into two levels:

1. Tier 1 (KERP), wherein the Company awards restricted stock in the amount of 5% of an executive’s or senior manager’s salary annually.

2. Tier 2 (KESIP), wherein the Company funds a 10-year to 15-year annuity at an annual rate between $15,000 and $100,000 as defined by the employee’s position in the Company. Most of our named executive officers participate in this Tier 2.

PBSJ Employee Profit Sharing and Stock Ownership Plan and Trust: This Plan is an Employee Stock Ownership Plan with a 401(k) feature. The company funds the 401(k) at its discretion, typically matching 50% of employee contributions up to a maximum of 3% of an employee’s salary. The employer contributions are vested on a five-year vesting schedule in which an employee vests 20% of employer contributions for each year of service up until full vesting at five years of service. In addition, the Company may make additional annual contributions contingent upon the financial performance of the Company. Executives receive no additional benefits above and beyond other fulltime employees.

Restricted Stock: In some instances, the Company may award an individual employee with a defined amount of restricted stock, typically as a retention tool or as a signing bonus upon employment. The Company’s board has reserved shares of common stock for this purpose and as of September 30, 2006, 122,450 shares of common stock were reserved for issuance as restricted stock. This stock is awarded at the current stock value but does not vest until the defined terms of the restriction are met.

Benefits: PBSJ Corporation provides all of its fulltime employees with health benefits. Executives benefit at the same levels and rates as all fulltime employees; the amount of company benefit is defined annually.

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PTO Cash-in: The Company administers a “PTO Cash-In” Program, wherein employees have the opportunity to “sell” unused PTO (Paid Time Off) back to the company at their current hourly rate (as defined by annual salary/2080 for exempt employees). This benefit is available for a two-week period in November of each year and is subject to a maximum number of hours to be cashed in and a minimum number of hours to be carried over to the following year.

Car Allowance: Executives and key management are typically provided a car allowance, which may be used toward the cost of car ownership, including leases/loans, insurance, and maintenance. In some instances, certain executives are allowed usage of a company leased vehicle in lieu of receiving a car allowance.

Club Fees and Dues: In some instances, the Company may fund club fees or membership dues for clubs for the personal, business and/or private use of an executive.

Frequency of Compensation Review

Executive compensation is reviewed annually in the months of November and December by the Compensation Committee. The review includes a thorough analysis of total compensation and all of its individual components, as well as a comparative analysis of executive compensation compared to industry peers and executives from comparable industries. During this review, the Committee also reviews performance evaluations for the executives and take individual contributions into account in the determination of bonus and salary.

Any recommended or proposed off-calendar adjustments to an executive’s compensation by the Board must be reviewed and approved in advance by the Compensation Committee.

Delegation of Limited Authority to the CEO and President for Equity Awards under the Restricted Stock Guidelines

The Board has delegated to the Compensation Committee the authority and responsibility for approving all awards of equity to our executives and other participants under the Restricted Stock Guidelines. The Compensation Committee in turn has chosen to delegate limited authority to our CEO and President to grant equity awards under the Restricted Stock Guidelines to eligible participants other than Named Executives. The purpose of this delegation is to facilitate the timely grant of restricted stock awards to non-Named Executives, particularly new employees and promoted employees, in interim periods between scheduled meetings of the Compensation Committee.

Total Compensation Review for 2006

The Committee reviewed a thorough analysis of industry benchmarks for executive compensation in peer firms within the industry and comparable companies outside industry. Specifically, this analysis utilized information from the following sources: PSMJ Executive Management Survey; Dietrich Consulting Executive Survey; Comp Analyst (a product of ancestry.com), and Salaryexpert.com. This analysis focused primarily on total cash compensation (salary and bonus) due to the limited availability of information, but the review of the Named Executives extended to a review of total compensation, including total cash compensation, as well as all other forms of short-term and long-term compensation including restricted stock grants, health benefits, auto-allowance, PTO Cash-in, and club dues.

The Committee also reviewed the FY2006 Performance Reviews for the Named Executives. Each of them were reviewed against a series of set goals within the firm’s proprietary “Integrated Performance Management” application. The Committee was furnished the Performance Appraisals conducted by the executives and relied on them heavily when making their recommendations, recognizing that financial metrics alone were insufficient measures of performance based on the increased demands on the leadership from the prior year.

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Base Salary

The salary review process for executives mirrors that of the company staff as a whole. Generally, executive salaries rise modestly and typically within the benchmarked range prescribed by the salary increase budget. With regard to executive compensation, The PBSJ Corporation has established a tradition of pay-for-performance, where executive salaries remain relatively conservative (when compared with industry peers) with a large portion of total compensation based on an annual bonus that is directly tied to the financial performance of the firm and the service-organization unit(s).

Based on the review of performance and the analyses of industry benchmarks for executive compensation, the Committee increased the base salaries of the Named Executives effective as of January 1, 2007 as shown in the following table. The Committee observed that the Chairman and President were compensated below industry peers, while the COO and National Service Director were both compensated above the industry benchmarks. However, these Named Executive’s salaries were reduced, primarily, as a result of changes in their responsibilities. The Committee’s decision was aimed at better aligning executive salaries with performance and industry norms for comparable positions.

Name	Title	Prior Base Salary		Revised Base Salary as of January 1, 2007
John B. Zumwalt III	Chairman of the Board and Chief Executive Officer	$	300,000	$	325,000
Donald J. Vrana	Chief Financial Officer	$	250,000	$	265,000
Todd J. Kenner	President and Chief Marketing Officer	$	280,000	$	300,000
Robert J. Paulsen	Chief Operating Officer	$	270,000	$	250,000
John S. Shearer	National Service Director	$	225,000	$	200,000

Annual Bonus Plan

Acknowledging the company’s failure to meet budgeted targets, the Committee chose to consider the extraordinary efforts put forth by the Board and Chief Financial Officer in confronting the continued challenges of the embezzlement investigation which included critical negotiations with key clients to reach favorable resolution with respect to the repayment of overcharges that resulted from the inflated overhead multiplier. To this end, the Committee chose to awarded bonuses to recognize their efforts in moving the investigation toward completion.

Severance and Change in Control Provisions

We have entered into an agreement with one of our Named Executives that contains severance and change-in-control provisions, the terms of which are described below in the section entitled “Potential Payment Upon Termination or Change-in-Control.” In this instance, we believe severance is appropriate in order to allow us to attract and retain the services of this executive.

Perquisites and Other Employee Benefits

We generally provide few and modest perquisites to our Named Executives, all of which are intended to minimize distractions, improve job efficiency and allow the Named Executives to concentrate on our business. An item is not a perk if it is integrally and directly related to the performance of the executive’s duties. The perquisites awarded to Named Executives have been quantified in the “Summary Compensation” table and are identified in the footnotes to the table.

All of our Named Executives are eligible to receive standard benefits such as medical, dental, vision, disability and life insurance and participation in our 401(k) plan and employee stock ownership plan. These benefits are available to all of our salaried employees and do not discriminate in favor of Named Executives.

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SUMMARY OF COMPENSATION

The following table sets forth information regarding salary, bonus, equity awards and other benefits paid for services rendered to The PBSJ Corporation by our Chief Executive Officer, our Chief Financial Officer and our three other most highly compensated executive officers (collectively the “Named Executives”) for the fiscal year ended September 30, 2006.

SUMMARY COMPENSATION

Name and Principal Position	Year	Salary ($)		Bonus ($)			Stock Awards ($) (2)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) (3)		All Other Compensation ($) (4)			Total ($)
John B. Zumwalt III Chairman of the Board; Chief Executive Officer	2006	$	295,000	$	200,000	(1)	$	25,200	$	0	$	0	$	32,785	$	35,145	(6)	$	588,130
Donald J. Vrana Senior Vice President and Chief Financial Officer	2006	$	229,167	$ $	150,000 50,000	(1) (5)	$	56,513	$	0	$	0	$	0	$	53,616	(7)	$	539,296
Todd J. Kenner President and Chief Marketing Officer	2006	$	272,500	$	175,000	(1)	$	10,051	$	0	$	0	$	41,835	$	175,142	(8)	$	674,528
Robert J. Paulsen Senior Executive Vice President and Chief Operating Officer	2006	$	270,000	$	120,000	(1)	$	3,559	$	0	$	0	$	30,662	$	29,989	(9)	$	454,210
John S. Shearer Executive Vice President; and National Service Director	2006	$	225,000	$	95,000	(1)	$	61,983	$	0	$	0	$	0	$	29,039	(10)	$	411,022

(1) Reflects cash awards to the Named Executives under our 2006 Bonus Plan, which is discussed in further detail under the heading, “Executive Compensation—Compensation Discussion and Analysis—Annual Bonus Plan.”

(2) Represents the dollar amount recognized for financial reporting purposes with respect to our 2006 fiscal year for the fair value of restricted stocks awarded in 2006 as well as prior fiscal years, in accordance with SFAS 123(R). Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. For additional information, refer to our note entitled “Stockholder’s Equity” in our Form 10-K for the respective fiscal years. See the “Grants of Plan-Based Awards In Fiscal Year 2006” table for further information on all restricted stock awards issued in 2006. These amounts reflect our accounting expense for restricted stock awards, and do not correspond to the actual values that may be realized by the Named Executives.

(3) Represents the annual change in the pension value in 2006. For additional information on the valuation assumptions used to calculate the pension value, refer to the table entitled “Pension Benefits” as well as our note entitled “Retirement Plans” in our Form 10-K for our fiscal year ended September 30, 2006.

(4) Calculated based on the aggregate incremental cost to PBSJ to provide these benefits.

(5) Hiring bonus paid pursuant to the Offer of Employment made to Mr. Vrana by the Company dated October 3, 2005.

(6) Consists of $8,835 for leased automobile expense, paid time-off cash-in $11,538, membership dues $6,677, health and welfare benefits expense $5,095, and a 401(k) defined contribution plan match of $3,000.

(7) Consists of $5,459 for leased automobile expense, paid time-off cash-in $9,615, health and welfare benefits expense $4,674, a 401(k) defined contribution match of $6,600, temporary living expenses of $17,329 and related income tax gross-up of $9,939.

(8) Consists of $8,157 for leased automobile expense, paid time-off cash-in $10,769, health and welfare benefits expense $5,311, a 401(k) defined contribution plan match of $6,600, relocation expenses of $98,830 and related income tax gross-up of $45,475.

(9) Consists of $7,910 for leased automobile expense, paid time-off cash-in $10,384, health and welfare benefits expense $5,095, and a 401(k) defined contribution plan match of $6,600.

(10) Consists of $7,033 for leased automobile expense, paid time-off cash-in $8,654, membership dues $1,657, health and welfare benefits expense $5,095, and a 401(k) defined contribution plan match of $6,600.

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The following table sets forth information regarding non-equity and equity awards granted to the Named Executives in fiscal year 2006.

GRANTS OF PLAN-BASED AWARDS IN FISCAL YEAR 2006

Name	Grant Date	Estimated Possible Payouts Under Non-Equity Incentive Plan Awards						Estimated Future Payouts Under Equity Incentive Plan Awards			All Other Stock Awards: Number of Shares of Stock (#) (1)	Grant Date Fair Value of Stock Awards (2)
		Threshold ($)		Target ($)		Maximum ($)		Threshold (#)	Target (#)	Maximum (#)
John B. Zumwalt III		$	0	$	0	$	0	—	—	—
											—		—
Donald J. Vrana		$	0	$	0	$	0	—	—	—
	10/31/05										5,000	$	135,000
Todd J. Kenner		$	0					—	—	—
											—		—
Robert J. Paulsen		$	0	$	0	$	0	—	—	—
											—		—
John S. Shearer		$	0	$	0	$	0	—	—	—	—		—

(1) The restricted stock award granted on October 31, 2005 will vest over the following periods: 2,000 shares on October 31, 2007 and 1,000 shares on each of October 31, 2008, October 31, 2009, and October 31, 2010.

(2) Represents the full grant date fair value based on the 9/30/04 stock valuation, which was the current valuation at the time of employment.

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The following table sets forth information regarding the outstanding equity awards held by our Named Executives in fiscal year 2006.

OUTSTANDING EQUITY AWARDS AS OF THE END OF FISCAL YEAR 2006

	Option Awards				Stock Awards
Named	Number of Securities Underlying Unexercised Options (#) Exercisable	Number of Securities Underlying Unexercised Options (#) Unexercisable	Option Exercise Price ($)	Option Expiration Date	Number of Shares or Units of Stock That Have Not Vested (#)		Market Value of Shares or Units of Stock That Have Not Vested ($) (1)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)	Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (1)
John B. Zumwalt III	—	—	—	—	30,000	(2)	$	730,200	—	—
Donald J. Vrana	—	—	—	—	5,000	(3)	$	121,700	—	—
Todd J. Kenner	—	—	—	—	19,080	(4)	$	464,407	—	—
Robert J. Paulsen	—	—	—	—	13,080	(5)	$	318,367	—	—
John S. Shearer	—	—	—	—	92,130	(6)	$	2,242,444	—	—

(1) The market value of the stock awards is based on the independently appraised value of our common stock as of September 30, 2006, which was $24.34

(2) Mr. Zumwalt’s restricted stock awards will vest on the later of March 1, 2008 or the start date of the 2008 stock window.

(3) Mr. Vrana’s restricted stock awards will vest as follows: 2,000 shares on October 31, 2007 and 1,000 shares on October 31, 2008, 2009 and 2010.

(4) Mr. Kenner’s restricted stock awards will vest as follows: 12,500 shares on October 31, 2015 and 6,580 shares on August 15, 2017.

(5) Mr. Paulsen’s restricted stock awards will vest on July 26, 2008.

(6) Mr. Shearer’s restricted stock awards will vest on July 8, 2007.

None of our Named Executives exercised stock options or had restricted stock awards vest during fiscal year 2006.

The following table sets forth information regarding the non-qualified defined benefit pension plan for our Named Executives in fiscal year 2006.

Pension Benefits

Name	Plan Name	Number of Years Credited Service (#) (1)	Present Value of Accumulated Benefit ($) (2)			Payments During Last Fiscal Year ($)
John B. Zumwalt III	Supplemental Income Program	> 10 years	$	656,431	(3)	$	0
Donald J. Vrana	—	—		—			—
Todd J. Kenner	Supplemental Income Program	> 10 years	$	271,158	(4)	$	0
Robert J. Paulsen	Supplemental Income Program	> 10 years	$	612,123	(5)	$	0
John S. Shearer	—	—		—			—

(1) The Supplemental Income Program is equal to a fixed benefit amount, for a specific number of years, with eligibility based on the number of years of service in the plan and the attainment of age 56 and is not totally based on years of credited services.

(2) The present value of the accumulated benefit is based on the following assumptions: (i) a benefit commencement date equal to the later of age 60 or 10 years of service in the plan; (ii) 3% per year cost of living increases; (iii) a discount rate of 5.75%; and monthly installments for the duration of the benefit. Additional SIP information is disclosed in “Note 9. Retirement Plans”.

(3) Mr. Zumwalt is fully vested in the SIP and upon retirement will receive an annual benefit of $75,000, adjusted for an annual 3% cost of living increase after benefits commence, for 15 years.

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(4) Upon retirement, Mr. Kenner will receive an annual benefit of $40,000, adjusted for an annual 3% cost of living increase until benefits commence, for 10 years.

(5) Upon retirement, Mr. Paulsen will receive an annual benefit of $75,000 increased by $2,788 annually after age 56, until retirement or age 65, whichever comes first, increased by 3% cost of living increase after benefits commence, for 15 years.

Non-qualified Defined Benefit Pension Plan

The Company maintains a two tiered noncontributory, unfunded, nonqualified defined benefit pension plan. The Key Employee Supplemental Option Plan (“KESOP”) is a two tiered plan that provides key officers and employees postretirement benefits. Tier one of the KESOP, known as the Key Employee Retention Program (“KERP”), provides an annual restricted stock award equal to five percent of the participant’s annual gross salary for a period of up to ten years. Benefits under the KERP vest at age 56 and after ten years of participation in the Plan and continuous service with the Company. Tier two of the KESOP, known as the Supplemental Income Program (“SIP”), is an unfunded plan that provides participants with retirement income for a specified period of between 10 and 15 years upon retirement, death, or disability. Participants in the SIP must also reach age 56, have ten years of participation in the Plan and had been continuously employed by the Company. The plan fixes a minimum level for retirement benefits to be paid to participants based on the participants’ position at the Company and their age and service at retirement. Mr. Zumwalt’s agreement includes an annual retainer for consulting services for a period of up to five years after retirement.

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

We have an agreement with Donald J. Vrana, our Senior Vice President and Chief Financial Officer that will require us to provide a payment to him in the event of his termination of employment by the Company without cause or a change in control of the Company. In order to illustrate the amount of this potential payment, the below table assumes that a triggering event with respect to the Named Executives occurred on September 30, 2006.

Donald J. Vrana, Senior Vice-President and Chief Financial Officer

	Voluntary Termination		Involuntary Not For Cause Termination		Termination After a Change-in-Control
Payment Upon Termination (1)
Cash Severance	$	0	$	135,416	$	135,416
Total:	$	0	$	135,416	$	135,416

(1) For purposes of this analysis, we assumed a base salary equal to $250,000. We are obligated to make a payment to Mr. Vrana in connection with the termination of his employment pursuant to the Offer of Employment, dated October 3, 2005. Mr. Vrana’s Offer of Employment provides for a lump sum severance payment equal to base salary if his employment is terminated without cause or if a change of control occurs within the first 24 months. However, if there is less than 6 months remaining in the two year period, the severance amount would be six months base salary. After the two year period, we are obligated to pay a lump sum payment equal to six months of Mr. Vrana’s current base salary if we terminate his employment without cause or for reasons related to a change in control.

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COMPENSATION OF NON-MANAGEMENT DIRECTORS

The following table sets forth information regarding non-management directors’ compensation in fiscal year 2006.

NON-MANAGEMENT DIRECTOR COMPENSATION FOR FISCAL YEAR 2006

Non-Management Director	Fees Earned or Paid in Cash ($)(1)		Stock Awards ($)		Option Awards ($)		All Other Compensation ($)		Total ($)
William D. Pruitt	$	115,250	$	0	$	0	$	0	$	115,250
Phillip E. Searcy	$	115,000	$	0	$	0	$	0	$	115,000
Frank A. Stasiowski	$	111,750	$	0	$	0	$	0	$	111,750

(1) This column reports the amount of cash compensation earned in fiscal year 2006 for Board and Committee services.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth certain information regarding the ownership of our common stock as of April 30, 2007 by: (1) each director; (2) each of the executive officers listed on the “Summary Compensation” table (the “Named Executives”); (3) all of our executive officers and directors as a group; and (4) all those known by us to be beneficial owners of more than five percent of our common stock. The applicable address for each of our directors and executive officers is c/o The PBSJ Corporation, 5300 West Cypress Street, Suite 200, Tampa, FL 33607.

Beneficial Owner	Common Stock Beneficially Owned (1)
	Number	Percentage
The PBSJ Employee Profit Sharing and Stock Ownership Plan and Trust	3,101,092	46.52	%
Todd J. Kenner (2)	109,683	1.65	%
Robert J. Paulsen (3)	136,407	2.05	%
William D. Pruitt (4)	—	—
Phillip E. Searcy (4)	—	—
John S. Shearer (5)	187,222	2.81	%
Frank A. Stasiowski (4)	—	—
John B. Zumwalt III (6)	185,301	2.78	%
Donald J. Vrana (7)	5,000	*
All executive officers and directors as a group (13 persons) (8)	707,917	10.62	%

 * Less than one percent.

(1) As of May 11, 2007, there were 6,666,161 shares of our common stock outstanding.

(2) Includes 13,808 shares owned via The PBSJ Employee Profit Sharing and Stock Ownership Plan and Trust and 19,080 shares of non-vested restricted stock.

(3) Includes 26,707 shares owned via The PBSJ Employee Profit Sharing and Stock Ownership Plan and Trust and 13,080 shares of non-vested restricted stock.

(4) Messrs. Pruitt, Searcy and Stasiowski are non-management members of The PBSJ Corporation Board and in accordance with our bylaws are not eligible to own stock.

(5) Includes 21,932 shares owned via The PBSJ Employee Profit Sharing and Stock Ownership Plan and Trust and 92,130 shares of non-vested restricted stock.

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(6) Includes 95,068 shares owned via The PBSJ Employee Profit Sharing and Stock Ownership Plan and Trust and 30,000 shares of non-vested restricted stock.

(7) Includes 5,000 shares non-vested restricted stock.

(8) Includes 174,121 shares owned via The PBSJ Employee Profit Sharing and Stock Ownership Plan and Trust and 176,422 shares of non-vested restricted stock.

The following table contains certain information about our equity compensation plans, which consist of a Restricted Stock Award Plan approved by the Board of Directors as of December 8, 2005. The number of shares of restricted stock available to be issued equals 2% of our common stock outstanding as of September 30, 2005.

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (in thousands) (a)	Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b)		Number of Securities Remaining Available for Issuance Under Equity Compensation Plans (excluding securities reflected in column(a)) (in thousands) (c)
Equity compensation plans approved by security holders	0	$	0	0
Equity compensation plans not approved by security holders	0		0	122,450
Total	0	$	0	122,450

ITEM 13. Certain Relationships and Related Transactions

We lease office space in a building which houses our Marietta, Georgia operations from BCE Properties, which is owned and controlled by James Belk. Mr. Belk is a former owner of Welker and a Vice-President and Project Director of ours. The lease was assumed in connection with our acquisition of Welker in March 2003. The rental cost of the space is $17,600 per month. On May 31, 2006, the lease expired and was not renewed. In June 2006, we moved our Marietta, Georgia operations to a new location.

We lease office space in a building which houses our Missoula, Montana operations from Cedar Enterprises, which is owned and controlled by Charlie K. Vandam. Mr. Vandam is a former owner of LWC and a Senior Program Manager of ours. The lease was assumed in connection with our acquisition of LWC in February 2005. The rental cost of the space is $9,500 per month.

We lease office space in a building which houses our Helena, Montana operations from Prickly Pear Enterprises, which is owned and controlled by Paul Callahan. Mr. Callahan is a former owner of LWC and a Vice-President and Senior Division Manager of ours. The lease was assumed in connection with our acquisition of LWC in February 2005. The rental cost of the space is $1,800 per month.

Throughout fiscal year 2006, we purchased $21,652 of products and services from PSMJ Resources, Inc. Frank A. Stasiowski, PSMJ Resources Inc.’s President and Chief Executive Officer joined our Board of Directors in July 2005. Our Audit Committee did not review the PSMJ Resources, Inc. purchases since the overall amount was deemed immaterial.

Throughout fiscal year 2006, Mr. Phillip Searcy received payments from the Company totaling $120,907 in accordance with his Supplemental Income Plan which originated when Mr. Searcy was employed with the Company. Mr. Searcy left full-time employment with the Company in 1992 and joined our Board of Directors in July 2005.

On August 14, 2006, the Board of Directors approved and adopted The PBSJ Corporation Code of Conduct, Building for the Future: Our Values, Principles, and Standards, as a statement of the Company’s core business ethics and compliance standards and values. These standards contain the Company’s core expectations as to the

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manner in which directors, officers, and employees will conduct business on behalf of PBSJ and its subsidiaries. All of our directors, officers, and employees are required to abide by our standards of business ethics and conduct to ensure that the Company operates in a consistent legal and ethical manner. The full text of our Code of Conduct is available on our internal website. If we amend our Code of Conduct, then we would post such amendment on our internal website, as required by applicable rules. If the board grants any waiver of any ethics policy for any director or executive officer, such waiver shall be promptly posted on our internal website.

Our employees are required to report any conduct that they believe in good faith to be an actual or apparent violation of the Code of Conduct. The Audit Committee has established procedures to receive, retain and address complaints regarding accounting, internal accounting controls or auditing matters and to allow for the confidential and anonymous submission by employees of related concerns.

Our bylaws require us to have at least five Board Members, the majority of which are shareholders of the Company and full time employees of the Company or its affiliates (as defined in the bylaws). The Board has developed a policy requiring at least seven Board Members, three of which are non-management directors. Messrs. Pruitt, Searcy and Stasiowski are the non-management directors and the Board has determined that each is “independent” as such term is defined in the corporate governance guidelines of the NYSE. In making this determination, the Board considered the transactions between the Company and PSMJ, of which Mr. Stasiowski is a principal and the fact that Mr. Searcy is a former executive with the Company and continues to receive supplemental income payments from the Company. The Board determined that neither of these relationships impaired their independence.

ITEM 14.    Principal Accountant Fees and Services

The following table presents fees for professional audit services rendered by Deloitte & Touche LLP for the audit of our financial statements for the fiscal years ended September 30, 2005 and September 30, 2004, and fees for other services rendered by Deloitte & Touche LLP during these periods.

	Fiscal Year 2006		Fiscal Year 2005
Audit Fees	$	2,980,246	$	213,650
Audit-Related Fees		1,269,666		4,500
Tax Fees		—		—
All Other Fees		178,305		284,161
Totals	$	4,428,217	$	502,311

Audit Fees. Audit services fees include fees for services rendered in connection with the annual audit of our consolidated financial statements. This category also includes fees during fiscal year 2006 for audits provided in connection with the audit for the year ended September 30, 2005 and the restatement of our fiscal year 2004 financial statements.

Audit-Related Fees. Audit-related fees primarily include fees associated with forensic services related to the investigation of the misappropriation required in connection with the fiscal 2005 audit and fiscal 2004 restatement of our financial statement.

Tax Fees. The Company did not incur fees with the principal accountant for tax or tax consultation services.

All Other Fees. All other fees primarily include fees to Deloitte Consulting LLP associated with performing benefits consulting for the Company’s health and welfare plans. Deloitte Consulting LLP does not set rates or provide actuarial calculations to the Company.

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Audit Committee Policies and Procedures for Pre-approval of Audit and Non-Audit Services

The Audit Committee is responsible for appointing, setting compensation and overseeing the work of the independent registered public accounting firm. The Audit Committee has established a policy regarding pre-approval of all audit and non-audit services provided by the independent registered public accounting firm.

On an on-going basis, management communicates specific projects and categories of service for which the advance approval of the Audit Committee is requested. The Audit Committee reviews these requests and advises management if the Audit Committee approves the engagement of the independent registered public accounting firm. On a periodic basis, management reports to the Audit Committee regarding the actual spending for such projects and services compared to the approved amounts. The Audit Committee also has delegated the ability to pre-approve audit and permitted non-audit services to the Chairman of the Audit Committee, Mr. Pruitt, provided that any pre-approvals by the Chairman are reported to the Audit Committee at a subsequent Audit Committee meeting.

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PART IV

ITEM 15.    Exhibits and Financial Statement Schedules

The following is a list of financial information filed as a part of this Annual Report:

1.      Consolidated Financial Statements—The following financial statements of The PBSJ Corporation and its subsidiaries are contained in Item 8 of this Form 10-K:
a)       Report of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.	56
b)       Consolidated Balance Sheets at September 30, 2006 and 2005.	57
c)       Consolidated Statements of Operations for each of the three years in the period ended September 30, 2006.	58
d)       Consolidated Statements of Stockholders’ Equity and comprehensive income at September 30, 2006, 2005 and 2004.	59
e)       Consolidated Statements of Cash Flows for each of the three years in the period ended September 30, 2006.	60
f)       Notes to the Consolidated Financial Statements.	61
2.      Financial Statement Schedules—The financial statement schedule information is included as part of the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K.
3.      A list of exhibits to this Annual Report is set forth in the Exhibit Index appearing elsewhere in this Annual Report and is incorporated herein by reference.

106

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	The PBSJ Corporation
Date: May 25, 2007	/S/    DONALD J. VRANA
	Donald J. Vrana
	Senior Vice President and
	Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of The PBSJ Corporation.

Date: May 25, 2007	/S/    JOHN B. ZUMWALT III
	John B. Zumwalt III
	Chairman of the Board and Chief Executive Officer
Date: May 25, 2007	/S/    DONALD J. VRANA
	Donald J. Vrana
	Senior Vice President and Chief Financial Officer
Date: May 25, 2007	/S/    ROBERT J. PAULSEN
	Robert J. Paulsen
	Director, Executive Vice President, Secretary and Vice Chairman of the Board
Date: May 25, 2007	/S/    TODD J. KENNER
	Todd J. Kenner
	Director and President
Date: May 25, 2007	/S/    JOHN S. SHEARER
	John S. Shearer
	Director and Senior Vice President
Date: May 25, 2007	/S/    WILLIAM D. PRUITT
	William D. Pruitt
	Director
Date: May 25, 2007	/S/    PHILLIP E. SEARCY
	Phillip E. Searcy
	Director
Date: May 25, 2007	/S/    FRANK A. STASIOWSKI
	Frank A. Stasiowski
	Director

107

Exhibit Index

Exhibit Number	Description
3.1	Articles of Incorporation, as amended. (1)
3.2	Amended and Restated Bylaws. (1)(4)
4.1	Form of Specimen Stock Certificate. (1)
10.1	The PBSJ Employee Profit Sharing and Stock Ownership Plan and Trust, amended and restated, dated February 22, 2002. (2)(3)
10.1(a)	Promissory Note previously filed as Exhibit 10.1 in Form 10-Q dated May 15, 2001; Promissory note, dated March 19, 2001, between Suntrust Bank, a Georgia corporation, and Post, Buckley, Schuh & Jernigan, Inc., the Registrant’s subsidiary.
10.2	Supplemental Income Plan effective as of January 12, 1988, as amended September 27, 1995. (1)
10.2(a)	Mortgage Security Agreement previously filed as Exhibit 10.2 in Form 10-Q dated May 15, 2001; Agreement, dated March 19, 2001, between Suntrust Bank, a Georgia corporation, and Post Buckley, Schuh & Jernigan, Inc., the Registrant’s subsidiary, as amended on December 10, 2003. (4)
10.3	Consulting/Supplemental Retirement/Death Benefits Agreement, dated November 6, 1987, between the Registrant and H. Michael Dye, as amended on October 16, 1989, August 21, 1991, March 1, 1993, February 6, 1995, May 19, 1998, November 22, 1999 and January 2, 2002. (1)
10.3(a)	ISDA Master Agreement previously filed as Exhibit 10.3 in Form 10-Q dated May 15, 2001; Agreement, dated March 8, 2001, between Suntrust Bank and Post Buckley, Schuh & Jernigan, Inc., the Registrant’s subsidiary. (4)
10.4	Supplemental Retirement/Death Benefits Agreement, dated December 17, 1987, between the Registrant and Robert J. Paulsen, as amended January 1, 2002 and January 1, 2004. (1)
10.4(a)	Schedule to the ISDA Master Agreement previously filed as Exhibit 10.4 in Form 10-Q dated May 15, 2001; Agreement, dated March 8, 2001, between Suntrust Bank and Post Buckley, Schuh & Jernigan, Inc., the Registrant’s subsidiary.
10.5	Supplemental Income Agreement, dated as of July 29, 1996, between the Registrant and Robert J. Paulsen (1)
10.5(a)	Confirmation of Interest Rate Transaction previously filed as Exhibit 10.5 in Form 10-Q dated May 15, 2001; Confirmation, dated March 9, 2001, between Suntrust Bank and Post Buckley, Schuh & Jernigan, Inc., the Registrant’s subsidiary. (4)
10.6	Employment/Retirement Benefits Agreement, dated February 15, 1999, between the Registrant and William W. Randolph. (1)
10.7	Supplemental Retirement/Death Benefits Agreement, dated December 17, 1987, between the Registrant and Richard A. Wickett, as amended on April 27, 1989, May 19, 1998, November 22, 1999 and January 2, 2002. (1)
10.8	Supplemental Retirement/Death Benefits Agreement dated December 17, 1987, between the Registrant and John B. Zumwalt, III, as amended on May 19, 1998, November 22, 1999, January 2, 2002 and January 1, 2004. (1)
10.9	Agreement, dated as of April 1, 1993, between the Registrant and John B. Zumwalt, III (1)
10.10	Split-Dollar Life Insurance Agreement dated February 1, 1999, by and between The Randolph Insurance Trust and the Registrant. (1)

108

Exhibit Number	Description
10.11	Credit Agreement, dated as of June 28, 1996, by and among Nationsbank, N.A., Suntrust Bank, Miami, N.A., Post, Buckley, Schuh and Jernigan, Inc., The PBSJ Corporation, and the subsidiaries named therein, as amended on July 3, 1997, June 30, 1999, June 30, 2002 and May 6, 2003. (1)(4)
10.12	Lease Agreement, dated as of March 25, 1998, by and between Post, Buckley, Schuh & Jernigan, Inc. and Highwoods/Florida Holdings L.P. as successor in interest to Cypress-Tampa II L.P., as amended on May 26, 1998, December 26, 1998, November 29, 1999, March 1, 2000 and July 1, 2003. (1)(4)
10.13	Employment Offer Letter dated October 7, 2005, between the Registrant and Donald J. Vrana. (5)
10.14	The PBSJ Corporation Stock Ownership Plan. (2)
10.15	Lease agreement, dated as of May 30, 2000, by and between Post, Buckley, Schuh & Jernigan, Inc. and RREEF American Reit Corp. G as amended on August 12, 2002 and February 19, 2003. (4)
10.16	Amendment No. 2 to Amended and Restated Credit Agreement, dated June 27, 2005, by and among Bank of America, N.A., The PBSJ Corporation, and the subsidiaries named therein, as amended May 5, 2003 and June 30, 2002. (5)
10.17	Key Employee Supplemental Option Plan effective as of July 23, 2002, as amended August 1, 2003. (4)
10.18	Agreement, dated as of April 1, 1993, between the Registrant and John S. Shearer. (4)
10.19	Amendment to Supplemental Income Retirement Agreement, dated January 1, 2000, between the Registrant and Todd J. Kenner. (4)
10.20	Key Employee Supplemental Income Program Agreement, dated January 1, 2004, between the Registrant and Todd J. Kenner. (4)
10.21	Supplemental Retirement/Death Benefits Agreement, dated September 24, 1986, between the Registrant and Phillip E. Searcy, as amended on April 17, 1989, October 18, 1993, February 6, 1995 and May 8, 2000. (4)
10.22	Agreement, dated April 1, 2005, between the Registrant and Rosario Licata. (4)
10.23	Agreement, dated April 22, 2005, between the Registrant and William Scott DeLoach. (4)
10.24	Agreement, dated November 23, 2005, between the Registrant and Maria Marietta Garcia. (4)
10.25	Non-Negotiable Promissory Note, dated February 23, 2006, between the Registrant and Kathryn J. Wilson. (4)
10.26	Non-Negotiable Promissory Note, dated February 23, 2006, between the Registrant and Richard A. Wickett. (4)
10.27	Tolling Agreement, dated March 16, 2006, between the Registrant and Kathryn J. Wilson. (4)
10.28	Tolling Agreement, dated March 16, 2006, between the Registrant and Richard A. Wickett. (4)
10.29	Non-Negotiable Promissory Note, dated February 13, 2007, between the Registrant and Richard J. Wickett. (6)
10.30	The PBSJ Employee Profit Sharing and Stock Ownership Plan and Trust, amended and restated, dated January 1, 2007. (6)
10.31	The First Amendment to the PBSJ Employee Profit Sharing and Stock Ownership Plan and Trust, amended and restated, dated January 1, 2007. (6)
14.1	PBSJ Code of Conduct. (6)

109

Exhibit Number	Description
21.1	Subsidiaries of the Registrant. (6)
31.1	Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (6)
31.2	Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (6)
32.1	Chief Executive Officer Certification and Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (6)

(1) Previously filed with the Registration Statement on Form 10 filed with the Commission on June 27, 2000.

(2) Previously filed with the Amended Registration Statement on Form 10A filed with the Commission on September 26, 2000.

(3) Previously filed with the Form 10-Q in a prior period.

(4) Previously filed with the Form 10-K in a prior period.

(5) Previously filed with the Form 8-K in a prior period.

(6) Filed herewith.

110

EX-10.29

Exhibit 10.29

REVISED

NON-NEGOTIABLE PROMISSORY NOTE

US $ 1,043,996.8 As of February 13, 2007

FOR VALUE RECEIVED, the undersigned, The PBSJ Corporation, a Florida corporation (“Maker”), hereby promises to pay to Richard A. Wickett (“Payee”), at such place as Payee shall designate in writing, in lawful money of the United States of America, the principal sum of One million forty-three thousand nine hundred ninety-six and 80/100 Dollars (US $ 1,043,996.80), together with interest thereon, or on so much thereof as is from time to time outstanding, at the rates hereinafter set forth below, the principal sum and interest being payable as set forth below.

THIS REVISED NOTE IS TO REPLACE THE EARLIER NOTE OF EVEN DATE TO CORRECT TYPOGRAPHICAL ERRORS AND CONFIRM THE CORRECT AMOUNT OF THE NOTE.

Section I. Rate of Interest

From and after the date hereof through December 30, 2007, interest shall accrue on the outstanding principal balance hereof at 8.25% per annum, which is the prime rate of Maker’s primary bank lender (the “Prime Rate”) as of the date hereof. On each December 31^st following the date hereof through and including December 31, 2011, the interest rate hereunder shall be reset to the Prime Rate as of the date thereof, such that from such December 31^st through the next succeeding December 30^th, interest shall accrue on the outstanding principal balance hereof at such Prime Rate.

Section II. Payment of Principal and Interest

Subject to Sections III, IV and V, on the 1st day of each month commencing March 1, 2007 and ending January 1, 2012, Maker shall pay to Payee $1 of principal and all interest accrued but not paid prior to such date. On February 28, 2012, Maker shall pay to Payee the remaining principal balance hereof then outstanding and not subject to a claim of set-off by Maker and all interest accrued but not paid prior to such date.

Section III. Prepayments

Maker shall have the right to prepay the indebtedness evidenced by this Note, in full or in part, at any time, without penalty, fee or charge.

Section IV. Events of Default

The occurrence of any of the following events or conditions shall constitute an “Event of Default” hereunder:

(a) Except as set forth in Section V, Maker shall fail to make any payment of principal or interest under this Note when due, and such failure shall have continued for 30 days after written notice from Payee to Maker;

(b) Maker shall: (i) file a voluntary petition or assignment in bankruptcy or a voluntary petition or assignment or answer seeking liquidation, reorganization, arrangement, readjustment of Maker’s debts, or any other relief under 11 U.S.C. §§ 101 et. seq. as the same may be amended (the “Bankruptcy Code”), or under any other act or law pertaining to insolvency or debtor relief, whether state, federal, or foreign, now or hereafter existing; (ii) enter into any agreement indicating consent to, approval of, or acquiescence in, any such petition or proceeding; (iii) apply for or permit the appointment, by consent or acquiescence, of a receiver, custodian or trustee of all or a substantial part of Maker’s property; (iv) make an assignment for the benefit of creditors; (v) be unable or shall fail to pay Maker’s debts generally as such debts become due, or (vi) admit in writing Maker’s inability or failure to pay Maker’s debts generally as such debts become due; or

(c) There occurs (i) a filing or issuance against Maker of an involuntary petition in bankruptcy or seeking liquidation, reorganization, arrangement, readjustment of Maker’s debts or any other relief under the Bankruptcy Code, or under any other act or law pertaining to insolvency or debtor relief, whether state, federal or foreign, now or hereafter existing; (ii) the involuntary appointment of a receiver, liquidator, custodian or trustee of Maker or for all or a substantial part of Maker’s property; or (iii) the issuance of a warrant of attachment, execution or similar process against all or any substantial part of the property of Maker and any of such (i) – (iii) shall not have been discharged (or provision shall not have been made for such discharge), or stay of execution thereof shall not have been procured, within ninety (90) days from the date of entry thereof.

Upon any Event of Default, the total outstanding principal and all interest payable hereunder shall become immediately due and payable.

Section V. Set-Off

Upon notice to Payee specifying in reasonable detail the basis therefor, Maker may set-off any Claim it may have against Payee against amounts otherwise payable under this Note. The exercise of such right of set-off by Maker in good faith, whether or not ultimately determined to be justified, will not constitute an Event of Default under this Note. Neither the exercise of nor the failure to exercise such right of set-off will constitute an election of remedies or limit Maker in any manner in the enforcement of any other remedies that may be available to it. For purposes of this Section V, “Claims” means any claims arising from any loss, liability, damage, expense (including costs of investigation and defense and reasonable attorneys’ fees and expenses) or diminution of value sustained by Maker.

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Section VI. General Provisions

In no event shall the amount of interest due or payable hereunder exceed the maximum rate of interest allowed by applicable law, and in the event any such payment is inadvertently paid by Maker or inadvertently received by Payee, then such excess sum shall be credited as a payment of principal, unless Maker shall notify Payee, in writing, that Maker elects to have such excess sum returned to Maker forthwith. It is the express intent hereof that Maker not pay and Payee not receive, directly or indirectly in any manner whatsoever, interest in excess of that which may be legally paid by Maker under applicable law.

Neither this Note nor any unpaid proceeds hereof may be assigned, negotiated or otherwise transferred by Payee, except by will or pursuant to the laws of descent and distribution.

THIS NOTE, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA (WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS).

[The balance of the page intentionally left blank. Signatures on next page.]

