As reported by the Company’s FORM 10-Q for the quarterly period ended September 30, 2002, on December 17, 2001, the Company and individual defendants reached a settlement of this action. The plaintiff class will receive $2,750,000 in connection with the settlement, all of which will be funded by the Company’s insurance carrier. The District Court approved this settlement by its Order issued on October 30, 2002.

Earlier, according to the same SEC filing, a consolidated putative class action complaint was filed on February 21, 2001 against the Company and certain of its officers in the United States District Court for the Western District of Texas, Austin Division. In re NetSolve Incorporated Securities Litigation, Civil Action No. A00-CA-591 SS. Plaintiffs seek to represent a class comprised of purchasers of the Company’s common stock between April 18, 2000 and August 18, 2000 (“Class Period”). They allege that the defendants engaged in a fraudulent scheme by issuing false and materially misleading statements regarding the Company’s business during the Class Period. The Company moved to dismiss the complaint on March 8, 2001 for failing to state a claim under which relief could be granted and for failing to comply with the pleading requirements of the Private Securities Litigation Reform Act of 1995, 15 U.S.C. § 78u-4 et seq. On August 15, 2001, the District Court granted this motion in part and denied it in part. The District Court dismissed claims against one officer of the Company and dismissed certain of the theories under which Plaintiffs alleged liability against the Company. However, the District Court let stand certain of the stated claims against the Company and certain of its officers.

The original complaint charges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market between April 18, 2000 and August 18, 2000. For example the complaint alleges that on May 18, 2000, NetSolve Vice President Harry S. Budow provided an interview to Bloomberg Forum concerning the Company and its operations. During that interview, which was disseminated over the Bloomberg Newswire, defendant Budow represented that the Company would beat the $0.41 earnings estimate of two analysts that follow the Company and stated: "We've exceeded the estimates since we went public by 2 cents or more a quarter . . . There's no reason not to expect [it won't keep happening]. . ." The complaint alleges that these statements were materially false and misleading because, among other things, they failed to disclose that the Company was not performing according to its internal projections and was experiencing declining demand for its products and services. Then, on August 18, 2000, defendants revealed that the Company's growth rate was slowing dramatically and that analysts should lower their earnings estimates. In response to this information, the price of NetSolve common stock plunged from $12.625 per share to $7.625 per share--a decline of 38%. During the Class Period, certain NetSolve insiders sold their personally-held NetSolve common stock to the unsuspecting public generating aggregate proceeds of more than $3 million.