According to the Company’s Form 10-K for the fiscal year ended May 1, 2005,
on January 21, 2004, the Company filed a motion to dismiss the class action suit, which the District Court granted in part and denied in part on September 27, 2004. On February 23, 2005, the shareholder plaintiffs in the class action filed a motion to certify a class of certain Pennexx shareholders. On June 29, 2005, the District Court dismissed the class action without prejudice for lack of prosecution. The District Court took this action following the withdrawal of the lead plaintiff and the failure of any other putative class member to step forward as lead plaintiff. The Company intends to defend any appeal of the dismissal of the class action vigorously.
Also in the same Form 10-K, on December 5, 2003, Pennexx filed a cross-claim in the class action against the Company and the Company’s officers who formerly served as directors of Pennexx. The cross-claim alleged, among other things, fraud, breach of fiduciary duty and tortious interference with contractual relations, and sought damages in excess of $226 million. On October 15, 2004, the Company filed a motion to dismiss Pennexx’s cross-claim, which the District Court granted in full on May 16, 2005. On June 2, 2005, Pennexx filed a Notice of Appeal of the District Court’s dismissal of the cross-claim to the U.S. Court of Appeals for the Third Circuit. On January 17, 2007 the USCA affirmed the lower court's decision to dismiss the case.
The original complaint alleges violations of federal securities laws and state common law and seeks unspecified compensatory damages in connection with the Company's foreclosure on Pennexx's assets.