3

IN WITNESS WHEREOF, the undersigned Maker has hereunto executed this instrument as of the day and year first above written.

MAKER:

The PBSJ Corporation
By:
Name:	John B. Zumwalt, III
Title:	Chairman, CEO

4

EX-10.30

Exhibit 10.30

PBSJ EMPLOYEE PROFIT SHARING AND

STOCK OWNERSHIP PLAN AND TRUST AGREEMENT

PBSJ EMPLOYEE PROFIT SHARING AND

STOCK OWNERSHIP PLAN AND TRUST AGREEMENT

TABLE OF CONTENTS

ARTICLE I	DEFINITIONS	1
ARTICLE II	ADMINISTRATION	16
2.1	POWERS AND RESPONSIBILITIES OF THE EMPLOYER	16
2.2	DESIGNATION OF ADMINISTRATIVE AUTHORITY	17
2.3	ALLOCATION AND DELEGATION OF RESPONSIBILITIES	17
2.4	POWERS AND DUTIES OF THE ADMINISTRATOR	17
2.5	RECORDS AND REPORTS	19
2.6	APPOINTMENT OF ADVISERS	19
2.7	PAYMENT OF EXPENSES	19
2.8	CLAIMS PROCEDURE	19
2.9	CLAIMS REVIEW PROCEDURE	20
ARTICLE III	ELIGIBILITY	20
3.1	CONDITIONS OF ELIGIBILITY	20
3.2	EFFECTIVE DATE OF PARTICIPATION	21
3.3	DETERMINATION OF ELIGIBILITY	21
3.4	TERMINATION OF ELIGIBILITY	21
3.5	OMISSION OF ELIGIBLE EMPLOYEE	21
3.6	INCLUSION OF INELIGIBLE EMPLOYEE	22
3.7	REHIRED EMPLOYEES AND BREAKS IN SERVICE	22
3.8	ELECTION NOT TO PARTICIPATE	23
ARTICLE IV	CONTRIBUTION AND ALLOCATION	23
4.1	FORMULA FOR DETERMINING EMPLOYER CONTRIBUTION	23
4.2	PARTICIPANT’S SALARY REDUCTION ELECTION	24
4.3	TIME OF PAYMENT OF EMPLOYER CONTRIBUTION	28
4.4	ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS	28
4.5	ACTUAL DEFERRAL PERCENTAGE TESTS	34
4.6	ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS	38
4.7	ACTUAL CONTRIBUTION PERCENTAGE TESTS	42
4.8	ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS	46
4.9	MAXIMUM ANNUAL ADDITIONS	49
4.10	ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS	51
4.11	PLAN-TO-PLAN TRANSFERS FROM QUALIFIED PLANS	53

ii

4.12	ROLLOVERS FROM OTHER PLANS	54
4.13	DIRECTED INVESTMENT ACCOUNT	55
4.14	QUALIFIED MILITARY SERVICE	56
4.15	SPECIAL LIMITATION FOR COMMONWEALTH OF PUERTO RICO	56
ARTICLE V	FUNDING AND INVESTMENT POLICY	56
5.1	INVESTMENT POLICY	56
5.2	APPLICATION OF CASH	57
5.3	LOANS TO THE TRUST	57
ARTICLE VI	VALUATIONS	58
6.1	VALUATION OF THE TRUST FUND	58
6.2	METHOD OF VALUATION	59
ARTICLE VII	DETERMINATION AND DISTRIBUTION OF BENEFITS	59
7.1	DETERMINATION OF BENEFITS UPON RETIREMENT	59
7.2	DETERMINATION OF BENEFITS UPON DEATH	59
7.3.	DETERMINATION OF BENEFITS IN EVENT OF DISABILITY	61
7.4	DETERMINATION OF BENEFITS UPON TERMINATION	61
7.5	DISTRIBUTION OF BENEFITS	63
7.6	HOW PLAN BENEFIT WILL BE DISTRIBUTED	68
7.7	DISTRIBUTION FOR MINOR OR INCOMPETENT BENEFICIARY	69
7.8	LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN	69
7.9	RIGHT OF FIRST REFUSALS	70
7.10	STOCK CERTIFICATE LEGEND	71
7.11	PUT OPTION	71
7.12	NONTERMINABLE PROTECTIONS AND RIGHTS	73
7.13	PRE-RETIREMENT DISTRIBUTION	73
7.14	QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION	73
ARTICLE VIII	TRUSTEE	74
8.1	BASIC RESPONSIBILITIES OF THE TRUSTEE	74
8.2	INVESTMENT POWERS AND DUTIES OF THE TRUSTEE	74
8.3	OTHER POWERS OF THE TRUSTEE	75
8.4	LOANS TO PARTICIPANTS	77
8.5	VOTING COMPANY STOCK	79
8.6	DUTIES OF THE TRUSTEE REGARDING PAYMENTS	79
8.7	TRUSTEE’S COMPENSATION AND EXPENSES AND TAXES	79
8.8	ANNUAL REPORT OF THE TRUSTEE	79

iii

8.9	AUDIT	80
8.10	RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE	81
8.11	TRANSFER OF INTEREST	81
8.12	TRUSTEE INDEMNIFICATION	82
8.13	DIRECT ROLLOVER	82
ARTICLE IX	AMENDMENT, TERMINATION AND MERGERS	83
9.1	AMENDMENT	83
9.2	TERMINATION	84
9.3	MERGER, CONSOLIDATION OR TRANSFER OF ASSETS	84
ARTICLE X	TOP HEAVY	85
10.1	TOP HEAVY PLAN REQUIREMENTS	85
10.2	DETERMINATION OF TOP HEAVY STATUS	85
ARTICLE XI	MISCELLANEOUS	88
11.1	PARTICIPANT’S RIGHTS	88
11.2	ALIENATION	88
11.3	CONSTRUCTION OF PLAN	89
11.4	GENDER AND NUMBER	89
11.5	LEGAL ACTION	89
11.6	PROHIBITION AGAINST DIVERSION OF FUNDS	89
11.7	EMPLOYER’S AND TRUSTEE’S PROTECTIVE CLAUSE	90
11.8	INSURER’S PROTECTIVE CLAUSE	90
11.9	RECEIPT AND RELEASE FOR PAYMENTS	90
11.10	ACTION BY THE EMPLOYER	90
11.11	NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY	90
11.12	HEADINGS	91
11.13	APPROVAL BY INTERNAL REVENUE SERVICE	91
11.14	UNIFORMITY	92
11.15	SECURITIES AND EXCHANGE COMMISSION APPROVAL	92
ARTICLE XII	PARTICIPATING EMPLOYERS	92
12.1	ADOPTION BY OTHER EMPLOYERS	92
12.2	REQUIREMENTS OF PARTICIPATING EMPLOYERS	92
12.3	DESIGNATION OF AGENT	92
12.4	EMPLOYEE TRANSFERS	93
12.5	PARTICIPATING EMPLOYER CONTRIBUTION AND FORFEITURES	93
12.6	AMENDMENT	93
12.7	DISCONTINUANCE OF PARTICIPATION	93
12.8	ADMINISTRATOR’S AUTHORITY	94

iv

PBSJ EMPLOYEE PROFIT SHARING AND

STOCK OWNERSHIP PLAN AND TRUST AGREEMENT

THIS AGREEMENT, hereby made and entered into this      day of                     , 200   by and between Post, Buckley, Schuh & Jernigan, Inc. (herein referred to as the “Employer”) and Michael E. Dozzi, Mark A. Ramseur, Sara Maples, Wayne J. Overman, Reynaldo A. Cortez, Charles D. Nostra, Donald R. Vogt, Wade C. Kelly, Sharon M. Phillips, Charles R. Redding, III and Barry J. Schulz (herein referred to as the “Trustees”).

WITNESSETH:

WHEREAS, the Employer heretofore established this plan effective January 1, 1985, (hereinafter called the “Effective Date”) as a profit sharing plan, and as employee stock ownership plan , effective October 1, 1994 in recognition of the contribution made to its successful operation by its employees and for the exclusive benefit of its eligible employees; and

WHEREAS, this plan known as PBSJ Employee Profit Sharing and Stock Ownership Plan and Trust Agreement (hereafter referred to as the “Plan”) was previously amended and restated effective January 1, 1997; and

WHEREAS, the Employer has adopted the following amendments to the PBSJ Employee Profit Sharing And Stock Ownership Plan and Trust: Amendment No. 1 on September 18, 2002; Amendment No. 2 on March 25, 2003; Amendment No. 3 on March 30, 2004; Amendment No. 4 on May 25, 2004; Amendment No. 5 on January 19, 2004; Amendment No. 6 on January 26, 2005; Amendment No. 7 on March 29, 2005; and the Mandatory Distribution Amendment on March 28, 2005.

WHEREAS, under the terms of the Plan, the Employer has the ability to amend the Plan, provided the Trustee joins in such amendment if the provisions of the Plan affecting the Trustee are amended; and

WHEREAS, contributions to the Plan will be made by the Employer and such contributions made to the trust will be invested primarily in the capital stock of the Employer;

NOW, THEREFORE, effective January 1, 2007, except as otherwise provided, the Employer and the Trustee in accordance with the provisions of the Plan pertaining to amendments thereof, hereby amend the Plan in its entirety and restate the Plan to provide as follows:

ARTICLE I

DEFINITIONS

1.1 “Act” means the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.

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1.2 “Administrator” means the Employer unless another person or entity has been designated by the Employer pursuant to Section 2.2 to administer the Plan on behalf of the Employer.

1.3 “Affiliated Employer” means any corporation which is a member of a controlled group of corporations (as defined in Code Section 414(b)) which includes the Employer; any trade or business (whether or not incorporated) which is under common control (as defined in Code Section 414(c)) with the Employer; any organization (whether or not incorporated) which is a member of an affiliated service group (as defined in Code Section 414(m)) which includes the Employer; and any other entity required to be aggregated with the Employer pursuant to Regulations under Code Section 414(o).

1.4 “Aggregate Account” means, with respect to each Participant, the value of all accounts maintained on behalf of a Participant, whether attributable to Employer or Employee contributions, subject to the provisions of Section 10.2.

1.5 “Anniversary Date” means the last day of the Plan Year.

1.6 “Beneficiary” means the person (or entity) to whom the share of a deceased Participant’s total account is payable, subject to the restrictions of Sections 7.2 and 7.5. For purposes of Sections 7.5(f) and 7.5(g), “designated Beneficiary” is the person designated under Code Section 401(a)(9) and Regulation 1.401(a)(9)-4.

1.7 “Catch-Up Contribution” means Deferred Compensation made by a Catch-Up Eligible Participant that exceeds, during any taxable year of such Participant:

(a) a statutory limit on Deferred Compensation or “annual additions” provided in Code Sections 401(a)(30), 402(h), 403(b), 408, 415(c), or 457(b)(2) (without regard to Code Section 457(b)(3), as applicable; or

(b) a Plan limit on Deferred Compensation which is not a limit provided in (a) above.

1.8 “Catch-Up Eligible Participant” means an Employee who:

(a) is eligible to defer Compensation pursuant to Section 4.2; and

(b) will attain age 50 or higher before the end of the Employee’s taxable year.

1.9 “Code” means the Internal Revenue Code of 1986, as amended or replaced from time to time.

1.10 “Company Stock” means common stock issued by the Employer (or by a corporation which is a member of the controlled group of corporations of which the Employer is a member) which is readily tradeable on an established securities market. If there is no common stock which meets the foregoing requirement, the term “Company Stock” means common stock issued by the Employer (or by a corporation which is a member of the same controlled group) having a combination of voting power and dividend rights

2

equal to or in excess of: (A) that class of common stock of the Employer (or of any other such corporation) having the greatest voting power, and (B) that class of common stock of the Employer (or of any other such corporation) having the greatest dividend rights. Noncallable preferred stock shall be deemed to be “Company Stock” if such stock is convertible at any time into stock which constitutes “Company Stock” hereunder and if such conversion is at a conversion price which (as of the date of the acquisition by the Trust) is reasonable. For purposes of the preceding sentence, pursuant to Regulations, preferred stock shall be treated as noncallable if after the call there will be a reasonable opportunity for a conversion which meets the requirements of the preceding sentence.

1.11 “Company Stock Account” means the account of a Participant which is credited with the shares of Company Stock purchased and paid for by the Trust Fund or contributed to the Trust Fund.

A separate accounting shall be maintained with respect to that portion of the Company Stock Account attributable to Elective Contributions and Non-Elective Contributions.

1.12 “Compensation” means the total amount paid by the Employer to the Employee in the course of Employer’s trade or business and

(a) excluding (even if includible in gross income) reimbursements or other expense allowances, fringe benefits (cash or noncash), moving expenses, deferred compensation, and welfare benefits.

(b) excluding overtime.

(c) excluding commissions.

(d) excluding bonuses.

(e) excluding Compensation in excess of $150,000 or such larger amount as the Commissioner of Internal Revenue may prescribe.

(f) including amounts which are contributed by the Employer pursuant to a salary reduction agreement and which are not includible in the gross income of the Participant under Code Sections 125, 132(0(4), 402(e)(3), 402(h)(l)(B), 403(b) or 457(b), and Employee contributions described in Code Section 414(h)(2) that are treated as Employer contributions For purposes of Code Section 125, amounts under Code Section 125 include any amounts not available to a Participant in cash in lieu of group health coverage because the Participant is unable to certify that the Participant has other health coverage. An amount will be treated as an amount under Code Section 125 only if the Employer does not request or collect information regarding the Participant’s other health coverage as part of the enrollment process for the health plan.

3

For a Participant’s initial year of participation, Compensation shall be recognized as of such Employee’s effective date of participation pursuant to Section 3.2.

If any class of Employees is excluded from the Plan, then Compensation for any Employee who becomes eligible or ceases to be eligible to participate during a Plan Year shall only include Compensation while the Employee is an Eligible Employee.

For purposes of this Section, if the Plan is a plan described in Code Section 413(c) or 414(f) (a plan maintained by more than one Employer), the limitation applies separately with respect to the Compensation of any Participant from each Employer maintaining the Plan.

1.13 “Contract” or “Policy” means any life insurance policy, retirement income policy or annuity policy (group or individual) issued pursuant to the terms of the Plan. In the event of any conflict between the terms of this Plan and the terms of any contract purchased hereunder, the Plan provisions shall control.

1.14 “Current Obligations” means Trust obligations arising from extension of credit to the Trust and payable in cash within (1) year from the date an Employer contribution is due.

1.15 “Deferred Compensation” with respect to any Participant means the amount of the Participant’s total Compensation which has been contributed to the Plan in accordance with the Participant’s deferral election pursuant to Section 4.2 excluding any such amounts distributed as excess “annual additions” pursuant to Section 4.10. Deferred Compensation (including Catch-Up Contributions) shall not exceed “415 Compensation.”

1.16 “Distribution Calendar Year” means a calendar year for which a minimum distribution pursuant to Sections 7.5(f) and 7.5(g) is required. For distributions beginning before the Participant’s death, the first Distribution Calendar Year is the calendar year immediately preceding the calendar year which contains the Participant’s required beginning date under Section 7.5(f). For distributions beginning after the Participant’s death, the first Distribution Calendar Year is the calendar year in which distributions are required to begin under Section 7.5(g)(2). The required minimum distribution for the Participant’s first Distribution Calendar Year will be made on or before the Participant’s required beginning date. The required minimum distribution for other Distribution Calendar Years, including the required minimum distribution for the Distribution Calendar Year in which the Participant’s required beginning date occurs, will be made on or before December 31st of that Distribution Calendar Year.

1.17 “Early Retirement Date.” This Plan does not provide for a retirement date prior to Normal Retirement Date.

1.18 “Elective Contribution” means the Employer contributions to the Plan of Deferred Compensation excluding any such amounts distributed as excess “annual additions” pursuant to Section 4.10. In addition, the Employer matching contribution made pursuant to Section 4.1(b) which is used to satisfy the “Actual Deferral Percentage” tests and any Employer Qualified Non-Elective Contribution made pursuant to Section 4.1(c) and Section 4.6(b) which is used to satisfy the “Actual Deferral Percentage” tests shall

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be considered an Elective Contribution for purposes of the Plan. Any contributions deemed to be Elective Contributions (whether or not used to satisfy the “Actual Deferral Percentage” (“ADP”) tests or the “Actual Contribution Percentage” (“ACP”) tests) shall be subject to the requirements of Sections 4.2(b) and 4.2(c) and shall further be required to satisfy the nondiscrimination requirements of Regulation 1.401(k)-1(b)(5) and Regulation 1.401(m)-1(b)(5), the provisions of which are specifically incorporated herein by reference.

1.19 “Eligible Employee” means any Employee.

Employees who are Leased Employees within the meaning of Code Sections 414(n)(2) and 414(o)(2) shall not be eligible to participate in this Plan.

Employees who are non-resident aliens who receive no earned income from sources within the United States shall not be eligible to participate in this Plan.

Employees whose employment is governed by the terms of a collective bargaining agreement between Employee representatives (within the meaning of Code Section 7701(a)(46)) and the Employer under which retirement benefits were the subject of good faith bargaining between the parties will not be eligible to participate in this Plan unless such agreement expressly provides for coverage in this Plan.

Employees of Affiliated Employers shall not be eligible to participate in this Plan unless such Affiliated Employers have specifically adopted this Plan in writing. Effective for Plan Years beginning on or after January 1, 2007, PBS&J Caribe Engineering, C.S.P. shall not be a participating Affiliated Employer and none of its Employees shall be eligible to participate or receive a contribution on or after such date.

Individuals classified by the Employer as independent contractors or employees otherwise excludable from the Plan who are subsequently determined by the Internal Revenue Service or by other binding determination that such an individual is an Employee or Lease Employee shall not be an Eligible Employee and shall not be eligible to participate in this Plan.

1.20 “Employee” means any person who is employed by the Employer or Affiliated Employer, and excludes any person who is employed as an independent contractor. Employee shall include Leased Employees within the meaning of Code Sections 414(n)(2) and 414(o)(2) unless such Leased Employees are covered by a plan described in Code Section 414(n)(5) and such Leased Employees do not constitute more than 20% of the recipient’s non-highly compensated work force.

1.21 “Employer” means Post, Buckley, Schuh & Jernigan, Inc. and, after January 1, 2007, means The PBSJ Corporation and any successor which shall maintain this Plan; and any predecessor which has maintained this Plan. The Employer is a corporation with principal offices in the State of Florida. In addition, where appropriate, the term Employer shall include any Participating Employer (as defined in Section 12.1) which shall adopt this Plan.

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1.22 “Excess Aggregate Contributions” means, with respect to any Plan Year, the excess of the aggregate amount of the Employer matching contributions made pursuant to Section 4.1(b) and any qualified non-elective contributions or elective deferrals taken into account pursuant to Section 4.7(c) on behalf of Highly Compensated Participants for such Plan Year, over the maximum amount of such contributions permitted under the limitations of Section 4.7(a) (determined by hypothetically reducing contributions made on behalf of Highly Compensated Participants in order of the actual contribution ratios beginning with the highest of such ratios). Such determination shall be made after first taking into account corrections of any Excess Deferred Compensation pursuant to Section 4.2 and taking into account any adjustments of any Excess Contributions pursuant to Section 4.6.

1.23 “Excess Contributions” means, with respect to a Plan Year, the excess of Elective Contributions used to satisfy the “Actual Deferral Percentage” tests made on behalf of Highly Compensated Participants for the Plan Year over the maximum amount of such contributions permitted under Section 4.5(a) (determined by hypothetically reducing contributions made on behalf of Highly Compensated Participants in order of the actual deferral ratios beginning with the highest of such ratios). Excess Contributions shall be treated as an “annual addition” pursuant to Section 4.9(b).

1.24 “Excess Deferred Compensation” means, with respect to any taxable year of a Participant, the excess of the aggregate amount of such Participant’s Deferred Compensation and the elective deferrals pursuant to Section 4.2(e) actually made on behalf of such Participant for such taxable year, over the dollar limitation provided for in Code Section 402(g), which is incorporated herein by reference. Excess Deferred Compensation shall be treated as an “annual addition” pursuant to Section 4.9(b) when contributed to the Plan unless distributed to the affected Participant not later than the first April 15th following the close of the Participant’s taxable year. Additionally, for purposes of Sections 10.2 and 4.4(i), Excess Deferred Compensation shall continue to be treated as Employer contributions even if distributed pursuant to Section 4.2(e). However, Excess Deferred Compensation of Non-Highly Compensated Participants is not taken into account for purposes of Section 4.5(a) to the extent such Excess Deferred Compensation occurs pursuant to Section 4.2(d).

1.25 “ESOP” means an employee stock ownership plan that meets the requirements of Code Section 4975(e)(7) and Regulation 54.4975-11.

1.26 “Exempt Loan” means a loan made to the Plan by a disqualified person or a loan to the Plan which is guaranteed by a disqualified person and which satisfies the requirements of Section 2550.408b-3 of the Department of Labor Regulations, Section 54.4975-7(b) of the Treasury Regulations and Section 5.3 hereof.

1.27 “Fiduciary” means any person who (a) exercises any discretionary authority or discretionary control respecting management of the Plan or exercises any authority or control respecting management or disposition of its assets, (b) renders investment advice for a fee or other compensation, direct or indirect, with respect to any monies or other property of the Plan or has any authority or responsibility to do so, or (c) has any discretionary authority or discretionary responsibility in the administration of the Plan.

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1.28 “Fiscal Year” means the Employer’s accounting year of 12 months commencing on October 1 of each year and ending the following September 30.

1.29 “Forfeiture” means that portion of a Participant’s Account that is not Vested, and occurs on the earlier of:

(a) the distribution of the entire Vested portion of the Participant’s Account of a Former Participant who has severed employment with the Employer, or

(b) the last day of the Plan Year in which a Former Participant who has severed employment with the Employer incurs five (5) consecutive 1-Year Breaks in Service.

Regardless of the preceding provisions, if a Former Participant is eligible to share in the allocation of Employer contributions or Forfeitures in the year in which the Forfeiture would otherwise occur, then the Forfeiture will not occur until the end of the first Plan Year for which the Former Participant is not eligible to share in the allocation of Employer contributions or Forfeitures. Furthermore, the term “Forfeiture” shall also include amounts deemed to be Forfeitures pursuant to any other provision of this Plan.

1.30 “Former Participant” means a person who has been a Participant, but who has ceased to be a Participant for any reason.

1.31 “414(s) Compensation” means any definition of compensation that satisfies the nondiscrimination requirements of Code Section 414(s) and the Regulations thereunder. The period for determining 414(s) Compensation must be either the Plan Year or the calendar year ending with or within the Plan Year. An Employer may further limit the period taken into account to that part of the Plan Year or calendar year in which an Employee was a Participant in the component of the Plan being tested. The period used to determine 414(s) Compensation must be applied uniformly to all Participants for the Plan Year.

1.32 “Highly Compensated Employee” or “HCE” means an Employee described in Code Section 414(q) and the Regulations thereunder, and generally means any Employee who:

(a) was a “five percent owner” as defined in Section 1.36(b) at any time during the “determination year” or the “look-back year”; or

(b) for the “look-back year” had “415 Compensation” from the Employer in excess of $80,000 and were in the Top Paid Group of Employees for the Plan Year. The $80,000 amount is adjusted at the same time and in the same manner as under Code Section 415(d), except that the base period is the calendar quarter ending September 30, 1996.

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The “determination year” means the Plan Year for which testing is being performed, and the “look back year” means the immediately preceding twelve (12) month period.

A highly compensated former Employee is based on the rules applicable to determining Highly Compensated Employee status as in effect for the “determination year,” in accordance with Regulation 1.414(q)-1T, A-4 and IRS Notice 97-45 (or any superseding guidance).

In determining who is a Highly Compensated Employee, Employees who are non-resident aliens and who received no earned income (within the meaning of Code Section 911(d)(2)) from the Employer constituting United States source income within the meaning of Code Section 861(a)(3) shall not be treated as Employees. Additionally, all Affiliated Employers shall be taken into account as a single employer and Leased Employees within the meaning of Code Sections 414(n)(2) and 414(o)(2) shall be considered Employees unless such Leased Employees are covered by a plan described in Code Section 414(n)(5) and are not covered in any qualified plan maintained by the Employer. The exclusion of Leased Employees for this purpose shall be applied on a uniform and consistent basis for all of the Employer’s retirement plans. Highly Compensated Former Employees shall be treated as Highly Compensated Employees without regard to whether they performed services during the “determination year.”

1.33 “Highly Compensated Participant” means any Highly Compensated Employee who is eligible to participate in the component of the Plan being tested.

1.34 “Hour of Service” means, for purposes of vesting and benefit accrual, (1) each hour for which an Employee is directly or indirectly compensated or entitled to compensation by the Employer for the performance of duties (these hours will be credited to the Employee for the computation period in which the duties are performed); (2) each hour for which an Employee is directly or indirectly compensated or entitled to compensation by the Employer (irrespective of whether the employment relationship has terminated) for reasons other than performance of duties (such as vacation, holidays, sickness, jury duty, disability, lay-off, military duty or leave of absence) during the applicable computation period (these hours will be calculated and credited pursuant to Department of Labor regulation 2530.200b-2 which is incorporated herein by reference); (3) each hour for which back pay is awarded or agreed to by the Employer without regard to mitigation of damages (these hours will be credited to the Employee for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement or payment is made). The same Hours of Service shall not be credited both under (1) or (2), as the case may be, and under (3).

Hours of Service will be based on actual hours for Employees for whom actual hours are recorded or maintained and will be based on the weekly equivalency method (45 hours per week) for Employees for whom actual hours are not determinable or recorded.

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Notwithstanding (2) above, (i) no more than 501 Hours of Service are required to be credited to an Employee on account of any single continuous period during which the Employee performs no duties (whether or not such period occurs in a single computation period); (ii) an hour for which an Employee is directly or indirectly paid, or entitled to payment, on account of a period during which no duties are performed is not required to be credited to the Employee if such payment is made or due under a plan maintained solely for the purpose of complying with applicable worker’s compensation, or unemployment compensation or disability insurance laws; and (iii) Hours of Service are not required to be credited for a payment which solely reimburses an Employee for medical or medically related expenses incurred by the Employee.

For purposes of (2) above, a payment shall be deemed to be made by or due from the Employer regardless of whether such payment is made by or due from the Employer directly, or indirectly through, among others, a trust fund, or insurer, to which the Employer contributes or pays premiums and regardless of whether contributions made or due to the trust fund, insurer, or other entity are for the benefit of particular Employees or are on behalf of a group of Employees in the aggregate.

For purposes of this Section, Hours of Service will be credited for employment with other Affiliated Employers. The provisions of Department of Labor regulations 2530.200b-2(b) and (c) are incorporated herein by reference.

1.35 “Income” means the income or losses allocable to Excess Deferred Compensation, Excess Contributions or Excess Aggregate Contributions which amount shall be allocated in the same manner as income or losses are allocated pursuant to Section 4.4(d).

1.36 “Investment Manager” means an entity that (a) has the power to manage, acquire, or dispose of Plan assets and (b) acknowledges nonfiduciary responsibility to the Plan in writing. Such entity must be a person, firm, or corporation registered as an investment adviser under the Investment Advisers Act of 1940, a bank, or an insurance company.

1.37 “Key Employee” means an Employee as defined in Code Section 416(i) and the Regulations thereunder. Generally, any Employee or former Employee (as well as each of the Employee’s or former Employee’s Beneficiaries) is considered a Key Employee if the Employee’s or former Employee’s, at any time during the Plan Year that contains the “determination date,” has been included in one of the following categories:

(a) an officer of the Employer (as that term is defined within the meaning of the Regulations under Code Section 416) having annual “415 Compensation” greater than $130,000 adjusted at the same time and in the same manner as under Code Section 415(d).

(b) a “five percent owner” of the Employer. “Five percent owner” means any person who owns (or is considered as owning within the meaning of Code Section 318) more than five percent (5%) of the outstanding stock of the Employer or stock possessing

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more than five percent (5%) of the total combined voting power of all stock of the Employer or, in the case of an unincorporated business, any person who owns more than five percent (5%) of the capital or profits interest in the Employer. In determining percentage ownership hereunder, employers that would otherwise be aggregated under Code Sections 414(b), (c), (m) and (o) shall be treated as separate employers.

(c) a “one percent owner” of the Employer having an annual “415 Compensation” from the Employer of more than $150,000. “One percent owner” means any person who owns (or is considered as owning within the meaning of Code Section 318) more than one percent (1%) of the outstanding stock of the Employer or stock possessing more than one percent (1%) of the total combined voting power of all stock of the Employer or, in the case of an unincorporated business, any person who owns more than one percent (1%) of the capital or profits interest in the Employer. In determining percentage ownership hereunder, employers that would otherwise be aggregated under Code Sections 414(b), (c), (m) and (o) shall be treated as separate employers. However, in determining whether an individual has “415 Compensation” of more than $150,000, “415 Compensation” from each employer required to be aggregated under Code Sections 414(b), (c), (m) and (o) shall be taken into account.

For purposes of this Section, the determination of “415 Compensation” shall be made by including amounts which are contributed by the Employer pursuant to a salary reduction agreement and which are not includible in the gross income of the Participant under Code Sections 125, 132(0(4), 402(e)(3), 402(h)(1)(B), 403(b) or 457(b), and Employee contributions described in Code Section 414(h)(2) that are treated as Employer contributions.

1.38 “Late Retirement Date” means the Anniversary Date coinciding with or next following a Participant’s actual Retirement Date after having reached Normal Retirement Date.

1.39 “Leased Employee” means any person (other than an Employee of the recipient Employer) who pursuant to an agreement between the recipient Employer and any other person or entity (“leasing organization”) has performed services for the recipient (or for the recipient and related persons determined in accordance with Code Section 414(n)(6)) on a substantially full time basis for a period of at least one year, and such services are performed under primary direction or control by the recipient Employer. Contributions or benefits provided a Leased Employee by the leasing organization which are attributable to services performed for the recipient Employer shall be treated as provided by the recipient Employer. Furthermore, Compensation for a Leased Employee shall only include Compensation from the leasing organization that is attributable to services performed for the recipient Employer. A Leased Employee shall not be considered an Employee of the recipient Employer:

(a) if such employee is covered by a money purchase pension plan providing:

(1) a nonintegrated employer contribution rate of at least 10% of compensation, as defined in Code Section 415(c)(3);

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(2) immediate participation;

(3) full and immediate vesting; and

(b) if Leased Employees do not constitute more than 20% of the recipient Employer’s nonhighly compensated work force.

1.40 “Life Expectancy” computed, for purposes of Sections 7.5(0 and 7.5(g), using the Single Life Table in Regulation 1.401(a)(9)-9.

1.41 “Non-Elective Contribution” means the Employer contributions to the Plan excluding, however, contributions made pursuant to the Participant’s deferral election provided for in Section 4.2 and any Qualified Non-Elective Contribution used in the “Actual Deferral Percentage” tests.

1.42 “Non-Highly Compensated Participant” means any Participant who is not a Highly Compensated Employee. However, for purposes of Section 4.5 and Section 4.7, if the prior year testing method is used, a Non-Highly Compensated Participant shall be determined using the definition of Highly Compensated Employee in effect for the preceding Plan Year.

1.43 “Non-Key Employee” means any Employee or former Employee (and such Employee’s or former Employee’s Beneficiaries) who is not a Key Employee.

1.44 “Normal Retirement Age” means the Participant’s 65 birthday. A Participant shall become fully Vested in the Participant’s Account upon attaining Normal Retirement Age.

1.45 “Normal Retirement Date” means the Anniversary Date nearest the Participant’s Normal Retirement Age.

1.46 “1-Year Break in Service” means, for purposes of vesting, the applicable computation period during which an Employee has not completed more than 500 Hours of Service with the Employer. Further, solely for the purpose of determining whether a Participant has incurred a 1-Year Break in Service, Hours of Service shall be recognized for “authorized leaves of absence” and “maternity and paternity leaves of absence.” Years of Service and 1-Year Breaks in Service shall be measured on the same computation period.

“Authorized leave of absence” means an unpaid, temporary cessation from active employment with the Employer pursuant to an established nondiscriminatory policy, whether occasioned by illness, military service, or any other reason.

A “maternity or paternity leave of absence” means an absence from work for any period by reason of the Employee’s pregnancy, birth of the Employee’s child, placement of a child with the Employee in connection with the adoption of such child, or any absence for the purpose of caring for such child for a period immediately following such birth or placement. For this purpose, Hours of Service shall be credited for the computation period in which the absence from work begins, only if credit therefore is necessary to

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prevent the Employee from incurring a 1-Year Break in Service, or, in any other case, in the immediately following computation period. The Hours of Service credited for a “maternity or paternity leave of absence” shall be those which would normally have been credited but for such absence, or, in any case in which the Administrator is unable to determine such hours normally credited, eight (8) Hours of Service per day. The total Hours of Service required to be credited for a “maternity or paternity leave of absence” shall not exceed the number of Hours of Service needed to prevent the Employee from incurring a 1-Year Break in Service.

1.47 “Other Investments Account” means the account of a Participant which is credited with such Participant’s share of the net gain (or loss) of the Plan, Forfeitures and Employer contributions in other than Company Stock and which is debited with payments made to pay for Company Stock.

A separate accounting shall be maintained with respect to that portion of the Other Investments Account attributable to Elective Contributions and Non-Elective Contributions.

1.48 “Participant” means any Eligible Employee who participates in the Plan and has not for any reason become ineligible to participate further in the Plan.

1.49 “Participant’s Account” means the account established and maintained by the Administrator for each Participant with respect to such Participant’s total interest in the Plan and Trust resulting from the Employer Non-Elective Contributions.

A separate accounting shall be maintained with respect to that portion of the Participant’s Account attributable to Employer matching contributions made pursuant to Section 4.1(b), Employer discretionary contributions made pursuant to Section 4.1(d) and any Employer Qualified Non-Elective Contributions.

1.50 “Participant’s Account Balance” means the account balance as of the last Valuation Date in the calendar year immediately preceding the Distribution Calendar Year (valuation calendar year) increased by the amount of any contributions made and allocated or Forfeitures allocated to the account balance as of dates in the valuation calendar year after the Valuation Date and decreased by distributions made in the valuation calendar year after the Valuation Date. The account balance for the valuation calendar year includes any amounts rolled over or transferred to the Plan either in the valuation calendar year or in the Distribution Calendar Year if distributed or transferred in the valuation calendar year.

1.51 “Participant’s Combined Account” means the total aggregate amount of each Participant’s Elective Account and Participant’s Account.

1.52 “Participant’s Elective Account” means the account established and maintained by the Administrator for each Participant with respect to the Participant’s total interest in the Plan and Trust resulting from the Employer Elective Contributions used to satisfy the “Actual Deferral Percentage” tests. A separate accounting shall be maintained with respect to that portion of the Participant’s

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Elective Account attributable to such Elective Contributions pursuant to Section 4.2 (including a separate accounting for Catch-Up Contributions) and any Employer Qualified Non-Elective Contributions.

For Plan Year beginning on or after January 1, 2007, the Participant’s Elective Account shall be comprised of Pre-Tax Elective Deferrals and Roth Elective Deferrals.

“Pre-Tax Elective Deferrals” means a Participant’s Elective Deferrals, made pursuant to a salary reduction election designating such deferrals as pre-tax, which are not includable in the Participant’s gross income at the time deferred.

“Roth Elective Deferrals” means a Participant’s Roth Elective Deferrals, made pursuant to a salary reduction election, designating such deferrals as Roth Elective Deferrals includable in the Participant’s income at the time the Participant would have received that amount in cash if the Participant had not made a salary reduction election. Roth contributions are not considered employee contributions for nay purpose under the plan.

Pre-Tax Elective Deferrals and Roth Elective Deferrals are designated irrevocably by the Participant at the time of the salary reduction election as either a Pre-Tax Elective Deferral or Roth Elective Deferral. Pre-Tax Elective Deferrals and Roth Elective Deferrals are each subject to a separate accounting that shall be maintained with respect to that portion of the Participant’s Elective Account attributable to such Pre-Tax Elective Deferrals or Roth Elective Deferrals pursuant to Section 4.2 (including a separate accounting for Catch-Up Contributions) and any gains or losses attributed to each and any Employer Qualified Non-Elective Contributions.

1.53 “Participant’s Rollover Account” means the account established and maintained by the Administrator for each Participant with respect to such Participant’s interest in the Plan resulting from amounts transferred from another plan or “conduit” Individual Retirement Account in accordance with Section 4.12.

A separate accounting shall be maintained with respect to that portion of the Participant’s Rollover Account attributable to after-tax Employee contributions.

1.54 “Participant’s Transfer Account” means the account established and maintained by the Administrator for each Participant with respect to the Participant’s total interest in the Plan resulting from amounts transferred to this Plan from a direct plan-to-plan transfer and/or with respect to such Participant’s interest in the Plan resulting from amounts transferred from another qualified plan or “conduit” Individual Retirement Account in accordance with Section 4.11.

1.55 “Plan” means this instrument, including all amendments thereto.

1.56 “Plan Year” means the Plan’s accounting year of twelve (12) months commencing on January 1 of each year and ending the following December 31.

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1.57 “Qualified Non-Elective Contribution” means any Employer contributions made pursuant to Section 4.1(c) and Section 4.6(b) and Section 4.8(f). Such contributions shall be considered an Elective Contribution for the purposes of the Plan and may be used to satisfy the “Actual Deferral Percentage” tests or the “Actual Contribution Percentage” tests.

1.58 “Regulation” means the Income Tax Regulations as promulgated by the Secretary of the Treasury or a delegate of the Secretary of the Treasury, and as amended from time to time.

1.59 “Retired Participant” means a person who has been a Participant, but who has become entitled to retirement benefits under the Plan.

1.60 “Retirement Date” means the date as of which a Participant retires for reasons other than Total and Permanent Disability, whether such retirement occurs on a Participant’s Normal Retirement Date or Late Retirement Date (see Section 7.1).

1.61 “Terminated Participant” means a person who has been a Participant, but whose employment has been terminated other than by death, Total and Permanent Disability or retirement.

1.62 “Top Heavy Plan” means a plan described in Section 10.2(a).

1.63 “Top Heavy Plan Year” means a Plan Year during which the Plan is a Top Heavy Plan.

1.64 “Top-Paid Group” means the top 20 percent of Employees who performed services for the Employer during the applicable year, ranked according to the amount of “415 Compensation” received from the Employer during such year. All Affiliated Employers shall be taken into account as a single employer, and Leased Employees within the meaning of Code Sections 414(n)(2) and 414(o)(2) shall be considered Employees unless such Leased Employees are covered by a plan described in Code Section 414(n)(5) and are not covered in any qualified plan maintained by the Employer. Employees who are non-resident aliens and who received no earned income (within the meaning of Code Section 911(d)(2)) from the Employer constituting United States source income within the meaning of Code Section 861(a)(3) shall not be treated as Employees. Furthermore, for the purpose of determining the number of active Employees in any year, the following additional Employees shall also be excluded, however, such Employees shall still be considered for the purpose of identifying the particular Employees in the Top-Paid Group:

(a) Employees with less than six (6) months of service;

(b) Employees who normally work less than 17 1/2 hours per week;

(c) Employees who normally work less than six (6) months during a year; and

(d) Employees who have not yet attained age twenty-one (21).

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In addition, if 90 percent or more of the Employees of the Employer are covered under agreements the Secretary of Labor finds to be collective bargaining agreements between Employee representatives and the Employer, and the Plan covers only Employees who are not covered under such agreements, then Employees covered by such agreements shall be excluded from both the total number of active Employees as well as from the identification of particular Employees in the Top-Paid Group.

The foregoing exclusions set forth in this Section shall be applied on a uniform and consistent basis for all purposes for which the Code Section 414(q) definition is applicable.

1.65 “Total and Permanent Disability” means a physical or mental condition of a Participant resulting from bodily injury, disease, or mental disorder which renders such Participant incapable of continuing usual and customary employment with the Employer. The disability of a Participant shall be determined by a licensed physician chosen by the Administrator. The determination shall be applied uniformly to all Participants.

1.66 “Trustees” means the persons or entities named as trustees herein or in any separate trust forming a part of this Plan, and any successors. From time to time Trustees shall be collectively referred to as “Trustee”.

1.67 “Trust Fund” means the assets of the Plan and Trust as the same shall exist from time to time.

1.68 “Unallocated Company Stock Suspense Account” means an account containing Company Stock acquired with the proceeds of an Exempt Loan and which has not been released from such account and allocated to the Participants’ Company Stock Accounts.

1.69 “Valuation Date” means the Anniversary Date and may include any other date or dates deemed necessary or appropriate by the Administrator for the valuation of the Participant’s accounts during the Plan Year, which may include any day that the Trustee, any transfer agent appointed by the Trustee or the Employer or any stock exchange used by such agent, are open for business.

1.70 “Vested” means the no forfeitable portion of any account maintained on behalf of a Participant.

1.71 “Year of Service” means the computation period of twelve (12) consecutive months, herein set forth, during which an Employee has at least 1,000 Hours of Service.

For vesting purposes, the computation periods shall be the Plan Year, including periods prior to the Effective Date of the Plan.

