According to the Notice of Settlement for the state action, on July 29, 1999, the Honorable Martin J. Jenkins granted plaintiffs' request for voluntary dismissal of the federal action without prejudice. The State Action and the Federal Action are collectively referred to herein as the "Litigation." The settlement fund for the Litigation consists of $5.0 million in case plus accrued interest.

The suit was originally filed on July 3, 1997, in Superior Court of the State of California. A trust claiming to have purchased shares of the Common Stock filed the suit entitled David T. O'Neal Trust, Dated 4/1/77, v. Vanstar Corporation, et al., Consolidated Case No. CV767266. On January 21, 1998, the same plaintiff, along with another plaintiff claiming to have purchased shares of Common Stock, filed suit in the United States District Court for the Northern District of California, making allegations virtually identical to those in the earlier suit.

The complaint charges VanStar, which sells computer products and services to corporate customers, and certain of its officers, directors and its investment bankers with violations of the California Corporations, Civil and Business & Professions Codes.

The complaint alleges that VanStar, its controlling shareholders, insiders and investment bankers misrepresented VanStar's business and prospects, enabling defendants to take VanStar public, at $10 per share, raising $74.7 million for VanStar, to reduce VanStar's debt burden and simultaneously create a trading market in VanStar stock so that when defendants drove VanStar stock toward its Class Period high of $29-3/4 per share, certain VanStar insiders could sell off over 665,000 shares of their VanStar stock at as high as $25.88 per share, for about $15 million, to sell securities convertible into its common stock to raise an additional $200 million to further reduce its debt burden and to issue (sell) an additional 1.3 million shares of its stock to make three acquisitions, all in just nine months.

But, then in late January 1997, when defendants revealed weak demand for VanStar's computer products, VanStar's impaired competitive position, the slowing growth of its services business, its failure to complete the development or implementation of its NOVA system and that its inability to control its rapidly escalating overhead expenses would result in sharply declining earnings per share and diminished prospects for future EPS growth, VanStar's stock declined to $6-1/2 per share.