Joseph J. Tabacco, Jr. (75484)
Christopher T. Heffelfinger (118058)
BERMAN, DEVALERIO, PEASE & TABACCO
425 California Street, Suite 2025
San Francisco, CA 94104
Telephone: (415) 433-3200

[Additional Counsel on Signature Page]

Plaintiff, individually and on behalf of all other persons similarly situated, by his undersigned attorneys, for his complaint, allege upon personal knowledge as to himself and his own acts, and upon information and belief as to all other matters, based upon, inter alia, the investigation made by and through his attorneys, which investigation included, among other things, a review of the public documents, Securities and Exchange Commission ("SEC") filings, analyst reports, news releases and media reports of Raster Graphics, Inc. ("Raster" or the "Company"), as follows:

1. The jurisdiction of this Court is based on the California Constitution, Article VI, § 10, because this case is a cause not given by statute to other trial courts. The claims asserted herein arise under Cal. Corp. Code §§ 25400 and 25500.

2. Many of the acts alleged herein, including the dissemination to the investing public of the misleading statements at issue, occurred in substantial part in the State of California and further, the Company is headquartered in San Jose, California, and the individual defendant is a citizen of the State of California. Each of the false and misleading statements made by defendants were made in and from California.

3. Plaintiff purchased 1,000 shares of Raster common stock on January 29, 1998, at a price of $4.50 per share and has been damaged as a result of defendants' conduct as alleged herein.

4. Defendant Raster is a Delaware corporation that maintains its principal offices in San Jose, California. The Company develops, manufactures and markets high-performance, large format, digital color printing systems and sells related consumables and software for the on-demand large format digital printer market. As of November 1, 1997, there were 9,560,385 shares of common stock issued and outstanding which trade on the NASDAQ National Market System.

5. Defendant Rak Kumar ("Kumar") is and was at all relevant times Raster's Chairman, President and Chief Executive Officer. For the fiscal year ended December 31, 1996 ("1996 Fiscal Year"), Kumar received cash compensation of $168,923. Kumar is also a signatory to the SEC filings described herein.

6. Plaintiff brings this action as a class action pursuant to California Code of Civil Procedure § 382 on behalf of a class consisting of all persons who purchased the Company's common stock during the period October 20, 1997 through April 3, 1998, inclusive (the "Class Period") and who suffered damages thereby (the "Class"). Excluded from the Class are the defendants, members of defendants' immediate families, any entity in which any defendant has a controlling interest or is a parent or subsidiary of or is controlled by the Company, and the officers, directors, affiliates, legal representatives, heirs, predecessors, successors and assigns of any of the defendants.

7. The members of the Class are located in California and geographically diverse areas and are so numerous that joinder of all members is impracticable. There are approximately 9.5 million shares of the Company's common stock outstanding. The exact number of Class members is unknown to the plaintiff at this time and can only be ascertained through appropriate discovery, but plaintiff believes there are, at a minimum, hundreds of members of the Class who purchased the common stock of Raster during the Class Period.

8. Company's common stock is traded on the NASDAQ National Market. During the Class Period, Raster was followed by securities analysts and the stock was traded actively in an efficient, open and well-informed market which assimilated the information disseminated publicly by and on behalf of the Company.

9. Common questions of law and fact exist as to all members of the Class and predominate over any questions affecting solely individual members of the Class. Among the questions of law and fact common to the Class are:

(a) Whether defendants violated Cal. Corp. Code §25400, as alleged herein, and are thus liable under Cal. Corp. Code §25500;

(b) Whether the challenged public statements disseminated to the investing public and to the members of the Class omitted or misrepresented material facts about the Company's financial condition, or became materially false and misleading during the Class Period;

(c) Whether defendants acted knowingly or recklessly in making the materially false and misleading statements or in failing to correct such statements upon learning that they were materially false and misleading;

(d) Whether the market prices of the Company's common stock were artificially inflated during the Class Period because of the defendants' conduct complained of herein; and

(e) Whether the members of the Class have sustained damages and, if so, what is the proper measure of damages.