The computation period shall be the Plan Year if not otherwise set forth herein.

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Notwithstanding the foregoing, for any short Plan Year, the determination of whether an Employee has completed a Year of Service shall be made in accordance with Department of Labor regulation 2530.203-2(c). However, in determining whether an Employee has completed a Year of Service for benefit accrual purposes in the short Plan Year, the number of the Hours of Service required shall be proportionately reduced based on the number of full months in the short Plan Year.

All Years of Service with any employer listed in Exhibit A shall be recognized for all purposes under the Plan. Years of Service with any Affiliated Employer shall be recognized for all purposes under the Plan.

ARTICLE II

ADMINISTRATION

2.1 POWERS AND RESPONSIBILITIES OF THE EMPLOYER

(a) In addition to the general powers and responsibilities otherwise provided for in this Plan, the Employer shall be empowered to appoint and remove the Trustee and the Administrator from time to time as it deems necessary for the proper administration of the Plan to ensure that the Plan is being operated for the exclusive benefit of the Participants and their Beneficiaries in accordance with the terms of the Plan, the Code, and the Act. The Employer may appoint counsel, specialists, advisers, agents (including any nonfiduciary agent) and other persons as the Employer deems necessary or desirable in connection with the exercise of its fiduciary duties under this Plan. The Employer may compensate such agents or advisers from the assets of the Plan as fiduciary expenses (but not including any business (settlor) expenses of the Employer), to the extent not paid by the Employer.

(b) The Employer may, by written agreement or designation, appoint at its option an Investment Manager (qualified under the Investment Company Act of 1940 as amended), investment adviser, or other agent to provide direction to the Trustee with respect to any or all of the Plan assets. Such appointment shall be given by the Employer in writing in a form acceptable to the Trustee and shall specifically identify the Plan assets with respect to which the Investment Manager or other agent shall have authority to direct the investment.

(c) The Employer shall establish a “funding policy and method,” i.e., it shall determine whether the Plan has a short run need for liquidity (e.g., to pay benefits) or whether liquidity is a long run goal and investment growth (and stability of same) is a more current need, or shall appoint a qualified person to do so. The Employer or its delegate shall communicate such needs and goals to the Trustee, who shall coordinate such Plan needs with its investment policy. The communication of such a “funding policy and method” shall not, however, constitute a directive to the Trustee as to the investment of the Trust Funds. Such “funding policy and method” shall be consistent with the objectives of this Plan and with the requirements of Title I of the Act.

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(d) The Employer shall periodically review the performance of any Fiduciary or other person to whom duties have been delegated or allocated by it under the provisions of this Plan or pursuant to procedures established hereunder. This requirement may be satisfied by formal periodic review by the Employer or by a qualified person specifically designated by the Employer, through day-to-day conduct and evaluation, or through other appropriate ways.

(e) The Employer will furnish Plan Fiduciaries and Participants with notices and information statements when voting rights must be exercised pursuant to Section 8.5.

2.2 DESIGNATION OF ADMINISTRATIVE AUTHORITY

The Employer shall be the Administrator. The Employer may appoint any person, including, but not limited to, the Employees of the Employer, to perform the duties of the Administrator. Upon the resignation or removal of any individual performing the duties of the Administrator, the Employer may designate a successor.

2.3 ALLOCATION AND DELEGATION OF RESPONSIBILITIES

If more than one person is appointed as Administrator, the responsibilities of each Administrator may be specified by the Employer and accepted in writing by each Administrator. In the event that no such delegation is made by the Employer, the Administrators may allocate the responsibilities among themselves, in which event the Administrators shall notify the Employer and the Trustee in writing of such action and specify the responsibilities of each Administrator. The Trustee thereafter shall accept and rely upon any documents executed by the appropriate Administrator until such time as the Employer or the Administrators file with the Trustee a written revocation of such designation.

2.4 POWERS AND DUTIES OF THE ADMINISTRATOR

The primary responsibility of the Administrator is to administer the Plan for the exclusive benefit of the Participants and their Beneficiaries, subject to the specific terms of the Plan. The Administrator shall administer the Plan in accordance with its terms and shall have the power and discretion to construe the terms of the Plan and to determine all questions arising in connection with the administration, interpretation, and application of the Plan. Any such determination by the Administrator shall be conclusive and binding upon all persons. The Administrator may establish procedures, correct any defect, supply any information, or reconcile any inconsistency in such manner and to such extent as shall be deemed necessary or advisable to carry out the purpose of the Plan; provided, however, that any procedure, discretionary act, interpretation or construction shall be done in a nondiscriminatory manner based upon uniform principles consistently applied and shall be consistent with the intent that the Plan shall continue to be deemed a qualified plan under the terms of Code Section 401(a), and shall comply with the terms of the Act and all regulations issued pursuant thereto. The Administrator shall have all powers necessary or appropriate to accomplish the Administrator’s duties under the Plan.

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The Administrator shall be charged with the duties of the general administration of the Plan as set forth under the terms of the Plan, including, but not limited to, the following:

(a) the discretion to determine all questions relating to the eligibility of Employees to participate or remain a Participant hereunder and to receive benefits under the Plan;

(b) to compute, certify, and direct the Trustee with respect to the amount and the kind of benefits to which any Participant shall be entitled hereunder;

(c) to authorize and direct the Trustee with respect to all nondiscretionary or otherwise directed disbursements from the Trust;

(d) to maintain all necessary records for the administration of the Plan;

(e) to interpret the provisions of the Plan and to make and publish such rules for regulation of the Plan as are consistent with the terms hereof;

(f) to determine the size and type of any Contract to be purchased from any insurer, and to designate the insurer from which such Contract shall be purchased;

(g) to compute and certify to the Employer and to the Trustee from time to time the sums of money necessary or desirable to be contributed to the Plan;

(h) to consult with the Employer and the Trustee regarding the short and long-term liquidity needs of the Plan in order that the Trustee can exercise any investment discretion in a manner designed to accomplish specific objectives;

(i) to prepare and implement a procedure to notify Eligible Employees that they may elect to have a portion of their Compensation deferred or paid to them in cash;

(j) to establish and communicate to Participants a procedure for allowing each Participant to direct the Trustee as to the distribution of such Participant’s Company Stock Account pursuant to Section 4.13;

(k) to establish and communicate to Participants a procedure and method to insure that each Participant will vote Company Stock allocated to such Participant’s Company Stock Account pursuant to Section 8.5;

(1) to determine the validity of, and take appropriate action with respect to, any qualified domestic relations order received by it; and

(m) to assist any Participant regarding the Participant’s rights, benefits, or elections available under the Plan.

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2.5 RECORDS AND REPORTS

The Administrator shall keep a record of all actions taken and shall keep all other books of account, records, policies, and other data that may be necessary for proper administration of the Plan and shall be responsible for supplying all information and reports to the Internal Revenue Service, Department of Labor, Participants, Beneficiaries and others as required by law.

2.6 APPOINTMENT OF ADVISERS

The Administrator, or the Trustee with the consent of the Administrator, may appoint counsel, specialists, advisers, agents (including fiduciary agents) and other persons as the Administrator or the Trustee deems necessary or desirable in connection with the administration of this Plan, including but not limited to agents and advisers to assist with the administration and management of the Plan, and thereby to provide, among such other duties as the Administrator may appoint, assistance with maintaining Plan records and the providing of investment information to the Plan’s investment fiduciaries.

2.7 PAYMENT OF EXPENSES

All expenses of administration may be paid out of the Trust Fund unless paid by the Employer. Such expenses shall include any expenses incident to the functioning of the Administrator, or any person or persons retained or appointed by any Named Fiduciary incident to the exercise of their duties under the Plan, including, but not limited to, fees of accountants, counsel, Investment Managers, and other specialists and their agents, the costs of any bonds required pursuant to Act Section 412, and other costs of administering the Plan. Until paid, the expenses shall constitute a liability of the Trust Fund.

The Employer may pay some Plan administration expenses with its own assets rather than using Plan assets. To the extent the Employer does not pay Plan expenses with its own assets, the Plan generally will pay the expenses of Plan Administration and will assess the expenses paid against each Participant’s Account prorata based on the value of each Participant’s Account Balance.

However, the Plan may assess to an individual Participant’s Account Balance certain expenses incurred by or attributable to such individual Participant, for example, but not limited to, loan processing fees. The Employer, from time to time, may change the manner in which the Plan allocates expenses or the type of expenses the Plan will assess against an individual Participant’s Account.

2.8 CLAIMS PROCEDURE

Claims for benefits under the Plan may be filed in writing with the Administrator. Written or electronic notice of the disposition of a claim shall be furnished to the claimant within 90 days (45 days if the claim involves disability benefits) after the application is filed, or such period as is required by applicable law or Department of Labor regulation. In the event the claim is denied, the reasons

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for the denial shall be specifically set forth in the notice in language calculated to be understood by the claimant, pertinent provisions of the Plan shall be cited, and, where appropriate, an explanation as to how the claimant can perfect the claim will be provided. In addition, the claimant shall be furnished with an explanation of the Plan’s claims review procedure.

2.9 CLAIMS REVIEW PROCEDURE

Any Employee, former Employee, or Beneficiary of either, who has been denied a benefit by a decision of the Administrator pursuant to Section 2.8 shall be entitled to request the Administrator to give further consideration to a claim by filing with the Administrator a written request for a hearing. Such request, together with a written statement of the reasons why the claimant believes the claim should be allowed, shall be filed with the Administrator no later than 60 days (180 days if the denied benefit involves disability benefits) after receipt of the written or electronic notification provided for in Section 2.8. The Administrator shall then conduct a hearing within the next 60 days (45 days if the claim involves disability benefits), at which the claimant may be represented by an attorney or any other representative of such claimant’s choosing and expense and at which the claimant shall have an opportunity to submit written and oral evidence and arguments in support of the claim. At the hearing the claimant or the claimant’s representative shall have an opportunity to review all documents in the possession of the Administrator which are pertinent to the claim at issue and its disallowance. Either the claimant or the Administrator may cause a court reporter to attend the hearing and record the proceedings. In such event, a complete written transcript of the proceedings shall be furnished to both parties by the court reporter. The full expense of any such court reporter and such transcripts shall be borne by the party causing the court reporter to attend the hearing. A final decision as to the allowance of the claim shall be made by the Administrator within 60 days (45 days if the claim involves disability benefits) of receipt of the appeal (unless there has been an extension of 60 days (45 days if the claim involves disability benefits) due to special circumstances, provided the delay and the special circumstances occasioning it are communicated to the claimant within the 60 day period (45 day period if the claim involves disability benefits). Such communication shall be written in a manner calculated to be understood by the claimant and shall include specific reasons for the decision and specific references to the pertinent Plan provisions on which the decision is based.

ARTICLE III

ELIGIBILITY

3.1 CONDITIONS OF ELIGIBILITY

Any Eligible Employee shall be eligible to participate hereunder on the date of such Employee’s employment with the Employer. However, any Employee who was a Participant in the Plan prior to the effective date of this amendment and restatement shall continue to participate in the Plan.

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3.2 EFFECTIVE DATE OF PARTICIPATION

An Eligible Employee shall become a Participant effective as of the date on which he satisfies the eligibility requirements of Section 3.1.

If an Employee, who has satisfied the Plan’s eligibility requirements and would otherwise have become a Participant, shall go from a classification of a noneligible Employee to an Eligible Employee, such Employee shall become a Participant on the date such Employee becomes an Eligible Employee or, if later, the date that the Employee would have otherwise entered the Plan had the Employee always been an Eligible Employee.

If an Employee, who has satisfied the Plan’s eligibility requirements and would otherwise become a Participant, shall go from a classification of an Eligible Employee to a noneligible class of Employees, such Employee shall become a Participant in the Plan on the date such Employee again becomes an Eligible Employee, or, if later, the date that the Employee would have otherwise entered the Plan had the Employee always been an Eligible Employee. However, if such Employee incurs a 1-Year Break in Service, eligibility will be determined under the Break in Service rules set forth in Section 3.7.

3.3 DETERMINATION OF ELIGIBILITY

The Administrator shall determine the eligibility of each Employee for participation in the Plan based upon information furnished by the Employer. Such determination shall be conclusive and binding upon all persons, as long as the same is made pursuant to the Plan and the Act. Such determination shall be subject to review pursuant to Section 2.9.

3.4 TERMINATION OF ELIGIBILITY

In the event a Participant shall go from a classification of an Eligible Employee to an ineligible Employee, such Former Participant shall continue to vest in the Plan for each Year of Service completed while a noneligible Employee, until such time as the Participant’s Account shall be forfeited or distributed pursuant to the terms of the Plan. Additionally, the Former Participant’s interest in the Plan shall continue to share in the earnings of the Trust Fund.

3.5 OMISSION OF ELIGIBLE EMPLOYEE

If, in any Plan Year, any Employee who should be included as a Participant in the Plan is erroneously omitted and discovery of such omission is not made until after a contribution by the Employer for the year has been made and allocated, then the Employer shall make a subsequent contribution, if necessary after the application of Section 4.4(f), so that the omitted Employee receives a total amount which the Employee would have received (including both Employer contributions and earnings thereon) had the Employee not been omitted. Such contribution shall be made regardless of whether it is deductible in whole or in part in any taxable year under applicable provisions of the Code.

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3.6 INCLUSION OF INELIGIBLE EMPLOYEE

If, in any Plan Year, any person who should not have been included as a Participant in the Plan is erroneously included and discovery of such inclusion is not made until after a contribution for the year has been made and allocated, the Employer shall be entitled to recover the contribution made with respect to the ineligible person provided the error is discovered within twelve (12) months of the date on which it was made. Otherwise, the amount contributed with respect to the ineligible person shall constitute a Forfeiture for the Plan Year in which the discovery is made. Notwithstanding the forgoing, any Deferred Compensation made by an ineligible person shall be distributed to the person (along with any earnings attributable to such Deferred Compensation).

3.7 REHIRED EMPLOYEES AND BREAKS IN SERVICE

(a) If any Participant becomes a Former Participant due to severance from employment with the Employer and is reemployed by the Employer before a 1-Year Break in Service occurs, the Former Participant shall become a Participant as of the reemployment date.

(b) After a Former Participant who has severed employment with the Employer incurs five (5) consecutive 1-Year Breaks in Service, the Vested portion of said Former Participant’s Account attributable to pre-break service shall not be increased as a result of post-break service. In such case, separate accounts will be maintained as follows:

(1) one account for nonforfeitable benefits attributable to pre-break service; and

(2) one account representing the Participant’s Employer derived account balance in the Plan attributable to post-break service.

(c) If any Participant becomes a Former Participant due to severance of employment with the Employer and is reemployed by the Employer before five (5) consecutive 1-Year Breaks in Service, and such Former Participant had received a distribution of the entire Vested interest prior to reemployment, then the forfeited account shall be reinstated only if the Former Participant repays the full amount which had been distributed. Such repayment must be made before the earlier of five (5) years after the first date on which the Participant is subsequently reemployed by the Employer or the close of the first period of five (5) consecutive 1-Year Breaks in Service commencing after the distribution. If a distribution occurs for any reason other than a severance of employment, the time for repayment may not end earlier than five (5) years after the date of distribution. In the event the Former Participant does repay the full amount distributed, the undistributed forfeited portion of the Participant’s Account must be restored in full, unadjusted by any gains or losses occurring subsequent to the Valuation Date preceding the distribution. The source for such reinstatement may be Forfeitures occurring during the Plan Year. If such source is insufficient, then the Employer will contribute an amount which is sufficient to

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restore any such forfeited Accounts provided, however, that if a discretionary contribution is made for such year pursuant to Section 4.1(d), such contribution shall first be applied to restore any such Accounts and the remainder shall be allocated in accordance with Section 4.4.

3.8 ELECTION NOT TO PARTICIPATE

An Employee may, subject to the approval of the Employer, elect voluntarily not to participate in the Plan. The election not to participate must be communicated to the Employer, in writing, within a reasonable period of time before the beginning of a Plan Year.

ARTICLE IV

CONTRIBUTION AND ALLOCATION

4.1 FORMULA FOR DETERMINING EMPLOYER CONTRIBUTION. For each Plan Year, the Employer shall contribute to the Plan:

(a) The amount of the total salary reduction elections of all Participants made pursuant to Section 4.2, which amount shall be deemed an Employer Elective Contribution.

(b) On behalf of each Participant who is eligible to share in matching contributions for the Plan Year, a discretionary matching contribution equal to a uniform percentage of each such Participant’s Deferred Compensation (less Catch-Up Contributions made pursuant to Section 4.2(a)), the exact percentage, if any, to be determined each year by the Employer, which amount, if any, shall be deemed an Employer Non-Elective Contribution plus any uniform discretionary percentage of each such Participant’s Deferred Compensation, the exact percentage, if any, to be determined each year by the Employer, which amount, shall be deemed an Employer Non-Elective Contribution.

(c) On behalf of each Non-Highly Compensated Participant who is eligible to share in the Qualified Non-Elective Contribution for the Plan Year, a discretionary Qualified Non-Elective Contribution equal to a uniform percentage of each eligible individual’s Compensation, the exact percentage, if any, to be determined each year by the Employer. Any Employer Qualified Non-Elective Contribution shall be deemed an Employer Elective Contribution.

(d) A discretionary amount, which amount, if any, shall be deemed an Employer Non-Elective Contribution.

(e) Additionally, to the extent necessary, the Employer shall contribute to the Plan the amount necessary to provide the top heavy minimum contribution. All contributions by the Employer shall be made in cash or in such property as is acceptable to the Trustee.

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4.2 PARTICIPANT’S SALARY REDUCTION ELECTION

(a) Each Participant may elect to defer the amount no less than 2% of the Compensation, which would have been received in the Plan Year, but for the deferral election, but no greater than the maximum amount allowed under Code Section 402(g). A deferral election (or modification of an earlier election) may not be made with respect to Compensation which is currently available on or before the date the Participant executed such election. In addition, except for occasional, bona fide administrative considerations, contributions made pursuant to such an election cannot precede the earlier of (1) the performance of services relating to the contribution and (2) when the Compensation that is subject to the election would be currently available to the Employee in the absence of an election to defer. For purposes of this Section, Compensation shall be determined on an annual basis prior to any reductions made pursuant to Code Sections 125, 132(f)(4), 402(e)(3), 402(h)(1)(B), 403(b), 414(v) or 457(b), and Employee contributions described in Code Section 414(h)(2) that are treated as Employer contributions.

Notwithstanding the above, with respect to an Eligible Employee who becomes a Participant on or after January 1, 2007; such individual may elect a salary deferral (either pre-tax or Roth) amount or zero upon such date. Failure to make any affirmative election within thirty (30) days from the date of hire will result in auto enrollment for such Eligible Employee as soon as administratively feasible; such a Participant’s Compensation shall automatically be reduced by 2%, which amount shall be deemed to be the Participant’s salary reduction election, unless the Participant makes a contrary election to defer a portion of Compensation greater then % or elects to receive cash in lieu of making salary deferral contributions. An Eligible Employee has an effective opportunity to elect to receive an amount in cash if the Eligible Employee receives notice of the availability of the election and the Eligible Employee has a reasonable period to make the election before the date on which the cash is currently available. The deemed salary reduction election described in this paragraph shall be considered a pre-tax elective contribution and not Roth Elective Deferral.

Notwithstanding the above, each Catch-Up Eligible Participant shall be eligible to make Catch-Up Contributions during the Plan Year in accordance with, and subject to the limitations of, Code Section 414(v). Such Catch-Up Contributions shall not be taken into account for purposes of Code Sections 402(g) and 415(c). The Plan shall not be treated as failing to satisfy the provisions of the Plan implementing the requirements of Code Section 401(k)(3), 416 or 410(b), as applicable, by reason of the making of such Catch-Up Contributions.

Notwithstanding the above, for Plan Years beginning on or after January 1, 2007, the Plan will accept Roth Elective Deferrals made on behalf of a Participant. A Participant’s Roth Elective Deferral will be allocated to the Participant’s Elective Account as a Roth Elective Deferral Account. Unless specifically stated otherwise, Roth Elective Deferrals will be treated as salary reduction elections for all purposes under the Plan and will be separately accounted for in the Participant’s Elective Account attributable to such Roth Elective Deferrals.

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The amount by which Compensation is reduced shall be that Participant’s Deferred Compensation and be treated as an Employer Elective Contribution and allocated to that Participant’s Elective Account.

(b) The balance in each Participant’s Elective Account shall be fully Vested at all times and, except as otherwise provided herein, shall not be subject to Forfeiture for any reason. The Plan shall disregard Elective Contributions in applying the vesting provisions of the Plan to other contributions or benefits under Code Section 411(a)(2). However, the Plan shall otherwise take Elective Contributions into account in determining the Participant’s Vested benefits under the Plan. Thus, for example, the Plan shall take Elective Contributions into account in determining whether a Participant has a nonforfeitable right to contributions under the Plan for purposes of forfeitures, and for applying provisions permitting the repayment of distributions to have forfeited amounts restored, and the provisions of Code Sections 410(a)(5)(D)(iii) and 411(a)(6)(D)(iii) permitting a plan to disregard certain service completed prior to breaks-in-service (sometimes referred to as “the rule of parity”).

(c) Notwithstanding anything in the Plan to the contrary, amounts held in the Participant’s Elective Account may not be distributable (including any offset of loans) earlier than:

(1) a Participant’s severance from employment;

(2) a Participant’s Total and Permanent Disability;

(3) death;

(4) a Participant’s attainment of age 59 1/2;

(5) the termination of the Plan without the existence at the time of Plan termination of another defined contribution plan or the establishment of a successor defined contribution plan by the Employer or an Affiliated Employer within the period ending twelve months after distribution of all assets from the Plan maintained by the Employer. For this purpose, a defined contribution plan does not include an employee stock ownership plan (as defined in Code Section 4975(e)(7) or 409), a simplified employee pension plan (as defined in Code Section 408(k)), or a simple individual retirement account plan (as defined in Code Section 408(p));

(6) the date of disposition by the Employer to an entity that is not an Affiliated Employer of substantially all of the assets (within the meaning of Code Section 409(d)(2)) used in a trade or business of such corporation if such corporation continues to maintain this Plan after the disposition with respect to a Participant who continues employment with the corporation acquiring such assets; or

(7) the date of disposition by the Employer or an Affiliated Employer who maintains the Plan of its interest in a subsidiary (within the meaning of Code Section 409(d)(3)) to an entity which is not an Affiliated Employer but only with respect to a Participant who continues employment with such subsidiary.

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(d) For each Plan Year, a Participant’s Deferred Compensation made under this Plan and all other plans, contracts or arrangements of the Employer maintaining this Plan shall not exceed, during any taxable year of the Participant, the limitation imposed by Code Section 402(g), as in effect at the beginning of such taxable year. If such dollar limitation is exceeded, a Participant will be deemed to have notified the Administrator of such excess amount which shall be distributed in a manner consistent with Section 4.2(e). The dollar limitation shall be adjusted annually pursuant to the method provided in Code Section 415(d) in accordance with Regulations.

(e) If a Participant’s Deferred Compensation under this Plan together with any elective deferrals (as defined in Regulations 1.402(g)-1(b) and 1.414(v)-1(g)(2)) under another qualified cash or deferred arrangement (as described in Code Section 401(k)), a simplified employee pension (as described in Code Section 408(k)(6)), a simple individual retirement account plan (as described in Code Section 408(p)), a salary reduction arrangement (within the meaning of Code Section 3121(a)(5)(D)), a deferred compensation plan under Code Section 457(b), or a trust described in Code Section 501(e)(18) cumulatively exceed the limitation imposed by Code Section 402(g) (as adjusted annually in accordance with the method provided in Code Section 415(d) pursuant to Regulations) for such Participant’s taxable year, the Participant may, not later than March 1st following the close of the Participant’s taxable year, notify the Administrator in writing of such excess and request that the Participant’s Deferred Compensation under this Plan be reduced by an amount specified by the Participant. In such event, the Administrator may direct the Trustee to distribute such excess amount (and any Income allocable to such excess amount) to the Participant not later than the first April 15th following the close of the Participant’s taxable year. Any distribution of less than the entire amount of Excess Deferred Compensation and Income shall be treated as a pro rata distribution of Excess Deferred Compensation and Income. The amount distributed shall not exceed the Participant’s Deferred Compensation under the Plan for the taxable year (and any Income allocable to such excess amount). Any distribution on or before the last day of the Participant’s taxable year must satisfy each of the following conditions:

(1) the distribution must be made after the date on which the Plan received the Excess Deferred Compensation;

(2) the Participant shall designate the distribution as Excess Deferred Compensation; and

(3) the Plan must designate the distribution as a distribution of Excess Deferred Compensation.

Notwithstanding the above, for Plan Years beginning on or after January 1, 2007, For any Plan Year in which a Participant may make and does elect to make both Roth Elective Deferrals and Pre-Tax Elective Deferrals, the Administrator operationally may implement an ordering rule procedure for the distribution of Excess Deferrals (Code Section 402(g)). The Plan has designated that Roth Elective Deferrals are distributed first, to the extent such type of Elective Deferrals was made for the year.

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Matching contributions which relate to Excess Deferred Compensation which is distributed pursuant to this Section 4.2(e) shall be treated as a Forfeiture.

(f) Notwithstanding Section 4.2(e) above, a Participant’s Excess Deferred Compensation shall be reduced, but not below zero, by any distribution of Excess Contributions pursuant to Section 4.6(a) for the Plan Year beginning with or within the taxable year of the Participant.

(g) At Normal Retirement Date, or such other date when the Participant shall be entitled to receive benefits, the fair market value of the Participant’s Elective Account shall be used to provide additional benefits to the Participant or the Participant’s Beneficiary.

(h) Employer Elective Contributions made pursuant to this Section may be segregated into a separate account for each Participant in a federally insured savings account, certificate of deposit in a bank or savings and loan association, money market certificate, or other short-term debt security acceptable to the Trustee until such time as the allocations pursuant to Section 4.4 have been made.

(i) The Employer and the Administrator shall implement the salary reduction elections provided for herein in accordance with the following:

(1) A Participant must make an initial salary deferral election within a reasonable time, not to exceed thirty (30) days, after entering the Plan pursuant to Section 3.2. If the Participant fails to make an initial salary deferral election within such time, then such Participant may thereafter make an election in accordance with the rules governing modifications. The Participant shall make such an election by entering into a written salary reduction agreement with the Employer and filing such agreement with the Administrator. Such election shall initially be effective beginning with the pay period following the acceptance of the salary reduction agreement by the Administrator, shall not have retroactive effect and shall remain in force until revoked.

(2) A Participant may modify a prior election at any time during the Plan Year and concurrently make a new election by filing a written notice with the Administrator within a reasonable time before the pay period for which such modification is to be effective. Any modification shall not have retroactive effect and shall remain in force until revoked.

(3) A Participant may elect to prospectively revoke the Participant’s salary reduction agreement in its entirety at any time during the Plan Year by providing the Administrator with thirty (30) days written notice of such revocation (or upon such shorter notice period as may be acceptable to the Administrator). Such revocation shall become effective as of the beginning of the first pay period coincident with or next following the expiration of the notice period. Furthermore, the termination of the Participant’s employment, or the cessation of participation for any reason, shall be deemed to revoke any salary reduction agreement then in effect, effective immediately following the close of the pay period within which such termination or cessation occurs.

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(j) This Section 4.2(j) will apply to contributions occurring on or after January 1, 2007.

(1) As of January 1, 2007, the Plan will accept Roth Elective Deferrals made on behalf of Participants. A Participant’s Roth Elective Deferrals will be allocated to a Roth Elective Deferral Account.

(2) Unless specifically stated otherwise, Roth Elective Deferrals will be treated as salary reduction elections for all purposes under the Plan.

(3) Contributions and withdrawals of Roth Elective Deferrals will be credited and debited to the Roth Elective Deferral Account maintained for each Participant.

(4) The Plan will maintain a record of the amount of Roth Elective Deferrals in each Participant’s Roth Elective Deferral Account.

(5) Gains, losses, and other credits or charges must be separately allocated on a reasonable and consistent basis to each Participant’s Roth Elective Deferral Account and the Participant’s other accounts under the Plan.

(6) No contributions other than Roth Elective Deferrals and properly attributable earnings will be credited to each Participant’s Roth Elective Deferral Account.

4.3 TIME OF PAYMENT OF EMPLOYER CONTRIBUTION

The Employer may make its contribution to the Plan for a particular Plan Year at such time as the Employer, in its sole discretion, determines. If the Employer makes a contribution for a particular Plan Year after the close of that Plan Year, the Employer will designate to the Trustee the Plan Year for which the Employer is making its contribution.

4.4 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS

(a) The Administrator shall establish and maintain an account in the name of each Participant to which the Administrator shall credit as of each Anniversary Date, or other Valuation Date, all amounts allocated to each such Participant as set forth herein.

(b) The Employer shall provide the Administrator with all information required by the Administrator to make a proper allocation of the Employer contributions for each Plan Year. Within a reasonable period of time after the date of receipt by the Administrator of such information, the Administrator shall allocate such contribution as follows:

(1) With respect to the Employer Elective Contribution made pursuant to Section 4.1(a), to each Participant’s Elective Account in an amount equal to each such Participant’s Deferred Compensation for the year.

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(2) With respect to the Employer Non-Elective Contribution made pursuant to Section 4.1(b), to each Participant’s Account in accordance with Section 4.1(b).

Only Participants who are actively employed on the last day of the Plan Year shall be eligible to share in the matching contribution for the year.

(3) With respect to the Employer Qualified Non-Elective Contribution made pursuant to Section 4.1(c), to each Participant’s Elective Account when used to satisfy the “Actual Deferral Percentage” tests or Participant’s Account in accordance with Section 4.1(c).

Only Non-Highly Compensated Participants who have completed a Year of Service during the Plan Year and are actively employed on the last day of the Plan Year shall be eligible to share in the Qualified Non-Elective Contribution for the year.

(4) With respect to the Employer Non-Elective Contribution made pursuant to Section 4.1(d), to each Participant’s Account in the same proportion that each such Participant’s Compensation for the year bears to the total Compensation of all Participants for such year.

Only Participants who have completed a Year of Service during the Plan Year and are actively employed on the last day of the Plan Year shall be eligible to share in the discretionary contribution for the year.

(c) The Company Stock Account of each Participant shall be credited as of each Anniversary Date with Forfeitures of Company Stock and the Participant’s allocable share of Company Stock (including fractional shares) purchased and paid for by the Plan or contributed in kind by the Employer. Stock dividends on Company Stock held in the Participant’s Company Stock Account shall be credited to the Participant’s Company Stock Account when paid to the Plan. Cash dividends on Company Stock held in the Participant’s Company Stock Account shall, in the sole discretion of the Administrator, either be credited to the Participant’s Other Investments Account when paid to the Plan or be used to repay an Exempt Loan; provided, however, that when cash dividends are used to repay an Exempt Loan, Company Stock shall be released from the Unallocated Company Stock Suspense Account and allocated to the Participant’s Company Stock Account pursuant to Section 4.4(e) and, provided further, that Company Stock allocated to the Participant’s Company Stock Account shall have a fair market value not less than the amount of cash dividends which would have been allocated to such Participant’s Other Investments Account for the year.

Notwithstanding the above, if the Employer elected to be an S corporation under Code Section 1362(a) and a distribution under Code Section 1368(a) is made, then the Administrator shall direct that such distribution on S corporation Company Stock held in the Participant’s Company Stock Account shall, in the sole discretion of the Administrator, either be credited to the Participant’s Other Investment Account when paid to the Plan or be used to repay an Exempt Loan; provided, however, that when such distribution is used to repay an Exempt Loan, Company Stock shall be released from the Unallocated Company Stock Suspense Account and

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allocated to the Participant’s Company Stock Account pursuant to Section 4.4(e) and, provided further, that Company Stock allocated to the Participant’s Company Stock Account shall have a fair market value not less than the amount of the distribution that would have been allocated to such Participant’s Other Investment Account for the year.

Company Stock acquired by the Plan with the proceeds of an Exempt Loan shall only be allocated to each Participant’s Company Stock Account upon release from the Unallocated Company Stock Suspense Account as provided in Section 4.4(e) herein. Company Stock acquired with the proceeds of an Exempt Loan shall be an asset of the Trust Fund and maintained in the Unallocated Company Stock Suspense Account.

(d) As of each Valuation Date, before the current valuation period allocation of Employer contributions and Forfeitures, any earnings or losses (net appreciation or net depreciation) of the Trust Fund shall be allocated in the same proportion that each Participant’s and Former Participant’s nonsegregated accounts (other than each Participant’s Company Stock Account) bear to the total of all Participants’ and Former Participants’ nonsegregated accounts (other than each Participant’s Company Stock Account) as of such date.

Earnings or losses do not include the interest paid under any installment contract for the purchase of Company Stock by the Trust Fund or on any loan used by the Trust Fund to purchase Company Stock, nor does it include income received by the Trust Fund with respect to Company Stock acquired with the proceeds of an Exempt Loan; all income received by the Trust Fund from Company Stock acquired with the proceeds of an Exempt Loan may, at the discretion of the Administrator, be used to repay such loan.

Participants’ transfers from other qualified plans deposited in the general Trust Fund shall share in any earnings and losses (net appreciation or net depreciation) of the Trust Fund in the same manner provided above. Each segregated account maintained on behalf of a Participant shall be credited or charged with its separate earnings and losses.

(e) All Company Stock acquired by the Plan with the proceeds of an Exempt Loan must be added to and maintained in the Unallocated Company Stock Suspense Account. Such Company Stock shall be released and withdrawn from that account as if all Company Stock in that account were encumbered. For each Plan Year during the duration of the loan, the number of shares of Company Stock released shall equal the number of encumbered shares held immediately before release for the current Plan Year multiplied by a fraction, the numerator of which is the amount of principal and interest paid for the Plan Year and the denominator of which is the sum of the numerator plus the principal and interest to be paid for all future Plan Years. As of each Anniversary Date, the Plan must consistently allocate to each Participant’s Account, in the same manner as Employer discretionary contributions pursuant to Section 4.1(d) are allocated, non-monetary units (shares and fractional shares of Company Stock) representing each Participant’s interest in Company Stock withdrawn from the Unallocated Company Stock Suspense Account. However, Company Stock released from the Unallocated Company Stock Suspense Account with cash dividends pursuant to Section 4.4(c) shall be allocated to each

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Participant’s Company Stock Account in the same proportion that each such Participant’s number of shares of Company Stock sharing in such cash dividends bears to the total number of shares of all Participant’s Company Stock sharing in such cash dividends. Income earned with respect to Company Stock in the Unallocated Company Stock Suspense Account shall be used, at the discretion of the Administrator, to repay the Exempt Loan used to purchase such Company Stock. Company Stock released from the Unallocated Company Stock Suspense Account with such income, and any income which is not so used, shall be allocated as of each Anniversary Date in the same proportion that each Participant’s and Former Participant’s nonsegregated accounts after the allocation of any earnings or losses pursuant to Section 4.4(d) bear to the total of all Participants’ and Former Participants’ nonsegregated accounts after the allocation of any earnings or losses pursuant to Section 4.4(d).

Notwithstanding the above, if the Employer elected to be an S corporation under Code Section 1362(a), Company Stock released from the Unallocated Company Stock Suspense Account with a distribution under Code Section 1368(a) on S corporation Company Stock pursuant to Section 4.4(c) shall be allocated to each Participant’s Company Stock Account in the same proportion that each Participant’s number of shares of Company Stock sharing in such distribution bears to the total number of shares of all Participant’s Company Stock sharing in such distribution.

(f) On or before each Anniversary Date any amounts which became Forfeitures since the last Anniversary Date may be made available to reinstate previously forfeited account balances of Former Participants, if any, in accordance with Section 3.7(d), be used to satisfy any contribution that may be required pursuant to Section 3.5 and/or 7.8, or used to pay any administrative expenses of the Plan. The remaining Forfeitures, if any, shall be allocated to Participants’ Accounts in the following manner:

(1) Forfeitures attributable to Employer matching contributions made pursuant to Section 4.1(b) shall be allocated among the Participants’ Accounts in the same proportion that each such Participant’s Compensation for the year bears to the total Compensation of all Participants for the year.

Except, however, Participants who are not eligible to share in matching contributions (whether or not a deferral election was made or suspended pursuant to Section 4.2) for a Plan Year shall not share in Plan Forfeitures attributable to Employer matching contributions for that year.

(2) Forfeitures attributable to Employer discretionary contributions made pursuant to Section 4.1(d) shall be added to any Employer discretionary contribution for the Plan Year in which such Forfeitures occur and allocated among the Participants’ Accounts in the same manner as any Employer discretionary contribution.

Provided, however, that in the event the allocation of Forfeitures provided herein shall cause the “annual addition” (as defined in Section 4.9) to any Participant’s Account to exceed the amount allowable by the Code, the excess shall be reallocated in accordance with Section 4.10.

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(g) For any Top Heavy Plan Year, Non-Key Employees not otherwise eligible to share in the allocation of contributions and Forfeitures as provided above, shall receive the minimum allocation provided for in Section 4.4(i) if eligible pursuant to the provisions of Section 4.4(k).

(h) Notwithstanding the foregoing, Participants who are not actively employed on the last day of the Plan Year due to Retirement (Normal or Late), Total and Permanent Disability or death shall share in the allocation of contributions and Forfeitures for that Plan Year.

(i) Minimum Allocations Required for Top Heavy Plan Years: Notwithstanding the foregoing, for any Top Heavy Plan Year, the sum of the Employer contributions and Forfeitures allocated to the Participant’s Combined Account of each Non-Key Employee shall be equal to at least three percent (3%) of such Non-Key Employee’s “415 Compensation” (reduced by contributions and forfeitures, if any, allocated to each Non-Key Employee in any defined contribution plan included with this Plan in a Required Aggregation Group). However, if (1) the sum of the Employer contributions and Forfeitures allocated to the Participant’s Combined Account of each Key Employee for such Top Heavy Plan Year is less than three percent (3%) of each Key Employee’s “415 Compensation” and (2) this Plan is not required to be included in an Aggregation Group to enable a defined benefit plan to meet the requirements of Code Section 401(a)(4) or 410, then the sum of the Employer contributions and Forfeitures allocated to the Participant’s Combined Account of each Non-Key Employee shall be equal to the largest percentage allocated to the Participant’s Combined Account of any Key Employee. However, in determining whether a Non-Key Employee has received the required minimum allocation, such Non-Key Employee’s Deferred Compensation and matching contributions needed to satisfy the “Actual Contribution Percentage” tests pursuant to Section 4.5 or the “Actual Contribution Percentage” test pursuant to Section 4.7 shall not be taken into account.

However, no such minimum allocation shall be required in this Plan for any Non-Key Employee who participates in another defined contribution plan subject to Code Section 412 included with this Plan in a Required Aggregation Group.

(j) For purposes of the minimum allocations set forth above, the percentage allocated to the Participant’s Combined Account of any Key Employee shall be equal to the ratio of the sum of the Employer contributions (excluding any Catch-Up Contributions) and Forfeitures allocated on behalf of such Key Employee divided by the “415 Compensation” for such Key Employee.

(k) For any Top Heavy Plan Year, the minimum allocations set forth above shall be allocated to the Participant’s Combined Account of all Non-Key Employees who are Participants and who are employed by the Employer on the last day of the Plan Year, including Non-Key Employees who have (1) failed to complete a Year of Service; and (2) declined to make mandatory contributions (if required) or, in the case of a cash or deferred arrangement, elective contributions to the Plan.

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(l) For the purposes of this Section, “415 Compensation” in excess of $150,000 (or such other amount provided in the Code) shall be disregarded. Such amount shall be adjusted for increases in the cost of living in accordance with Code Section 401(a)(17)(B), except that the dollar increase in effect on January 1 of any calendar year shall be effective for the Plan Year beginning with or within such calendar year. If “415 Compensation” for any prior determination period is taken into account in determining a Participant’s minimum benefit for the current Plan Year, the “415 Compensation” for such determination period is subject to the applicable annual “415 Compensation” limit in effect for that prior period. For this purpose, in determining the minimum benefit in Plan Years beginning on or after January 1, 1989, the annual “415 Compensation” limit in effect for determination periods beginning before that date is $200,000 (or such other amount as adjusted for increases in the cost of living in accordance with Code Section 415(d) for determination periods beginning on or after January 1, 1989, and in accordance with Code Section 401(a)(17)(B) for determination periods beginning on or after January 1, 1994). For determination periods beginning prior to January 1, 1989, the $200,000 limit shall apply only for Top Heavy Plan Years and shall not be adjusted. For any short Plan Year the “415 Compensation” limit shall be an amount equal to the “415 Compensation” limit for the calendar year in which the Plan Year begins multiplied by the ratio obtained by dividing the number of full months in the short Plan Year by twelve (12).

(m) Notwithstanding anything herein to the contrary, Participants who terminated employment for any reason during the Plan Year shall share in the salary reduction contributions made by the Employer for the year of termination without regard to the Hours of Service credited.

