According to the firm's FORM 10-K For The Fiscal Year Ended December 31, 2002, in April 1999, purported securities class action complaints were filed in the United States District Court for the Northern District of California against the Company and certain of its officers and directors. Each complaint alleges that defendants made false and misleading statements about the Company's business condition and prospects during a purported class period of November 10, 1998 through March 31, 1999, and asserts claims for violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5. In July 2002, the Company reached a settlement of the class action complaint. In November 2002, the Court granted final approval of the settlement for $10.1 million. $2.8 million in cash will be covered by the Company's insurance. The $7.3 million balance of the settlement, reflected on the consolidated statement of operations as other non-recurring expense, will be contributed by the Company in common stock or in a combination of common stock and cash at the date of distribution. The final allocation of the contribution will be determined by us at our sole option. Distribution of the settlement is anticipated sometime in mid-2003.

The original Complaint alleges that during the Class Period, the defendants, consisting of Secure Computing and certain of its officers and directors, violated the federal securities laws by issuing false and misleading statements which caused Secure Computing's stock price to be artificially inflated during the Class Period. The Complaint alleges that, in order to allow the Company's top insiders to dispose of their stock valued at more than $6 million, the defendants artificially inflated Secure Computing's stock price to a Class Period high of $28 in January 1999 before the true facts about Secure Computing's dismal operating results and diminishing prospects became known to the public and the stock plummeted to as low as $5 9/16 per share.