10. Plaintiff's claims are typical of the claims of the members of the Class as plaintiff and members of the Class sustained damages arising out of defendants' wrongful conduct.

11. Plaintiff will fairly and adequately protect the interests of the members of the Class and has retained counsel competent and experienced in class and securities litigation. Plaintiff has no interests antagonistic to or in conflict with those of the Class.

12. A class action is superior to other available methods for the fair and efficient adjudication of this controversy since joinder of all members of the Class is impracticable. Furthermore, because the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation make it impossible for the Class members individually to redress the wrongs done to them. There will be no difficulty in the management of this action as a class action.

13. Raster went public on August 9, 1996, offering for sale to the public 3 million shares of common stock at a price of $8 per share ("IPO"). Raster stock rose to over $11 per share in the weeks following the IPO.

14. On or about October 20, 1997, Raster issued a press release ("October 20 press release") announcing its financial results for the third quarter ended September 30, 1997 ("3Q financial results"). In the October 20 press release, defendants reported a 31% increase in net revenue to $14,330,000, compared with $10,960,000 for the same period in the prior year and net income of $889,000 or as $.09 per share compared with $937,000 or $.10 per share. Defendants boasted in the October 20 press release that this marked Raster's fifteenth consecutive quarter of revenue growth and thirteenth consecutive quarter of profitability.

15. In the October 20 press release, defendant Kumar stated:

We believe our top line growth of over 30 percent, although not meeting our internal targets, represents good performance in a quarter which was extremely slow in several of [Raster's] important international markets -- a condition which, we believe, existed across the industry.

16. In a separate press release on October 20, 1997, Raster announced that, effective immediately, Chief Financial Officer Dennis R. Mahoney ("Mahoney") was leaving the Company. No reason was given for Mahoney's departure.

17. On or about November 14, 1997, Raster filed its Form 10-Q for the quarter ended September 30, 1997 with the SEC ("3Q 10-Q"), which was signed by defendant Kumar. The 3Q 10-Q reiterated the financial information set forth in the October 20 press release.

18. In the 3Q 10-Q, Raster indicated that its $5 million bank line of credit that was secured by the Company's tangible assets was scheduled to expire on December 14, 1997 but that management expected to renew the facility under similar terms and conditions by that date.

19. In the 3Q 10Q, Raster reported accounts receivables, net of allowance for doubtful accounts of $835,000 in 1997, of $18,709,000, compared with $10,070,000 for the same period in the prior year. Inventories were reported as $11,066,000, compared with $6,705,000 for the same period in the prior year. According to the "Notes to Condensed Consolidated Financial Statements" (the "Notes") inventories are stated at the lower of cost (first in, first out) at fair market value.

20. In the Notes in the 3Q 10Q, defendants stated:

The Company has implemented a program under which customers are introduced to financing institutions through a third party broker by the Company. Through this program, customers are able to obtain lease financing for their purchases with the Company receiving the associated payment directly from the financial institution.

21. Defendants also represented in the 3Q 10Q that:

In the opinion of management, the accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the audited financial statements and include all recurring adjustments necessary for a fair presentation of the interim periods presented. The operating results for the nine months ended September 30, 1997 are not necessarily indicative of the results for any other interim period or for the full fiscal year ending December 31, 1997.

22. Thereafter, on February 3, 1998, Raster issued a press release ("February 3 press release") announcing that it expected to report a loss for the fourth quarter ended December 31, 1997 ("4Q financial results"), and further, to the surprise of the investment community, that it expected to restate its 3Q financial results.

23. With respect to the Company's 3Q financial results, the February 3 press release disclosed that Raster would restate its results, thereby decreasing revenue for that period by approximately $1 million. The Company attributed the decrease to the "reversal of revenue from transactions involving sales that had not been funded by third party leasing partners as of September 30, 1997." Thus, Raster acknowledged that, consistent with generally accepted accounting principles ("GAAP"), it could only recognize revenue when the leased equipment is accepted by the customer and the lease has been funded by Raster's leasing partners.