(n) Notwithstanding anything in this Section to the contrary, all information necessary to properly reflect a given transaction may not be available until after the date specified herein for processing such transaction, in which case the transaction will be reflected when such information is received and processed. Subject to express limits that may be imposed under the Code, the processing of any contribution, distribution or other transaction may be delayed for any legitimate business reason (including, but not limited to, failure of systems or computer programs, failure of the means of the transmission of data, force majeure, the failure of a service provider to timely receive values or prices, and the correction for errors or omissions or the errors or omissions of any service provider). The processing date of a transaction will be binding for all purposes of the Plan.

(o) Notwithstanding anything to the contrary, if this is a Plan that would otherwise fail to meet the requirements of Code Section 410(b)(1)(B) and the Regulations thereunder because Employer contributions would not be allocated to a sufficient number or percentage of Participants for a Plan Year, then the following rules shall apply:

(1) The group of Participants eligible to share in the Employer’s contribution and Forfeitures for the Plan Year shall be expanded to include the minimum number of Participants who would not otherwise be eligible as are necessary to satisfy the applicable test specified above. The specific Participants who shall become eligible under the terms of this paragraph shall be those who have not separated from service prior to the last day of the Plan Year and have completed the greatest number of Hours of Service in the Plan Year.

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(2) If after application of paragraph (1) above, the applicable test is still not satisfied, then the group of Participants eligible to share in the Employer’s contribution and Forfeitures for the Plan Year shall be further expanded to include the minimum number of Participants who have separated from service prior to the last day of the Plan Year as are necessary to satisfy the applicable test. The specific Participants who shall become eligible to share shall be those Participants who have completed the greatest number of Hours of Service in the Plan Year before terminating employment.

(3) Nothing in this Section shall permit the reduction of a Participant’s accrued benefit. Therefore any amounts that have previously been allocated to Participants may not be reallocated to satisfy these requirements. In such event, the Employer shall make an additional contribution equal to the amount such affected Participants would have received had they been included in the allocations, even if it exceeds the amount which would be deductible under Code Section 404. Any adjustment to the allocations pursuant to this paragraph shall be considered a retroactive amendment adopted by the last day of the Plan Year.

(4) Notwithstanding the foregoing, if the portion of the Plan which is not a Code Section 401(k) or 401(m) plan would fail to satisfy Code Section 410(b) if the coverage tests were applied by treating those Participants whose only allocation would otherwise be provided under the top heavy formula as if they were not currently benefiting under the Plan, then, for purposes of this Section 4.4(o), such Participants shall be treated as not benefiting and shall therefore be eligible to be included in the expanded class of Participants who will share in the allocation provided under the Plan’s non top heavy formula.

4.5 ACTUAL DEFERRAL PERCENTAGE TESTS

(a) Maximum Annual Allocation: For each Plan Year, the annual allocation derived from Employer Elective Contributions to a Highly Compensated Participant’s Elective Account shall satisfy one of the following tests:

(1) The “Actual Deferral Percentage” for the Highly Compensated Participant group shall not be more than the “Actual Deferral Percentage” of the Non-Highly Compensated Participant group (for the preceding Plan Year if the prior year testing method is used to calculate the “Actual Deferral Percentage” for the Non-Highly Compensated Participant group) multiplied by 1.25, or

(2) The excess of the “Actual Deferral Percentage” for the Highly Compensated Participant group over the “Actual Deferral Percentage” for the Non-Highly Compensated Participant group (for the preceding Plan Year if the prior year testing method is used to calculate the “Actual Deferral Percentage” for the Non-Highly Compensated Participant group) shall not be more than two percentage points. Additionally, the “Actual Deferral Percentage” for the Highly Compensated Participant group shall not exceed the

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“Actual Deferral Percentage” for the Non-Highly Compensated Participant group (for the preceding Plan Year if the prior year testing method is used to calculate the “Actual Deferral Percentage” for the Non-Highly Compensated Participant group) multiplied by 2. The provisions of Code Section 401(k)(3) and Regulation 1.401(k)-1(b) are incorporated herein by reference.

(b) For the purposes of this Section “Actual Deferral Percentage” means, with respect to the Highly Compensated Participant group and Non-Highly Compensated Participant group for a Plan Year, the average of the ratios, calculated separately for each Participant in such group, of the amount of Employer Elective Contributions (less Catch-Up Contributions) allocated to each Participant’s Elective Account for such Plan Year, to such Participant’s “414(s) Compensation” for such Plan Year. The Actual Deferral Ratio (“ADR”) for each Participant and the “Actual Deferral Percentage” for each group shall be calculated to the nearest one-hundredth of one percent. Employer Elective Contributions (less Catch-Up Contributions) allocated to each Non-Highly Compensated Participant’s Elective Account shall be reduced by Excess Deferred Compensation to the extent such excess amounts are made under this Plan or any other plan maintained by the Employer and any matching contributions which relate to such Excess Deferred Compensation.

Notwithstanding the above, if the prior year testing method is used to calculate the “Actual Deferral Percentage” for the Non-Highly Compensated Participant group for the first Plan Year of this amendment and restatement, the “Actual Deferral Percentage” for the Non-Highly Compensated Participant group for the preceding Plan Year shall be calculated pursuant to the provisions of the Plan then in effect.

(c) For the purposes of Sections 4.5(a) and 4.6, a Highly Compensated Participant and a Non-Highly Compensated Participant shall include any Employee eligible to make a deferral election pursuant to Section 4.2, whether or not such deferral election was made or suspended pursuant to Section 4.2.

Notwithstanding the above, if the prior year testing method is used to calculate the “Actual Deferral Percentage” for the Non-Highly Compensated Participant group for the first Plan Year of this amendment and restatement, for purposes of Section 4.5(a) and 4.6, a Non-Highly Compensated Participant shall include any such Employee eligible to make a deferral election, whether or not such deferral election was made or suspended, pursuant to the provisions of the Plan in effect for the preceding Plan Year.

(d) For purposes of this Section and Code Sections 401(a)(4), 410(b) and 401(k), this Plan may not be combined with any other plan.

(e) For the purpose of this Section, when calculating the “Actual Deferral Percentage” for the Non-Highly Compensated Participant group, the current year testing method shall be used. Any change from the current year testing method to the prior year testing method shall be made pursuant to Internal Revenue Service Notice 98-1, Section VII (or superseding guidance), the provisions of which are incorporated herein by reference.

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(f) Notwithstanding anything in this Section to the contrary, the provisions of this Section and Section 4.6 may be applied separately (or will be applied separately to the extent required by Regulations) to each plan within the meaning of Regulation 1.401(k)-1(g)(11). Furthermore, the provisions of Code Section 401(k)(3)(F) may be used to exclude from consideration all Non-Highly Compensated Employees who have not satisfied the minimum age and service requirements of Code Section 10(a)(1)(A).

(g) For Plan Years beginning after December 31, 2005, the Plan adopts good faith compliance with the final 401(k) and 401(m) Regulations and adopts the provisions related to such final Regulations within certain subsections contained in Sections 4.5 through 4.8 of the Plan. Targeted contribution limits apply to Qualified Nonelective Contributions (as defined in Regulation Section 1.401(k)-6) cannot be taken into account in determining the Actual Deferral Percentage for a Plan Year for a Non-Highly Compensated Employee (“NHCE”) to the extent such contributions exceed the product of that Non-Highly Compensated Employee ‘s 414(s) Compensation and the greater of five percent (5%) or two (2) times the Plan’s “representative contribution rate.” Any Qualified Nonelective Contribution taken into account under an Actual Contribution Percentage test under Regulation Section 1.401(m)-2(a)(6) (including the determination of the representative contribution rate for purposes of Regulation Section 1.401(m)-2(a)(6)(v)(B)), is not permitted to be taken into account for purposes of this Section 4.5(g) (including the determination of the “representative contribution rate” under this Section). For purposes of this Section 4.5(g):

(1) The Plan’s “representative contribution rate” is the lowest “applicable contribution rate” of any eligible Non-Highly Compensated Employee among a group of eligible Non-Highly Compensated Employees that consists of half of all eligible Non-Highly Compensated Employees for the Plan Year (or, if greater, the lowest “applicable contribution rate” of any eligible Non-Highly Compensated Employee who is in the group of all eligible Non-Highly Compensated Employees for the Plan Year and who is employed by the Employer on the last day of the Plan Year), and

(2) The “applicable contribution rate” for an eligible Non-Highly Compensated Employee is the sum of the Qualified Matching Contributions (as defined in Regulation Section 1.401(k)-6) taken into account in determining the Actual Deferral Ratio for the eligible Non-Highly Compensated Employee for the Plan Year and the Qualified Nonelective Contributions made for the eligible Non-Highly Compensated Employee for the Plan Year, divided by the eligible Non-Highly Compensated Employee ‘s 414(s) Compensation for the same period.

Notwithstanding the above, Qualified Nonelective Contributions that are made in connection with an Employer’s obligation to pay prevailing wages under the Davis-Bacon Act (46 Stat. 1494), Public Law 71-798, Service Contract Act of 1965 (79 Stat. 1965), Public Law 89-286, or similar legislation can be taken into account for a Plan Year for an Non-Highly Compensated Employee to the extent such contributions do not exceed 10 percent (10%) of that Non-Highly Compensated Employee ‘s 414(s) Compensation.

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Qualified Matching Contributions (as defined in Regulation Section 1.401(k)-6) may only be used to calculate an Actual Deferral Percentage to the extent that such Qualified Matching Contributions are matching contributions that are not precluded from being taken into account under the Actual Contribution Percentage test for the Plan Year under the rules of Regulation Section 1.401(m)-2(a)(5)(ii) and as set forth in Section 4.7(h).

(h) Qualified Nonelective Contributions and Qualified Matching Contributions cannot be taken into account to determine an Actual Deferral Percentage to the extent such contributions are taken into account for purposes of satisfying any other Actual Deferral Ratio test, any Actual Contribution Percentage test, or the requirements of Regulation Sections 1.401(k)-3, 1.401(m)-3, or 1.401(k)-4. Thus, matching contributions that are made pursuant to Regulation Section 1.401(k)-3(c) cannot be taken into account under the Actual Contribution Percentage test. Similarly, if a plan switches from the current year testing method to the prior year testing method pursuant to Regulation Section 1.401(k)-2(c), Qualified Nonelective Contributions that are taken into account under the current year testing method for a year may not be taken into account under the prior year testing method for the next year.

(i) The Actual Deferral Ratio (ADR) of any Participant who is an Highly Compensated Employee for the Plan Year and who is eligible to have Elective Contributions (as defined in Regulation Section 1.401(k)-6) (and Qualified Nonelective Contributions and/or Qualified Matching Contributions, if treated as Elective Contributions for purposes of the ADP test) allocated to such Participant’s accounts under two (2) or more cash or deferred arrangements described in Code Section 401(k), that are maintained by the same Employer, shall be determined as if such Elective Contributions (and, if applicable, such Qualified Nonelective Contributions and/or Qualified Matching Contributions) were made under a single arrangement. If an Highly Compensated Employee participates in two or more cash or deferred arrangements of the Employer that have different Plan Years, then all Elective Contributions made during the Plan Year being tested under all such cash or deferred arrangements shall be aggregated, without regard to the plan years of the other plans. However, for Plan Years beginning before the effective date of this Section 4.5(i), if the plans have different Plan Years, then all such cash or deferred arrangements ending with or within the same calendar year shall be treated as single cash or deferred arrangement. Notwithstanding the foregoing, certain plans shall be treated as separate if mandatorily disaggregated under the Regulations of Code Section 401(k).

(j) Plans using different testing methods for the Actual Deferral Percentage and Actual Contribution Percentage testing. Except as otherwise provided in this Section, the Plan may use the current year testing method or prior year testing method for the Actual Deferral Percentage test for a Plan Year without regard to whether the current year testing method or prior year testing method is used for the Actual Contribution Percentage test for that Plan Year. However, if different testing methods are used, then the Plan cannot use:

(1) The recharacterization method of Regulation Section 1.401(k)-2(b)(3) to correct excess contributions for a Plan Year;

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(2) The rules of Regulation Section 1.401(m)-2(a)(6)(ii) to take Elective Contributions into account under the Actual Contribution Percentage test (rather than the Actual Deferral Percentage test); or

(3) The rules of Regulation Section 1.401(k)-2(a)(6)(v) to take Qualified Matching Contributions into account under the Actual Deferral Percentage test (rather than the Actual Contribution Percentage test).

4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS

In the event (or if it is anticipated) that the initial allocations of the Employer Elective Contributions made pursuant to Section 4.4 do (or might) not satisfy one of the tests set forth in Section 4.5(a), the Administrator shall adjust Excess Contributions pursuant to the options set forth below:

(a) On or before the fifteenth day of the third month following the end of each Plan Year, but in no event later than the close of the following Plan Year, the Highly Compensated Participant having the largest dollar amount of Elective Contributions (less Catch-Up Contributions) shall have a portion of such Participant’s Elective Contributions treated as Catch-Up Contributions and/or distributed until the total amount of Excess Contributions has been treated as Catch-Up Contributions and/or distributed, or until the amount of such Participant’s remaining Elective Contributions equals the Elective Contributions (less Catch-Up Contributions) of the Highly Compensated Participant having the second largest dollar amount of Elective Contributions (less Catch-Up Contributions). This process shall continue until the total amount of Excess Contributions has been eliminated. In determining the amount of Excess Contributions to be treated as Catch-Up Contributions and/or distributed with respect to an affected Highly Compensated Participant as determined herein, such amount shall be reduced pursuant to Section 4.2(e) by any Excess Deferred Compensation previously distributed to such affected Highly Compensated Participant for such Participant’s taxable year ending with or within such Plan Year and any forfeited matching contributions which relate to such Excess Deferred Compensation. Notwithstanding the above, for Plan Years beginning on or after January 1, 2007, For any Plan Year in which a Participant may make and does elect to make both Roth Elective Deferrals and Pre-Tax Elective Deferrals, the Administrator operationally may implement an ordering rule procedure for the distribution of Excess Contributions (Code Section 401(k)). The Plan has designated that Roth Elective Deferrals are distributed first, to the extent such type of Elective Deferrals was made for the year.

(1) With respect to the distribution of Excess Contributions pursuant to (a) above, such distribution:

(i) may be postponed but not later than the close of the Plan Year following the Plan Year to which they are allocable;

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(ii) shall be proportionately from Deferred Compensation and matching contributions which relate to such Deferred Compensation if used in the “Actual Deferral Percentage” text pursuant to Section 4.5

(iii) shall be adjusted for Income; and

(iv) shall be designated by the Employer as a distribution of Excess Contributions (and Income).

(2) Any distribution of less than the entire amount of Excess Contributions shall be treated as a pro rata distribution of Excess Contributions and Income. Matching contributions which relate to Excess Contributions shall be forfeited unless the related matching contribution is distributed as an Excess Contribution pursuant to (1) above or as an Excess Aggregate Contribution pursuant to this Article.

(3) Matching contributions which relate to Excess Contributions shall be forfeited unless the related matching contribution is distributed as an Excess Aggregate Contribution pursuant to Section 4.8.

(b) Notwithstanding the above, within twelve (12) months after the end of the Plan Year, the Employer may make a special Qualified Non-Elective Contribution in accordance with one of the following provisions which contribution shall be allocated to the Participant’s Elective Account of each Non-Highly Compensated Participant eligible to share in the allocation in accordance with such provision. The Employer shall provide the Administrator with written notification of the amount of the contribution being made and for which provision it is being made pursuant to:

(1) A special Qualified Non-Elective Contribution may be made on behalf of Non-Highly Compensated Participants in an amount sufficient to satisfy (or to prevent an anticipated failure of) one of the tests set forth in Section 4.5(a). Such contribution shall be allocated in the same proportion that each Non-Highly Compensated Participant’s 414(s) Compensation for the year (or prior year if the prior year testing method is being used) bears to the total 414(s) Compensation of all Non-Highly Compensated Participants for such year.

(2) A special Qualified Non-Elective Contribution may be made on behalf of Non-Highly Compensated Participants in an amount sufficient to satisfy (or to prevent an anticipated failure of) one of the tests set forth in Section 4.5(a). Such contribution shall be allocated to each Non-Highly Compensated Participant electing salary reductions pursuant to Section 4.2 in the same proportion that each such Non-Highly Compensated Participant’s Deferred Compensation (less Catch-Up Contributions) for the year (or at the end of the prior Plan Year if the prior year testing method is being used) bears to the total Deferred Compensation (less Catch-Up Contributions) of all such Non-Highly Compensated Participants for such year.

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(3) A special Qualified Non-Elective Contribution may be made on behalf of Non-Highly Compensated Participants in an amount sufficient to satisfy (or to prevent an anticipated failure of) one of the tests set forth in Section 4.5(a). Such contribution shall be allocated in equal amounts (per capita).

(4) A special Qualified Non-Elective Contribution may be made on behalf of Non-Highly Compensated Participants electing salary reductions pursuant to Section 4.2 in an amount sufficient to satisfy (or to prevent an anticipated failure of) one of the tests set forth in Section 4.5(a). Such contribution shall be allocated for the year (or at the end of the prior Plan Year if the prior year testing method is used) to each Non-Highly Compensated Participant electing salary reductions pursuant to Section 4.2 in equal amounts (per capita).

(5) A special Qualified Non-Elective Contribution may be made on behalf of Non-Highly Compensated Participants in an amount sufficient to satisfy (or to prevent an anticipated failure of) one of the tests set forth in Section 4.5(a). Such contribution shall be allocated to the Non-Highly Compensated Participant having the lowest 414(s) Compensation, until one of the tests set forth in Section 4.5(a) is satisfied (or is anticipated to be satisfied), or until such Non-Highly Compensated Participant has received the maximum “annual addition” pursuant to Section 4.9. This process shall continue until one of the tests set forth in Section 4.5(a) is satisfied (or is anticipated to be satisfied).

Notwithstanding the above, at the Employer’s discretion, Non-Highly Compensated Participants who are not employed at the end of the Plan Year (or at the end of the prior Plan Year if the prior year testing method is being used) shall not be eligible to receive a special Qualified Non-Elective Contribution and shall be disregarded.

Notwithstanding the above, if the testing method changes from the current year testing method to the prior year testing method, then for purposes of preventing the double counting of Qualified Non-Elective Contributions for the first testing year for which the change is effective, any special Qualified Non-Elective Contribution on behalf of Non-Highly Compensated Participants used to satisfy the “Actual Deferral Percentage” or “Actual Contribution Percentage” test under the current year testing method for the prior year testing year shall be disregarded.

(c) If during a Plan Year, it is projected that the aggregate amount of Elective Contributions to be allocated to all Highly Compensated Participants under this Plan would cause the Plan to fail the tests set forth in Section 4.5(a), then the Administrator may automatically reduce the deferral amount of affected Highly Compensated Participants, beginning with the Highly Compensated Participant who has the highest deferral ratio until it is anticipated the Plan will pass the tests or until the actual deferral ratio equals the actual deferral ratio of the Highly Compensated Participant having the next highest actual deferral ratio. This process may continue until it is anticipated that the Plan will satisfy one of the tests set forth in Section 4.5(a). Alternatively, the Employer may specify a maximum percentage of Compensation that may be deferred.

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(d) Any Excess Contributions (and Income) which are distributed on or after 2  ¹/2 months after the end of the Plan Year shall be subject to the ten percent (10%) Employer excise tax imposed by Code Section 4979.

(e) Distributions of Excess Contributions must be adjusted for income (gain or loss), including an adjustment for income for the period between the end of the Plan Year and the date of the distribution (the “gap period”). The Administrator has the discretion to determine and allocate income using any of the methods set forth below:

(1) The Administrator may use any reasonable method for computing the income allocable to Excess Contributions, provided that the method does not violate Code Section 401(a)(4), is used consistently for all Participants and for all corrective distributions under the Plan for the Plan Year, and is used by the Plan for allocating income to Participant’s accounts. A Plan will not fail to use a reasonable method for computing the income allocable to Excess Contributions merely because the income allocable to Excess Contributions is determined on a date that is no more than seven (7) days before the distribution.

(2) The Administrator may allocate income to Excess Contributions for the Plan Year by multiplying the income for the Plan Year allocable to the Elective Contributions and other amounts taken into account under the Actual Deferral Percentage test (including contributions made for the Plan Year), by a fraction, the numerator of which is the Excess Contributions for the Employee for the Plan Year, and the denominator of which is the sum of the:

(i) Account balance attributable to Elective Contributions and other amounts into account under the Actual Deferral Percentage test as of the beginning of the Plan Year, and

(ii) Any additional amount of such contributions made for the Plan Year.

(3) The Administrator may use the safe harbor method in this subsection to determine income on Excess Contributions for the gap period. Under this safe harbor method, income on Excess Contributions for the gap period is equal to ten percent (10%) of the income allocable to Excess Contributions for the Plan Year that would be determined under subsection (2) above, multiplied by the number of calendar months that have elapsed since the end of the Plan Year. For purposes of calculating the number of calendar months that have elapsed under the safe harbor method, a corrective distribution that is made on or before the fifteenth (15^th) day of a month is treated as made on the last day of the preceding month and a distribution made after the fifteenth day of a month is treated as made on the last day of the month.

(4) The Administrator may determine the income for the aggregate of the Plan Year and the gap period, by applying the alternative method provided by subsection (2) above to this aggregate period. This is accomplished by (i) substituting the income for the Plan Year and the gap period, for the income for the Plan Year, and (ii) substituting the amounts taken into account under the Actual Deferral Percentage test for the Plan Year and the gap period, for the amounts taken into account the Actual Deferral Percentage test for the Plan Year in determining the fraction that is multiplied by that income.

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(f) If a failed Actual Deferral Percentage test is to be corrected by making an Employer contribution, then the provisions of the Plan for the corrective contributions shall be applied by limiting the contribution made on behalf of any Non-Highly Compensated Employee pursuant to such provisions to an amount that does not exceed the targeted contribution limits of Section 4.5(g), or in the case of a corrective contribution that is a Qualified Matching Contribution, the targeted contribution limit of Section 4.7(h).

4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS

(a) The “Actual Contribution Percentage” for the Highly Compensated Participant group shall not exceed the greater of:

(1) 125 percent of such percentage for the Non-Highly Compensated Participant group (for the preceding Plan Year if the prior year testing method is used to calculate the “Actual Deferral Percentage” for the Non-Highly Compensated Participant group); or

(2) the lesser of 200 percent of such percentage for the Non-Highly Compensated Participant group (for the preceding Plan Year if the prior year testing method is used to calculate the “Actual Deferral Percentage” for the Non-Highly Compensated Participant group), or such percentage for the Non-Highly Compensated Participant group (for the preceding Plan Year if the prior year testing method is used to calculate the “Actual Deferral Percentage” for the Non-Highly Compensated Participant group) plus 2 percentage points. The provisions of Code Section 401(m) and Regulation 1.401(m)-1(b) are incorporated herein by reference.

(b) For the purposes of this Section and Section 4.8, “Actual Contribution Percentage” for a Plan Year means, with respect to the Highly Compensated Participant group and Non-Highly Compensated Participant group (for the preceding Plan Year if the prior year testing method is used to calculate the “Actual Deferral Percentage” for the Non-Highly Compensated Participant group), the average of the ratios (calculated separately for each Participant in each group and rounded to the nearest one-hundredth of one percent) of:

(1) the sum of Employer matching contributions made pursuant to Section 4.1(b) (to the extent such matching contributions are not used to satisfy the “Actual Deferral Percentage” tests) on behalf of each such Participant for such Plan Year; to

(2) the Participant’s “414(s) Compensation” for such Plan Year.

Notwithstanding the above, Employer matching contributions attributable to Catch-Up Contributions are excluded from the calculation of the “Actual Contribution Percentage.” Such matching contributions shall be treated as a Forfeiture.

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Notwithstanding the above, if the prior year testing method is used to calculate the “Actual Contribution Percentage” for the Non-Highly Compensated Participant group for the first Plan Year of this amendment and restatement, for purposes of Section 4.7(a), the “Actual Contribution Percentage” for the Non-Highly Compensated Participant group for the preceding Plan Year shall be determined pursuant to the provisions of the Plan then in effect.

(c) For purposes of determining the “Actual Contribution Percentage,” only Employer matching contributions contributed to the Plan prior to the end of the succeeding Plan Year shall be considered. In addition, the Administrator may elect to take into account, with respect to Employees eligible to have Employer matching contributions made pursuant to Section 4.1(b) allocated to their accounts, elective deferrals (as defined in Regulation 1.402(g)-1(b)) and qualified non-elective contributions (as defined in Code Section 401(m)(4)(C)) contributed to any plan maintained by the Employer. Such elective deferrals and qualified non-elective contributions shall be treated as Employer matching contributions subject to Regulation 1.401(m)-1(b)(5) which is incorporated herein by reference. However, the Plan Year must be the same as the plan year of the plan to which the elective deferrals and the qualified non-elective contributions are made.

(d) For purposes of this Section and Code Sections 401(a)(4), 410(b) and 401(m), this Plan may not be combined with any other plan.

(e) For purposes of Sections 4.7(a) and 4.8, a Highly Compensated Participant and Non-Highly Compensated Participant shall include any Employee eligible to have Employer matching contributions (whether or not a deferral election was made or suspended) allocated to the Participant’s account for the Plan Year.

Notwithstanding the above, if the prior year testing method is used to calculate the “Actual Contribution Percentage” for the Non-Highly Compensated Participant group for the first Plan Year of this amendment and restatement, for the purposes of Section 4.7(a), a Non-Highly Compensated Participant shall include any such Employee eligible to have Employer matching contributions (whether or not a deferral election was made or suspended) allocated to the Participant’s account for the preceding Plan Year pursuant to the provisions of the Plan then in effect.

(f) For the purpose of this Section, when calculating the “Actual Contribution Percentage” for the Non-Highly Compensated Participant group, the current year testing method shall be used. Any change from the current year testing method to the prior year testing method shall be made pursuant to Internal Revenue Service Notice 98-1, Section VII (or superseding guidance), the provisions of which are incorporated herein by reference.

(g) Notwithstanding anything in this Section to the contrary, the provisions of this Section and Section 4.8 may be applied separately (or will be applied separately to the extent required by Regulations) to each plan within the meaning of Regulation 1.401(k)-1(g)(11). Furthermore, the provisions of Code Section 401(k)(3)(F) may be used to exclude from consideration all Non-Highly Compensated Employees who have not satisfied the minimum age and service requirements of Code Section 410(a)(1)(A).

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(h) A matching contribution with respect to an Elective Contribution for a Plan Year is not taken into account under the Actual Contribution Percentage test for an Non-Highly Compensated Employee to the extent it exceeds the greatest of:

(1) five percent (5%) of the Non-Highly Compensated Employee’s 414(s) Compensation for the Plan Year;

(2) the Non-Highly Compensated Employee’s Elective Contributions for the Plan Year; and

(3) the product of two (2) times the Plan’s “representative matching rate” and the Non-Highly Compensated Employee ‘s Elective Contributions for the Plan Year.

For purposes of this Section, the Plan’s “representative matching rate” is the lowest “matching rate” for any eligible Non-Highly Compensated Employee among a group of Non-Highly Compensated Employees that consists of half of all eligible Non-Highly Compensated Employees in the Plan for the Plan Year who make Elective Contributions for the Plan Year (or, if greater, the lowest “matching rate” for all eligible Non-Highly Compensated Employees in the Plan who are employed by the Employer on the last day of the Plan Year and who make Elective Contributions for the Plan Year).

For purposes of this Section, the “matching rate” for a Participant generally is the matching contributions made for such Participant divided by the Participant’s Elective Contributions for the Plan Year. If the matching rate is not the same for all levels of Elective Contributions for a Participant, then the Participant’s “matching rate” is determined assuming that an Participant’s Elective Contributions are equal to six percent (6%) of Code Section 414(s) Compensation.

If the Plan provides a match with respect to the sum of the Participant’s after-tax Employee Contributions and Elective Contributions, then for the purposes of this Section, that sum is substituted for the amount of the Participant’s Elective Contributions in subsections (2) & (3) above and in determining the “matching rate,” and Participants who make either after-tax Employee Contributions or Elective Contributions are taken into account in determining the Plan’s “representative matching rate.” Similarly, if the Plan provides a match with respect to the Participant’s after-tax Employee Contributions, but not Elective Contributions, then for purposes of this subsection, the Participant’s after-tax Employee Contributions are substituted for the amount of the Participant’s Elective Contributions in subsections (2) & (3) above and in determining the “matching rate,” and Participants who make after-tax Employee Contributions are taken into account in determining the Plan’s “representative matching rate.”

(i) Qualified Nonelective Contributions (as defined in Regulation Section 1.401(k)-6) cannot be taken into account under the Actual Contribution Percentage test for a Plan Year for an Non-Highly Compensated Employee to the extent such contributions exceed the product of that Non-Highly Compensated Employee’s 414(s) Compensation and the greater of five percent (5%) or two

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(2) times the Plan’s “representative contribution rate.” Any Qualified Nonelective Contribution taken into account under an Actual Deferral Percentage test under Regulation Section 1.401(k)-2(a)(6) (including the determination of the “representative contribution rate” for purposes of Regulation Section 1.40(k)-2(a)(6)(iv)(B)) is not permitted to be taken into account for purposes of this subsection (including the determination of the “representative contribution rate” for purposes of subsection (1) below). For purposes of this subsection:

( 1) The Plan’s “representative contribution rate” is the lowest “applicable contribution rate” of any eligible Non-Highly Compensated Employee among a group of eligible Non-Highly Compensated Employees that consists of half of all eligible Non-Highly Compensated Employees for the Plan Year (or, if greater, the lowest “applicable contribution rate” of any eligible Non-Highly Compensated Employee who is in the group of all eligible Non-Highly Compensated Employees for the Plan Year and who is employed by the Employer on the last day of the Plan Year), and

(2) The “applicable contribution rate” for an eligible Non-Highly Compensated Employee is the sum of the matching contributions (as defined in Regulation Section 1.401(m)-1(a)(2)) taken into account in determining the Applicable Contribution Rate for the eligible Non-Highly Compensated Employee for the Plan Year and the Qualified Nonelective Contributions made for that Non-Highly Compensated Employee for the Plan Year, divided by that Non-Highly Compensated Employees Code Section 414(s) Compensation for the Plan Year.

Notwithstanding the above, Qualified Nonelective Contributions that are made in connection with an Employer’s obligation to pay prevailing wages under the Davis-Bacon Act (46 Stat. 1494), Public Law 71-798, Service Contract Act of 1965 (79 Stat. 1965), Public Law 89-286, or similar legislation can be taken into account for a Plan Year for an Non-Highly Compensated Employee to the extent such contributions do not exceed 10 percent (10%) of that Non-Highly Compensated Employees 414(s) Compensation.

(j) The Actual Contribution Ratio (ACR) for any Participant who is a Highly Compensated Employee and who is eligible to have Matching Contributions or after-tax Employee Contributions allocated to his or her account under two (2) or more plans described in Code Section 401(a), or arrangements described in Code Section 401(k) that are maintained by the same Employer, shall be determined as if the total of such contributions was made under each plan and arrangement. If a Highly Compensated Employee participates in two (2) or more such plans or arrangements that have different plan years, then all matching contributions and after-tax Employee Contributions made during the Plan Year being tested under all such plans and arrangements shall be aggregated, without regard to the plan years of the other plans. For Plan Years beginning before the effective date of this Section 4.7(j), all such plans and arrangements ending with or within the same calendar year shall be treated as single plan or arrangement. Notwithstanding the foregoing, certain plans shall be treated as separate if mandatorily disaggregated under the Regulations of Code Section 401(m).

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(k) Plans using different testing methods for the Actual Contribution Percentage and Actual Deferral Percentage test. Except as otherwise provided in this subsection, the Plan may use the current year testing method or prior year testing method for the Actual Contribution Percentage test for a Plan Year without regard to whether the current year testing method or prior year testing method is used for the ADP test for that Plan Year. However, if different testing methods are used, then the Plan cannot use:

(1) The recharacterization method of Regulation Section 1.401(k)-2(b)(3) to correct excess contributions for a Plan Year;

(2) The rules of Regulation Section 1.401(m)-2(a)(6)(ii) to take Elective Contribution into account under the Actual Contribution Percentage test (rather than the Actual Deferral Percentage test); or

(3) The rules of Regulation Section 1.401(k)-2(a)(6) to take Qualified Matching Contributions into account under the Actual Deferral Percentage test (rather than the Actual Contribution Percentage test).

4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS

(a) In the event (or if it is anticipated) that the “Actual Contribution Percentage” for the Highly Compensated Participant group exceeds (or might exceed) the “Actual Contribution Percentage” for the Non-Highly Compensated Participant group pursuant to Section 4.7(a), the Administrator (on or before the fifteenth day of the third month following the end of the Plan Year, but in no event later than the close of the following Plan Year) shall direct the Trustee to distribute to the Highly Compensated Participant having the largest dollar amount of contributions determined pursuant to Section 4.7(b)(1), the Vested portion of such contributions (and Income allocable to such contributions) and, if forfeitable, forfeit such non-Vested Excess Aggregate Contributions attributable to Employer matching contributions (and Income allocable to such forfeitures) until the total amount of Excess Aggregate Contributions has been distributed, or until the Participant’s remaining amount equals the amount of contributions determined pursuant to Section 4.7(b)(1) of the Highly Compensated Participant having the second largest dollar amount of contributions. This process shall continue until the total amount of Excess Aggregate Contributions has been distributed.

Notwithstanding the above, for Plan Years beginning on or after January 1, 2007, For any Plan Year in which a Participant may make and does elect to make both Roth Elective Deferrals and Pre-Tax Elective Deferrals, the Administrator operationally may implement an ordering rule procedure for the distribution of Excess Aggregate Contributions (Code Section 401(m)). The Plan has designated that Roth Elective Deferrals are distributed first, to the extent such type of Elective Deferrals was made for the year.

If the correction of Excess Aggregate Contributions attributable to Employer matching contributions is not in proportion to the Vested and non-Vested portion of such contributions, then the Vested portion of the Participant’s Account attributable to Employer matching contributions after the correction shall be subject to Section 7.5(i).

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(b) Any distribution and/or forfeiture of less than the entire amount of Excess Aggregate Contributions (and Income) shall be treated as a pro rata distribution and/or forfeiture of Excess Aggregate Contributions and Income. Distribution of Excess Aggregate Contributions shall be designated by the Employer as a distribution of Excess Aggregate Contributions (and Income). Forfeitures of Excess Aggregate Contributions shall be treated in accordance with Section 4.4. However, no such forfeiture may be allocated to a Highly Compensated Participant whose contributions are reduced pursuant to this Section.

(c) Excess Aggregate Contributions, including forfeited matching contributions, shall be treated as Employer contributions for purposes of Code Sections 404 and 415 even if distributed from the Plan.

Forfeited matching contributions that are reallocated to Participants’ Accounts for the Plan Year in which the forfeiture occurs shall be treated as an “annual addition” pursuant to Section 4.9(b) for the Participants to whose Accounts they are reallocated and for the Participants from whose Accounts they are forfeited.

(d) The determination of the amount of Excess Aggregate Contributions with respect to any Plan Year shall be made after first determining the Excess Contributions, if any, to be treated as after-tax voluntary Employee contributions due to recharacterization for the plan year of any other qualified cash or deferred arrangement (as defined in Code Section 401(k)) maintained by the Employer that ends with or within the Plan Year.

(e) If during a Plan Year the projected aggregate amount of Employer matching contributions to be allocated to all Highly Compensated Participants under this Plan would, by virtue of the tests set forth in Section 4.7(a), cause the Plan to fail such tests, then the Administrator may automatically reduce proportionately or in the order provided in Section 4.8(a) each affected Highly Compensated Participant’s projected share of such contributions by an amount necessary to satisfy one of the tests set forth in Section 4.7(a).

(f) Notwithstanding the above, within twelve (12) months after the end of the Plan Year, the Employer may make a special Qualified Non-Elective Contribution in accordance with one of the following provisions which contribution shall be allocated to the Participant’s Account of each Non-Highly Compensated Participant eligible to share in the allocation in accordance with such provision. The Employer shall provide the Administrator with written notification of the amount of the contribution being made and for which provision it is being made pursuant to:

(1) A special Qualified Non-Elective Contribution may be made on behalf of Non-Highly Compensated Participants in an amount sufficient to satisfy (or to prevent an anticipated failure of) one of the tests set forth in Section 4.7. Such contribution shall be allocated in the same proportion that each Non-Highly Compensated Participant’s 414(s) Compensation for the year (or prior year if the prior year testing method is being used) bears to the total 414(s) Compensation of all Non-Highly Compensated Participants for such year.

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(2) A special Qualified Non-Elective Contribution may be made on behalf of Non-Highly Compensated Participants in an amount sufficient to satisfy (or to prevent an anticipated failure of) one of the tests set forth in Section 4.7. Such contribution shall be allocated to each Non-Highly Compensated Participant electing salary reductions pursuant to Section 4.2 in the same proportion that each such Non-Highly Compensated Participant’s Deferred Compensation (less Catch-Up Contributions) for the year (or at the end of the prior Plan Year if the prior year testing method is being used) bears to the total Deferred Compensation (less Catch-Up Contributions) of all such Non-Highly Compensated Participants for such year.

(3) A special Qualified Non-Elective Contribution may be made on behalf of Non-Highly Compensated Participants in an amount sufficient to satisfy (or to prevent an anticipated failure of) one of the tests set forth in Section 4.7. Such contribution shall be allocated in equal amounts (per capita).

(4) A special Qualified Non-Elective Contribution may be made on behalf of Non-Highly Compensated Participants electing salary reductions pursuant to Section 4.2 in an amount sufficient to satisfy (or to prevent an anticipated failure of) one of the tests set forth in Section 4.7. Such contribution shall be allocated for the year (or at the end of the prior Plan Year if the prior year testing method is used) to each Non-Highly Compensated Participant electing salary reductions pursuant to Section 4.2 in equal amounts (per capita).

(5) A special Qualified Non-Elective Contribution may be made on behalf of Non-Highly Compensated Participants in an amount sufficient to satisfy (or to prevent an anticipated failure of) one of the tests set forth in Section 4.7. Such contribution shall be allocated to the Non-Highly Compensated Participant having the lowest 414(s) Compensation, until one of the tests set forth in Section 4.7 is satisfied (or is anticipated to be satisfied), or until such Non-Highly Compensated Participant has received the maximum “annual addition” pursuant to Section 4.9. This process shall continue until one of the tests set forth in Section 4.7 is satisfied (or is anticipated to be satisfied).

Notwithstanding the above, at the Employer’s discretion, Non-Highly Compensated Participants who are not employed at the end of the Plan Year (or at the end of the prior Plan Year if the prior year testing method is being used) shall not be eligible to receive a special Qualified Non-Elective Contribution and shall be disregarded.

Notwithstanding the above, if the testing method changes from the current year testing method to the prior year testing method, then for purposes of preventing the double counting of Qualified Non-Elective Contributions for the first testing year for which the change is effective, any special Qualified Non-Elective Contribution on behalf of Non-Highly Compensated Participants used to satisfy the “Actual Deferral Percentage” or “Actual Contribution Percentage” test under the current year testing method for the prior year testing year shall be disregarded.

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(g) Any Excess Aggregate Contributions (and Income) which are distributed on or after 2 1/2 months after the end of the Plan Year shall be subject to the ten percent (10%) Employer excise tax imposed by Code Section 4979.

(h) Distributions of Excess Aggregate Contributions must be adjusted for income (gain or loss), including an adjustment for income for the period between the end of the Plan Year and the date of the distribution (the “gap period”). For the purpose of this subsection, “income” shall be determined and allocated in accordance with the provisions of Section 4.6(e), except that such subsection shall be applied by substituting “Excess Contributions” with “Excess Aggregate Contributions” and by substituting amounts taken into account under the Actual Contribution Percentage test for amounts taken into account under the Actual Deferral Percentage test.

(i) If a failed Actual Deferral Percentage test is to be corrected by making an Employer Contribution, then the provisions of the Plan for the corrective contributions shall be applied by limiting the contribution made on behalf of any Non-Highly Compensated Employee pursuant to such provisions to an amount that does not exceed the targeted contribution limits of subsections 4.7(h) and 4.7(i).

4.9 MAXIMUM ANNUAL ADDITIONS

(a) Notwithstanding the foregoing, the maximum “annual additions” credited to a Participant’s accounts for any “limitation year” shall equal the lesser of: (1) $40,000 adjusted annually as provided in Code Section 415(d) pursuant to the Regulations, or (2) one-hundred percent (100%) of the Participant’s “415 Compensation” for such “limitation year.” If the Employer contribution that would otherwise be contributed or allocated to the Participant’s accounts would cause the “annual additions” for the “limitation year” to exceed the maximum “annual additions,” the amount contributed or allocated will be reduced so that the “annual additions” for the “limitation year” will equal the maximum “annual additions,” and any amount in excess of the maximum “annual additions,” which would have been allocated to such Participant may be allocated to other Participants. For any short “limitation year,” the dollar limitation in (1) above shall be reduced by a fraction, the numerator of which is the number of full months in the short “limitation year” and the denominator of which is twelve (12).

