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Case Status:    SETTLED
On or around 01/31/2002 (Date of order of final judgment)

Filing Date: December 12, 1997

According to the docket dated September 13, 2002, the Assignment Committee transferred the case to the U.S. District for the Northern District of California San Francisco division (the case was origibally filed in San Jose division). The case was reassigned to Judge Phyllis J. Hamilton and the Court gave it a new case no. 00-02525. However, there was a parallel ongoing securities class action lawsuit against this company. Both lawsuits were settled and this case was dismissed with prejudice. The decision in this case is connected to a settlement reached in the state court action.

The Notice of Pendency and Proposed Settlement for the state court action announced the creation of a settlement fund in the amount of $2,750,000 plus interest to settle both the state and federal actions.

The original complaint charges Storm and certain of its officers, directors and underwriters with violations of the Securities Act of 1933. Plaintiffs seek to recover damages on behalf of all purchasers of the common stock of Storm issued pursuant to Storm's September 30, 1996 Registration Statement and Prospectus (the "Class").

Specifically, the complaint alleges that Storm told investors that it had recently successfully introduced two new products, the EasyPhoto SmartPage and EasyPhoto Drive, and that volume shipments of, and rapidly accelerating revenues from, these two new products would result in sharply increased revenues and reduced losses for Storm in its 4thQ of 1996, and in Storm achieving huge revenue increases and reaching profitability in 1997, so that Storm would achieve 1997 revenues and earnings per share of $60 million and $.38, respectively.

The complaint alleges that as a result of these positive representations and forecasts, the defendants successfully completed Storm's IPO at $10.50 per share on Sept. 30, 1996 and Storm's stock quickly rose to $17 per share. But then, on Dec. 16, 1996, just 2-1/2 months after Storm's IPO, before Storm had even completed its 1stQ as a public company, Storm revealed its 4thQ 1996 results would be much worse than earlier forecast due to poor sales of the EasyPhoto Drive because of weak demand for that product and poor sales of the EasyPhoto SmartPage because of a lack of availability of large volumes of that product for sale due to mechanical and design defects. Storm's stock immediately dropped to $5-1/8 per share on volume of 1.1 million shares, by far the largest one-day price drop and stock volume for Storm since it went public. Storm's stock then fell to just $1-1/8 per share, as Storm's 1stQ 1997 revenues collapsed to just $2 million, resulting in a huge $6.3 million, or $.60 per share, loss.

The complaint further alleges that Storm abandoned its EasyPhoto Drive, taking over $1.1 million in inventory write-offs for that product, and is mired in ongoing losses and unable to achieve commercial success for its products, revenue growth or reach profitability, in stark contrast to the earlier representation that the EasyPhoto Drive had been successfully launched.

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