Research In Motion Limited provides this status update pursuant to the alternative information guidelines of the Ontario Securities Commission

March 5, 2007

9 Min Read

WATERLOO, Ontario -- Research In Motion Limited (“RIM” or the “Company”) (Nasdaq: RIMM; TSX: RIM) today provides this status update pursuant to the alternative information guidelines of the Ontario Securities Commission (the “OSC”). These guidelines contemplate that the Company will normally provide bi-weekly updates on its affairs until such time as the Company is current with its filing obligations under Canadian securities laws.

RIM announced today the results of the voluntary internal review (the “Review”) undertaken by the Company of its stock option granting practices and related accounting. The Review was commenced under the direction of the Audit Committee of RIM’s Board of Directors, at the initiative of Dennis Kavelman, the Company’s Chief Financial Officer, with the support of Jim Balsillie, the co-Chief Executive Officer of the Company, and the executive management team amidst the heightened public awareness and concern regarding stock option granting practices by publicly-traded companies. Following the recusal of two Audit Committee members who also served on the Compensation Committee, the Review was completed by the other members of the Audit Committee, Jim Estill and John Richardson, as a special committee of independent directors of the Board of Directors (the “Special Committee”). Any references to actions by the Special Committee prior to January 16, 2007 are to the Audit Committee. The Special Committee was assisted in the Review by outside legal counsel and outside accounting advisors in both Canada and the United States. Certain of the investigative actions by the Special Committee described in this update were carried out by the outside legal counsel or outside accounting advisors under the direction of the Special Committee.

Background of the Review

The Audit Committee commenced the Review on August 8, 2006. The Company promptly informed its external auditors, Ernst & Young LLP (“E&Y”), of the Review and has kept E&Y informed as the Review has progressed. On September 28, 2006, the Company publicly announced that the Audit Committee had made a preliminary determination that, under U.S. generally accepted accounting principles (“GAAP”), pursuant to which RIM has been preparing its financial statements since fiscal 2004 (prior to which time RIM prepared its primary financial statements in accordance with Canadian GAAP – together with a U.S. GAAP reconciliation note following its U.S. listing in 1999), accounting errors were made in connection with the administration of certain stock options granted since RIM’s initial public offering in 1997 and that a restatement (the “Restatement”) of the Company’s historical financial statements would therefore be required. At that time, the Company also announced that it had voluntarily informed the United States Securities and Exchange Commission (the “SEC”) and the OSC about the Review.

Following this self-reporting, the SEC commenced an informal inquiry. On October 13, 2006, in accordance with applicable Canadian securities laws, RIM contacted the OSC on behalf of all Canadian securities regulators and requested that the OSC issue a management cease trade order (the “MCTO”) prohibiting trading in RIM’s securities by its senior officers, directors and other insiders (who were already subject to a RIM-initiated trading blackout) as a result of RIM’s inability to file its financial statements for the second quarter of fiscal 2007. The MCTO, which was issued on November 7, 2006, continues to be in force. On November 8, 2006, the OSC publicly stated that it was conducting an investigation into stock option grants made by RIM. The Company has had communications with the staff of each of the SEC and the OSC concerning the Review. The Company intends to continue to cooperate with the OSC and SEC.

In its September 28, 2006 release, RIM had estimated, based on information available to it at that time, that the non-cash charge associated with past option grants would be approximately US$25-45 million, although the Review was continuing. On October 13, 2006, the Company publicly announced that, subsequent to its September 28, 2006 announcement, in connection with the Review the Company identified an additional error in the Company’s application of U.S. GAAP for stock options that would require a further adjustment to its historical financial statements. This additional error stemmed from the application of U.S. GAAP accounting rules to a “net settlement” feature that existed in RIM’s stock option plan prior to February 2002, which is discussed below under “Restatement”. RIM noted on October 13, 2006 that the net effect of variable accounting resulting from this additional error would be to substantially increase the amount of RIM’s September 28th estimate of non-cash charges associated with past option grants and thereby reduce the amount of RIM’s previously reported U.S. GAAP earnings over the periods to be restated.

