According to a Form 10-K filed December 25, 1999, on August 12, 1998, a class action complaint was filed in the United States District Court for the Southern District of New York on behalf of all persons who purchased the Common Stock of the Company between May 1997 and August 1998, inclusive. On October 7, 1998, holders of the Company's TOPrS filed a class-action complaint based on substantially identical allegations, which complaints were subsequently consolidated. On October 12, 1999, the Court approved a settlement of the consolidated actions. The Company has admitted no wrongdoing but paid $1,250,000 toward the settlement.

The Notice of Pendency Of Class Action posted announces the establishment of a Settlement Fund consisting of $5,250,000 in cash. By the Order dated November 9, 1998, pursuant to the Private Securities Litigation Reform Act of 1995, 15 U.S.C. §78u-4, United States District Court Judge Allen Schwartz appointed certain of the class plaintiffs as Lead Plaintiffs and Milberg Weiss Bershad Hynes & Lerach LLP as Plaintiffs' Lead Counsel. The Defendants have moved to dismiss the Complaint. The Lead Plaintiffs have opposed the motion and it is currently pending before the Court.

Golden Books originally was named as a defendant in this proceeding. On February 26, 1999, Golden Books filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code. As a result of that filing, the litigation as against Golden Books has been stayed pursuant to 11 U.S.C. §362(a).

The original complaint alleged that the defendants issued a series of materially false and misleading statements concerning the impact of the Company's 1996 restructuring plan on the Company's financial condition, liquidity and future prospects. On October 7, 1998, holders of the Company's TOPRS (Trust Originated Preferred Securities) also filed a class-action complaint based on substantially identical allegations, which complaints were subsequently consolidated. While the outcome of the case cannot be predicted with any certainty, the Company believes that it has meritorious defenses to the claims, and that the claims against the Company will be resolved or discharged during the pendency of the Chapter 11 proceedings.