(b) For purposes of applying the limitations of Code Section 415, “annual additions” means the sum credited to a Participant’s accounts for any “limitation year” of (1) Employer contributions, (2) Employee contributions, (3) forfeitures, (4) amounts allocated, after March 31, 1984, to an individual medical account, as defined in Code Section 415(1)(2) which is part of a pension or annuity plan maintained by the Employer, (5) amounts derived from contributions paid or accrued after December 31, 1985, in taxable years ending after such date, which are attributable to post-retirement medical benefits allocated to the separate account of a key employee (as defined in Code Section 419A(d)(3)) under a welfare benefit plan (as defined in Code Section 419(e)) maintained by the Employer

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and (6) allocations under a simplified employee pension plan. Except, however, the “415 Compensation” percentage limitation referred to in paragraph (a)(2) above shall not apply to: (1) any contribution for medical benefits after separation from service (within the meaning of Code Sections 401(h) or 419A(f)(2)) which is otherwise treated as an “annual addition,” or (2) any amount otherwise treated as an “annual addition” under Code Section 415(l)(1).

If the “annual additions” under the Plan would cause the maximum “annual additions” to be exceeded for any Participant, and all or a portion of the “excess amount” is treated as a Catch-Up Contribution, then any matching contributions which relate to such Catch-Up Contribution will be used to reduce the Employer contribution in the next “limitation year.”

(c) For purposes of applying the limitations of Code Section 415, the following are not “annual additions”: (1) the transfer of funds from one qualified plan to another and (2) provided the Employer has not elected to be an S corporation under Code Section 1362(a) and provided no more than one-third of the Employer contributions for the year are allocated to Highly Compensated Participants, Forfeitures of Company Stock purchased with the proceeds of an Exempt Loan and Employer contributions applied to the payment of interest on an Exempt Loan. In addition, the following are not Employee contributions for the purposes of Section 4.9(b): (1) rollover contributions (as defined in Code Sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3) and 457(e)(16)); (2) repayments of loans made to a Participant from the Plan; (3) repayments of distributions received by an Employee pursuant to Code Section 411(a)(7)(B) (cash-outs); (4) repayments of distributions received by an Employee pursuant to Code Section 411(a)(3)(D) (mandatory contributions); and (5) Employee contributions to a simplified employee pension excludable from gross income under Code Section 408(k)(6).

(d) For purposes of applying the limitations of Code Section 415, the “limitation year” shall be the Plan Year.

(e) For the purpose of this Section, all qualified defined contribution plans (whether terminated or not) ever maintained by the Employer shall be treated as one defined contribution plan.

(f) For the purpose of this Section, if the Employer is a member of a controlled group of corporations, trades or businesses under common control (as defined by Code Section 1563(a) or Code Section 414(b) and (c) as modified by Code Section 415(h)), is a member of an affiliated service group (as defined by Code Section 414(m)), or is a member of a group of entities required to be aggregated pursuant to Regulations under Code Section 414(o), all Employees of such Employers shall be considered to be employed by a single Employer.

(g) If this is a plan described in Code Section 413(c) (other than a plan described in Code Section 413(f)), then all of the benefits or contributions attributable to a Participant from all of the Employers maintaining this Plan shall be taken into account in applying the limits of this Section with respect to such Participant. Furthermore, in applying the limitations of this Section with respect to such a Participant, the total “415 Compensation” received by the Participant from all of the Employers maintaining the Plan shall be taken into account.

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(h)(1) If a Participant participates in more than one defined contribution plan maintained by the Employer which have different Anniversary Dates, the maximum “annual additions” under this Plan shall equal the maximum “annual additions” for the “limitation year” minus any “annual additions” previously credited to such Participant’s accounts during the “limitation year.”

(2) If a Participant participates in both a defined contribution plan subject to Code Section 412 and a defined contribution plan not subject to Code Section 412 maintained by the Employer which have the same Anniversary Date, “annual additions” will be credited to the Participant’s accounts under the defined contribution plan subject to Code Section 412 prior to crediting “annual additions” to the Participant’s accounts under the defined contribution plan not subject to Code Section 412.

(3) If a Participant participates in more than one defined contribution plan not subject to Code Section 412 maintained by the Employer which have the same Anniversary Date, the maximum “annual additions” under this Plan shall equal the product of (A) the maximum “annual additions” for the “limitation year” minus any “annual additions” previously credited under subparagraphs (1) or (2) above, multiplied by (B) a fraction (i) the numerator of which is the “annual additions” which would be credited to such Participant’s accounts under this Plan without regard to the limitations of Code Section 415 and (ii) the denominator of which is such “annual additions” for all plans described in this subparagraph.

(i) Notwithstanding anything contained in this Section to the contrary, the limitations, adjustments and other requirements prescribed in this Section shall at all times comply with the provisions of Code Section 415 and the Regulations thereunder.

4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS

(a) If, as a result of the allocation of Forfeitures, a reasonable error in estimating a Participant’s Compensation, a reasonable error in determining the amount of elective deferrals (within the meaning of Code Section 402(g)(3)) that may be made with respect to any Participant under the limits of Section 4.9 or other facts and circumstances to which Regulation 1.415-6(b)(6) shall be applicable, the “annual additions” under this Plan would cause the maximum “annual additions” to be exceeded for any Participant, the “excess amount” will be disposed of in one of the following manners, as uniformly determined by the Administrator for all Participants similarly situated.

(1) Any matched Deferred Compensation and Employer matching contributions which relate to such Deferred Compensation will be proportionately reduced to the extent they would reduce the “excess amount.” The Deferred Compensation (and any gains attributable to such Deferred Compensation) will be distributed to the Participant and the Employer matching contributions (and any gains attributable to such matching contributions) will be used to reduce the Employer contribution in the next “limitation year;”

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(2) If, after the application of paragraph (1) above, an “excess amount” still exists, and the Participant is covered by the Plan at the end of the “limitation year,” then the “excess amount” will be used to reduce the Employer contribution (including allocation of any Forfeitures) for such Participant in the next “limitation year,” and each succeeding “limitation year” if necessary;

(3) If, after the application of subparagraphs (1) and (2) above, an “excess amount” still exists, and the Participant is not covered by the Plan at the end of the “limitation year,” then the “excess amount” will be held unallocated in a “Section 415 suspense account.” The “Section 415 suspense account” will be applied to reduce future Employer contributions (including allocation of any Forfeitures) for all remaining Participants in the next “limitation year,” and each succeeding “limitation year” if necessary;

(4) If a “Section 415 suspense account” is in existence at any time during the “limitation year” pursuant to this Section, it will not participate in the allocation of investment gains and losses of the Trust Fund. If a “Section 415 suspense account” is in existence at any time during a particular “limitation year,” all amounts in the “Section 415 suspense account” must be allocated and reallocated to Participants’ accounts before any Employer contributions or any Employee contributions may be made to the Plan for that “limitation year.” Except as provided in (1) above, “excess amounts” may not be distributed to Participants or Former Participants.

(b) For purposes of this Article, “excess amount” for any Participant for a “limitation year” shall mean the excess, if any, of (1) the “annual additions” which would be credited to the Participant’s account under the terms of the Plan without regard to the limitations of Code Section 415 over (2) the maximum “annual additions” determined pursuant to Section 4.9.

(c) For purposes of this Section, “Section 415 suspense account” shall mean an unallocated account equal to the sum of “excess amounts” for all Participants in the Plan during the “limitation year.”

(d) Notwithstanding the above, for Plan Years beginning on or after January 1, 2007, For any Plan Year in which a Participant may make and does elect to make both Roth Elective Deferrals and Pre-Tax Elective Deferrals, the Administrator operationally may implement an ordering rule procedure for the distribution of Excess Annual Additions (Code Section 415). Such ordering rules may specify whether the Pre-Tax Elective Deferrals or Roth Elective Deferrals are distributed first, to the extent such type of Elective Deferrals was made for the year. Furthermore, such procedure may permit the Participant to elect which type of Elective Deferrals shall be distributed first.

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4.11 PLAN-TO-PLAN TRANSFERS FROM QUALIFIED PLANS

(a) With the consent of the Administrator, amounts may be transferred (within the meaning of Code Section 414(l)) to this Plan from other tax qualified plans under Code Section 401(a) by Eligible Employees, provided that the trust from which such funds are transferred permits the transfer to be made and the transfer will not jeopardize the tax exempt status of the Plan or Trust or create adverse tax consequences for the Employer. Prior to accepting any transfers to which this Section applies, the Administrator may require an opinion of counsel that the amounts to be transferred meet the requirements of this Section. The amounts transferred shall be set up in a separate account herein referred to as a Participant’s Transfer Account. Furthermore, for vesting purposes, the Participant’s portion of the Participant’s Transfer Account attributable to any transfer shall be subject to Section 7.4(b).

Except as permitted by Regulations (including Regulation 1.411(d)-4), amounts attributable to elective contributions (as defined in Regulation 1.401(k)-1(g)(3)), including amounts treated as elective contributions, which are transferred from another qualified plan in a plan-to-plan transfer (other than a direct rollover) shall be subject to the distribution limitations provided for in Regulation 1.401(k)-1(d).

(b) Amounts in a Participant’s Transfer Account shall be held by the Trustee pursuant to the provisions of this Plan and may not be withdrawn by, or distributed to the Participant, in whole or in part, except as provided in Section 7.13 and paragraph (c) of this Section. The Trustee shall have no duty or responsibility to inquire as to the propriety of the amount, value or type of assets transferred, nor to conduct any due diligence with respect to such assets; provided, however, that such assets are otherwise eligible to be held by the Trustee under the terms of this Plan.

(c) At Normal Retirement Date, or such other date when the Participant or the Participant’s Beneficiary shall be entitled to receive benefits, the Participant’s Transfer Account shall be used to provide additional benefits to the Participant or the Participant’s Beneficiary. Any distributions of amounts held in a Participant’s Transfer Account shall be made in a manner which is consistent with and satisfies the provisions of Section 7.5, including, but not limited to, all notice and consent requirements of Code Section 411(a)(11) and the Regulations thereunder. Furthermore, such amounts shall be considered as part of a Participant’s benefit in determining whether an involuntary cash-out of benefits may be made without Participant consent.

(d) The Administrator may direct that Employee transfers made after a Valuation Date be segregated into a separate account for each Participant until such time as the allocations pursuant to this Plan have been made, at which time they may remain segregated or be invested as part of the general Trust Fund.

(e) This Plan shall not accept any direct or indirect transfers (as that term is defined and interpreted under Code Section 401(a)(11) and the Regulations thereunder) from a defined benefit plan, money purchase plan (including a target benefit plan), stock bonus or profit sharing plan which would otherwise have provided for a life annuity form of payment to the Participant.

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(f) Notwithstanding anything herein to the contrary, a transfer directly to this Plan from another qualified plan (or a transaction having the effect of such a transfer) shall only be permitted if it will not result in the elimination or reduction of any “Section 411(d)(6) protected benefit” as described in Section 9.1.

4.12 ROLLOVERS FROM OTHER PLANS

(a) With the consent of the Administrator, the Plan may accept a “rollover” by Eligible Employees, provided the “rollover” will not jeopardize the tax-exempt status of the Plan or create adverse tax consequences for the Employer. Prior to accepting any “rollovers” to which this Section applies, the Administrator may require the Employee to establish (by providing an opinion of counsel, or otherwise) that the amounts to be rolled over to this Plan meet the requirements of this Section. The amounts rolled over shall be set up in a separate account herein referred to as a Participant’s Rollover Account. Such account shall be fully Vested at all times and shall not be subject to Forfeiture for any reason.

Notwithstanding anything in this Plan to the contrary, with the consent of the Administrator, the Plan will accept a “rollover” by an Eligible Employee of an amount designated as a Roth Elective Deferral only if it is a “direct rollover” from another Roth Elective Deferral account of an applicable retirement plan as described in Code Section 402A(e)(1) and only to the extent the rollover is permitted under the rules of Code Section 402(c). The Employer, operationally and on a uniform and nondiscriminatory basis, may decide whether to accept any such rollovers.

(b) Amounts in a Participant’s Rollover Account shall be held by the Trustee pursuant to the provisions of this Plan and may not be withdrawn by, or distributed to the Participant, in whole or in part, except as provided in Section 7.13 and paragraph (c) of this Section. The Trustee shall have no duty or responsibility to inquire as to the propriety of the amount, value or type of assets transferred, nor to conduct any due diligence with respect to such assets; provided, however, that such assets are otherwise eligible to be held by the Trustee under the terms of this Plan.

(c) At such date when the Participant or the Participant’s Beneficiary shall be entitled to receive benefits, the Participant’s Rollover Account shall be used to provide additional benefits to the Participant or the Participant’s Beneficiary. Furthermore, amounts in the Participant’s Rollover Account, with respect to distributions made on and after March 28, 2005 shall be considered as part of a Participant’s benefit in determining whether an involuntary cash-out of benefits may be made without Participant consent. Any distributions of amounts held in a Participant’s Rollover Account shall be made in a manner which is consistent with and satisfies the provisions of Section 7.5, including, but not limited to, all notice and consent requirements of Code Section 411(a)(11) and the Regulations thereunder.

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(d) The Administrator may direct that Employee “rollovers” made after a Valuation Date be segregated into a separate account for each Participant until such time as the allocations pursuant to this Plan have been made, at which time they may remain segregated or be invested as part of the general Trust Fund.

(e) For purposes of this Section the following definitions shall apply:

(1) A “rollover” means: (i) amounts transferred to this Plan directly from another “eligible retirement plan;” (ii) distributions received by an Employee from other “eligible retirement plans” which are eligible for tax-free rollover to an “eligible retirement plan” and which are transferred by the Employee to this Plan within sixty (60) days following receipt thereof; (iii) amounts transferred to this Plan from a conduit individual retirement account provided that the conduit individual retirement account has no assets other than assets which (A) were previously distributed to the Employee by another “eligible retirement plan,” (B) were eligible for tax-free rollover to an “eligible retirement plan” and (C) were deposited in such conduit individual retirement account within sixty (60) days of receipt thereof; (iv) amounts distributed to the Employee from a conduit individual retirement account meeting the requirements of clause (iii) above, and transferred by the Employee to this Plan within sixty (60) days of receipt thereof from such conduit individual retirement account; and (v) any other amounts which are eligible to be rolled over to this Plan pursuant to the Code.

(2) An “eligible retirement plan” means an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b) (other than an endowment contract), a qualified trust (an employees’ trust described in Code Section 401(a) which is exempt from tax under Code Section 501(a)), an annuity plan described in Code Section 403(a), an eligible deferred compensation plan described in Code Section 457(b) which is maintained by an eligible employer described in Code Section 457(e)(1)(A), and an annuity contract described in Code Section 403(b).

4.13 DIRECTED INVESTMENT ACCOUNT

(a) Each “Qualified Participant” may elect within ninety (90) days after the close of each Plan Year during the “Qualified Election Period” to direct the Trustee in writing as to the distribution in cash of 25 percent of the total number of shares of Company Stock acquired by or contributed to the Plan that have ever been allocated to such “Qualified Participant’s” Company Stock Account (reduced by the number of shares of Company Stock previously distributed in cash pursuant to a prior election). In the case of the election year in which the last election can be made by the Participant, the preceding sentence shall be applied by substituting “50 percent” for “25 percent.” If the “Qualified Participant” elects to direct the Trustee as to the distribution of the Participant’s Company Stock Account, such direction shall be effective no later than 180 days after the close of the Plan Year to which such direction applies.

Notwithstanding the above, if the fair market value (determined pursuant to Section 6.1 at the Plan Valuation Date immediately preceding the first day on which a “Qualified Participant” is eligible to make an election) of Company Stock acquired by or

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contributed to the Plan and allocated to a “Qualified Participant’s” Company Stock Account is 8500 or less, then such Company Stock shall not be subject to this paragraph. For purposes of determining whether the fair market value exceeds $500, Company Stock held in accounts of all employee stock ownership plans (as defined in Code Section 4975(e)(7)) and tax credit employee stock ownership plans (as defined in Code Section 409(a)) maintained by the Employer or any Affiliated Employer shall be considered as held by the Plan.

(b) For the purposes of this Section the following definitions shall apply:

(1) “Qualified Participant” means any Participant or Former Participant who has completed ten (10) Years of Service as a Participant and has attained age 55.

(2) “Qualified Election Period” means the six (6) Plan Year period beginning with the first Plan Year in which the Participant first became a “Qualified Participant.”

4.14 QUALIFIED MILITARY SERVICE

Notwithstanding any provision of this Plan to the contrary, contributions, benefits and service will be provided in accordance with Code Section 414(u).

4.15 SPECIAL LIMITATION FOR COMMONWEALTH OF PUERTO RICO

With respect to all employees whose taxation is governed by the revenue laws of Puerto Rico, the limitations set forth in this Article IV shall be reduced to comply with the limitations as shall from time to time be applicable under the revenue laws of the Commonwealth of Puerto Rico.

ARTICLE V

FUNDING AND INVESTMENT POLICY

5.1 INVESTMENT POLICY

(a) The Plan is designed to invest primarily in Company Stock. However, Deferred Compensation shall not be invested in Company Stock.

(b) With due regard to subparagraph (a) above, the Administrator may also direct the Trustee to invest funds under the Plan in other property described in the Trust or in life insurance policies to the extent permitted by subparagraph (c) below, or the Trustee may hold such funds in cash or cash equivalents.

(c) With due regard to subparagraph (a) above, the Administrator may also direct the Trustee to invest funds under the Plan in insurance policies on the life of any “keyman” Employee. The proceeds of a “keyman” insurance policy may not be used for the repayment of any indebtedness owed by the Plan which is secured by Company Stock. In the event any “keyman” insurance is purchased by the Trustee, the premiums paid thereon during any Plan Year, net of any policy dividends and increases in cash surrender values, shall be treated as the cost of Plan investment and any death benefit or cash surrender value received shall be treated as proceeds from an investment of the Plan.

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(d) The Plan may not obligate itself to acquire Company Stock from a particular holder thereof at an indefinite time determined upon the happening of an event such as the death of the holder.

(e) The Plan may not obligate itself to acquire Company Stock under a put option binding upon the Plan. However, at the time a put option is exercised, the Plan may be given an option to assume the rights and obligations of the Employer under a put option binding upon the Employer.

(f) All purchases of Company Stock shall be made at a price which, in the judgment of the Administrator, does not exceed the fair market value thereof. All sales of Company Stock shall be made at a price which, in the judgment of the Administrator, is not less than the fair market value thereof. The valuation rules set forth in Article VI shall be applicable.

5.2 APPLICATION OF CASH

Employer contributions in cash, and any earnings on such contributions, shall first be applied to pay any Current Obligations of the Trust Fund.

5.3 LOANS TO THE TRUST

(a) The Plan may borrow money for any lawful purpose, provided the proceeds of an Exempt Loan are used within a reasonable time after receipt only for any or all of the following purposes:

(1) To acquire Company Stock.

(2) To repay such loan.

(3) To repay a prior Exempt Loan.

(b) All loans to the Trust which are made or guaranteed by a disqualified person must satisfy all requirements applicable to Exempt Loans including but not limited to the following:

(1) The loan must be at a reasonable rate of interest;

(2) Any collateral pledged to the creditor by the Plan shall consist only of the Company Stock purchased with the borrowed funds;

(3) Under the terms of the loan, any pledge of Company Stock shall provide for the release of shares so pledged on a pro-rata basis pursuant to Section 4.4(e);

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(4) Under the terms of the loan, the creditor shall have no recourse against the Plan except with respect to such collateral, earnings attributable to such collateral, Employer contributions (other than contributions of Company Stock) that are made to meet Current Obligations and earnings attributable to such contributions;

(5) The loan must be for a specific term and may not be payable at the demand of any person, except in the case of default;

(6) In the event of default upon an Exempt Loan, the value of the Trust Fund transferred in satisfaction of the Exempt Loan shall not exceed the amount of default. If the lender is a disqualified person, an Exempt Loan shall provide for a transfer of Trust Funds upon default only upon and to the extent of the failure of the Plan to meet the payment schedule of the Exempt Loan;

(7) Exempt Loan payments during a Plan Year must not exceed an amount equal to: (A) the sum, over all Plan Years, of all contributions and cash dividends paid by the Employer to the Plan with respect to such Exempt Loan and earnings on such Employer contributions and cash dividends, less (B) the sum of the Exempt Loan payments in all preceding Plan Years. A separate accounting shall be maintained for such Employer contributions, cash dividends and earnings until the Exempt Loan is repaid.

(c) For purposes of this Section, the term “disqualified person” means a person who is a Fiduciary, a person providing services to the Plan, an Employer any of whose Employees are covered by the Plan, an employee organization any of whose members are covered by the Plan, an owner, direct or indirect, of 50% or more of the total combined voting power of all classes of voting stock or of the total value of all classes of the stock, or an officer, director, 10% or more shareholder, or a highly compensated Employee.

ARTICLE VI

VALUATIONS

6.1 VALUATION OF THE TRUST FUND

The Administrator shall direct the Trustee, as of each Valuation Date, to determine the net worth of the assets comprising the Trust Fund as it exists on the Valuation Date. In determining such net worth, the Trustee shall value the assets comprising the Trust Fund at their fair market value (or their contractual value in the case of a Contract or Policy) as of the Valuation Date and shall deduct all expenses for which the Trustee has not yet obtained reimbursement from the Employer or the Trust Fund.

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6.2 METHOD OF VALUATION

Valuations must be made in good faith and based on all relevant factors for determining the fair market value of securities. In the case of a transaction between a Plan and a disqualified person, value must be determined as of the date of the transaction. For all other Plan purposes, value must be determined as of the most recent Valuation Date under the Plan. An independent appraisal will not in itself be a good faith determination of value in the case of a transaction between the Plan and a disqualified person. However, in other cases, a determination of fair market value based on at least an annual appraisal independently arrived at by a person who customarily makes such appraisals and who is independent of any party to the transaction will be deemed to be a good faith determination of value. Company Stock not readily tradeable on an established securities market shall be valued by an independent appraiser meeting requirements similar to the requirements of the Regulations prescribed under Code Section 170(a)(1).

ARTICLE VII

DETERMINATION AND DISTRIBUTION OF BENEFITS

7.1 DETERMINATION OF BENEFITS UPON RETIREMENT

Every Participant may terminate employment with the Employer and retire for the purposes hereof on the Participant’s Normal Retirement Date. However, a Participant may postpone the termination of employment with the Employer to a later date, in which event the participation of such Participant in the Plan, including the right to receive allocations pursuant to Section 4.4, shall continue until such Participant’s Late Retirement Date. Upon a Participant’s Retirement Date, or as soon thereafter as is practicable, the Trustee shall distribute, at the election of the Participant, all amounts credited to such Participant’s Combined Account in accordance with Sections 7.5 and 7.6.

7.2 DETERMINATION OF BENEFITS UPON DEATH

(a) Upon the death of a Participant before the Participant’s Retirement Date or other termination of employment, all amounts credited to such Participant’s Combined Account shall become fully Vested. If elected, distribution of the Participant’s Combined Account shall commence not later than one ( 1) year after the close of the Plan Year in which such Participant’s death occurs. The Administrator shall direct the Trustee, in accordance with the provisions of Sections 7.5 and 7.6, to distribute the value of the deceased Participant’s accounts to the Participant’s Beneficiary.

(b) Upon the death of a Former Participant, the Administrator shall direct the Trustee, in accordance with the provisions of Sections 7.5 and 7.6, to distribute any remaining Vested amounts credited to the accounts of a deceased Former Participant to such Former Participant’s Beneficiary.

(c) Any security interest held by the Plan by reason of an outstanding loan to the Participant or Former Participant shall be taken into account in determining the amount of the death benefit.

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(d) The Administrator may require such proper proof of death and such evidence of the right of any person to receive payment of the value of the account of a deceased Participant or Former Participant as the Administrator may deem desirable. The Administrator’s determination of death and of the right of any person to receive payment shall be conclusive.

(e) The Beneficiary of the death benefit payable pursuant to this Section shall be the Participant’s spouse. Except, however, the Participant may designate a Beneficiary other than the spouse if:

(1) the spouse has waived the right to be the Participant’s Beneficiary, or

(2) the Participant is legally separated or has been abandoned (within the meaning of local law) and the Participant has a court order to such effect (and there is no “qualified domestic relations order” as defined in Code Section 414(p) which provides otherwise), or

(3) the Participant has no spouse, or

(4) the spouse cannot be located.

In such event, the designation of a Beneficiary shall be made on a form satisfactory to the Administrator. A Participant may at any time revoke a designation of a Beneficiary or change a Beneficiary by filing written (or in such other form as permitted by the Internal Revenue Service) notice of such revocation or change with the Administrator. However, the Participant’s spouse must again consent in writing (or in such other form as permitted by the Internal Revenue Service) to any change in Beneficiary unless the original consent acknowledged that the spouse had the right to limit consent only to a specific Beneficiary and that the spouse voluntarily elected to relinquish such right.

(f) In the event no valid designation of Beneficiary exists, or if the Beneficiary is not alive at the time of the Participant’s death, the death benefit will be paid in the following order of priority to:

(1) the Participant’s surviving spouse;

(2) the Participant’s children, including adopted children, per stirpes;

(3) the Participant’s surviving parents in equal shares; or

(4) the Participant’s estate.

If the Beneficiary does not predecease the Participant, but dies prior to distribution of the death benefit, the death benefit will be paid to the Beneficiary’s estate.

(g) Notwithstanding anything in this Section to the contrary, if a Participant has designated the spouse as a Beneficiary, then a divorce decree or a legal separation that relates to such spouse shall revoke the Participant’s designation of the spouse as a Beneficiary unless the decree or a qualified domestic relations order (within the meaning of Code Section 414(p)) provides otherwise.

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(h) Any consent by the Participant’s spouse to waive any rights to the death benefit must be in writing (or in such other form as permitted by the Internal Revenue Service), must acknowledge the effect of such waiver, and be witnessed by a Plan representative or a notary public. Further, the spouse’s consent must be irrevocable and must acknowledge the specific nonspouse Beneficiary.

7.3. DETERMINATION OF BENEFITS IN EVENT OF DISABILITY

In the event of a Participant’s Total and Permanent Disability prior to the Participant’s Retirement Date or other termination of employment, all amounts credited to such Participant’s Combined Account shall become fully Vested. In the event of a Participant’s Total and Permanent Disability, the Administrator, in accordance with the provisions of Sections 7.5 and 7.6, shall direct the distribution to such Participant of all Vested amounts credited to such Participant’s Combined Account. If such Participant elects, distribution shall commence not later than one (1) year after the close of the Plan Year in which Total and Permanent Disability occurs.

7.4 DETERMINATION OF BENEFITS UPON TERMINATION

(a) If a Participant’s employment with the Employer is terminated for any reason other than death, Total and Permanent Disability or retirement, then such Participant shall be entitled to such benefits as are provided hereinafter pursuant to this Section 7.4.

If a portion of a Participant’s Account is forfeited, Company Stock allocated to the Participant’s Company Stock Account must be forfeited only after the Participant’s Other Investments Account has been depleted. If interest in more than one class of Company Stock has been allocated to a Participant’s Account, the Participant must be treated as forfeiting the same proportion of each such class.

Distribution of the funds due to a Terminated Participant shall be made on the occurrence of an event which would result in the distribution had the Terminated Participant remained in the employ of the Employer (upon the Participant’s death, Total and Permanent Disability or Normal Retirement). However, at the election of the Participant, the Administrator shall direct the Trustee that the entire Vested portion of the Terminated Participant’s Combined Account to be payable to such Terminated Participant as soon as administratively feasible after termination of employment. Distribution to a Participant shall not include any Company Stock acquired with the proceeds of an Exempt Loan until the close of the Plan Year in which such loan is repaid in full. Any distribution under this paragraph shall be made in a manner which is consistent with and satisfies the provisions of Section 7.5 and 7.6, including, but not limited to, all notice and consent requirements of Code Section 411(a)(11) and the Regulations thereunder.

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If the value of a Terminated Participant’s Vested benefit does not exceed $1,000, then the Administrator shall direct the Trustee to cause the entire Vested benefit to be paid to such Participant in a single lump sum as soon as administratively feasible after termination of employment. The value of the Participant’s interest in the Plan for such purpose is derived from Employer, Employee and Rollover contributions, including any rollover contributions (and earnings thereon) within the meaning of Code Sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16). The Plan shall not provide for a direct rollover (including an automatic rollover) for distributions from a Participant’s Roth Elective Deferral account if the amount of the distributions that are eligible rollover distributions are reasonably expected to total less than $200 during a year. In addition, any distribution from a Participant’s Roth Elective Deferral account are not taken into account in determining whether distributions from a Participant’s other accounts are reasonably expected to total less than $200 during a year. However, eligible rollover distributions from a Participant’s Roth Elective Deferral account are taken into account in determining whether the total amount of the Participant’s account balances under the Plan exceed the Plan’s limits for purposes of mandatory distributions from the Plan.

(b) The Vested portion of any Participant’s Account attributable to contributions other than Qualified Non-Elective Contributions (including any matching contributions used to satisfy the Actual Deferral Percentage or Actual Contribution Percentage tests) shall be a percentage of the total amount credited to the Participant’s Account determined on the basis of the Participant’s number of Years of Service according to the following schedule:

Vesting Schedule
Years of Service	Percentage
1	20	%
2	40	%
3	60	%
4	80	%
5	100	%

(c) Notwithstanding the above, Company Stock allocated to each Participant’s Company Stock Account pursuant to Section 4.4(e) must be forfeited only after other assets.

(d) Notwithstanding the vesting schedule above, the Vested percentage of a Participant’s Account shall not be less than the Vested percentage attained as of the later of the effective date or adoption date of this amendment and restatement, furthermore, the Vested portion of any Participant’s Account will never be less than the lesser of $25.00 or his/her entire Account balance, even if the application of the vesting schedule would result in a smaller Vested Account balance.

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(e) Notwithstanding the vesting schedule above, upon the complete discontinuance of the Employer contributions to the Plan or upon any full or partial termination of the Plan, all amounts then credited to the account of any affected Participant shall become 100% Vested and shall not thereafter be subject to Forfeiture.

(f) The computation of a Participant’s nonforfeitable percentage of such Participant’s interest in the Plan shall not be reduced as the result of any direct or indirect amendment to this Plan. In the event that the Plan is amended to change or modify any vesting schedule, or if the Plan is amended in any way that directly or indirectly affects the computation of the Participant’s nonforfeitable percentage, or if the Plan is deemed amended by an automatic change to a top heavy vesting schedule, then each Participant with at least three (3) Years of Service as of the expiration date of the election period may elect to have such Participant’s nonforfeitable percentage computed under the Plan without regard to such amendment or change. If a Participant fails to make such election, then such Participant shall be subject to the new vesting schedule. The Participant’s election period shall commence on the adoption date of the amendment and shall end sixty (60) days after the latest of:

(1) the adoption date of the amendment,

(2) the effective date of the amendment, or

(3) the date the Participant receives written notice of the amendment from the Employer or Administrator.

7.5 DISTRIBUTION OF BENEFITS

(a) The Administrator, pursuant to the election of the Participant, shall direct the Trustee to distribute to a Participant or such Participant’s Beneficiary any amount, subject to Section 7.5(b), to which the Participant is entitled under the Plan in one or more of the following methods:

(1) One lump-sum payment.

(2) Payments over a period certain in monthly, quarterly, semiannual, or annual installments. The period over which such payment is to be made shall not extend beyond the earlier of the Participant’s life expectancy (or the joint life expectancy of the Participant and the Participant’s “designated Beneficiary”) or the limited distribution period provided for in Section 7.5(b).

(b) Unless the Participant elects in writing (or such other form as permitted by the Internal Revenue Service) a longer distribution period, distributions to a Participant or the Participant’s Beneficiary attributable to Company Stock shall be in substantially equal monthly, quarterly, semiannual, or annual installments over a period not longer than five (5) years. In the case of a Participant with an account balance attributable to Company Stock in excess of $800,000, the five (5) year period shall be extended one (1) additional year (but not more than five (5) additional years) for each $160,000 or fraction thereof by which such balance exceeds $800,000. The dollar limits shall be adjusted at the same time and in the same manner as provided in Code Section 415(d).

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(c) Any distribution to a Participant who has a benefit which exceeds $1,000, shall require such Participant’s written (or in such other form as permitted by the Internal Revenue Service) consent if such distribution commences prior to the time the benefit is “immediately distributable.” A benefit is “immediately distributable” if any part of the benefit could be distributed to the Participant (or surviving spouse) before the Participant attains (or would have attained if not deceased) the later of the Participant’s Normal Retirement Age or age 62. With regard to this required consent:

(1) The Participant must be informed of the right to defer receipt of the distribution. If a Participant fails to consent, it shall be deemed an election to defer the commencement of payment of any benefit. However, any election to defer the receipt of benefits shall not apply with respect to distributions which are required under Section 7.5(f).

(2) Notice of the rights specified under this paragraph shall be provided no less than thirty (30) days and no more than ninety (90) days before the date the distribution commences.

(3) Written (or such other form as permitted by the Internal Revenue Service) consent of the Participant to the distribution must not be made before the Participant receives the notice and must not be made more than ninety (90) days before the date the distribution commences.

(4) No consent shall be valid if a significant detriment is imposed under the Plan on any Participant who does not consent to the distribution.

Any such distribution may commence less than thirty (30) days after the notice required under Regulation 1.411(a)-11(c) is given, provided that: (1) the Administrator clearly informs the Participant that the Participant has a right to a period of at least thirty (30) days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (2) the Participant, after receiving the notice, affirmatively elects a distribution.

(d) Notwithstanding anything herein to the contrary, the Administrator may direct that cash dividends on shares of Company Stock allocable to Participants’ Company Stock Accounts be:

(1) Paid by the Employer directly in cash to the Participants in the Plan or their Beneficiaries.

(2) Paid to the Plan and distributed in cash to Participants in the Plan or their Beneficiaries no later than ninety (90) days after the close of the Plan Year in which paid.

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(3) Used to make payments on an Exempt Loan the proceeds of which were used to acquire Company Stock (whether or not allocated to Participants’ Company Stock Accounts) with respect to which the cash dividend is paid.

(4) Allocated to Participants’ Other Investment Accounts.

(e) Any part of a Participant’s benefit which is retained in the Plan after the Anniversary Date on which the Participant’s participation ends will continue to be treated as a Company Stock Account or as an Other Investments Account (subject to Section 7.4(a)) as provided in Article IV. However, neither account will be credited with any further Employer contributions or Forfeitures.

(f) Notwithstanding any provision in the Plan to the contrary, the distribution of a Participant’s benefits will be made in accordance with the following requirements and will otherwise comply with Code Section 401(a)(9) and the Regulations thereunder, the provisions of which are incorporated herein by reference:

(1) A Participant’s benefits will be distributed not later than April 1st of the calendar year following the later of (i) the calendar year in which the Participant attains age 70 1/2 or (ii) the calendar year in which the Participant retires, provided, however, that this clause (ii) shall not apply in the case of a Participant who is a “five (5) percent owner” at any time during the Plan Year ending with or within the calendar year in which such owner attains age 70 1/2. Such distribution shall be equal to or greater than any required distribution.

Alternatively, distributions to a Participant must begin no later than the applicable April 1st as determined above and must be made over a period certain measured by the Life Expectancy of the Participant (or joint Life Expectancies of the Participant and the Participant’s “designated Beneficiary”) in accordance with Regulations. Such distributions will be equal to or greater than any required distribution.

(2) Distributions to a Participant and the Participant’s Beneficiaries will only be made in accordance with the incidental death benefit requirements of Code Section 401(a)(9)(G) and the Regulations thereunder.

(3) Unless the Participant’s interest is distributed in a single sum on or before the required beginning date specified in (1) above, the minimum amount that will be distributed for each Distribution Calendar Year (including the first Distribution Calendar Year and the Distribution Calendar Year that includes the Participant’s date of death) is the lesser of:

(i) the quotient obtained by dividing the Participant’s Account Balance by the distribution period in the Uniform Lifetime Table set forth in Regulation 1.401(a)(9)-9, using the Participant’s age as of the Participant’s birthday in the Distribution Calendar Year; or

(ii) if the Participant’s sole “designated Beneficiary” for the Distribution Calendar Year is the Participant’s spouse, the quotient obtained by dividing the Participant’s Account Balance by the number in the Joint and Last Survivor Table set forth in Regulation 1.401(a)(9)-9, using the Participant’s and spouse’s attained ages as of the Participant’s and spouse’s birthdays in the Distribution Calendar Year.

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(g) Notwithstanding any provision in the Plan to the contrary, distributions upon the death of a Participant will be made in accordance with the following requirements and will otherwise comply with Code Section 401(a)(9) and the Regulations thereunder, the provisions of which are incorporated be reference.

(1) If the Participant dies on or after the date distributions begin and there is a “designated Beneficiary,” then the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account Balance by the longer of the remaining Life Expectancy of the Participant or the remaining Life Expectancy of the Participant’s “designated Beneficiary,” determined as follows:

(i) The Participant’s remaining Life Expectancy is calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

(ii) If the Participant’s surviving spouse is the Participant’s sole “designated Beneficiary,” then the remaining Life Expectancy of the surviving spouse is calculated for each Distribution Calendar Year after the year of the Participant’s death using the surviving spouse’s age as of the spouse’s birthday in that year. For Distribution Calendar Years after the year of the surviving spouse’s death, the remaining Life Expectancy of the surviving spouse is calculated using the age of the surviving spouse as of the spouse’s birthday in the calendar year of the spouse’s death, reduced by one for each subsequent calendar year.

(iii) If the Participant’s surviving spouse is not the Participant’s sole “designated Beneficiary,” then the “designated Beneficiary’s” remaining Life Expectancy is calculated using the age of the beneficiary in the year following the year of the Participant’s death, reduced by one for each subsequent year.

However, if there is no “designated Beneficiary” as of September 30th of the year after the year of the Participant’s death, then the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account Balance by the Participant’s remaining Life Expectancy calculated using the age of the Participant in the year of death, reduced by one for each subsequent year.

(2) If a Participant dies before the date distributions begin, then the Participant’s entire interest will be distributed, or begin to be distributed, no later than as follows:

(i) If the Participant’s surviving spouse is the Participant’s sole “designated Beneficiary,” then distributions to the surviving spouse may begin by December 31st of the calendar year immediately following the calendar year in which the Participant died, or by December 31st of the calendar year in which the Participant would have attained age 70  ¹/2, if later.

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(ii) If the Participant’s surviving spouse is not the Participant’s sole “designated Beneficiary,” then distributions to the “designated Beneficiary” may begin by December 31st of the calendar year immediately following the calendar year in which the Participant died.

(iii) Participants or Beneficiaries may elect on an individual basis whether the “5-year rule” or the life expectancy rule in this Section 7.5(g)(2) applies to distributions after the death of a Participant who has a “designated Beneficiary.” The election must be made no later than the earlier of September 30th of the calendar year in which distribution would be required to begin under Sections 7.5(g)(2)(i) and 7.5(g)(2)(ii), or by September 30th of the calendar year which contains the fifth anniversary of the Participant’s (or, if applicable, surviving spouse’s) death. If neither the Participant nor Beneficiary makes an election under this paragraph, distributions will be made in accordance with the “5-year rule.”

(iv) If there is no “designated Beneficiary” as of September 30th of the year following the year of the Participant’s death, the Participant’s entire interest will be distributed by December 31st of the calendar year containing the fifth anniversary of the Participant’s death.

(v) If the Participant is survived by a “designated Beneficiary,” then the minimum amount that will be distributed for each Distribution Calendar Year after the year of the Participant’s death is the quotient obtained by dividing the Participant’s Account Balance by the remaining Life Expectancy of the Participant’s “designated Beneficiary,” determined as provided in Section 7.5(g)(1).

(vi) If the Participant’s surviving spouse is the Participant’s sole “designated Beneficiary” and the surviving spouse dies after the Participant but before distributions to the surviving spouse begin, then this Section 7.5(g)(2), other than Section 7.5(g)(2)(i), will apply as if the surviving spouse were the Participant.

(3) For purposes of this Section 7.5(g), the Participant’s death benefit will be distributed to the Participant’s Beneficiaries subject to the following rules:

(i) Distributions are considered to begin on the Participant’s required beginning date. However, if Section 7.5(g)(2)(vi) applies, distributions are considered to begin on the date distributions are required to begin to the surviving spouse.

(ii) Unless the Participant’s interest is distributed in a single sum on or before the required beginning date, as of the first Distribution Calendar Year distributions will be made in accordance with Section 7.5(g).

(h) Except as limited by Sections 7.5 and 7.6, whenever the Trustee is to make a distribution or to commence a series of payments, the distribution or series of payments may be made or begun on such date or as soon thereafter as is practicable. However,

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unless a Former Participant elects in writing to defer the receipt of benefits (such election may not result in a death benefit that is more than incidental), the payment of benefits shall begin not later than the sixtieth (60th) day after the close of the Plan Year in which the latest of the following events occurs:

(1) the date on which the Participant attains the earlier of age 65 or the Normal Retirement Age specified herein;

(2) the tenth (10th) anniversary of the year in which the Participant commenced participation in the Plan; or

(3) the date the Participant terminates his service with the Employer.