24. In the February 3 press release, Raster misleadingly announced that the 4Q financial results would show a pretax loss of between $3.2 - $3.7 million as compared to net income of $993,000 for the same period in 1996. The Company attributed the loss to "...the recognition of greater than expected exposure in accounts receivable and inventories," and a revenue shortfall. In addition, Raster announced that it expected to recognize $1 million of inventory adjustments and write downs, and would increase the reserve for allowance for doubtful accounts by approximately $1.5 million to cover "significant customer accounts which are more than 90 days outside their payment terms...."

25. On February 4, 1998, the day after the announcement of the third quarter restatement, Raster stock closed at $2.94, down from the prior day's closing price of $4.50 per share.

26. On February 26, 1998, the Company issued a press release further quantifying its restatement of revenues for its third quarter ending September 31, 1997 (the "February 26 press release"). The February 26 press release indicated that the restated net revenue for that period was $13,398,000 compared to the initially reported $14,330,000; net income for the third quarter was restated to $388,000, or $.04 per share, compared to previously reported net income of $889,000, or $.09 per share. The Company further acknowledged that under its "current" policy, revenue is recognized when third party financing used to assist the Company's customers in purchasing Raster's products was completed; previously, revenue was recognized at the time of shipment. Thus, the February 26 press release, like the February 3, 1998 press release, acknowledged that the Company's initial reporting of the 1997 third quarter results were inaccurate.

27. The February 26 press release, like the February 3, 1998 press release, also contained false and misleading information regarding the Company's 1997 fourth quarter results. Specifically, the February 26 press release reported (a) a 1997 fourth quarter net loss of $3.8 million, or $.40 per share, stating that these "final results" were in "line with the preliminary results" described in the February 3 press release; and (b) 1997 year-end revenues of $54.6 million, and a year-end loss of $1.175 million, or $.12 per share.

28. On April 3, 1998, the Company issued a press release (the "April 3 press release") which finally accurately disclosed the Company's 1997 fourth quarter and year-end financial results. As stated in their April 3 press release, (a) in February 1998, Remo Canesse became Raster's Chief Financial Officer, and in that capacity, determined that a number of transactions did not meet the Company's revenue recognition policies; (b) as a result, there would be a "reversal of revenues" in connection with the Company's 1997 year-end results, resulting in a $4 million to $5 million reduction of revenues from the previously reported revenues of $54.7 million; and (c) the Company expected that it would report a 1997 year-end loss "substantially in excess" of the $1.2 million loss reported on February 26, 1998.

29. The disclosures relating to the Company's restated financial results for its 1997 third and fourth quarters, and its 1997 year-end results, dramatically affected the market price of the Company's securities. During the class period, the Company's stock traded as high as $8.31 per share; on February 4, 1998, the day after the announcement of the Company's restated third quarter results, the Company's stock closed at $2.94, down from the prior day's closing price of $4.52 per share; and on April 3, 1998, after disclosure of the Company's restated 1997 fourth quarter and year-end results, the Company's stock traded at $1.94 per share.

Defendants Misrepresented and
Failed to Disclose Material Facts

30. In knowing or reckless disregard of the truth and/or as part of their ongoing efforts to continue the illusion of Raster's consecutive earnings growth, defendants issued and/or participated in the issuance of materially false and misleading statements and financial information to the investing public as particularized above. These representations were materially false and misleading when made for the reasons set forth herein in that they falsely stated and/or failed to disclose the following material, adverse facts about Raster's business and financial condition, which acts were known to or recklessly disregarded by defendants that:

(a) The 3Q 10-Q and the October 20, February 3 and February 26 press releases, which Kumar caused the Company to file and issue during the Class Period, were the result of fraudulent financial manipulations which deceived the investing public, who purchased Raster securities based upon those representations, in that revenue and net income were over stated;

(b) Defendants falsely stated in the 3Q 10-Q that Raster's financial statements were prepared in accordance with GAAP; and

(c) Defendants falsely represented that the allowance for doubtful accounts was adequate when defendants knew that material amounts were already past due at the time the 3Q 10Q was filed.

