PEMSTAR, Inc. is a provider of electronics manufacturing services to OEMs in the communications, computing, data storage, industrial and medical equipment markets.

The original Complaint charges PEMSTAR and certain of its officers and directors with violations of the Securities Exchange Act of 1934. The Complaint alleges that during the Class Period, Defendants caused PEMSTAR's shares to trade at artificially inflated levels through the issuance of false and misleading statements. The Registration Statement and Prospectus for the June 8, 2001 Secondary Offering were materially false and misleading when issued as they misrepresented and/or omitted one or more of the following adverse facts which then existed and disclosure of which was necessary to make the statements made not false and/or misleading, including, but not limited to: (a) In order to attract and maintain the appearance of a diverse customer base, PEMSTAR: (i) executed orders from customers without industry track records or acceptable financial conditions, in fact, several were on the brink of bankruptcy; and (ii) had an extremely liberal policy of accepting and holding inventory for and from existing and prospective customers (often without ever obtaining a written contract), the result of which was that PEMSTAR significantly increased its costs of doing business and was forced to write down obsolete inventory. In fact, a substantial amount of the Company's inventory was already obsolete. (b) Due to a lack of internal controls reflected, but not acknowledged in PEMSTAR's contracts with Datasweep: (i) PEMSTAR's "cash conversion cycle," or the amount of time between the purchase of inventory and the collection of payment, was dramatically lower than its competitors', which resulted in PEMSTAR having to write down material amounts of accounts receivables; and (ii) PEMSTAR's "days sales outstanding," the number of days PEMSTAR had to wait payment for sales, was dramatically lower than its competitors', which resulted in PEMSTAR having to write down material amounts of accounts receivables.

The Complaint further claims that the true facts, which were known to the Defendants but concealed from the public following the Secondary Offering, were as follows: (a) The Company was in violation of its financial loan covenants; (b) The Company's inventory and accounts receivables valuations were grossly overstated; (c) Defendants needed to keep the Company's shares artificially inflated to complete the Company's convertible offering; (d) The Company was then experiencing lower than projected utilization rates at the Company's higher cost locations which performed many of the Company's higher margin services, including engineering, New Product Introduction ("NPI") and prototyping; (e) The Company's customers were being devastated financially in the severe "end-market" downturn; (f) The Company was actually selling back its inventory to original equipment manufacturers ("OEMs") because, unbeknownst to shareholders, the Company was actually "holding" inventory from its OEMs without any written/binding agreement to perform; and (g) As a result of (a)- (f) above, the Defendants' projections for the Company's third and fourth quarters of F02 were materially false and misleading.

The Complaint further alleges that on or around May 3, 2002, the Company issued a press release entitled, "PEMSTAR Revises Estimates for Fourth Fiscal Quarter 2002 Results and Announces Private Placement of Up to $50 Million." On this news, the Company's share price plunged more than 60% to $2.84 on May 6, 2002 on trading of more than 4.5 million shares.

As summarized in the Notice of Pendency of Class Action, dated March 17, 2005, on October 9, 2002, the Court ordered the seven actions consolidated for all purposes under the caption In re PEMSTAR, Inc. Securities Litigation, Case No. 02-1821 DWF/SRN (the “Consolidated Action”), appointed Matt L. Brody, Keith Hewlett, Jr. and Keith Hewlett, Sr., as lead Plaintiffs, approved lead Plaintiffs’ selection of lead Counsel and liaison Counsel, and provided for the filing of a consolidated amended Complaint. Thereafter, Plaintiffs filed the Amended Consolidated Class Action Complaint on or about January 7, 2003. On January 13, 2003, Plaintiffs filed the [Corrected] Consolidated Complaint. On July 25, 2003, Defendants moved to dismiss the [Corrected] Consolidated Complaint with prejudice. Lead Plaintiffs opposed Defendants’ motion, and it was denied by the Court on August 15, 2003. On December 23, 2004, Plaintiffs filed the [Corrected] Interlineated Amended Consolidated Complaint (the “Complaint”), and Defendants moved to dismiss certain claims and Defendants from the Complaint on January 8, 2005. While this motion was pending, the Parties reached an agreement in principle on January 20, 2005, to settle the Litigation.

According to the Company’s FORM 10-K for the fiscal year ended March 31, 2005, in March, 2005, the Company entered into a settlement agreement with the Plaintiffs of the In re PEMSTAR Securities Litigation. On May 27, 2005, the Company received final approval of the settlement by the United States District Court for the District of Minnesota. Under the terms of the $12 million settlement, the Company will pay $250,000 and its insurers will pay the remaining $11,750,000. This settlement fully resolves these claims against the Company and several of its current and former officers and directors.