(i) If a distribution is made to a Participant who has not severed employment and who is not fully Vested in the Participant’s Account and the Participant may increase the Vested percentage in such account, then, at any relevant time the Participant’s Vested portion of the account will be equal to an amount (“X”) determined by the formula:

X equals P(AB plus D) – D

For purposes of applying the formula: P is the Vested percentage at the relevant time, AB is the account balance at the relevant time, and D is the amount of distribution.

7.6 HOW PLAN BENEFIT WILL BE DISTRIBUTED

(a) Distribution of a Participant’s benefit may be made in cash or Company Stock or both, provided, however, that if a Participant or Beneficiary so demands, such benefit (other than Deferred Compensation and any Income allocable to such Deferred Compensation) shall be distributed only in the form of Company Stock. Prior to making a distribution of benefits, the Administrator shall advise the Participant or the Participant’s Beneficiary, in writing (or such other form as permitted by the Internal Revenue Service), of the right to demand that benefits be distributed solely in Company Stock.

(b) If a Participant or Beneficiary demands that benefits, except as provided above, be distributed solely in Company Stock, distribution of a Participant’s benefit will be made entirely in whole shares or other units of Company Stock. Any balance in a Participant’s Other Investments Account will be applied to acquire for distribution the maximum number of whole shares or other units of Company Stock at the then fair market value. Any fractional unit value unexpended will be distributed in cash. If Company Stock is not available for purchase by the Trustee, then the Trustee shall hold such balance until Company Stock is acquired and then make such distribution, subject to Sections 7.5(h) and 7.5(1).

(c) The Trustee will make distribution from the Trust only on instructions from the Administrator.

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(d) Notwithstanding anything contained herein to the contrary, if the Employer charter or by-laws restrict ownership of substantially all shares of Company Stock to Employees and the Trust Fund, as described in Code Section 409(h)(2)(B)(ii)(I), then the Administrator shall distribute a Participant’s Combined Account entirely in cash without granting the Participant the right to demand distribution in shares of Company Stock.

(e) Except as otherwise provided herein, Company Stock distributed by the Trustee may be restricted as to sale or transfer by the by-laws or articles of incorporation of the Employer, provided restrictions are applicable to all Company Stock of the same class. If a Participant is required to offer the sale of Company Stock to the Employer before offering to sell Company Stock to a third party, in no event may the Employer pay a price less than that offered to the distributee by another potential buyer making a bona fide offer and in no event shall the Trustee pay a price less than the fair market value of the Company Stock.

(f) If Company Stock acquired with the proceeds of an Exempt Loan (described in Section 5.3 hereof) is available for distribution and consists of more than one class, a Participant or the Participant’s Beneficiary must receive substantially the same proportion of each such class.

7.7 DISTRIBUTION FOR MINOR OR INCOMPETENT BENEFICIARY

In the event a distribution is to be made to a minor or incompetent Beneficiary, then the Administrator may direct that such distribution be paid to the legal guardian, or if none in the case of a minor Beneficiary, to a parent of such Beneficiary or a responsible adult with whom the Beneficiary maintains residence, or to the custodian for such Beneficiary under the Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted by the laws of the state in which said Beneficiary resides. Such a payment to the legal guardian, custodian or parent of a minor Beneficiary shall fully discharge the Trustee, Employer, and Plan from further liability on account thereof.

7.8 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN

In the event that all, or any portion, of the distribution payable to a Participant or Beneficiary hereunder shall, at the later of the Participant’s attainment of age 62 or Normal Retirement Age, remain unpaid solely by reason of the inability of the Administrator, after sending a registered letter, return receipt requested, to the last known address, and after further diligent effort, to ascertain the whereabouts of such Participant or Beneficiary, the amount so distributable shall be treated as a Forfeiture pursuant to the Plan. Notwithstanding the foregoing, if the value of a Participant’s Vested benefit derived from Employer and Employee contributions does not exceed $5,000, then the amount distributable may, in the sole discretion of the Administrator, either be treated as a Forfeiture, or be paid directly to an individual retirement account described in Code Section 408(a) or individual retirement annuity described in Code Section 408(b) at the time it is determined that the whereabouts of the Participant or the Participant’s Beneficiary cannot be ascertained. In the event a Participant or Beneficiary is located subsequent to the Forfeiture, such benefit shall be restored, first from

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Forfeitures, if any, and then from an additional Employer contribution if necessary. However, regardless of the preceding, a benefit which is lost by reason of escheat under applicable state law is not treated as a Forfeiture for purposes of this Section nor as an impermissible forfeiture under the Code.

7.9 RIGHT OF FIRST REFUSALS

(a) If any Participant, the Participant’s Beneficiary or any other person to whom shares of Company Stock are distributed from the Plan (the “Selling Participant”) shall, at any time, desire to sell some or all of such shares (the “Offered Shares”) to a third party (the “Third Party”), the Selling Participant shall give written notice of such desire to the Employer and the Administrator, which notice shall contain the number of shares offered for sale, the proposed terms of the sale and the names and addresses of both the Selling Participant and Third Party. Both the Trust Fund and the Employer shall each have the right of first refusal for a period of fourteen (14) days from the date the Selling Participant gives such written notice to the Employer and the Administrator (such fourteen (14) day period to run concurrently against the Trust Fund and the Employer) to acquire the Offered Shares. As between the Trust Fund and the Employer, the Trust Fund shall have priority to acquire the shares pursuant to the right of first refusal. The selling price and terms shall be the same as offered by the Third Party.

(b) If the Trust Fund and the Employer do not exercise their right of first refusal within the required fourteen (14) day period provided above, the Selling Participant shall have the right, at any time following the expiration of such fourteen (14) day period, to dispose of the Offered Shares to the Third Party; provided, however, that (i) no disposition shall be made to the Third Party on terms more favorable to the Third Party than those set forth in the written notice delivered by the Selling Participant above, and (ii) if such disposition shall not be made to a third party on the terms offered to the Employer and the Trust Fund, the offered Shares shall again be subject to the right of first refusal set forth above.

(c) The closing pursuant to the exercise of the right of first refusal under Section 7.9(a) above shall take place at such place agreed upon between the Administrator and the Selling Participant, but not later than ten (10) days after the Employer or the Trust Fund shall have notified the Selling Participant of the exercise of the right of first refusal. At such closing, the Selling Participant shall deliver certificates representing the Offered Shares duly endorsed in blank for transfer, or with stock powers attached duly executed in blank with all required transfer tax stamps attached or provided for, and the Employer or the Trust Fund shall deliver the purchase price, or an appropriate portion thereof, to the Selling Participant.

(d) Except as provided in this paragraph (d), no Company Stock acquired with the proceeds of an Exempt Loan complying with the requirements of Section 5.3 hereof shall be subject to a right of first refusal. Company Stock acquired with the proceeds of an Exempt Loan, which is distributed to a Participant or Beneficiary, shall be subject to the right of first refusal provided for in paragraph (a) of this Section only so long as the Company Stock is not publicly traded. The term “publicly traded” refers to a

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securities exchange registered under Section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78(f)) or that is quoted on a system sponsored by a national securities association registered under Section 15A(b) of the Securities Exchange Act (15 U.S.C. 780). In addition, in the case of Company Stock which was acquired with the proceeds of a loan described in Section 5.3, the selling price and other terms under the right must not be less favorable to the seller than the greater of the value of the security determined under Section 6.2, or the purchase price and other terms offered by a buyer (other than the Employer or the Trust Fund), making a good faith offer to purchase the security. The right of first refusal must lapse no later than fourteen (14) days after the security holder gives notice to the holder of the right that an offer by a third party to purchase the security has been made. The right of first refusal shall comply with the provisions of paragraphs (a), (b) and (c) of this Section, except to the extent those provisions may conflict with the provisions of this paragraph.

7.10 STOCK CERTIFICATE LEGEND

Certificates for shares distributed pursuant to the Plan shall contain the following legend:

“The shares represented by this certificate are transferable only upon compliance with the terms of PBSJ EMPLOYEE PROFIT SHARING AND STOCK OWNERSHIP PLAN AND TRUST AGREEMENT effective as of January 1 1985, which grants to Post, Buckley, Schuh & Jernigan, Inc. a right of first refusal, a copy of said Plan being on file in the office of the Company.”

7.11 PUT OPTION

(a) If Company Stock which was not acquired with the proceeds of an Exempt Loan is distributed to a Participant and such Company Stock is not readily tradeable on an established securities market, a Participant has a right to require the Employer to repurchase the Company Stock distributed to such Participant under a fair valuation formula. Such Stock shall be subject to the provisions of Section 7.11(c).

(b) Company Stock which is acquired with the proceeds of an Exempt Loan and which is not publicly traded when distributed, or if it is subject to a trading limitation when distributed, must be subject to a put option. For purposes of this paragraph, a “trading limitation” on a Company Stock is a restriction under any Federal or State securities law or any regulation thereunder, or an agreement (not prohibited by Section 7.12) affecting the Company Stock which would make the Company Stock not as freely tradeable as stock not subject to such restriction.

(c) The put option must be exercisable only by a Participant, by the Participant’s donees, or by a person (including an estate or its distributee) to whom the Company Stock passes by reason of a Participant’s death. (Under this paragraph Participant or Former Participant means a Participant or Former Participant and the beneficiaries of the Participant or Former Participant under the Plan.) The put option must permit a Participant to put the Company Stock to the Employer. Under no circumstances may the put option bind

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the Plan. However, it shall grant the Plan an option to assume the rights and obligations of the Employer at the time that the put option is exercised. If it is known at the time a loan is made that Federal or State law will be violated by the Employer honoring such put option, the put option must permit the Company Stock to be put, in a manner consistent with such law, to a third party (e.g., an affiliate of the Employer or a shareholder other than the Plan) that has substantial net worth at the time the loan is made and whose net worth is reasonably expected to remain substantial.

The put option shall commence as of the day following the date the Company Stock is distributed to the Former Participant and end sixty (60) days thereafter and if not exercised within such sixty (60) day period, an additional sixty (60) day option shall commence on the first day of the fifth month of the Plan Year next following the date the stock was distributed to the Former Participant (or such other sixty (60) day period as provided in Regulations). However, in the case of Company Stock that is publicly traded without restrictions when distributed but ceases to be so traded within either of the sixty (60) day periods described herein after distribution, the Employer must notify each holder of such Company Stock in writing on or before the tenth day after the date the Company Stock ceases to be so traded that for the remainder of the applicable sixty (60) day period the Company Stock is subject to the put option. The number of days between the tenth day and the date on which notice is actually given, if later than the tenth day, must be added to the duration of the put option. The notice must inform distributees of the term of the put options that they are to hold. The terms must satisfy the requirements of this paragraph.

The put option is exercised by the holder notifying the Employer in writing that the put option is being exercised; the notice shall state the name and address of the holder and the number of shares to be sold. The period during which a put option is exercisable does not include any time when a distributee is unable to exercise it because the party bound by the put option is prohibited from honoring it by applicable Federal or State law. The price at which a put option must be exercisable is the value of the Company Stock determined in accordance with Section 6.2. Payment under the put option involving a “Total Distribution” shall be paid in substantially equal monthly, quarterly, semiannual or annual installments over a period certain beginning not later than thirty (30) days after the exercise of the put option and not extending beyond five (5) years. The deferral of payment is reasonable if adequate security and a reasonable interest rate on the unpaid amounts are provided. The amount to be paid under the put option involving installment distributions must be paid not later than thirty (30) days after the exercise of the put option. Payment under a put option must not be restricted by the provisions of a loan or any other arrangement, including the terms of the Employer articles of incorporation, unless so required by applicable state law.

For purposes of this Section, “Total Distribution” means a distribution to a Participant or the Participant’s Beneficiary within one (1) taxable year of the entire Vested Participant’s Combined Account.

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(d) An arrangement involving the Plan that creates a put option must not provide for the issuance of put options other than as provided under this Section. The Plan (and the Trust Fund) must not otherwise obligate itself to acquire Company Stock from a particular holder thereof at an indefinite time determined upon the happening of an event such as the death of the holder.

7.12 NONTERMINABLE PROTECTIONS AND RIGHTS

No Company Stock, except as provided in Section 7.10 and Section 7.11(b), acquired with the proceeds of a loan described in Section 5.3 hereof may be subject to a put, call, or other option, or buy-sell or similar arrangement when held by and when distributed from the Trust Fund, whether or not the Plan is then an ESOP. The protections and rights granted in this Section are nonterminable, and such protections and rights shall continue to exist under the terms of this Plan so long as any Company Stock acquired with the proceeds of a loan described in Section 5.3 hereof is held by the Trust Fund or by any Participant or other person for whose benefit such protections and rights have been created, and neither the repayment of such loan nor the failure of the Plan to be an ESOP, nor an amendment of the Plan shall cause a termination of said protections and rights.

7.13 PRE-RETIREMENT DISTRIBUTION

After a Participant attains the age of 65 years or has made Deferred Compensation contributions to the Plan for at least five (5) years, the Participant, until he/she retires, has a continuing election to receive all or any portion of Vested Participant’s Account Balance, but excluding any portion of the Participant’s Account Balance attributable to Deferred Compensation. A Participant who has made Deferred Compensation contributions to the Plan for less than five (5) years, until he/she retires, has a continuing election to receive all or any portion of his/her Vested Participant’s Account Balance that has been contributed to the Plan more than two (2) Plan Years prior to the withdrawal, but excluding any portion of the Participant’s Account Balance attributable to Deferred Compensation. A Participant only may make one withdrawal pursuant to this Section 7.13 per Plan Year.

7.14 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION

All rights and benefits, including elections, provided to a Participant in this Plan shall be subject to the rights afforded to any “alternate payee” under a “qualified domestic relations order.” Furthermore, a distribution to an “alternate payee” shall be permitted if such distribution is authorized by a “qualified domestic relations order,” even if the affected Participant has not separated from service and has not reached the “earliest retirement age” under the Plan. For the purposes of this Section, “alternate payee,” “qualified domestic relations order” and “earliest retirement age” shall have the meaning set forth under Code Section 414(p).

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ARTICLE VIII

TRUSTEE

8.1 BASIC RESPONSIBILITIES OF THE TRUSTEE

(a) The Trustee shall have the following categories of responsibilities:

(1) Consistent with the “funding policy and method” determined by the Employer, to invest, manage, and control the Plan assets subject, however, to the direction of the Employer or an Investment Manager appointed by the Employer or any agent of the Employer;

(2) At the direction of the Administrator, to pay benefits required under the Plan to be paid to Participants, or, in the event of their death, to their Beneficiaries; and

(3) To maintain records of receipts and disbursements and furnish to the Employer and/or Administrator for each Plan Year a written annual report pursuant to Section 8.8.

(b) In the event that the Trustee shall be directed by the Employer, or an Investment Manager or other agent appointed by the Employer with respect to the investment of any or all Plan assets, the Trustee shall have no liability with respect to the investment of such assets, but shall be responsible only to execute such investment instructions as so directed.

(1) The Trustee shall be entitled to rely fully on the written (or other form acceptable to the Administrator and the Trustee, including, but not limited to, voice recorded) instructions of the Employer, or any Fiduciary or nonfiduciary agent of the Employer, in the discharge of such duties, and shall not be liable for any loss or other liability, resulting from such direction (or lack of direction) of the investment of any part of the Plan assets.

(2) The Trustee may delegate the duty of executing such instructions to any nonfiduciary agent, which may be an affiliate of the Trustee or any Plan representative.

(c) If there shall be more than one Trustee, they shall act by a majority of their number, but may authorize one or more of them to sign papers on their behalf.

8.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE

(a) The Trustee shall invest and reinvest the Trust Fund to keep the Trust Fund invested without distinction between principal and income and in such securities or property, real or personal, wherever situated, as the Trustee shall deem advisable, including, but not limited to, stocks, common or preferred, open-end or close-end mutual funds, bonds and other evidences of indebtedness or ownership, and real estate or any interest therein. The Trustee shall at all times in making investments of the Trust Fund consider, among other factors, the short and long-term financial needs of the Plan on the basis of information furnished by the Employer. In making such investments, the Trustee shall not be restricted to securities or other property of the character expressly authorized by the

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applicable law for trust investments; however, the Trustee shall give due regard to any limitations imposed by the Code or the Act so that at all times the Plan may qualify as an Employee Stock Ownership Plan and Trust.

(b) The Trustee may employ a bank or trust company pursuant to the terms of its usual and customary bank agency agreement, under which the duties of such bank or trust company shall be of a custodial, clerical and record-keeping nature.

(c) In the event the Trustee invests any part of the Trust Fund, pursuant to the directions of the Administrator, in any shares of stock issued by the Employer, and the Administrator thereafter directs the Trustee to dispose of such investment, or any part thereof, under circumstances which, in the opinion of counsel for the Trustee, require registration of the securities under the Securities Act of 1933 and/or qualification of the securities under the Blue Sky laws of any state or states, then the Employer at its own expense, will take or cause to be taken any and all such action as may be necessary or appropriate to effect such registration and/or qualification.

8.3 OTHER POWERS OF THE TRUSTEE

The Trustee, in addition to all powers and authorities under common law, statutory authority, including the Act, and other provisions of the Plan, shall have the following powers and authorities, to be exercised in the Trustee’s sole discretion:

(a) To purchase, or subscribe for, any securities or other property and to retain the same. In conjunction with the purchase of securities, margin accounts may be opened and maintained;

(b) To sell, exchange, convey, transfer, grant options to purchase, or otherwise dispose of any securities or other property held by the Trustee, by private contract or at public auction. No person dealing with the Trustee shall be bound to see to the application of the purchase money or to inquire into the validity, expediency, or propriety of any such sale or other disposition, with or without advertisement;

(c) To vote upon any stocks, bonds, or other securities; to give general or special proxies or powers of attorney with or without power of substitution; to exercise any conversion privileges, subscription rights or other options, and to make any payments incidental thereto; to oppose, or to consent to, or otherwise participate in, corporate reorganizations or other changes affecting corporate securities, and to delegate discretionary powers, and to pay any assessments or charges in connection therewith; and generally to exercise any of the powers of an owner with respect to stocks, bonds, securities, or other property. However, the Trustee shall not vote proxies relating to securities for which it has not been assigned full investment management responsibilities. In those cases where another party has such investment authority or discretion, the Trustee will deliver all proxies to said party who will then have full responsibility for voting those proxies;

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(d) To cause any securities or other property to be registered in the Trustee’s own name or in the name of one or more of the Trustee’s nominees, in a clearing corporation, in a depository, or in entry form or in bearer form, but the books and records of the Trustee shall at all times show that all such investments are part of the Trust Fund;

(e) To borrow or raise money for the purposes of the Plan in such amount, and upon such terms and conditions, as the Trustee shall deem advisable; and for any sum so borrowed, to issue a promissory note as Trustee, and to secure the repayment thereof by pledging all, or any part, of the Trust Fund; and no person lending money to the Trustee shall be bound to see to the application of the money lent or to inquire into the validity, expediency, or propriety of any borrowing;

(f) To keep such portion of the Trust Fund in cash or cash balances as the Trustee may, from time to time, deem to be in the best interests of the Plan, without liability for interest thereon;

(g) To accept and retain for such time as the Trustee may deem advisable any securities or other property received or acquired as Trustee hereunder, whether or not such securities or other property would normally be purchased as investments hereunder;

(h) To make, execute, acknowledge, and deliver any and all documents of transfer and conveyance and any and all other instruments that may be necessary or appropriate to carry out the powers herein granted;

(i) To settle, compromise, or submit to arbitration any claims, debts, or damages due or owing to or from the Plan, to commence or defend suits or legal or administrative proceedings, and to represent the Plan in all suits and legal and administrative proceedings;

(j) To employ suitable agents and counsel and to pay their reasonable expenses and compensation, and such agent or counsel may or may not be agent or counsel for the Employer;

(k) To apply for and procure from responsible insurance companies, to be selected by the Administrator, as an investment of the Trust Fund such annuity, or other Contracts (on the life of any Participant) as the Administrator shall deem proper; to exercise, at any time or from time to time, whatever rights and privileges may be granted under such annuity, or other Contracts; to collect, receive, and settle for the proceeds of all such annuity or other Contracts as and when entitled to do so under the provisions thereof;

(l) To invest funds of the Trust in time deposits or savings accounts bearing a reasonable rate of interest or in cash or cash balances without liability for interest thereon;

(m) To invest in Treasury Bills and other forms of United States government obligations;

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(n) To invest in shares of investment companies registered under the Investment Company Act of 1940;

(o) To deposit monies in federally insured savings accounts or certificates of deposit in banks or savings and loan associations;

(p) To vote Company Stock as provided in Section 8.5;

(q) To consent to or otherwise participate in reorganizations, recapitalizations, consolidations, mergers and similar transactions with respect to Company Stock or any other securities and to pay any assessments or charges in connection therewith;

(r) To deposit such Company Stock (but only if such deposit does not violate the provisions of Section 8.5 hereof) or other securities in any voting trust, or with any protective or like committee, or with a trustee or with depositories designated thereby;

(s) To sell or exercise any options, subscription rights and conversion privileges and to make any payments incidental thereto;

(t) To exercise any of the powers of an owner, with respect to such Company Stock and other securities or other property comprising the Trust Fund. The Administrator, with the Trustee’s approval, may authorize the Trustee to act on any administrative matter or class of matters with respect to which direction or instruction to the Trustee by the Administrator is called for hereunder without specific direction or other instruction from the Administrator;

(u) To sell, purchase and acquire put or call options if the options are traded on and purchased through a national securities exchange registered under the Securities Exchange Act of 1934, as amended, or, if the options are not traded on a national securities exchange, are guaranteed by a member firm of the New York Stock Exchange regardless of whether such options are covered; and

(v) To do all such acts and exercise all such rights and privileges, although not specifically mentioned herein, as the Trustee may deem necessary to carry out the purposes of the Plan.

8.4 LOANS TO PARTICIPANTS

(a) The Trustee may, in the Trustee’s discretion, make loans to Participants and Beneficiaries under the following circumstances: (1) loans shall be made available to all Participants and Beneficiaries on a reasonably equivalent basis; (2) loans shall bear a reasonable rate of interest; (3) loans shall be adequately secured; (4) loans shall provide for periodic repayment over a reasonable period of time; and (5) loans shall not be made available to Highly Compensated Employees in an amount greater than the amount made available to other Participants and Beneficiaries.

(b) Loans made pursuant to this Section (when added to the outstanding balance of all other loans made by the Plan to the Participant) may, in accordance with a uniform and nondiscriminatory policy established by the Administrator, be limited to the lesser of:

(1) $50,000 reduced by the excess (if any) of the highest outstanding balance of loans from the Plan to the Participant during the one year period ending on the day before the date on which such loan is made, over the outstanding balance of loans from the Plan to the Participant on the date on which such loan was made, or

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(2) one-half ( ¹/2) of the present value of the non-forfeitable accrued benefit of the Participant under the Plan.

For purposes of this limit, all plans of the Employer shall be considered one plan.

(c) Loans shall provide for level amortization with payments to be made not less frequently than quarterly over a period not to exceed five (5) years. However, loans used to acquire any dwelling unit which, within a reasonable time, is to be used (determined at the time the loan is made) as a “principal residence” of the Participant shall provide for periodic repayment over a reasonable period of time that may exceed five (5) years. For this purpose, a “principal residence” has the same meaning as a “principal residence” under Code Section 1034. Loan repayments may be suspended under this Plan as permitted under Code Section 414(u)(4).

(d) Any loans granted or renewed shall be made pursuant to a Participant loan program. Such loan program shall be established in writing and must include, but need not be limited to, the following:

(1) the identity of the person or positions authorized to administer the Participant loan program;

(2) a procedure for applying for loans;

(3) the basis on which loans will be approved or denied;

(4) limitations, if any, on the types and amounts of loans offered;

(5) the procedure under the program for determining a reasonable rate of interest;

(6) the types of collateral which may secure a Participant loan; and

(7) the events constituting default and the steps that will be taken to preserve Plan assets.

Such Participant loan program shall be contained in a separate written document which, when properly executed, is hereby incorporated by reference and made a part of the Plan. Furthermore, such Participant loan program may be modified or amended in writing from time to time without the necessity of amending this Section.

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(e) Notwithstanding anything in this Plan to the contrary, if a Participant or Beneficiary defaults on a loan made pursuant to this Section, then the loan default will be a distributable event to the extent permitted by the Code and Regulations.

(f) Notwithstanding anything in this Section to the contrary, any loans made prior to the date this amendment and restatement is adopted shall be subject to the terms of the plan in effect at the time such loan was made.

8.5 VOTING COMPANY STOCK

All Participants shall have the right to vote all Company Stock which is allocated to the Participant’s Company Stock Account. The Trustee shall follow the voting instructions of each Participant. With respect to a Participant who does not vote Company Stock which is allocated to the Participant’s Company Stock Account, the Trustee shall not vote such Company Stock. All Company Stock which is unallocated shall be voted by the Trustees in the same proportion that the allocated Company Stock are voted by the Plan Participants.

8.6 DUTIES OF THE TRUSTEE REGARDING PAYMENTS

At the direction of the Administrator, the Trustee shall, from time to time, in accordance with the terms of the Plan, make payments out of the Trust Fund. The Trustee shall not be responsible in any way for the application of such payments.

8.7 TRUSTEE’S COMPENSATION AND EXPENSES AND TAXES

The Trustee shall be paid such reasonable compensation as set forth in the Trustee’s fee schedule (if the Trustee has such a schedule) or as agreed upon in writing by the Employer and the Trustee. However, an individual serving as Trustee who already receives full-time pay from the Employer shall not receive compensation from the Plan. In addition, the Trustee shall be reimbursed for any reasonable expenses, including reasonable counsel fees incurred by it as Trustee. Such compensation and expenses shall be paid from the Trust Fund unless paid or advanced by the Employer. All taxes of any kind whatsoever that may be levied or assessed under existing or future laws upon, or in respect of, the Trust Fund or the income thereof, shall be paid from the Trust Fund.

8.8 ANNUAL REPORT OF THE TRUSTEE

(a) Within a reasonable period of time after the later of the Anniversary Date or receipt of the Employer contribution for each Plan Year, the Trustee, or its agent, shall furnish to the Employer and Administrator a written statement of account with respect to the Plan Year for which such contribution was made setting forth:

(1) the net income, or loss, of the Trust Fund;

(2) the gains, or losses, realized by the Trust Fund upon sales or other disposition of the assets;

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(3) the increase, or decrease, in the value of the Trust Fund;

(4) all payments and distributions made from the Trust Fund; and

(5) such further information as the Trustee and/or Administrator deems appropriate.

(b) The Employer, promptly upon its receipt of each such statement of account, shall acknowledge receipt thereof in writing and advise the Trustee and/or Administrator of its approval or disapproval thereof. Failure by the Employer to disapprove any such statement of account within thirty (30) days after its receipt thereof shall be deemed an approval thereof. The approval by the Employer of any statement of account shall be binding on the Employer and the Trustee as to all matters contained in the statement to the same extent as if the account of the Trustee had been settled by judgment or decree in an action for a judicial settlement of its account in a court of competent jurisdiction in which the Trustee, the Employer and all persons having or claiming an interest in the Plan were parties. However, nothing contained in this Section shall deprive the Trustee of its right to have its accounts judicially settled if the Trustee so desires.

8.9 AUDIT

(a) If an audit of the Plan’s records shall be required by the Act and the regulations thereunder for any Plan Year, the Administrator shall direct the Trustee to engage on behalf of all Participants an independent qualified public accountant for that purpose. Such accountant shall, after an audit of the books and records of the Plan in accordance with generally accepted auditing standards, within a reasonable period after the close of the Plan Year, furnish to the Administrator and the Trustee a report of the audit setting forth the accountant’s opinion as to whether any statements, schedules or lists that are required by Act Section 103 or the Secretary of Labor to be filed with the Plan’s annual report, are presented fairly in conformity with generally accepted accounting principles applied consistently.

(b) All auditing and accounting fees shall be an expense of and may, at the election of the Employer, be paid from the Trust Fund.

(c) If some or all of the information necessary to enable the Administrator to comply with Act Section 103 is maintained by a bank, insurance company, or similar institution, regulated, supervised, and subject to periodic examination by a state or federal agency, then it shall transmit and certify the accuracy of that information to the Administrator as provided in Act Section 103(b) within one hundred twenty (120) days after the end of the Plan Year or by such other date as may be prescribed under regulations of the Secretary of Labor.

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8.10 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE

(a) Unless otherwise agreed to by both the Trustee and the Employer, a Trustee may resign at any time by delivering to the Employer, at least thirty (30) days before its effective date, a written notice of resignation.

(b) Unless otherwise agreed to by both the Trustee and the Employer, the Employer may remove a Trustee at any time by delivering to the Trustee, at least thirty (30) days before its effective date, a written notice of such Trustee’s removal.

(c) Upon the death, resignation, incapacity, or removal of any Trustee, a successor may be appointed by the Employer; and such successor, upon accepting such appointment in writing and delivering same to the Employer, shall, without further act, become vested with all the powers and responsibilities of the predecessor as if such successor had been originally named as a Trustee herein. Until such a successor is appointed, the remaining Trustee or Trustees shall have full authority to act under the terms of the Plan.

(d) The Employer may designate one or more successors prior to the death, resignation, incapacity, or removal of a Trustee. In the event a successor is so designated by the Employer and accepts such designation, the successor shall, without further act, become vested with all the powers and responsibilities of the predecessor as if such successor had been named as Trustee herein immediately upon the death, resignation, incapacity, or removal of the predecessor.

(e) Whenever any Trustee hereunder ceases to serve as such, the Trustee shall furnish to the Employer and Administrator a written statement of account with respect to the portion of the Plan Year during which the individual or entity served as Trustee. This statement shall be either (i) included as part of the annual statement of account for the Plan Year required under Section 8.8 or (ii) set forth in a special statement. Any such special statement of account should be rendered to the Employer no later than the due date of the annual statement of account for the Plan Year. The procedures set forth in Section 8.8 for the approval by the Employer of annual statements of account shall apply to any special statement of account rendered hereunder and approval by the Employer of any such special statement in the manner provided in Section 8.8 shall have the same effect upon the statement as the Employer’s approval of an annual statement of account. No successor to the Trustee shall have any duty or responsibility to investigate the acts or transactions of any predecessor who has rendered all statements of account required by Section 8.8 and this subparagraph.

8.11 TRANSFER OF INTEREST

Notwithstanding any other provision contained in this Plan, the Trustee at the direction of the Administrator shall transfer the Vested interest, if any, of a Participant to another trust forming part of a pension, profit sharing or stock bonus plan maintained by such Participant’s new employer and represented by said employer in writing as meeting the requirements of Code Section 401(a), provided that the trust to which such transfers are made permits the transfer to be made.

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8.12 TRUSTEE INDEMNIFICATION

The Employer agrees to indemnify and hold harmless the Trustee against any and all claims, losses, damages, expenses and liabilities the Trustee may incur in the exercise and performance of the Trustee’s power and duties hereunder, unless the same are determined to be due to gross negligence or willful misconduct.

8.13 DIRECT ROLLOVER

(a) Notwithstanding any provision of the Plan to the contrary that would otherwise limit a “distributee’s” election under this Section, a “distributee” may elect, at the time and in the manner prescribed by the Administrator, to have any portion of an “eligible rollover distribution” that is equal to at least $500 paid directly to an “eligible retirement plan” specified by the “distributee” in a “direct rollover.” For purposes of the $500 limitation in the immediately preceding sentence, any amount distributed from the Participant’s Roth Elective Deferral Account shall be treated as a separate distribution from any amount distributed from the Participant’s other Accounts in the Plan, even if the amounts are distributed at the same time. Furthermore, “direct rollover” of a distribution from a Roth Elective Deferral Account under the Plan will only be made to another Roth Elective Deferral Account under a qualified retirement plan described in Code Section 402A (e)(1) or to a Roth IRA described in Code Section 408A, and only to the extent the “direct rollover” is permitted under the rules of Code Section 402(c) and that the recipient plan accepts such rollovers.

(b) For purposes of this Section the following definitions shall apply:

(1) An “eligible rollover distribution” is any distribution of all or any portion of the balance to the credit of the “distributee,” except that an “eligible rollover distribution” does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the “distributee” or the joint lives (or joint life expectancies) of the “distributee” and the “distributee’s” designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Code Section 401(a)(9); the portion of any other distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities); any hardship distribution described in Code Section 401(k)(2)(B)(i)(IV); and any other distribution that is reasonably expected to total less than 5200 during a year.

(2) An “eligible retirement plan” is an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b), (other than an endowment contract), a qualified trust (an employees’ trust) described in Code Section 401(a) which is exempt from tax under Code Section 501(a), an annuity plan described in Code Section 403(a), an eligible deferred compensation plan described in Code Section 457(b) which is maintained by an eligible employer described in Code

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Section 457(e)(1)(A), and an annuity contract described in Code Section 403(b), that accepts the “distributee’s” “eligible rollover distribution.” However, in the case of an “eligible rollover distribution” to the surviving spouse, an “eligible retirement plan” is an individual retirement account or individual retirement annuity.

(3) A “distributee” includes an Employee or former Employee. In addition, the Employee’s or former Employee’s surviving spouse and the Employee’s or former Employee’s spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Code Section 414(p), are “distributees” with regard to the interest of the spouse or former spouse.

(4) A “direct rollover” is a payment by the Plan to the “eligible retirement plan” specified by the “distributee.”

ARTICLE IX

AMENDMENT, TERMINATION AND MERGERS

9.1 AMENDMENT

(a) The Employer shall have the right at any time to amend this Plan subject to the limitations of this Section. However, any amendment which affects the rights, duties or responsibilities of the Trustee or Administrator, may only be made with the Trustee’s or Administrator’s written consent. Any such amendment shall become effective as provided therein upon its execution. The Trustee shall not be required to execute any such amendment unless the amendment affects the duties of the Trustee hereunder.

(b) No amendment to the Plan shall be effective if it authorizes or permits any part of the Trust Fund (other than such part as is required to pay taxes and administration expenses) to be used for or diverted to any purpose other than for the exclusive benefit of the Participants or their Beneficiaries or estates; or causes any reduction in the amount credited to the account of any Participant; or causes or permits any portion of the Trust Fund to revert to or become property of the Employer.

(c) Except as permitted by Regulations (including Regulation 1.411(d)-4) or other IRS guidance, no Plan amendment or transaction having the effect of a Plan amendment (such as a merger, plan transfer or similar transaction) shall be effective if it eliminates or reduces any “Section 411(d)(6) protected benefit” or adds or modifies conditions relating to “Section 411(d)(6) protected benefits” which results in a further restriction on such benefit unless such “Section 411(d)(6) protected benefits” are preserved with respect to benefits accrued as of the later of the adoption date or effective date of the amendment. “Section 411(d)(6) protected benefits” are benefits described in Code Section 411(d)(6)(A), early retirement benefits and retirement-type subsidies, and optional forms of benefit. A Plan amendment that eliminates or restricts the ability of a Participant to receive payment of the Participant’s interest in the Plan under a particular optional form of benefit will be permissible if the amendment satisfies the conditions in (1) and (2) below:

(1) The amendment provides a single-sum distribution form that is otherwise identical to the optional form of benefit eliminated or restricted. For purposes of this condition (1), a single-sum distribution form is otherwise identical only if it is identical in all respects to the eliminated or restricted optional form of benefit (or would be identical except that it provides greater rights to the Participant) except with respect to the timing of payments after commencement.

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(2) The amendment is not effective unless the amendment provides that the amendment shall not apply to any distribution with an annuity starting date earlier than the earlier of: (i) the ninetieth (90th) day after the date the Participant receiving the distribution has been furnished a summary that reflects the amendment and that satisfies the Act requirements at 29 CFR 2520.104b-3 (relating to a summary of material modifications) or (ii) the first day of the second Plan Year following the Plan Year in which the amendment is adopted.

In addition, no such amendment shall have the effect of terminating the protections and rights set forth in Section 7.12, unless such termination shall then be permitted under the applicable provisions of the Code and Regulations; such a termination is currently expressly prohibited by Regulation 54.4975-11(a)(3)(ii).

9.2 TERMINATION

(a) The Employer shall have the right at any time to terminate the Plan by delivering to the Trustee and Administrator written notice of such termination. Upon any full or partial termination, all amounts credited to the affected Participants’ Combined Accounts shall become 100% Vested as provided in Section 7.4 and shall not thereafter be subject to forfeiture, and all unallocated amounts, including Forfeitures, shall be allocated to the accounts of all Participants in accordance with the provisions hereof.

(b) Upon the full termination of the Plan, the Employer shall direct the distribution of the assets of the Trust Fund to Participants in a manner which is consistent with and satisfies the provisions of Sections 7.5 and 7.6. Except as permitted by Regulations, the termination of the Plan shall not result in the reduction of “Section 411(d)(6) protected benefits” in accordance with Section 9.1(c).

9.3 MERGER, CONSOLIDATION OR TRANSFER OF ASSETS

This Plan and Trust may be merged or consolidated with, or its assets and/or liabilities may be transferred to any other plan and trust only if the benefits which would be received by a Participant of this Plan, in the event of a termination of the Plan immediately after such transfer, merger or consolidation, are at least equal to the benefits the Participant would have received if the Plan had terminated immediately before the transfer, merger or consolidation, and such transfer, merger or consolidation does not otherwise result in the elimination or reduction of any “Section 411(d)(6) protected benefits” in accordance with Section 9.1(c).

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ARTICLE X

TOP HEAVY

10.1 TOP HEAVY PLAN REQUIREMENTS

For any Top Heavy Plan Year, the Plan shall provide the special vesting requirements of Code Section 416(b) pursuant to Section 7.4 of the Plan and the special minimum allocation requirements of Code Section 416(c) pursuant to Section 4.4 of the Plan.

10.2 DETERMINATION OF TOP HEAVY STATUS

(a) This Plan shall be a Top Heavy Plan for any Plan Year in which, as of the “determination date,” (1) the Present Value of Accrued Benefits of Key Employees and (2) the sum of the Aggregate Accounts of Key Employees under this Plan and all plans of an Aggregation Group, exceeds sixty percent (60%) of the Present Value of Accrued Benefits and the Aggregate Accounts of all Key and Non-Key Employees under this Plan and all plans of an Aggregation Group.

If any Participant is a Non-Key Employee for any Plan Year, but such Participant was a Key Employee for any prior Plan Year, such Participant’s Present Value of Accrued Benefit and/or Aggregate Account balance shall not be taken into account for purposes of determining whether this Plan is a Top Heavy Plan (or whether any Aggregation Group which includes this Plan is a Top Heavy Group). In addition, if a Participant or Former Participant has not performed any services for any Employer maintaining the Plan at any time during the one-year period ending on the “determination date,” any accrued benefit for such Participant or Former Participant shall not be taken into account for the purposes of determining whether this Plan is a Top Heavy Plan.

(b) Aggregate Account: A Participant’s Aggregate Account as of the “determination date” is the sum of:

(1) the Participant’s Combined Account balance as of the most recent valuation occurring within a twelve (12) month period ending on the “determination date.” However, with respect to Employees not performing services for the Employer during the year ending on the “determination date,” the Participant’s Combined Account balance as of the most recent valuation occurring within a twelve (12) month period ending on the “determination date” shall not be taken into account for purposes of this Section.

(2) an adjustment for any contributions due as of the “determination date.” Such adjustment shall be the amount of any contributions actually made after the Valuation Date but due on or before the “determination date,” except for the first Plan Year when such adjustment shall also reflect the amount of any contributions made after the “determination date” that are allocated as of a date in that first Plan Year.

(3) any Plan distributions made within the Plan Year that includes the “determination date” or, with respect to distributions made for a reason other than separation from service, disability or death, within the five (5) preceding Plan Years. The preceding sentence

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shall also apply to distributions under a terminated plan which, had it not been terminated, would have been aggregated with the Plan under Code Section 416(g)(2)(A)(i). In the case of distributions made after the Valuation Date and prior to the “determination date,” such distributions are not included as distributions for top heavy purposes to the extent that such distributions are already included in the Participant’s Aggregate Account balance as of the Valuation Date.

(4) any Employee contributions, whether voluntary or mandatory. However, amounts attributable to tax deductible qualified voluntary employee contributions shall not be considered to be a part of the Participant’s Aggregate Account balance.

(5) with respect to unrelated rollovers and plan-to-plan transfers (ones which are both initiated by the Employee and made from a plan maintained by one employer to a plan maintained by another employer), if this Plan provides the rollovers or plan-to-plan transfers, it shall always consider such rollovers or plan-to-plan transfers as a distribution for the purposes of this Section. If this Plan is the plan accepting such rollovers or plan-to-plan transfers, it shall not consider such rollovers or plan-to-plan transfers as part of the Participant’s Aggregate Account balance.

(6) with respect to related rollovers and plan-to-plan transfers (ones either not initiated by the Employee or made to a plan maintained by the same employer), if this Plan provides the rollover or plan-to-plan transfer, it shall not be counted as a distribution for purposes of this Section. If this Plan is the plan accepting such rollover or plan-to-plan transfer, it shall consider such rollover or plan-to-plan transfer as part of the Participant’s Aggregate Account balance, irrespective of the date on which such rollover or plan-to-plan transfer is accepted.

