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Case Status:    DISMISSED    
On or around 09/08/2003 (Other)

Filing Date: January 23, 1998

According to the latest docket posted, on February 2, 2001, the case was reopened. On February 20, 2001, the Court entered the Order that the action was dismissed with prejudice as requested against defendant Nu-Kote Holding, Inc., and that plaintiff's claims against other defendants remain open. On September 7, 2001, the Court entered the Memorandum Opinion and Order granting the remaining defendants’ motions to dismiss and denied the plaintiffs’ motion to certify the class action. Judgment was further entered that day and the case was closed. On September 10, 2002, the plaintiff filed a notice of appeal. On November 7, 2002, the Court entered the Order of the U.S. Court of Appeals. Pursuant to the agreed motion of the parties, Lori Lemmer and Hans Paffhausen, portions of the appeal of Lemmer v. Paffhausen were dismissed. On September 8, 2003, the Court entered the Judgment/Mandate of the USCA which affirmed the Judgment of the District Court.

As previously reported by the Company’s FORM 10-K For The Fiscal Year Ended March 31, 1999, all proceedings in this case have been stayed as a result of Nu-kote's filing for protection under Chapter 11 of the U.S. Bankruptcy Code. On September 28, 1999, Nu-kote's lead bankruptcy counsel was notified by the United States District Court for the Northern District of Texas that this case was to be administratively closed.

The complaint charges Nu-kote and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The complaint alleges that defendants knowingly made false and misleading statements about the success of Nu-kote's 1995 acquisition of Pelikan Products (a large European seller of impact and non-impact printing products), the strong demand for, and market acceptance of, Nu-kote's products, Nu-kote's successful transition from sales of impact products to non-impact products, including its state-of-the-art manufacturing facilities in the U.S. and Europe, its technological research and development expertise that purportedly enabled it to rapidly develop large numbers of new products, including piezoelectric non-impact printer heads and related products and Nu-kote's prospects for strong earnings per share growth during FY97-FY98, while reporting false financial results, including inflated earnings per share for the 4thQ of FY96 and the 1stQ, 2ndQ and 3rdQ of FY97. As a result of these allegedly false statements, assurances and forecasts, Nu- kote's stock advanced from $10-3/8 per share in March 1995 to a Class Period high of $22-1/2 in November 1995, a 100%+ increase. However, beginning in mid- 1996, Nu-kote began to report disappointing lower-than-forecasted results, followed by large and escalating losses. Despite Nu-kote's continuing reassurances that its problems were temporary and could be or were being overcome and it would return to profitability, it did not. In FY97, it suffered a huge $49 million, $2.28 per share loss, followed by more losses in FY98 to date, due to the failure of the Pelikan merger, including the inability to successfully integrate Pelikan's operations into Nu-kote's, much larger than forecast "restructuring" charges due to the closing of outdated, uneconomical manufacturing facilities, the failure to generate sufficient sales of non- impact printing products to offset the decline in the sales of impact printing products, the failure to successfully develop commercially viable products based on the piezoelectric technology and huge writedowns of excess, over- valued impact printing supply products. Nu-kote's stock collapsed to less than $1 per share, 99% below its Class Period high, Nu-kote's Board sold off non- essential assets to raise cash to permit the Company to continue operations and put the Company up for sale, as its ability to continue in business as a separate entity was now very much in doubt.

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