According to the Judgment entered on May 22, 2001, the settlement was approved and the lawsuits were dismissed with prejudice and on the merits. Plaintiffs’ attorneys were awarded fees in the amount of $2,500,000 and expenses in the amount of $75,699.12.

By the Notice of Pendency of Class Action, a Settlement Fund consisting of $7,500,000 in cash, plus interest, has been established. A hearing will be held on May 4, 2001 to determine whether a proposed settlement of the Actions as set forth in the Stipulation and Agreement of Settlement dated as of February 1, 2001, is fair, reasonable and adequate and to consider the proposed Plan of Allocation for the Settlement proceeds and the application of Plaintiffs' Counsel for attorneys' fees and reimbursement of expenses.

As reported by the Company’s FORM 10-Q for the quarterly period ended June 30, 2000, in February 1999, actions were filed against the Company and certain of its current and former executive officers in the United States District Court for the Southern District of Iowa. These actions allege that the Company violated Sections 10(b) and 20(a) of, and Rule 10b-5 under, the Securities Exchange Act of 1934. They allege that the Company made false or misleading statements of material fact about the Company’s accounting for in-process research and development in connection with the Rosetta Technologies, Inc. and Sense8 Corporation acquisitions and the Company’s 1999 business prospects. They seek unspecified damages. These claims are now consolidated into one class action purporting to include individuals who purchased the Company’s common stock between February 19, 1998 and April 6, 1999. The court has appointed lead plaintiffs and co-lead counsel in the action. The court has granted in part and dismissed in part the motion we filed to dismiss the plaintiffs' amended complaint.

In October 1999, actions were filed against the Company and certain of its current and former executive officers in the United States District Court for the Southern District of Iowa. These actions allege that the Company violated Sections 10(b) and 20(a) of, and Rule 10b-5 under, the Securities Exchange Act of 1934. They allege that the Company made false or misleading statements of material fact about the Company’s financial results for the second quarter of 1999. These claims are now consolidated into one class action purporting to include individuals who purchased the Company’s common stock between July 29, 1999, and October 1, 1999. The court has appointed lead plaintiffs and lead counsel in the action.

The original complaint charges Engineering Animation and certain officers and directors of the Company during the relevant time period with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. The complaint alleges that defendants issued a series of materially false and misleading statements concerning the Company's financial results in order to (i) permit the Individual Defendants to dump $20,800,000.00 of Engineering Animation stock on the unsuspecting public at artificially inflated prices (ii) acquire multiple companies using the Company's inflated stock as currency for the acquisitions (iii) and materially understate the Company's losses for the first and third quarters of 1998. The Complaint further alleges that the Defendants were able to complete their scheme through engaging in improper accounting practices involving violations of the Generally Accepted Accounting Principles ("GAAP"). Because of the issuance of a series of false and misleading statements, the price of Engineering Animation common stock was artificially inflated during the Class Period.