(7) For the purposes of determining whether two employers are to be treated as the same employer in (5) and (6) above, all employers aggregated under Code Section 414(b), (c), (m) and (o) are treated as the same employer.

(c) “Aggregation Group” means either a Required Aggregation Group or a Permissive Aggregation Group as hereinafter determined.

(1) Required Aggregation Group: In determining a Required Aggregation Group hereunder, each plan of the Employer in which a Key Employee is a participant in the Plan Year containing the Determination Date or any of the four preceding Plan Years, and each other plan of the Employer which enables any plan in which a Key Employee participates to meet the requirements of Code Sections 401(a)(4) or 410, will be required to be aggregated. Such group shall be known as a Required Aggregation Group.

In the case of a Required Aggregation Group, each plan in the group will be considered a Top Heavy Plan if the Required Aggregation Group is a Top Heavy Group. No plan in the Required Aggregation Group will be considered a Top Heavy Plan if the Required Aggregation Group is not a Top Heavy Group.

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(2) Permissive Aggregation Group: The Employer may also include any other plan not required to be included in the Required Aggregation Group, provided the resulting group, taken as a whole, would continue to satisfy the provisions of Code Sections 401(a)(4) and 410. Such group shall be known as a Permissive Aggregation Group.

In the case of a Permissive Aggregation Group, only a plan that is part of the Required Aggregation Group will be considered a Top Heavy Plan if the Permissive Aggregation Group is a Top Heavy Group. No plan in the Permissive Aggregation Group will be considered a Top Heavy Plan if the Permissive Aggregation Group is not a Top Heavy Group.

(3) Only those plans of the Employer in which the Determination Dates fall within the same calendar year shall be aggregated in order to determine whether such plans are Top Heavy Plans.

(4) An Aggregation Group shall include any terminated plan of the Employer if it was maintained within the last five (5) years ending on the Determination Date.

(d) “Determination date” means (a) the last day of the preceding Plan Year, or (b) in the case of the first Plan Year, the last day of such Plan Year.

(e) Present Value of Accrued Benefit: In the case of a defined benefit plan, the Present Value of Accrued Benefit for a Participant other than a Key Employee, shall be as determined using the single accrual method used for all plans of the Employer and Affiliated Employers, or if no such single method exists, using a method which results in benefits accruing not more rapidly than the slowest accrual rate permitted under Code Section 411(b)(1)(C). The determination of the Present Value of Accrued Benefit shall be determined as of the most recent valuation date that falls within or ends with the 12-month period ending on the Determination Date except as provided in Code Section 416 and the Regulations thereunder for the first and second plan years of a defined benefit plan.

(f) “Top Heavy Group” means an Aggregation Group in which, as of the Determination Date, the sum of:

(1) the Present Value of Accrued Benefits of Key Employees under all defined benefit plans included in the group, and

(2) the Aggregate Accounts of Key Employees under all defined contribution plans included in the group, exceeds sixty percent (60%) of a similar sum determined for all Participants.

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ARTICLE XI

MISCELLANEOUS

11.1 PARTICIPANT’S RIGHTS

This Plan shall not be deemed to constitute a contract between the Employer and any Participant or to be a consideration or an inducement for the employment of any Participant or Employee. Nothing contained in this Plan shall be deemed to give any Participant or Employee the right to be retained in the service of the Employer or to interfere with the right of the Employer to discharge any Participant or Employee at any time regardless of the effect which such discharge shall have upon the Employee as a Participant of this Plan.

11.2 ALIENATION

(a) Subject to the exceptions provided below, and as otherwise permitted by the Code and Act, no benefit which shall be payable out of the Trust Fund to any person (including a Participant or the Participant’s Beneficiary) shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be void; and no such benefit shall in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements, or torts of any such person, nor shall it be subject to attachment or legal process for or against such person, and the same shall not be recognized by the Trustee, except to such extent as may be required by law.

(b) Subsection (a) shall not apply to the extent a Participant or Beneficiary is indebted to the Plan by reason of a loan made pursuant to Section 8.4, as a result of a loan from the Plan. At the time a distribution is to be made to or for a Participant’s or Beneficiary’s benefit, such proportion of the amount to be distributed as shall equal such indebtedness shall be paid to the Plan, to apply against or discharge such indebtedness. Prior to making a payment, however, the Participant or Beneficiary must be given written notice by the Administrator that such indebtedness is to be so paid in whole or part from the Participant’s Combined Account. If the Participant or Beneficiary does not agree that the indebtedness is a valid claim against the Vested Participant’s Combined Account, the Participant or Beneficiary shall be entitled to a review of the validity of the claim in accordance with procedures provided in Sections 2.8 and 2.9.

(c) Subsection (a) shall not apply to a “qualified domestic relations order” defined in Code Section 414(p), and those other domestic relations orders permitted to be so treated by the Administrator under the provisions of the Retirement Equity Act of 1984. The Administrator shall establish a written procedure to determine the qualified status of domestic relations orders and to administer distributions under such qualified orders. Further, to the extent provided under a “qualified domestic relations order,” a former spouse of a Participant shall be treated as the spouse or surviving spouse for all purposes under the Plan.

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(d) Subsection (a) shall not apply to an offset to a Participant’s accrued benefit against an amount that the Participant is ordered or required to pay the Plan with respect to a judgment, order, or decree issued, or a settlement entered into in accordance with Code Sections 401(a)(13)(C) and (D).

11.3 CONSTRUCTION OF PLAN

This Plan and Trust shall be construed and enforced according to the Code, the Act and the laws of the State of Florida, other than its laws respecting choice of law, to the extent not pre-empted by the Act.

11.4 GENDER AND NUMBER

Wherever any words are used herein in the masculine, feminine or neuter gender, they shall be construed as though they were also used in another gender in all cases where they would so apply, and whenever any words are used herein in the singular or plural form, they shall be construed as though they were also used in the other form in all cases where they would so apply.

11.5 LEGAL ACTION

In the event any claim, suit, or proceeding is brought regarding the Trust and/or Plan established hereunder to which the Trustee, the Employer or the Administrator may be a party, and such claim, suit, or proceeding is resolved in favor of the Trustee, the Employer or the Administrator, they shall be entitled to be reimbursed from the Trust Fund for any and all costs, attorney’s fees, and other expenses pertaining thereto incurred by them for which they shall have become liable.

11.6 PROHIBITION AGAINST DIVERSION OF FUNDS

(a) Except as provided below and otherwise specifically permitted by law, it shall be impossible by operation of the Plan or of the Trust, by termination of either, by power of revocation or amendment, by the happening of any contingency, by collateral arrangement or by any other means, for any part of the corpus or income of any Trust Fund maintained pursuant to the Plan or any funds contributed thereto to be used for, or diverted to, purposes other than the exclusive benefit of Participants, Former Participants, or their Beneficiaries.

(b) In the event the Employer shall make an excessive contribution under a mistake of fact pursuant to Act Section 403(c)(2)(A), the Employer may demand repayment of such excessive contribution at any time within one (1) year following the time of payment and the Trustees shall return such amount to the Employer within the one (1) year period. Earnings of the Plan attributable to the contributions may not be returned to the Employer but any losses attributable thereto must reduce the amount so returned.

(c) Except for Sections 3.5, 3.6, and 4.1(e), any contribution by the Employer to the Trust Fund is conditioned upon the deductibility of the contribution by the Employer under the Code and, to the extent any such deduction is disallowed, the Employer

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may, within one (1) year following the final determination of the disallowance, whether by agreement with the Internal Revenue Service or by final decision of a competent jurisdiction, demand repayment of such disallowed contribution and the Trustee shall return such contribution within one (1) year following the disallowance. Earnings of the Plan attributable to the contribution may not be returned to the Employer, but any losses attributable thereto must reduce the amount so returned.

11.7 EMPLOYER’S AND TRUSTEE’S PROTECTIVE CLAUSE

The Employer, Administrator and Trustee, and their successors, shall not be responsible for the validity of any Contract issued hereunder or for the failure on the part of the insurer to make payments provided by any such Contract, or for the action of any person which may delay payment or render a Contract null and void or unenforceable in whole or in part.

11.8 INSURER’S PROTECTIVE CLAUSE

Except as otherwise agreed upon in writing between the Employer and the insurer, an insurer which issues any Contracts hereunder shall not have any responsibility for the validity of this Plan or for the tax or legal aspects of this Plan. The insurer shall be protected and held harmless in acting in accordance with any written direction of the Trustee, and shall have no duty to see to the application of any funds paid to the Trustee, nor be required to question any actions directed by the Trustee. Regardless of any provision of this Plan, the insurer shall not be required to take or permit any action or allow any benefit or privilege contrary to the terms of any Contract which it issues hereunder, or the rules of the insurer.

11.9 RECEIPT AND RELEASE FOR PAYMENTS

Any payment to any Participant, the Participant’s legal representative, Beneficiary, or to any guardian or committee appointed for such Participant or Beneficiary in accordance with the provisions of the Plan, shall, to the extent thereof, be in full satisfaction of all claims hereunder against the Trustee and the Employer, either of whom may require such Participant, legal representative, Beneficiary, guardian or committee, as a condition precedent to such payment, to execute a receipt and release thereof in such form as shall be determined by the Trustee or Employer.

11.10 ACTION BY THE EMPLOYER

Whenever the Employer under the terms of the Plan is permitted or required to do or perform any act or matter or thing, it shall be done and performed by a person duly authorized by its legally constituted authority.

11.11 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY

The “named Fiduciaries” of this Plan are (1) the Employer, (2) the Administrator and (3) the Trustee, and (4) any Investment Manager appointed hereunder. The named Fiduciaries shall have only those specific powers, duties, responsibilities, and obligations

90

as are specifically given them under the Plan including, but not limited to, any agreement allocating or delegating their responsibilities, the terms of which arc incorporated herein by reference. In general, the Employer shall have the sole responsibility for making the contributions provided for under Section 4.1; and shall have the authority to appoint and remove the Trustee and the Administrator; to formulate the Plan’s “funding policy and method;” and to amend or terminate, in whole or in part, the Plan. The Administrator shall have the sole responsibility for the administration of the Plan, including, but not limited to, the items specified in Article II of the Plan, as the same may be allocated or delegated thereunder. The Trustee shall have the sole responsibility of management of the assets held under the Trust, except to the extent directed pursuant to Article II or with respect to those assets, the management of which has been assigned to an Investment Manager, who shall be solely responsible for the management of the assets assigned to it, all as specifically provided in the Plan. Each named Fiduciary warrants that any directions given, information furnished, or action taken by it shall be in accordance with the provisions of the Plan, authorizing or providing for such direction, information or action. Furthermore, each named Fiduciary may rely upon any such direction, information or action of another named Fiduciary as being proper under the Plan, and is not required under the Plan to inquire into the propriety of any such direction, information or action. It is intended under the Plan that each named Fiduciary shall be responsible for the proper exercise of its own powers, duties, responsibilities and obligations under the Plan as specified or allocated herein. No named Fiduciary shall guarantee the Trust Fund in any manner against investment loss or depreciation in asset value. Any person or group may serve in more than one Fiduciary capacity.

11.12 HEADINGS

The headings and subheadings of this Plan have been inserted for convenience of reference and are to be ignored in any construction of the provisions hereof.

11.13 APPROVAL BY INTERNAL REVENUE SERVICE

Notwithstanding anything herein to the contrary, if, pursuant to an application for qualification filed by or on behalf of the Plan by the time prescribed by law for filing the Employer’s return for the taxable year in which the Plan is adopted, or such later date that the Secretary of the Treasury may prescribe, the Commissioner of Internal Revenue Service or the Commissioner’s delegate should determine that the Plan does not initially qualify as a tax-exempt plan under Code Sections 401 and 501, and such determination is not contested, or if contested, is finally upheld, then if the Plan is a new plan, it shall be void ab initio and all amounts contributed to the Plan by the Employer, less expenses paid, shall be returned within one (1) year and the Plan shall terminate, and the Trustee shall be discharged from all further obligations. If the disqualification relates to an amended plan, then the Plan shall operate as if it had not been amended.

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11.14 UNIFORMITY

All provisions of this Plan shall be interpreted and applied in a uniform, nondiscriminatory manner. In the event of any conflict between the terms of this Plan and any Contract purchased hereunder, the Plan provisions shall control.

11.15 SECURITIES AND EXCHANGE COMMISSION APPROVAL

The Employer may request an interpretative letter from the Securities and Exchange Commission stating that the transfers of Company Stock contemplated hereunder do not involve transactions requiring a registration of such Company Stock under the Securities Act of 1933. In the event that a favorable interpretative letter is not obtained, the Employer reserves the right to amend the Plan and Trust retroactively to their Effective Dates in order to obtain a favorable interpretative letter or to terminate the Plan.

ARTICLE XII

PARTICIPATING EMPLOYERS

12.1 ADOPTION BY OTHER EMPLOYERS

Notwithstanding anything herein to the contrary, with the consent of the Employer and Trustee, any other corporation or entity, whether an affiliate or subsidiary or not, may adopt this Plan and all of the provisions hereof, and participate herein and be known as a Participating Employer, by a properly executed document evidencing said intent and will of such Participating Employer.

12.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS

(a) Each such Participating Employer shall be required to use the same Trustee as provided in this Plan.

(b) The Trustee may, but shall not be required to, commingle, hold and invest as one Trust Fund all contributions made by Participating Employers, as well as all increments thereof.

(c) Any expenses of the Plan which are to be paid by the Employer or borne by the Trust Fund shall be paid by each Participating Employer in the same proportion that the total amount standing to the credit of all Participants employed by such Employer bears to the total standing to the credit of all Participants.

12.3 DESIGNATION OF AGENT

Each Participating Employer shall be deemed to be a party to this Plan; provided, however, that with respect to all of its relations with the Trustee and Administrator for the purpose of this Plan, each Participating Employer shall be deemed to have designated irrevocably the Employer as its agent. Unless the context of the Plan clearly indicates the contrary, the word “Employer” shall be deemed to include each Participating Employer as related to its adoption of the Plan.

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12.4 EMPLOYEE TRANSFERS

In the event an Employee is transferred between Participating Employers, accumulated service and eligibility shall be carried with the Employee involved. No such transfer shall effect a termination of employment hereunder, and the Participating Employer to which the Employee is transferred shall thereupon become obligated hereunder with respect to such Employee in the same manner as was the Participating Employer from whom the Employee was transferred.

12.5 PARTICIPATING EMPLOYER CONTRIBUTION AND FORFEITURES

Any contribution or Forfeiture subject to allocation during each Plan Year shall be allocated only among those Participants of the Employer or Participating Employer making the contribution or by which the forfeiting Participant was employed. However, if the contribution is made, or the forfeiting Participant was employed, by an Affiliated Employer, in which event such contribution or Forfeiture shall be allocated among all Participants of all Participating Employers who are Affiliated Employers in accordance with the provisions of this Plan. On the basis of the information furnished by the Administrator, the Trustee may keep separate books and records concerning the affairs of each Participating Employer hereunder and as to the accounts and credits of the Employees of each Participating Employer. The Trustee may, but need not, register Contracts so as to evidence that a particular Participating Employer is the interested Employer hereunder, but in the event of an Employee transfer from one Participating Employer to another, the employing Participating Employer shall immediately notify the Trustee thereof.

12.6 AMENDMENT

Amendment of this Plan by the Employer at any time when there shall be a Participating Employer hereunder shall only be by the written action of each and every Participating Employer and with the consent of the Trustee where such consent is necessary in accordance with the terms of this Plan.

12.7 DISCONTINUANCE OF PARTICIPATION

Any Participating Employer shall be permitted to discontinue or revoke its participation in the Plan at any time. At the time of any such discontinuance or revocation, satisfactory evidence thereof and of any applicable conditions imposed shall be delivered to the Trustee. The Trustee shall thereafter transfer, deliver and assign Contracts and other Trust Fund assets allocable to the Participants of such Participating Employer to such new trustee as shall have been designated by such Participating Employer, in the event that it has established a separate qualified retirement plan for its Employees provided, however, that no such transfer shall be made if the result is the elimination or reduction of any “Section 411(d)(6) protected benefits” as described in Section 9.1(c). If no successor is designated, the Trustee shall retain such assets for the Employees of said Participating Employer pursuant to the provisions of

93

Article VII hereof. In no such event shall any part of the corpus or income of the Trust as it relates to such Participating Employer be used for or diverted for purposes other than for the exclusive benefit of the Employees of such Participating Employer.

12.8 ADMINISTRATOR’S AUTHORITY

The Administrator shall have authority to make any and all necessary rules or regulations, binding upon all Participating Employers and all Participants, to effectuate the purpose of this Article.

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IN WITNESS WHEREOF, this Plan has been executed the day and year first above written.

EMPLOYER/PLAN SPONSOR:

THE PBSJ CORPORATION

By

Its:

PARTICIPATING EMPLOYERS:

POST, BUCKLEY, SCHUH & JERNIGAN, INC.

By

Its:

PBS&J CONSTRUCTORS, INC.

By

Its:

PBS & J CONSTRUCTION SERVICES, INC.

By

Its:

TRUSTEES:

MICHAEL E. DOZZI

MARK A. RAMSEUR

SARA MAPLES

WAYNE J. OVERMAN

REYNALDO A. CORTEZ

95

CHARLES D. NOSTRA

DONALD R. VOGT

WADE C. KELLY

SHARON M. PHILLIPS

CHARLES R. REDDING, III

BARRY J. SCHULZ

96

PBSJ EMPLOYEE PROFIT SHARING AND

STOCK OWNERSHIP PLAN AND TRUST

AGREEMENT

Exhibit A

Church Engineering

The Nelson Corporation

Coastal Environmental Services, Inc.

Frank Coleman and Associates, Inc.

Espey, Huston & Associates, Inc.

Kercheval and Associates, Inc.

J. Powell & Associates, Inc.

Durham Technologies, Inc.

Welker & Associates, Inc.

TriLine Associates, Inc.

W. Koo and Associates Structural Engineers, Inc.

Croslin Associates, Inc.

Land & Water Consulting, Inc.

EIP Associates

97

EX-10.31

EXHIBIT 10.31

FIRST AMENDMENT TO THE

PBSJ EMPLOYEE PROFIT SHARING

AND STOCK OWNERSHIP PLAN

WHEREAS, Post, Buckley, Schuh & Jernigan, Inc., a Florida corporation, previously established a profit sharing plan, effective January 1, 1985, and added an employee stock ownership plan, effective October 1, 1994, now known as the PBSJ Employee Profit Sharing and Stock Ownership Plan (the “Plan”); and

WHEREAS, The PBSJ Corporation (the “Employer”) became the plan sponsor and administrator, effective January 1, 2007; and

WHEREAS, the Plan was previously amended and restated effective January 1, 2007; and

WHEREAS, under Article IX of the Plan, the Employer has the right to amend the Plan at any time; and

WHEREAS, the Employer wishes to amend the Plan in order to make certain modifications to facilitate the administration of the Plan as a result of retaining a new third-party administrator.

NOW, THEREFORE, the Plan is amended effective as of January 1, 2007, unless a different date is indicated, as follows:

1. Section 1.45, entitled “Normal Retirement Date” is hereby amended by removing the definition of Normal Retirement Date in its entirety and replacing it with the following:

“1.45 “Normal Retirement Date” means the Participant’s Normal Retirement Age.”

2. Section 4.1(b) regarding the allocation of discretionary matching contributions made by the Employer is hereby amended by removing the subsection and replacing it in its entirety, to read as follows:

“(b) On behalf of each Participant who is eligible to share in matching contributions for the Plan Year, a discretionary matching contribution equal to a uniform percentage of each such Participant’s Deferred Compensation (less Catch-Up Contributions made pursuant to Section 4.2(a)), the exact percentage, if any, to be determined each year by the

Employer, which amount, if any, shall be deemed an Employer Non-Elective Contribution plus, on behalf of each Non-Highly Compensated Employee who is a Participant eligible to share in the qualified matching contribution, any uniform discretionary percentage of each such Participant’s Deferred Compensation (less Catch-Up Contributions made pursuant to Section 4.2(a)), the exact percentage, if any, to be determined each year by the Employer, which amount, shall be deemed an Employer Non-Elective Contribution.”

3. Subsection 4.4(b)(2) regarding the allocation of matching and qualified matching contributions is hereby amended by removing the subsection and replacing it in its entirety, to read as follows:

“(2) With respect to the Employer Non-Elective Contribution made pursuant to Section 4.1(b), to each Participant’s Account or, to each Participant’s Elective Account when used to satisfy the “Actual Deferral Percentage” tests in accordance with Section 4.1(b).

Only Participants who are actively employed on the last day of the Plan Year shall be eligible to share in the matching contribution or qualified matching contribution for the year.”

4. Section 7.4(d) regarding the vesting of a Participant’s Account in the Plan is hereby amended by removing the subsection and replacing it in its entirety, to read as follows:

“(d) In the event of a change in the vesting schedule, the Vested percentage of a Participant’s Account shall not be less than the Vested percentage attained as of the later of the effective date or adoption date of this amendment and restatement and in accordance with subsection 7.4(f).”

5. Section 7.13, entitled PRE-RETIREMENT DISTRIBUTION, of the Plan is hereby by amended by removing the section and replacing it in its entirety, to read as follows:

“7.13 PRE-RETIREMENT DISTRIBUTION

While still employed a Participant may be eligible to withdraw all or a portion of his/her Participant’s Account, as follows:

(a) Effective January 1, 1997,a Participant who has attained age 65 shall be eligible to elect to withdraw all or any portion of his/her Vested Participant’s Account Balance in the Plan;

(b) a Participant who has completed at least five (5) years of participation in the Plan shall be eligible to elect to withdraw all or any portion of his/her Vested Participant’s Account Balance, excluding any portion of the Participant’s Account Balance attributable to Contributions made pursuant to Sections 4.1(a) or 4.2 of the Plan;

2

(c) a Participant shall be eligible to elect to withdraw all or any portion of his/her Vested Participant’s Account Balance, excluding any portion of the Participant’s Account Balance attributable to Contributions made pursuant to Sections 4.1(a) or 4.2 of the Plan, including earnings thereon, provided that such amounts have been in the Plan more than two (2) Plan Years prior to the withdrawal of such amounts; or

(d) a Participant, upon attainment of age 59 ¹/2, shall be eligible to elect to withdraw any annuity contract previouisly purchased by the Plan on his/her behalf in which the Participant is fully vested, regardless of the source of the Contribution used to purchase said annuity contract.

A Participant may only make one withdrawal pursuant to this Section 7.13 per Plan Year. Any distribution made pursuant to this Section shall be made in a manner consistent with Section 7.5 of the Plan and the requirements of Code Sections 411(a)(11) and 417.”

6. Except as provided herein, no other changes are being made to the Plan.

IN WITNESS WHEREOF, the Employer has caused this First Amendment to be executed by its duly authorized officers on this     day of                 , 2007.

THE PBSJ CORPORATION

By:

Title:

3

EX-14.1

Exhibit 14.1

PBS&J Code of Conduct

Building for the Future:

Our Values, Principles, and Standards

PBS&J Code of Conduct

Building for the Future:

Our Values, Principles, and Standards

The compass is commonly thought of as a device used to determine geographic direction. For PBS&J, the compass represents the firm’s ethics and compliance program. It symbolizes the firm’s commitment to its Code of Conduct and the values, principles, and standards that provide direction for PBS&J employees in an increasingly complex business environment. We all face ethical dilemmas in our professional decisions and actions. The solutions are not always easy, but we do have choices—and when we have questions, we can make integrity the compass that guides everything we do.

An employee-owned company

A Message to all Employees from our Chairman and Chief Executive Officer

Belief in our fundamental values has earned PBS&J its reputation since its founding almost a half century ago. As we look to a future filled with growth and promise, it is important that we build on that foundation and plan for a time when our daily decision making and long-term relationship building may become even more complex. In my 33 years of service to PBS&J, never have I seen our core value of “belief in the values of integrity, hard work, and loyalty” tested as it has been recently. Even so, I believe that our company’s ethics and compliance standards remain strong.

We all have a responsibility to do what is right and comply with the law. To help us do that, we have developed a new code of conduct for business ethics and compliance, Building for the Future: Our Values, Principles, and Standards. This code affirms our long-standing Core Values and Guiding Principles. It also provides practical guidance and procedures that we can use to help us make good business decisions and address an increasingly complex business environment. These procedures require that all employees take steps to determine the right course of action whenever there is any doubt.

The Code of Conduct has been adopted by the Board of Directors of The PBSJ Corporation, parent company to PBS&J, as a statement of our core ethical standards and business values. These standards will complement the company’s core values, guide our work, shape our workplace, and define PBS&J as a company deeply committed to business ethics. Every PBS&J employee is required to behave in a manner that is consistent with the standards set forth in the code. If you do not understand something, you must seek counsel from your immediate supervisor, another manager or supervisor, our Vice President and Chief Ethics and Compliance Officer, or other company resources in Legal, Finance, or Human Resources.

Our Chief Ethics and Compliance Officer has my full support and will help you address any concerns. Please be vigilant and help us ensure that every member of our team adheres to the highest ethical and legal standards. If an ethical dilemma or concern comes to your attention, it is your responsibility to let us know.

How we conduct our business is every bit as important as what we do. We have worked hard to build and enhance our reputation, and I thank you for everything you have done to help us achieve that. Those we serve and partner with in the marketplace, as well as the communities where we live and work, have come to trust that we at PBS&J will “do the right thing.” Maintaining that trust is crucial to our continued success.

I am confident that each one of you will follow the letter and the spirit of this code and help our company secure its bright future.

Regards,

John B. Zumwalt, III, P.E. August 2006

Contents

PBS&J’s Mission, Vision, Core Values, and Guiding Principles	6
Mission	6
Vision	6
Core Values	6
Guiding Principles	7
Introduction	9
Purpose and Use of Our Code of Conduct	11
Asking Questions and Raising Concerns	11
Where to Go for Help	12
Violations and Cooperating with Internal Investigations	13
Non-Retaliation Policy	13
Note to Employees	13
Responsibilities to Our Clients	14
Quality Performance	14
Gifts and Entertainment	14
Honesty in Communications and Contracting	19
Gathering Competitive Information	19
Anti-Kickback and Bribery Policy	20
Government Audits and Investigations	20
Hiring Government Employees	21
Fair Competition	21
Organizational Conflicts of Interest	21
Responsibilities to Our Fellow Employees	22
Health and Safety	22
Drugs and Alcohol	22
Diversity and Fair Treatment	22
Workplace Harassment	23
Employee Privacy	23
Responsibilities to Our Shareholders	24
Use of Company Resources and Assets	24
Accuracy of Books and Records	25

Conflicts of Interest	26
Records Retention Related to Litigation or Investigations	27
International Trade	28
Anti-Money Laundering	28
Communications with Media	28
Responsibilities to Our Suppliers and Business Partners	29
Responsibilities to Our Communities
Where We Live and Work	30
Compliance with Laws and Regulations	30
Upholding Professional Standards	30
Respecting the Environment	30
Community Activities	30
Political Activities and Contributions	30
Lobbying	31
Employee Commitment	32
Notes	33
Employee Commitment Form	34
Comments and Suggestions Form	34

PBS&J’s Mission,

Vision, Core Values,

and Guiding Principles

Mission

To provide professional services to our clients through technical excellence and innovation.

Vision

To be recognized nationally as the consultant of choice.

Core Values

Belief in the virtues of integrity, hard work, and loyalty. Belief in the virtues of integrity, hard work, and loyalty has earned PBS&J its reputation over the years. Building and maintaining trust in our client and industry relationships is essential to our continued success.

• Do the right thing even when no one is looking, and if unsure of what the right thing is, ask for guidance.

• Admit mistakes and be ready with corrective action.

• Make the extra effort to get the work done right.

• Be responsible and accountable for your own adherence to all of the company’s ethics and compliance standards.

• Be responsible and accountable for reporting actual or suspected ethics and compliance violations.

Relentless in the pursuit of quality and excellence.

The firm’s pursuit of quality and excellence is relentless. It starts with hiring the best people, continues with the desire to continuously improve on client service, and ends with quality work worthy of pride by all PBS&J employees.

• Encourage one another to constantly improve in the delivery of client services.

• Seek review of deliverables to assure they are accurate and of high quality.

• Strive to satisfy client expectations.

Honor our contractual requirements and commitments.

We are proud of our long history of honoring our contractual commitments. We aggressively manage schedules, budgets, and technical requirements. Our commitment sets the tone for the way we do business and helps establish trust with our clients and employees.

• Do not over-commit resources, capabilities, or deliverables.

• Aggressively manage schedules, budgets, and resources to ensure adherence to all project commitments.

• Recognize that effective communication is instrumental in delivering on our commitments.

• Maintain accountability at all levels of PBS&J.

Belief in open, honest, respectful communications. Open, honest, and respectful communications are what we expect from each other, from management, and from our board members. We communicate with our clients in the same manner.

• Be honest and truthful with clients, competitors, and fellow employees.

• Practice open communication throughout the company.

• Commit companywide to an open-door policy.

• Be a good listener.

Actively support our professions. As an industry leader, we do much more than provide services in our respective markets. We must acknowledge the responsibilities associated with our stature and actively shape and guide our profession.

• Share knowledge and information within our professional networks.

• Actively support our professional associations and seek leadership roles where appropriate.

• Seek opportunities to encourage students to enter our professions and mentor them through the educational process.

Personally invest in our communities. As a community stakeholder, we must take full account of the needs and challenges of the communities in which we do business and make a personal investment to address them.

• Encourage and support participation in community service activities.

• Take pride in our professional accomplishments and their positive impacts in the world around us.

• Seek opportunities to play leadership roles in addressing the business, political, and social issues of our communities.

• Seek opportunities to apply our knowledge and individual talents to the challenges of our communities, always remaining cognizant that we are ambassadors for PBS&J.

Guiding Principles

• Conduct our business with integrity, honesty, decency, fairness, and trustworthiness.

• Comply with all applicable laws, regulations, company policies and procedures, and industry best practices.

• Avoid conflicts of interest.

• Hold paramount the health and safety of the public by never sacrificing quality for profit.

• Do not discriminate with respect to race, color, religion, gender, national origin, age, medical condition or disability, sexual orientation, veteran status, or any other legally protected category.

• Embody the highest professional standards and comply with our company’s values and business and professional guidelines.

• Be proud to explain our actions to our colleagues, friends and family, and PBS&J Founders.

• Show courtesy and respect for others and promote a positive work environment.

• Make proper and appropriate use of company funds or assets.

• Avoid false, misleading, or exaggerated claims.

• Refrain from comment or action that may injure the professional reputation, practice, or services of PBS&J and others.

Introduction

PBS&J is a firm made up of individuals with a high regard for integrity. We are in a rapidly changing and demanding business environment. We face complex challenges that place great pressures on everyone. No matter what financial or business goals the Company sets, our commitment to integrity must always come first. We need the trust and we do business. As employees of PBS&J, we will operate our business in accordance with the highest ethical standards and in full compliance with all laws, regulations, and industry best practices. Above all, we pledge honesty and integrity in all of our business dealings.

Building for the Future: Our Values, Principles, and Standards (also referred to in this booklet as the “Code” or “Code of Conduct”) is a statement of our core values, principles, and key policies and procedures that govern the conduct of PBS&J’s business and our relationships with our key stakeholders: our clients, fellow employees, share holders, suppliers and business partners, and communities where we live and work. They all expect us to conduct our business with integrity.

• Clients. Our mission is to provide professional services to our clients through technical excellence and innovation. Continuing to fulfill this mission is essential for our success. To this end, we are fully committed to the pursuit of continuous quality improvement, and we strive to satisfy client expectations at all times. We seek to build trust and to always communicate honestly with our clients. We are dedicated to honoring our contracts and our commitments.

• Fellow Employees. Our success depends on the integrity, hard work, and loyalty of PBS&J employees. We value our employees and treat them with respect and dignity. We are fair and courteous in our dealings with one another. As an organization, we aim to hire the best people, and we strive to create a productive work environment where we constantly encourage one another to achieve quality and excellence. We are all responsible for creating a positive, supportive work environment that values diversity and promotes open and honest communication.

• Shareholders. As an organization, we have a number of responsibilities to our shareholders, who are also current or former employees and who have important expectations in their role as shareholders. Each of us is responsible for making proper and appropriate use of Company funds and assets. We also are responsible for maintaining accurate and complete Company records and data and avoiding conflicts of interest.

• Suppliers and Business Partners. We believe in developing and maintaining fair and mutually beneficial relationships with our business partners and suppliers. We are committed to treating all of our suppliers and business partners with fairness, dignity, and respect.

• Communities Where We Live and Work. We believe in holding paramount the health and safety of the public and never sacrificing quality for profit. Being a citizen of the global marketplace also means that we are all responsible for understanding the needs and challenges of the communities in which we do business. In addition, we acknowledge the responsibilities associated with our professions.

By working for PBS&J, you are agreeing to act

in accordance with the spirit as well as the letter

of this Code and the Company policies and

procedures that apply to your job.

Our shared core values and guiding principles define who we are and remind us of how we should conduct our business. The standards and principles expressed in this Code—standards that we all must agree to follow—are derived from our basic values. Following these standards is the way we can demonstrate the shared values that drive the success of PBS&J.

Each of us on The PBSJ Corporation* team—including members of our Board of Directors, employees of any PBS&J entity, Company affiliates, consultants, sub-consultants, contract employees, and others—is responsible for following the standards outlined in the Code when conducting business for or on behalf of the Company. By working for PBS&J, you are agreeing to act in accordance with the spirit as well as the letter of this Code and the Company policies and procedures that apply to your job.

Each of us is responsible for our own conduct. No one has the authority to make anyone violate our Code, and any attempt to direct or otherwise influence any employee to commit a violation is itself a violation of our Code. Each of us has a responsibility to properly report any violation or reasonably suspected violation in accordance with this Code. Alleged violations will be investigated and appropriate action taken.

Purpose and Use of Our Code of Conduct	Purpose and Use of the Code
	Asking Questions and Raising Concerns
	Integrity Test
	Where to Go for Help
	Violations and Cooperating with Internal Investigations
	Non-Retaliation Policy
	Note to Employees

Purpose and Use of the Code

The laws and standards for business conduct are more demanding than ever. Failing to meet those standards is not only wrong but also could expose PBS&J to serious harm. The Code provides an introduction to important laws and policies that everyone on the PBS&J team must follow. The purpose of the Code is to help each of us:

• Understand and follow the basic ethics and compliance rules that apply to our jobs.

• Know when and whom to ask for advice.

The Code addresses general ethics and compliance concepts and gives employees a broad outline of acceptable behavior. The policies and procedures that apply to your job are based on the concepts in the Code. All of the Company’s policies and procedures are under review, and as they are revised and updated, and as additional policies and procedures are developed and implemented in the future, they will be incorporated into the Code and must be followed.

The Code, in addition to the Company’s policies and procedures, may be changed from time to time by the Company. Any changes will be promptly communicated to you. For up-to-date information about changes to the Code, Company policies or procedures, and other ethics and compliance-related information, look for Ethics and Compliance on the PBS&J e*net.

Asking Questions and Raising Concerns

The Code is designed to serve as a broad framework of the ethical and legal principles that we are required to abide by when acting on behalf of the Company. You can learn more about these principles by referring to PBS&J’s Company policies and procedures, which address specific areas of potential concern or risk; these policies and procedures are on the e*net. Because our Code and Company policies and procedures cannot address every legal or ethical issue you might face in the course of business, we all must use common sense and good judgment every day.

Acting with integrity, honesty, and fairness means speaking up when we:

• Are unsure about the proper course of action and need advice.

• Believe that someone acting on behalf of PBS&J is doing, or may be about to do, something that violates the law or our standards of conduct.

Because our Code and Company policies and procedures cannot address every legal or ethical issue you might face in the course of business, we all must use common sense and good judgment every day.

PBS&J encourages open discussion of ethics and compliance issues by all employees, supervisors, and managers. If you have any doubt about the course to follow, ask for help and consult Company resources to determine whether an action is proper.

Where to Go for Help

If you are unsure of how to proceed in a particular situation, if you have a business conduct question or concern, or if you suspect wrongdoing, it is crucial to discuss the issue with appropriate Company personnel. Resources are available to assist you.

We encourage you to first speak with your direct supervisor or manager if you have an ethics or compliance issue. You may also get help or advice from:

• A senior manager or vice president, or another member of management if (1) your immediate supervisor is unable to resolve the issue, or (2) you are uncomfortable speaking to your supervisor about the issue.

• Our Chief Ethics and Compliance Officer.

• Your Human Resources representative, a member of the Legal Department responsible for your division, the Finance Department, Health and Safety, Risk Management, or other Company resources.

• The PBS&J Ethics and Compliance HelpLine (800.587.5104), which is available to you 24 hours a day, 7 days a week. If you are unsure about where to find help, uncomfortable about using resources listed in the Code, or want to raise an issue anonymously, the Ethics and Compliance HelpLine is a resource you are encouraged to use.

The HelpLine is operated by an independent organization. A call specialist will listen to your concern, make a detailed summary of the call, and forward the information to the PBS&J Ethics and Compliance Department so that the matter can be addressed. If you wish to remain anonymous, you will be assigned a personal reference number so that you can check back for a response or provide more information. Giving your name, however, can help us look into the matter more thoroughly. As explained below, PBS&J has a firm policy against retaliation for raising a concern in good faith.

Violations and Cooperating with Internal Investigations

If you believe that someone associated with PBS&J has violated a provision of our Code or any laws or regulations, you have a personal responsibility to bring the issue in good faith to the attention of one of the contacts listed above. “Good faith” means that you have provided information that you believe to be honest and accurate even if you are later proved to be mistaken. Reporting suspected violations allows the Company to investigate and take prompt remedial action. You can make reports by telephone, through e-mail, in person, or by contacting the Ethics and Compliance HelpLine.

PBS&J is committed to reviewing or investigating—and taking appropriate action regarding—all allegations of violations of its policies and applicable laws. The review and investigation will be kept confidential to the extent possible, regardless of the outcome. PBS&J will take corrective action and make any necessary changes. Anyone violating our standards of conduct will be subject to appropriate disciplinary action, up to and including termination of employment.

All employees have an affirmative obligation to cooperate fully with internal investigations, including providing information, documents, and personal interviews when requested. Failure to cooperate, including but not limited to, misleading, lying, destroying or altering records, or failing to respond promptly to requests for information by investigators is grounds for disciplinary action, up to and including termination of employment.

The Company may report the misconduct to the appropriate authorities. PBS&J will cooperate with government investigations as appropriate. When we are notified of an external investigation, we will take prompt action to preserve relevant documents and data.

Non-Retaliation Policy

Any employee who in good faith seeks advice, raises a concern, or reports misconduct is doing the right thing. PBS&J understands that employees may not be willing to report ethics or compliance problems if they feel they may be subjected to harassment or retaliation by their supervisor or co-workers. Accordingly, PBS&J will not permit retaliation of any kind against good faith reports or complaints of violations of our Code or other illegal or unethical conduct to Company officials or the Ethics and Compliance HelpLine.

It is important to note that retaliation can take many forms, some more blatant than others. The Company will not demote, terminate, or otherwise discriminate against employees for raising concerns. Additionally, colleagues should not alienate employees who have raised concerns; such employees should be treated with respect.

Any person, including supervisors or managers, who is found to have engaged in or condoned an act of retaliation against an individual in response to a good-faith report of a violation or suspected violation will be subject to disciplinary action, up to and including termination of employment. Employees who believe they have suffered retaliation for raising concerns or asking a question should seek help immediately from one of the resources listed above.

Note to Employees

This Code does not change the terms and conditions of your employment. Its intent is to help each of us understand what is expected of us to be sure that we always act ethically and legally when representing the Company.

Responsibilities to Our Clients	Quality Performance
	Gifts and Entertainment
	Honesty in Communications and Contracting
	Gathering Competitive Information
	Anit-Kickback and Bribery Policy
	Government Audits and Investigations
	Hiring Government Employees
	Fair Competition
	Organizational Conflicts of Interest

Quality Performance

As professionals, we have an ethical and legal responsibility to the public in general to perform to a standard of care consistent with that of the industries we serve and the assignments we undertake. Moreover, we are obligated to achieve our clients’ expectations as defined by our contracts, and we must also conform to applicable laws and professional standards. These requirements define the basic framework of quality performance, which includes quality control, quality assurance, and continuous quality improvement. Quality performance is the backbone of PBS&J’s Corporate Quality Initiative and is an expectation of PBS&J employees.

Because PBS&J offers broad and diverse technical and managerial services, the Company allows individual practice managers to develop quality assurance and quality control (QA/QC) programs to match their specific business models. Failure to conduct or to comply with these quality performance practices is unacceptable and violates the Code.

Gifts and Entertainment

We win projects or assignments based on the merits of our people, expertise, and services. While reasonable gifts and entertainment are common practices used to strengthen business relationships, our position is clear: No gift, favor, or entertainment should be solicited, accepted, or provided if it will obligate or appear to obligate the person who receives it. Never offer, accept, or provide to anyone cash or cash equivalents (for example, gift certificates, bank checks, traveler’s checks, money orders, loans, stock, or stock options).

