According to the Company’s Form 10-K/A for the fiscal year ended June 28, 2003, on August 13, 2001, Handspring and two of its officers were named as defendants in a securities class action lawsuit filed in United States District Court for the Southern District of New York. On September 6, 2001, a substantially identical suit was filed. These cases have been consolidated with hundreds of other so called “laddering” cases brought on similar grounds in the United States District Court for the Southern District of New York. The complaints against Handspring assert that the prospectus for Handspring’s June 20, 2000 initial public offering failed to disclose certain alleged actions by the underwriters for the offering. The complaints against Handspring allege claims against Handspring and two of its officers under Sections 11 and 15 of the Securities Act of 1933, as amended, and under Section 10(b) and Section 20(a) of the Securities Exchange Act of 1934, as amended. The complaints against Handspring also name as defendants the underwriters for Handspring’s initial public offering. Handspring has sought indemnification from its underwriters pursuant to the Underwriting Agreement dated as of June 20, 2000 with the underwriters in connection with Handspring’s initial public offering. On October 9, 2002, the Handspring officers named as defendants were dismissed without prejudice from these cases by court order. On July 9, 2003, a committee of Handspring’s Board of Directors conditionally approved a proposed partial settlement with the plaintiffs in this matter. The settlement would provide, among other things, a release of Handsprings and its officers, and Handspring’s agreement to assign to the plaintiffs certain potential claims Handspring may have against its underwriters. Any direct financial impact of the proposed settlement is expected to be borne by Handspring’s insurers.

The complaint alleges violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. On or about June 21, 2000, Handspring commenced an initial public offering of 10,000,000 of its shares of common stock at an offering price of $20 per share (the "Handspring IPO"). In connection therewith, Handspring 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) defendants had solicited and received excessive and undisclosed commissions from certain investors in exchange for which defendants allocated to those investors material portions of the restricted number of Handspring shares issued in connection with the Handspring IPO; and (ii) defendants had entered into agreements with customers whereby defendants agreed to allocate Handspring shares to those customers in the Handspring IPO in exchange for which the customers agreed to purchase additional Handspring shares in the aftermarket at pre-determined prices.

NOTE: In October 2003, the Company was acquired by Palm, Inc.