According to the Company’s FORM 10-Q For the Quarterly Period Ended June 30, 2004, on July 15, 2002, the issuer defendants and individual defendants filed an omnibus motion to dismiss addressing issues generally applicable to the defendants as a group. On October 9, 2002, the district court entered an order dismissing all of the living individual Commerce One officers and directors from the case without prejudice. On February 16, 2003, the district court entered an order denying most of the defenses asserted by the defendants in the omnibus motion to dismiss and allowing most of the case to proceed. A stipulation of settlement has been submitted to the Court for preliminary approval. Under the settlement if approved, the plaintiffs would dismiss the issuer defendants from the lawsuit (including Commerce One and named individual defendants) and continue to pursue their case against the underwriter defendants. In exchange for this dismissal, the D&O insurance carriers would agree to guarantee a recovery by the plaintiffs from the underwriter defendants of at least $1.0 billion. The Company's Board of Directors has approved Commerce One's participation in the settlement. The settlement remains subject to a number of conditions, including approval of the proposed settling parties and the court.

As summarized by the same SEC filing, various plaintiffs have filed similar actions asserting virtually identical allegations against more than 200 other companies. The lawsuits against Commerce One and other companies have been coordinated for pretrial purposes with these other related lawsuits and have been assigned the collective caption In re Initial Public Offering Securities Litigation. On April 19, 2002, plaintiffs' lawyers for the coordinated lawsuits filed an amended complaint consisting of a set of "Master Allegations" and individual amended complaints against the various defendants, including Commerce One and the Individual Defendants. The amended complaint alleges violations of Section 11 and Section 15 of the Securities Act of 1933, Section 20(a) of the Securities Exchange Act of 1934 ("Exchange Act"), and Section 10(b) of the Exchange Act (and Rule 10b-5, promulgated thereunder) as a result of alleged conduct of the underwriters of the IPO to engage in a scheme to under price the IPO and then artificially inflate our stock price in the aftermarket.

The complaint alleges violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. On or about July 1, 1999, Commerce One commenced an initial public offering of 3,300,000 of its shares of common stock at an offering price of $21.00 per share (the ``Commerce One IPO''). In connection therewith, Commerce One filed a registration statement, which incorporated a prospectus (the ``Prospectus''), with the SEC. The complaint further alleges that the Prospectus was materially false and misleading because it failed to disclose, among other things, that: (i) Credit Suisse and Robertson Stephens had solicited and received excessive and undisclosed commissions from certain investors in exchange for which Credit Suisse and Robertson Stephens allocated to those investors material portions of the restricted number of Commerce One shares issued in connection with the Commerce One IPO; and (ii) Credit Suisse and Robertson Stephens had entered into agreements with customers whereby Credit Suisse and Robertson Stephens agreed to allocate Commerce One shares to those customers in the Commerce One IPO in exchange for which the customers agreed to purchase additional Commerce One shares in the aftermarket at pre-determined prices.