We want to avoid even the appearance of impropriety; therefore, we limit the types of gifts and entertainment (sometimes referred to as “business courtesies”) that we may offer or give to, or solicit or accept from, firms, agencies, and persons with whom we do business. “Gifts and entertainment” or “business courtesies” means anything of value, including but not limited to gifts, services, meals, entertainment, hospitality, transportation, use of vacation facilities, home improvements, membership fees or dues, tickets, and gift certificates. The potential list is endless, and these are just examples.

Ordinarily, you are permitted to pay for and accept customary amenities, such as meals, as long as expenses are reasonable and associated with a business purpose. A good test as to whether a gift or entertainment should be offered or accepted is to ask yourself if public knowledge of the gift or hospitality would be embarrassing or would jeopardize important relationships with clients, employees, suppliers, or the general public.

Giving Gifts and Entertainment

The Company is committed to effectively marketing its products and services based on quality, price, service, and reputation for integrity in conducting its business. The Company’s funds or assets must not be used for gifts to, or entertainment of, customers, suppliers, and subcontractors unless the following criteria are met:

• The business courtesy is not offered to influence or obligate the recipient with respect to general or specific action, or as a quid pro quo (that is, something offered for something in return for the business courtesy).

• The business courtesy does not violate any laws, regulations, or standards of conduct of either the Company’s or the recipient’s organization. It is our responsibility to inquire about prohibitions or limitations of the recipient’s organization before offering any business courtesy. Further, Company employees have the duty to inquire and seek the advice of the Company’s Legal Department in order to fully understand any local laws and regulations governing the giving of gifts and/or entertainment.

• The business courtesy is consistent with accepted business practices and does not exceed the norm in the context of the person giving or receiving the courtesy, is infrequent in nature, and is not lavish or extravagant.

• Gifts and entertainment must be properly recorded in accordance with Company policy.

Some jurisdictions outside of the United States more strictly regulate the giving of gifts to private individuals, including customers and suppliers. In other jurisdictions and under certain circumstances in the United States as well, gift giving between private parties for a corrupt purpose is unlawful. Contracts awarded under such circumstances are likely to be voided, and the Company is likely not to be paid for goods or services provided. The Company expressly prohibits the expenditure of any funds for any purpose that may constitute a violation of the law or regulation of any jurisdiction in which the Company operates.

Gifts and Entertainment for Government Officials and Employees

What may be customary when conducting non-govern-mental, commercial business often may not be acceptable in doing business with government officials or employees and may be prohibited by the particularly restrictive and complex rules and practices that govern the acceptance of meals, entertainment, gifts, or other business courtesies. In fact, certain commercial business practices, if applied in a government setting, can lead to administrative or civil penalties, or even criminal sanctions, both for individual employees and for the Company.

Special laws apply to United States federal government employees, including members of Congress and their staffs. In general, government personnel are prohibited from accepting, and you are prohibited from offering, any items having more than minimal monetary value. The prohibition includes meals, transportation, lodging, services, conference fees, vendor promotional training, and discounts not available to the general public. Similar restrictions may apply to state and local officials and employees, and to officials and employees in other countries, who are directly or indirectly involved in government procurements.

The Company supports these rules, and employees are expected to comply with both the spirit and the letter of any laws or regulations. Even though government employees are responsible for tracking and monitoring restrictions that apply to them, no PBS&J employee shall knowingly violate any applicable rules. If you are unsure about what is or is not appropriate, you must seek guidance from the Legal Department.

To avoid any appearance of impropriety, and to avoid any questions as to conduct under laws and regulations, the Company has adopted a policy of discouraging the provision of entertainment and the giving of gifts, gratuities, and favors to federal, state, and local government employees, agents, or officials. However, there may be some instances when the Company may choose to provide a gift or entertainment to a government official as a common business courtesy. In such cases, a gift may be given or entertainment may be provided only if the following criteria are met:

• Any gift and/or entertainment must be unequivocally and expressly consistent with all applicable laws and regulations and in accordance with generally acceptable ethical practices in all governing jurisdictions. Company employees have the duty to inquire and seek the advise of the Company’s Legal Department in order to fully understand any local laws and regulations governing the offering or giving of gifts and/or entertainment.

• The gift and/or entertainment is provided as a courtesy or token for regard or esteem or in return for hospitality.

• Gifts and entertainment must be of nominal value only, considering the local context. Other than gifts or entertainment of nominal value, do not offer any gift, gratuity, or entertainment to a government official or employee without Legal Department advice that such gift or entertainment is permissible.

• The gift and/or entertainment must not be give for the purpose of influencing any decisions by the recipient, influencing the recipient to act or not to act, or securing any advantage from the recipient.

• Gifts must not under any circumstance be in the form of and expressly consistent with all applicable laws and cash, loans, stocks, bonds, scholarships, or similar types regulations and in accordance with generally acceptable of cash equivalents, regardless of amount.

• Gifts and entertainment must be properly authorized of the Company’s Legal Department in order to fully and recorded in accordance with Company policy.

The Company is committed to effectively marketing its products

and services based on quality, price, service,

and reputation for integrity in conducting its business.

Q. Our client has asked us to set up a working lunch for a group that will include both federal and state employees. The state employees are allowed to accept a reasonable lunch and will expect lunch to be provided. What should we do?

A. Provide a modest lunch (for example, sandwiches and chips), typically less than $20.00 per person, depending on the jurisdiction. For audit purposes, maintain in the files documentation of the meeting attendees and the cost of lunch. Federal employees will be required to pay for their own lunches; therefore, document actual costs and indicate that the federal employees paid for their individual lunches. Provide a basket, along with a suggested contribution amount, for federal employees to deposit their lunch payments.

Gifts and Entertainment for Foreign Government

Officials and Employees of Foreign Governments

The general guidance regarding gifts and payments to government officials set forth above applies to both domestic and foreign government officials. Company employees must understand that additional restrictions on the provision of gifts or payments to foreign government officials are imposed by both U.S. and foreign laws.

It is a violation of U.S. federal law to corruptly influence or attempt to influence foreign public officials in order to improperly obtain or retain any business advantage. Employees should be particularly mindful of the Foreign Corrupt Practices Act of 1977 as amended by the International Anti-Bribery and Fair Competition Act of 1998. It is a violation both of this law and of Company policy for an employee or an agent of the Company directly or indirectly, including by or through an agent or representative or any other person, to give, offer, or promise anything of value to a foreign public official, government employee, politician, or candidate for public office, including a public international organization or political party, with the intent to influence such official, politician, political party, or employee in his or her official capacity, or to induce such official, politician, political party, or employee to use his or her influence with his or her government to assist the Company in obtaining or retaining business, or to secure any improper advantage. Payments need not be in cash to be illegal. Over the years, many non-cash items have been the basis of federal prosecutions, including travel expenses, golf outings, automobiles, and loans with favorable interest rates or repayment terms. If you have questions about what may be permissible, contact the Company Legal Department.

Many foreign countries have implemented their own laws that criminalize bribery of foreign public officials in connection with international business no matter where in the world the operative act of bribery occurs. In some cases, the laws of these countries are stricter than U.S. laws, in that they have made it a criminal offense for any of their citizens or employees of their companies to bribe, offer to bribe, or attempt to bribe any person anywhere. Under the laws of these countries, it is a crime to bribe not only public government officials but also private sector individuals. All employees should ensure that they comply with all applicable criminal laws, in every jurisdiction.

Receiving Gifts and Entertainment

(Please note: Although the receipt of gifts and entertainment may be more common in the context of supplier relationships, these guidelines are included here for reference and convenience.)

Just as we have strict rules for offering or providing gifts and entertainment, we must also be careful how we receive them. Suppliers are vital to our Company’s success, which is why our relationships with them must be based entirely on sound business decisions and fair dealing. Business gifts and entertainment can build goodwill, but they can also make it harder to be objective about the person providing them.

* Persons in a “close personal relationship” to you can include the following: spouse, same or opposite sex domestic partner, parents, step-parents, children, step-children, siblings, step-siblings, nephews, nieces, aunts, uncles, grandparents, grandchildren, in-laws, and any person in your household.

16 Building for the Future: Our Values, Principles, and Standards other preferential treatment from any of the Company’s actual or potential subcontractors, suppliers, or customers. In application of this policy, the following criteria shall apply:

• Gifts, entertainment, or other preferential treatment must not be solicited by an No employee, or any person with whom the employee has a close personal relationship*, shall solicit cash, loans, or cash equivalents of any amount, or any gifts or entertainment, or any other preferential treatment from any of the Company’s actual or potential subcontractors, suppliers, or customers. They also shall not accept any cash, loans, or cash equivalents of any amount, or any gifts or entertainment of other than nominal value, or any employee or by any person with whom the employee has a close personal relationship.

• Employees may accept common courtesies usually associated with accepted business practices, provided:—It is lawful to do so.

-The acceptance is not for the purpose of influencing a decision or securing favorable treatment. successful business relations.

-The courtesies are not lavish or extravagant under the circumstances.

-The courtesies are not part of a pattern of frequent acceptance of courtesies from the same person or firm.

-The employee accepting the courtesies would feel comfortable knowing that his or her managers and co-workers, as well as the public, know about the courtesies.

• Gifts in the form of cash, loans, stocks, bonds, or similar types of cash equivalents must not be accepted, regardless of amount.

• It is recognized that in certain countries, due to cultural customs, refusal of personal gifts with a value materially in excess of nominal value could result in embarrassing business situations or unintentional insult. The propriety of employees keeping such gifts for personal use should be discussed with the Company’s Legal Department in each case promptly upon receipt.

• The offering of gifts, entertainment, or other preferential treatment that materially exceeds nominal value to an employee or any person with whom the employee has a close personal relationship should be promptly reported in writing by the employee to his or her supervisor and to the Chief Ethics and Compliance Officer. Each employee is personally responsible for ensuring that his or her acceptance of such meals, refreshments, or entertainment is proper and could not reasonably be construed in any way as an attempt to secure favorable treatment.

No gift, favor, or entertainment should be solicited, accepted, or provided if it

will obligate or appear to obligate the person who receives it.

Honesty in Communications and Contracting

We are committed to conducting our business fairly and honestly. We must:

• Be honest, accurate, and truthful in all statements, communications, and representations.

• Exercise care to prevent any material or non-approved changes from our contract obligations and scope of work.

• Ensure that all services provided by PBS&J meet our contract requirements.

Time Sheets and Expense Reports

Time sheets must be completed truthfully and accurately. Employees must ensure that hours worked and costs are applied to the account for which they were incurred. We must never submit, or direct or pressure any employee to submit, time charges that do not accurately reflect actual time worked on a particular contract or project. In addition, our work as a government contractor has special record-keeping requirements. Our time records and expense reports, as well as other information we prepare, may be provided directly to the government or may form the basis for a representation or claim PBS&J makes to the government. For more information, refer to Corporate Policy 510.0, Time Sheets, and Corporate Policy 512.0, Expense Reports.

Gathering Competitive Information

To compete effectively in the marketplace, it is necessary and legal to fairly and honestly gather or receive government or competitive information. We must always compete fairly and honestly, and we will not solicit, gather, receive, possess, or use information about competitors or government information that we should not have or that we have gathered or received by inappropriate means. Additionally, we will not give such information to others. Solicitation, receipt, possession, knowledge of, use, or transmittal of certain government or competitive information is a violation of the law, and some forms of information gathering can violate the law as well as our own Company standards.

We are committed to avoiding even the appearance of improper solicitation, possession, receipt, use, or transmittal of government or competitive information. We will not solicit, receive, possess, use, or transmit:

• Any confidential or proprietary information belonging to someone else to which the Company is not legitimately entitled from a client, competitor, or any other source.

• In a federal or other government procurement, Source Selection Information (SSI) that is not publicly available, whether marked SSI or not. Such information includes competitor bid prices or proposed costs or prices; source selection or technical evaluation plans; technical, cost, or price evaluations of competitors’ proposals; rankings of bids, proposals, or competitive range determinations; reports of source selection panels, boards, or councils; or any other information marked as SSI.

• Confidential or proprietary information gained through association with another firm in a joint venture in which the joint venture agreement provides for protection of this information.

• Confidential or proprietary information in any form possessed by new hires from previous employers.

We are committed to avoiding even the appearance of improper solicitation, possession,

receipt, use, or transmittal of government or competitive information.

If you are uncertain as to whether a solicitation, receipt, possession, use, or release of non-public information is unauthorized, do not distribute or use it until the question has been reviewed and resolved by the Legal Department.

Q. What are legitimate methods of gathering competitive information?

A. We recognize that it is necessary and legal to gather competitive information fairly and honestly. Legitimate sources of competitive information can include newspapers, press accounts, information on the Internet or at trade shows, other public information, and conversations with clients who are not competitors and who are not discussing confidential or competitive information.

Q. While attending a conference, I overheard one of our competitors describe a new construction process they will use for an upcoming project. Since they will bid against us on the project, should I give this information to anyone?

A. Under some circumstances, the Company could legally use this information. However, the rules regarding proper use are complex. Therefore, before using or disclosing the information to anyone within PBS&J, you should consult the Legal Department or Chief Ethics and Compliance Officer.

Anti-kickback and Bribery Policy

We believe in safeguarding the integrity of the procurement process for all of our clients. Therefore, nothing of value is to be offered, solicited, given, or accepted as a basis for giving, obtaining, or retaining contracts or favorable treatment under contracts. If you have reason to believe that a bribe or kickback has been given or accepted, you must immediately report it to the Legal Department or Chief Ethics and Compliance Officer.

Government Audits and Investigations

Our business is highly regulated, and occasionally our personnel may come into contact with government officials responsible for conducting audits or enforcing the law. For example, the U.S. government has the right to examine selected Company books, records, and data. State and local agencies may also have similar rights. It is PBS&J’s policy to cooperate with government investigations as appropriate. Always deal honestly with government of officials. All requests for information must be coordinated through the Legal Department. Any information provided must be accurate, honest, and truthful.

Q. We have just been notified that the U.S. government will be conducting an audit at our location. What should we do?

A. We have adopted procedures for responding to federal, state, and local government inquiries or investigations into our business activities. First, contact the Legal Department immediately when you become aware of an inquiry, request for information, or investigation by any government entity. Second, be sure that records relevant to the inquiry are preserved. Third, when requested to furnish financial data to government auditors, responses are to be approved and provided by our President and Chief Financial Officer. Release of any other records and data requested by any government agency will be approved as appropriate by the Legal Department.

Hiring Government Employees

We want to safeguard the integrity of the contracting process by never causing or contributing to even the appearance of favoritism in connection with the hiring of current or former government employees.

Strict rules may govern the hiring, attempting to hire, or discussing the hiring of certain employees of many government agencies. Before discussing employment with any current or former government employee, you must consult and receive prior written approval from the Legal Department and applicable National Service Director. If a current or former government employee initiates any employment discussions, you must immediately contact and obtain advice from the Legal Department.

Fair Competition

We believe our clients and society at large benefit from fair, free, and open markets. Therefore, we will not engage in any practices that would “fix” prices, unfairly restrain trade, or keep competitors out of the marketplace. In addition, we will not:

• Communicate with competitors about prices, controlling prices, allocation of markets, boycotting clients or suppliers, or limiting the sale of services.

• Make false statements about our competitors.

• Improperly receive or use our competitors’ proprietary information, including pricing information.

Strict rules may govern the hiring, attempting to hire,

or discussing the hiring of certain employees

of many government agencies.

Organizational Conflicts of Interest

PBS&J complies with all laws and regulations prohibiting organizational conflicts of interest. We must take appropriate steps to recognize and avoid organizational conflicts of interest in which the activities of one service or division of PBS&J may preclude another service or division of PBS&J from pursuing a related opportunity. If an organizational conflict of interest exists, we must disclose and mitigate such conflicts in accordance with applicable laws and regulations.

Responsibilities to Our Fellow Employees	Health and Safety
	Drugs and Alcohol
	Diversity and Fair Treatment
	Workplace Harassment
	Employee Privacy

Health and Safety

PBS&J strives to provide its employees with a clean, safe, and healthy place to work. Each of us is responsible for, and shares in the benefits of, a safe and healthy work environment. Employees must understand the shared responsibilities of abiding by all safety rules and practices, taking the necessary precautions to protect oneself and co-workers, and reporting immediately any unsafe conditions, practices, or accidents. If you have questions or want to report an unhealthy or unsafe condition, immediately contact your supervisor, the Company’s Health and Safety Officer, or other Company resources. If you want to report an accident, contact Risk Management as soon as possible.

Drugs and Alcohol

PBS&J expects employees to report to work able to perform their duties, and free from the influence of illegal drugs, controlled substances, abuse of prescribed or over-the-counter drugs, or alcohol. The interests of our clients and other employees demand full attention and concentration. Reporting to work under the influence of any illegal drug or alcohol, improperly using medication, or using, possessing, buying, or selling illegal drugs or controlled substances while on the job or on Company property is forbidden and may result in immediate discharge. If you suspect any drug or alcohol abuse, report it to your supervisor, a Human Resources representative, our Chief Ethics and Compliance Officer, or call the Ethics and Compliance HelpLine. For more information, refer to Corporate Policy 310.0, Substance Abuse, and Corporate Policy 310.10, Drug and Alcohol Testing.

Diversity and Fair Treatment

We support diversity in our workplace and among our clients and suppliers. We have established a Corporate Diversity Advisory Council to help strengthen our corporate commitment to developing best practices in recruiting, retaining, and advancing people of diverse backgrounds.

Discrimination against any employee or prospective employee, or the making of disparaging comments or criticisms, on the basis of race, color, religion, gender, national origin, age, medical condition or disability, sexual orientation, veteran status, or any other protected group is strictly prohibited. This policy relates to all phases of employment, including recruitment, hiring, placement, promotion, transfer, compensation, benefits, training, educational, social, and recreational programs, as well as the use of Company facilities. Our officers, managers, and supervisors at all levels are responsible for ensuring that the spirit and intent of this policy is consistently practiced. If you have questions on equal employment equity, or if you have observed or experienced any form of discrimination, contact the Company’s Equal Employment Opportunity (EEO) Officer in Human Resources or the Legal Department. Also refer to Corporate Policy 104.0, Discrimination/Harassment/Retaliation.

Workplace Harassment

We are expected to conduct ourselves in a manner appropriate to the workplace, to keep all work environments free of harassment, and to treat others with respect and fairness.

Workplace harassment can be verbal, physical, or visual where the purpose or effect is to create an offensive, hostile, or intimidating environment. Sexual harassment, in particular, can include sexual advances, requests for sexual favors, unwanted physical contact, or repeated and unwelcome sexual suggestions. Examples of other prohibited conduct include offensive racial, ethnic, religious,

age-related, or sexual jokes or insults; distributing or displaying offensive pictures or cartoons; and using voicemail, e-mail, or other electronic devices to transmit derogatory or discriminatory information.

If you observe or experience any form of harassment, report it immediately so that the Company can properly address it. Such reports may be made to your Human Resources representative, the Company Legal Department, or via the Ethics and Compliance HelpLine. For more information, refer to Corporate Policy 104.0, Discrimination/Harassment/Retaliation, and Corporate Policy 225.0, Relationships at Work.

Q. I would like to ask a colleague out on a date. Is this acceptable?

A. It is acceptable if the colleague is not in a direct or indirect reporting relationship to you. You must use good judgment to ensure that if the offer is unwelcome, you do not pursue it further or create a hostile or intimidating environment.

Employee Privacy

We respect every employee’s right to confidentiality of certain employment records, including certain health information, as well as the privacy of personal activities outside of business hours. Employees who are responsible for maintaining personal information, and those who are provided access to such information, must not disclose it inappropriately.

While we respect an employee’s right to privacy, we must also recognize that there are situations where it may be necessary for the Company to access employee communications. Our Company retains rights of access to all Company property, including computers and all communications, e-mail and voicemail messages, records, and information created in the business setting, regardless of whether the individual considers the information or communication to be private.

For additional information, see page 21, Use of PBS&J’s Information Systems.

While we respect an employee’s right to privacy,

we must also recognize that there are situations where

it may be necessary for the Company to access

employee communications.

Responsibilities to Our Shareholders	Use of Company Resources and Assets
	Accuracy of Books and Records
	Conflicts of Interest
	Records Retention Related to Litigation or Investigations
	International Trade
	Anti-Money Laundering
	Communications with Media

Use of Company Resources and Assets

Our Company resources belong to our shareholders, and we must be responsible for their use. Company resources include, but are not limited to, our facilities, computers, inventory, trade secrets, office supplies, equipment, vehicles, products, confidential information, and funds. Additionally, our reputation and identity are among the Company’s most valuable assets. All employees are the Company’s most valuable assets. All employees are responsible for using good judgment to ensure that these resources are not misused or wasted. Theft, carelessness, and waste have a direct impact on our profitability and, ultimately, on all of our jobs. Also, misuse or misappropriation of Company assets may be considered criminal and can bring severe consequences.

Protection of Company and Other Confidential Information

Information is an important asset, and we each share a special responsibility to protect our Company’s confidential information and the confidential information of others. All employees, officers, and directors must maintain the privacy of confidential information entrusted to us by the Company or its subcontractors, clients, or joint venture or other business partners, and may not disclose it unless written authorization to do so is provided by a Company official with appropriate authority. Confidential information includes all non-public information that might be of use to our competitors or harmful to PBS&J or our clients if disclosed. Keep documents that contain confidential information protected and secure.

Use of PBS&J’s Information Systems

Information systems (the hardware, software, and data that are stored, processed, and reported) are critical to our business success. Examples include desktop or laptop computers, telephones, file servers and networks, e-mail messages, and documents. Everyone who uses our information systems is responsible for ensuring that these resources operate as they should. This means all employees must use these systems responsibly and primarily for legitimate business purposes. PBS&J policy prohibits the use of its information systems for:

• Engaging in communications that might be considered illegal, offensive, defamatory, harassing, obscene, vulgar, or otherwise disruptive to normal business activity.

• Visiting inappropriate Internet sites.

• Improperly disseminating copyrighted or licensed materials or confidential and proprietary information.

• Installing hardware or software by anyone other than appropriate Technology Operations personnel.

• Conducting for-profit, non-PBS&J business.

We are also expected to protect the security and confidentiality of our information systems. We must:

• Protect information used to access Company information systems, including user IDs, passwords, and building-access key cards.

• Protect the confidentiality and security of our information systems, especially our data.

• Protect information systems from damage, including physical damage and virus-caused damage.

You may use the e-mail, network, and Internet systems for incidental personal use, provided such use does not interfere with PBS&J’s business operations or your employment obligations. Excessive personal use of the systems is not acceptable.

Communications that you have at work (including e-mail, voicemail, network, and Internet access) are not necessarily private, and confidentiality cannot be assured. Our Company reserves the right to monitor or make records of all such communications to verify that Company policies are being followed or for other reasons. PBS&J also reserves the right to disclose specific use of these systems to others.

Q. Can my manager access my e-mail without informing me?

A. Our Company reserves the right to monitor e-mail and other information systems as necessary; however, managers must have a valid reason to access an employee’s e-mail account and must obtain prior approval from the Legal Department and Human Resources.

For more information, refer to Corporate Policy 220.0, Information Technology Security, and Corporate Policy 305.0, Personal Telephone Calls and Mail Facility.

Theft, carelessness, and waste have a direct impact on

our profitability and, ultimately, on all of our jobs.

Accuracy of Books and Records

All Company business information, documents, and electronic data, including internal or external correspondence, memoranda, or communications of any type, must be prepared as completely, honestly, and accurately as possible and in accordance with generally accepted accounting principles and practices. All Company business documents must be preserved and retained in accordance with Company policy. Refer to Corporate Policy 226.0, Records Retention and Disposal.

Accounting and Reporting

We make decisions based on information recorded at every level of the Company. Inaccurate records lead to poor decisions and

negative business consequences. Additionally, our record-keeping procedures are essential to ensure that all costs are properly charged. All transactions between the Company and outside individuals and organizations must be promptly and accurately entered in our books in accordance with generally accepted accounting practices and principles. No undisclosed or unrecorded fund may be established for any purpose.

Employees are expected to report to the Company when they reasonably believe that any person has engaged in questionable accounting or auditing practices. Contact the Finance Department, Legal Department, or Chief Ethics and Compliance Officer with accounting or auditing concerns. Remember, if you prefer to voice concerns anonymously, call the Ethics and Compliance HelpLine.

Q. I am planning an office event where wine and beer will be served. Do I need to split out the alcohol costs separately when I report the expenses?

A. Yes. Because we do business with government entities, we must make provisions for certain costs that cannot be charged to the government; for example, alcoholic beverages. These costs require special accounting treatment. Other examples include entertaining clients and potential clients (such as tickets to sporting events, theater tickets, golf tournaments); general advertising; first-class airfare; and flowers or birthday cakes for employees. Please note that government accounting rules are complex and require careful attention. Questions should be directed to the Finance Department.

Conflicts of Interest

A conflict of interest occurs when our private interest interferes, or even appears to interfere, with the interests of the Company as a whole. A conflict situation can arise when we take actions or have interests that may make it difficult for us to make objective and fair decisions when performing our jobs. Conflicts of interest between personal and official responsibilities may arise in a variety of ways. Although we cannot list every possible conflict of interest, below are some common examples that illustrate actual, apparent, or potential conflicts of interest.

• Outside Employment with a Competitor. We may not compete with the Company or consult with, be employed in any capacity by, or perform services for or represent in any way a competitor of our Company. (This includes any person or organization that is seeking to become a competitor.)

• Outside Employment with a Supplier or Client. We may not be employed by, serve as a director of, or perform services for or represent in any way a supplier or client of PBS&J. (This includes any person or organization that is seeking to become a supplier or client.)

• Financial Interests in Other Businesses. We may not own, directly or indirectly, an interest in any business that does or seeks to do business with PBS&J, or seeks to compete with PBS&J. However, it is usually not considered a conflict of interest to make investments of no more than 1 percent of the outstanding securities of a public company, no more than $25,000 of a privately owned company, or no more than 5 percent of your and/or your family members’ total assets.

Never invest in a supplier if you have any involvement in the selection or assessment of, or negotiations with, the supplier, or if you supervise anyone who has such responsibility. Also, never invest in a client if you are responsible for dealing with that client or supervise anyone with such responsibility.

• Corporate Opportunities. When the opportunity arises, we owe a duty to PBS&J to advance its legitimate interests. We may not

take personally for ourselves opportunities that are discovered through the use of Company property, information, or position, or use Company property, information, or position for personal gain.

• Certain Relationships. We may find ourselves in a situation where we have a close relationship with a supplier, client, competitor, or employee of PBS&J. Such situations are not necessarily prohibited, but you are required to disclose the situation to your supervisor and to the Chief Ethics and Compliance Officer. In general, anyone with whom you have a close relationship should not have any business dealings with you, with anyone working in your business unit, or with anyone who reports to you. In addition, you should never be in a situation where you have the ability to hire, supervise, affect terms and conditions of employment, or influence the management of anyone with whom you have a close relationship, regardless of whether that person is a PBS&J employee. You must also be careful not to disclose confidential business information to anyone with whom you have a close relationship. Persons in a close relationship to you can include the following: spouse, same or opposite sex domestic partner, parents, step-parents, children, step-children, siblings, step-siblings, nephews, nieces, aunts, uncles, grandparents, grandchildren, in-laws, and any person in your household.

• Loans and Guarantees. It is unlawful for PBS&J to extend or maintain credit, arrange for the extension of credit, or renew an extension of credit in the form of a personal loan to or for any director or executive officer.

Perhaps the most important word to remember when it comes to conflicts of interest and outside business activities is disclose. Disclosures must be timely. We have the obligation to be transparent in our dealings on behalf of PBS&J. If you are ever in a situation in which someone might question your loyalty to PBS&J, you must disclose it.

If you think you may have a conflict of interest or an appearance of a conflict of interest, or that others could possibly believe an activity or relationship you are engaged in is a conflict of interest, you must contact the Chief Ethics and Compliance Officer or the Legal Department for appropriate review and resolution. It is your responsibility to voluntarily do so without the need for specific inquiry by the Company. Employees may not engage in any conduct involving a possible or apparent conflict of interest unless they receive prior written permission from the Legal Department. Many conflicts of interest can be resolved in a mutually acceptable way, but they must be addressed. Failure to disclose a conflict may lead to disciplinary action.

In addition, while PBS&J does not specifically prohibit employees from engaging in outside business activities, employees and managers are expected to disclose to their supervisor and to the Chief Ethics and Compliance Officer, in a timely manner, any actual or potential outside employment, consulting, or other business activities with any external business. Refer to Corporate Policy 211.0, Outside Employment.

Records Retention Related to Litigation or Investigations

If you learn of a subpoena, a pending or contemplated lawsuit, or a government investigation, immediately contact the Legal Department. Retain and preserve all records that may pertain to or be relevant to the subpoena, the litigation, or the investigation until informed by our Legal Department as to how to proceed. In addition, once you have learned of a subpoena, lawsuit, or government investigation, take steps to preserve from destruction all relevant records that, without intervention, would automatically be destroyed or erased (such as e-mail or voicemail messages). Destruction of such records, even if inadvertent, could seriously harm our Company. If you have questions regarding whether a particular record pertains to a potential investigation, subpoena, or lawsuit, or how to preserve particular types of records, preserve the records in question and ask the Legal Department for guidance.

For detailed instructions on records retention, refer to Corporate Policy 226.0, Records Retention and Disposal.

Many conflicts of interest can be resolved in a mutually acceptable

way, but they must be addressed.

International Trade

As responsible corporate citizens, we must comply with the laws concerning international trade. It is Company policy to comply with all applicable customs, anti-boycott, embargo, export, and trade control laws, rules, and regulations. PBS&J regularly verifies that its clients, potential clients, and business partners are not subject to a U.S. embargo, sanction, or transaction control.

In international dealings, you must know and comply with all export controls, trade restrictions, and other laws pertaining to conducting business internationally. In some circumstances, a license may be required for certain disclosures or activities that take place in the U.S. If you are involved in international business, contact the Legal Department to make sure you understand the standards applicable to your business activities. Applicable international trade regulations include:

• International Traffic in Arms Regulations, a U.S. law administered by the U.S. Department of State that regulates the international transfers of certain military equipment or technology and may require prior reporting, approval, and licensing by the Department of State.

• Export Administration Regulations, a federal law administered by the U.S. Department of Commerce that regulates exports of commercial and dual-use commodities and technology and may require prior Department of Commerce reporting, approval, and licensing. Dual-use items are products, software, and technical data developed for civil applications that can also be used for military purposes without further modification. Items requiring export licenses appear on the Commerce Control List in the Export Administration Regulations.

Anti-Money Laundering

Anti-money laundering laws prohibit engaging in transactions when it is known that the funds involved were derived from illegal activities. We comply with all applicable anti-money laundering laws, rules, and regulations of the United States and other countries having comparable laws.

Communications with Media

We want to provide open, accurate, and consistent communications to the public. To maintain the consistency and accuracy of this information, corporate spokespersons are designated to respond to all inquiries. Only these spokespersons are authorized to release information to the public at appropriate times. Unless you have been designated as a spokesperson, do not respond to inquiries from the press. In addition, our contractual agreements often require that we obtain authorization from our clients prior to the release of

certain information. All inquiries from the media should be forwarded immediately to the Company’s Manager of Corporate Communications, PBS&J’s President, or other designated spokespersons.

Responsibilities to

Our Suppliers and Business Partners

We are committed to managing our subcontractor, sub-consultant, and supplier relationships in a fair and reasonable manner, consistent with applicable laws and good business practices. When we select suppliers for professional services and make other purchasing decisions, these decisions must be based on sound business practices and fairness. We promote quality based selection for professional services to the maximum extent practicable. We will select subcontractors, suppliers, and vendors on the basis of merit by comparing and evaluating price, quality, technical excellence, performance, and their reputations for conducting business with honesty and integrity.

We will base our purchasing decisions on suppliers’ abilities to meet our needs and not on personal relationships and friendships. We will use the highest ethical standards in business practices in source selection, negotiation, determination of contract awards, and the administration of purchasing activities. We will not encourage a vendor or subcontractor to grant, and we will not knowingly accept, any unlawful discount or price that does not represent a fair market value or goods or services of similar quality and quantity.

Refer to Receiving Gifts and Entertainment on page 14, which is generally applicable in the context of relationships with suppliers and other business partners.

We will base our purchasing decisions on suppliers’

abilities to meet our needs and not on personal

relationships and friendships.

Responsibilities to Our Communities Where We Live and Work	Compliance with Laws and Regulations
	Upholding Professional Standards
	Respecting the Environment
	Community Activities
	Political Activities and Contributions
	Lobbying
	Employee Commitment

Compliance with Laws and Regulations

We want to be a good corporate citizen wherever we operate by complying with all applicable laws and regulations. Our business is highly regulated, and it is the responsibility of each of us to ensure that we know and comply with the laws and regulations applicable to our job responsibilities. If you need more information about the legal requirements of your job, contact your manager or the Legal Department.

Upholding Professional standards

Many of us have a responsibility to be aware of and adhere to applicable professional standards of conduct, ranging from engineering to accounting to law. As an industry leader, we have responsibilities to help shape and guide our professions by:

• Sharing knowledge and information within our professional networks.

• Actively supporting our professional associations and seeking leadership roles where appropriate.

• Seeking opportunities to encourage students to enter our professions and mentor them through the educational process.

Respecting the Environment

It is our policy to manage our business in an environmentally responsible manner and to comply with all federal, state, and local laws and regulations relating to the protection of the environment. All PBS&J offices and facilities must implement processes designed to comply with applicable environmental laws. All facilities must have the necessary permits and submit appropriate documentation to governmental agencies in an accurate and timely manner.

Community Activities

PBS&J employees are encouraged to participate in community organizations and activities; however, be alert to conflicts of interest if holding public office or serving on commissions or advisory groups.

Political Activities and Contributions

PBS&J strongly believes in the importance of participating in civic affairs and the political process, and we encourage all of our employees to exercise their rights to vote and to support candidates and parties of their choice. However, in the United States, federal law prohibits corporations and government contractors such as PBS&J from using company facilities or assets to influence any federal election. Local and state laws also govern political contributions, expenditures, and activities as they apply in their respective jurisdictions, and similar laws exist in other countries.

Accordingly, while employees are encouraged to be actively involved in the political process, such activity must be done on your own time, at your own expense, and with your own facilities and equipment. Subject to certain limited exceptions permitted by law and authorized in advance and in writing by both the Chief Executive Officer and Corporate Legal Counsel, employees and board members may not:

• Make a corporate contribution or expenditure in connection with any federal, state, or local election, or in connection with any political party or activity or any political action committee (PAC).

• Ask for or receive, directly or indirectly, reimbursement for any individual contribution or expenditure with respect to any federal, state, or local election or other political activity or any PAC.

• Use or permit another to use company facilities (for example, offices, meeting rooms, telephones, stationery, e-mail access, computers, or faxes) in connection with any federal, state, or local election, or in connection with any political party or activity or PAC.

• Engage in or ask another to engage in any political activity, including soliciting contributions, while on Company time or on Company premises.

• Attempt to influence or pressure, directly or indirectly, any colleague, supplier, client, or business partner to make any political contribution or expenditure, or support any political party or candidate. For example, you may not ask your subordinates to purchase tickets to a political fundraiser.

PBS&J has established and administers PACs that may solicit and accept contributions from certain employees and then use those funds to make contributions and expenditures in connection with federal, state, and local elections, as permitted by law. PBS&J’s federal PAC does not use Company funds to make contributions or expenditures. Instead, PBS&J’s federal PAC makes contributions or expenditures using contributions to the federal PAC from a limited group of employees (such as executives and officers). A similar policy applies to PBS&J’s state PAC(s) except where applicable law permits otherwise. Contributions to the Company PACs by eligible employees are entirely voluntary; those who do not contribute will suffer no adverse effects or retaliation.

For further information about political activities, refer to Corporate Policy 516.0, Political Activities and Contributions. If you have questions about political activities, contributions, and expenditures, contact the Legal Department.

Lobbying

It is PBS&J’s policy to comply with all applicable laws and regulations relating to lobbying and activities that support lobbying. Lobbying and lobbying activities at the federal level are governed by the Lobbying Disclosure Act of 1995, as amended, which requires, among other things, registration and regular filings with the Clerk of the U.S. House of Representatives and Secretary of the U.S. Senate. The Act applies when lobbying members of Congress, their staffs, or senior members of the Executive Branch. Certain lobbying activities are prohibited altogether, and no lobbying activity may be charged to state or federal contracts. Each state has its own laws governing lobbying of state officials.

No PBS&J employee or board member may engage in any lobbying on behalf of the Company without the prior written authorization of both the Chief Executive Officer and Corporate Legal Counsel. For additional guidance, or for clarification on whether proposed activities are or are not lobbying, contact Corporate Legal Counsel.

Employee Commitment

As this Code makes clear, PBS&J’s success depends upon every employee adhering to the law and performing with the highest standards of business conduct and integrity. All employees will receive the Code and will be required to participate in training and awareness sessions on the Company’s ethics and compliance program. You will be expected to confirm your understanding of the requirement to act responsibly on behalf of the Company by:

• Adhering to the standards of conduct in the Code, including all policies and procedures that apply to your job.

• Participating in periodic training courses on ethics and compliance topics relevant to your job.

• Using one of the resources available when you need information or guidance about an ethical concern or legal issue, or to report any action that appears inconsistent with the Company’s standards of conduct.

All employees must have a signed commitment form in their personnel file. Your signature on the form acknowledges that you have received the Company’s Code of Conduct, that you have read the Code, that you understand the Code, and that you commit to adhering to the obligations expressed above. After you have read and signed the form on page 31, please return it to your Human Resources representative.

Thank you

Thank you to all of the employees who contributed by reviewing drafts and providing their comments and concerns to the Ethics and Compliance Office in the preparation of Building for the Future: Our Values, Principles, and Standards. We continue to welcome your ideas for future updates and have provided a form on page 31 for you to do so. In addition, we benchmarked our Code of Conduct against those of other organizations. We appreciate the time and effort they spent in sharing their work with us.

PBS&J’s success depends upon every employee

adhering to the law and performing with the highest

standards of business conduct and integrity.

Notes

Where to Go for Help

If you are unsure of how to proceed in a particular situation, if you have a business conduct question or concern, or if you suspect wrongdoing, it is crucial to discuss the issue with appropriate Company personnel. Resources are available to assist you.

We encourage you to first speak with your direct supervisor or manager if you have an ethics or compliance issue. You may also get help or advice from:

• A senior manager or vice president, or another member of management if (1) your immediate supervisor is unable to resolve the issue, or (2) you are uncomfortable speaking to your supervisor about the issue.

• Our Chief Ethics and Compliance Officer.

• Your Human Resources representative, a member of the Legal Department responsible for your division, the Finance Department, Health and Safety, Risk Management, or other Company resources.

• The PBS&J Ethics and Compliance HelpLine (800.587.5104), which is available to you 24 hours a day, 7 days a week. If you are unsure about where to find help, uncomfortable about using resources listed in the Code, or want to raise an issue anonymously, the Ethics and Compliance HelpLine is a resource you are encouraged to use.

EX-21.1

EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

The following entities, unless otherwise indicated, are wholly-owned direct or indirect subsidiaries of the Registrant as of September 30, 2006.

Name	State or Country of Organization
Post, Buckley, Schuh & Jernigan, Inc. (PBS&J)	Florida
PBS&J Construction Services, Inc.	Florida
PBS&J Constructors, Inc.	Florida
Seminole Development, Inc.	Florida
Seminole Development II, Inc.	Florida
Post, Buckley International, Inc.	Florida
Durham Technologies, Inc.	Virginia
Welker & Associates, Inc.	Georgia
Tri-Line Associates, Inc.	Pennsylvania
W. Koo & Associates, Inc.	California
Croslin & Associates, Inc.	Texas
Land & Water Consulting, Inc.	Montana
EIP Associates	California
PBS&J Caribe Engineering, CSP	Puerto Rico

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

I, John B. Zumwalt III, certify that:

1. I have reviewed this report on Form 10-K of The PBSJ Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by the report based on such evaluation; and

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

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 25, 2007	/s/ John B. Zumwalt III
	John B. Zumwalt III
	Chairman of the Board and
	Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

I, Donald J. Vrana, certify that:

1. I have reviewed this report on Form 10-K of The PBSJ Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Annual Report;

6. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by the report based on such evaluation; and

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

4. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 25, 2007	/s/ Donald J. Vrana
	Donald J. Vrana
	Senior Vice President and
	Chief Financial Officer

EX-32.1

Exhibit 32.1

Certificate Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officers of the PBSJ Corporation (the “Company”) hereby certify, to such officers’ knowledge, that:

(i) the accompanying Annual Report on Form 10-K of the Company for the period ended December 31, 2006 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 25, 2007	/s/ John B. Zumwalt III
	John B. Zumwalt III
	Chairman of the Board and
	Chief Executive Officer
Date: May 25, 2007	/s/ Donald J. Vrana
	Donald J. Vrana
	Senior Vice President and
	Chief Financial Officer