31. During the Class Period, defendants materially misled the investing public, thereby inflating and/or maintaining the price of Raster securities, by publicly issuing false and misleading statements and omitting to disclose material facts necessary to make defendants' statements, as set forth herein, not false and misleading. Said statements and omissions were materially false and misleading in that they failed to disclose material adverse information and misrepresented the truth about the Company, its financial performance, accounting, reporting and condition, including, inter alia:

(a) (i) With respect to the Company's 1997 third quarter, the Company's revenues, earnings, and earnings per share as reported in the 3Q 10-Q and October 20 press release were overstated, with revenues overstated by approximately $1 million, a material amount considering the Company's originally-reported results;

(ii) With respect to the Company's 1997 fourth quarter and year-end results as reported in the February 3 and February 26 press releases, the Company's revenues were materially overstated, and its losses and losses per share were materially understated;

(b) The financial statements in the 3Q 10-Q did not present, in all material respects, the Company's true financial condition, and did not reflect all adjustments which were necessary for a fair statement of the interim period presented; and

(c) The Company's 3Q 10-Q was not presented in conformity with GAAP or principles of fair reporting.

32. In addition, the defendants not only falsely and materially overstated the Company's net income and earnings per share, but failed to file financial statements with the SEC which conformed to the requirements of GAAP, such that the financial statements were presumptively misleading and inaccurate pursuant to Regulation S-X, 17 CFR 210.4-01(a)(1).

33. As a result of its accounting improprieties, the Company's reported financial results also violated at least the following provisions of GAAP for which defendants are necessarily responsible:

(a) The principle that financial reporting should provide information that is useful to present and potential investors and creditors and other users in making rational investment, credit and similar decisions was violated (FASB Statement of Concepts No. 1, ¶ 34);

(b) The principle that financial reporting should provide information about the economic resources of an enterprise, the claims to those resources, and the effects of transactions, events and circumstances that change resources and claims to those resources was violated (FASB Statement of Concepts No. 1, ¶ 40);

(c) The principle that financial reporting should provide information about how management of an enterprise has discharged its stewardship responsibility to owners (stockholders) for the use of enterprise resources entrusted to it was violated. To the extent that management offers securities of the enterprise to the public, it voluntarily accepts wider responsibilities for accountability to prospective investors and to the public in general (FASB Statement of Concepts No. 1, ¶ 50);

(d) The principle that financial reporting should provide information about an enterprise's financial performance during a period was violated. Investors and creditors often use information about the past to help in assessing the prospects of an enterprise. Thus, although investment and credit decisions reflect investors' expectations about future enterprise performance, those expectations are commonly based at leads partly on evaluations of past enterprise performance (FASB Statement of Concepts No. 1, ¶ 42);

(e) The principle that financial reporting should be reliable in that it represents what it purports to represent was violated. That information should be reliable as well as relevant to a notion that is central to accounting (FASB Statement of Concepts No. 2, ¶ ¶ 58-59);

(f) The principle of completeness, which means that nothing is left out of the information that may be necessary to ensure that it validly represents underlying events and conditions, was violated (FASB Statement of Concepts No. 2, ¶ 79); and

(g) The principle that conservatism be used as a prudent reaction to uncertainty to try to ensure that uncertainties and risks inherent in business situations are adequately considered was violated. The best way to avoid injury to investors is to try to ensure that what is reported represents what it purports to represent (FASB Statement of Concepts No. 2, ¶ ¶ 95, 97).

34. The February 3 press release revealed problems related to Raster's business and financial operations which by their nature were ongoing and severe. These problems were operative throughout the Class Period and contrary to and/or discredited by defendants' statements disseminated to the investing public during the Class Period.

Defendants' Knowledge or Reckless
Disregard of the False and Mis-
leading Financial Statements

35. Defendants' false representations and material omissions were made with scienter in that: defendants knew or recklessly disregarded that the 3Q 10-Q and the October 20, February 3 and February 26 press releases disseminated by Raster with respect to its third and fourth quarter and 1997 year-end results were materially false and misleading as described above; knew or were reckless in not knowing that the false financial results would be issued or disseminated to the investing public; and knowingly and substantially participated in the preparation and/or issuance or dissemination of such statements or documents. The following factors indicate that defendants made the misrepresentations knowingly or with reckless disregard for the truth:

(a) Defendants were under strong pressure to report consecutive earnings growth for each quarter;

(b) The Company, which was in need of renegotiating its bank facility prior to the end of the fiscal year, would have had a difficult time obtaining such financing if Raster posted a loss;

(c) Defendant Kumar was the signatory on the 3Q 10-Q which contained the financial statements, which were subsequently restated; and

(d) The Company's Chief Financial Officer resigned on the date defendants released the Company's 3Q financial results. This resignation caused, or should have caused, defendants, but for their recklessness, to have been aware of the improper revenue recognition by the Company.

36. Plaintiff repeats and realleges each of the allegations set forth in the foregoing paragraphs.

37. This Count is asserted against all defendants herein and is based upon Cal. Corp. Code §§ 25400 and 25500.

38. Throughout the Class Period, defendants individually and in concert, directly and indirectly, engaged in a continuous course of conduct and conspiracy to artificially inflate the revenues and earnings of Raster. Defendants employed devices, schemes and artifices to defraud and engaged in acts, practices, and a course of conduct designed to assure investors that the Company's financial statements were prepared in accordance with GAAP, and that Raster's financial statements were true and accurate. Such actions included the making of untrue statements, in or from California, of material facts and omitting to state material facts necessary in order to make the statements made about the Company's revenues and earnings during the Class Period, in light of the circumstances in which they were made, not misleading, and engaging in transactions, practices and courses of business which operated as a fraud and deceit upon the purchasers of Raster stock during the Class Period.

39. Specifically, the statements made by defendants as set forth in ¶¶ 14-27 above were materially false and misleading and/or failed to disclose facts necessary to render what was said true and accurate.

40. Defendants are liable for each of the fraudulently misleading statements set forth above in that they directly or indirectly issued such statements.

41. Defendant Kumar, as an officer and director of Raster, is liable as a direct participant in the wrongs complained of herein. As an officer and director of a publicly traded corporation, Kumar had a duty to promptly disseminate accurate and truthful information with respect to the operations and financial results of Raster, and to correct any previously issued statements that had become materially misleading or untrue, so that the market price of Raster's publicly traded securities would be based on truthful and accurate information. Through his position of control and authority as an officer and director of Raster, Kumar was able to and did control, directly or indirectly, the content of the financial statements and public statements disseminated by and through Raster. With knowledge of the falsity and/or misleading nature of the statements contained therein, and in reckless disregard of the true financial condition and prospects of Raster, Kumar caused the heretofore complained of public statements to contain material misstatements and omissions of material facts as alleged above, in violation of their aforementioned duties and of Cal. Corp. Code § 25400.

42. As described above, Kumar had actual knowledge of the misrepresentations and omissions of material facts set forth herein, or acted with reckless disregard for the truth in that he failed to ascertain and to disclose the true facts, even though such facts were available to him.

43. As a result of the dissemination of the false and misleading statements set forth above, the market price of Raster common stock was artificially inflated during the Class Period. In ignorance of the false and misleading nature of the statements described above, plaintiff and the other members of the Class relied, to their detriment, on the integrity of the market price of the stock in purchasing Raster common stock. Had plaintiff and the other members of the Class known the truth, they would not have purchased said shares or would not have purchased them at the inflated prices that were paid.

44. Plaintiff and the other members of the Class have suffered substantial damages as a result of the wrongs herein alleged in an amount to be proved at trial.

45. By reason of the foregoing, defendants violated Cal. Corp. Code § 25400 and are liable to the members of the Class pursuant to Cal. Corp. Code §25500.

WHEREFORE, plaintiff prays for judgment as follows:

1. Declaring this action to be a proper class action on behalf of the Class defined herein;

2. Awarding plaintiff and the other members of the Class compensatory and/or punitive damages;

3. Awarding plaintiff and the Class their costs and expenses for this litigation including reasonable attorney' fees and other disbursements; and

4. Granting such other and further relief as this Court deems to be just and proper.

Plaintiff demands a trial by jury.