Scope of the Review

The Special Committee reviewed the facts and circumstances surrounding the 3,231 grants of stock options to acquire common shares that were made between December 1996 and August 2006 to 2,034 employees and RIM’s directors. The Special Committee reviewed more than 700,000 electronic and paper documents. The Special Committee also reviewed stock based awards granted prior to the adoption of the Company’s December 4, 1996 stock option plan. The Special Committee conducted interviews of all current board members, members of senior management and certain other RIM employees and former employees identified as being involved in the options granting process or who were otherwise relevant to the Review.

While the Special Committee’s review of stock option granting practices is now complete, the Special Committee and its advisors, together with the Company and the Company’s external auditors, continue to do the work necessary to determine the accounting impact resulting from the Special Committee’s findings and to complete the Restatement, as described below under “Restatement”.

Grants

The 3,231 stock option grants made between December 1996 and August 2006 can be broadly classified as grants to new employees or to former co-op students who re-joined RIM after completing university (“New Hire Grants”), and periodic awards to existing employees and directors, including grants awarded to employees following a promotion to a more senior position (“Periodic Grants”). Under U.S. GAAP, all options granted prior to February 27, 2002, were accounted for incorrectly as the Company failed to apply variable accounting for the awards as a result of the net settlement feature of its stock option plan as discussed more fully below under Restatement. From February 28, 2002 to August 2006, incorrect measurement dates for accounting purposes have been identified for approximately 321 grants in respect of options to acquire 4,581,000 common shares. This represents approximately 63% of the grants made by the Company after February 28, 2002. The nature of the measurement date errors are more fully discussed below under “Errors Identified” and “Restatement”.

Option Granting Process

Since after its initial public offering in 1997, RIM has publicly reported that stock options were granted upon the approval of the Board or the Compensation Committee. Over the same period, RIM has also publicly reported that options were granted at an exercise price not less than the market price of the shares on the date immediately prior to the grant of the option.

The Review revealed that until after the commencement of the Review in August 2006, all stock option grants, except grants to RIM’s co-CEOs, were made by or under the authority of co-CEO Jim Balsillie or his delegate in accordance with an apparent delegation of such authority by RIM’s Board. For a number of years after the Company’s initial public offering in 1997, Mr. Balsillie was directly involved in approving grants, including grants that have been found to have been accounted for incorrectly. Mr. Balsillie’s direct involvement in approving grants diminished over time, as more responsibility for approving certain grants was delegated, without explicit conditions or documentation, to the Company’s Chief Financial Officer, Dennis Kavelman, and to other employees. Mr. Kavelman and other, less senior, personnel were also involved in the granting of options that have been found to have been accounted for incorrectly.

Mr. Balsillie advised the Special Committee that option grants were made to attract and retain skilled personnel to a rapidly growing technology company in an intensely competitive environment, and the informality of the option granting process was, in part, a reflection of the stage of development of the Company and the rapid growth occurring within the organization at the time.

Co-CEO, Mike Lazaridis, and COOs, Don Morrison and Larry Conlee, also had a role in the granting of options, which in the case of the COOs was limited to their direct report employees.

Grants to the co-CEOs were approved by RIM’s Compensation Committee or the Board. After March 2003, the Compensation Committee also reviewed compensation payable to the COOs and the CFO, including option grants.

Some New Hire Grants and the majority of Periodic Grants were accounted for using an incorrect measurement date, with the result that the exercise price of the option was less than the fair market value as of the date when all the events necessary to make the grant were complete. In many instances, including in connection with some option grants to the co-CEOs, COOs and the CFO (the “C-level officers”), hindsight was used to select grant dates with favorable pricing on grants, resulting in grantees receiving an in-the-money benefit that was not recorded in the financial statements as stock-based compensation.

A number of individuals interviewed by the Special Committee who were involved in the granting of options at the Company, including Mr. Balsillie and Mr. Kavelman, reported that at the time they had a general understanding that options could be granted at a chosen date within the applicable period for reporting options grants to relevant Canadian regulatory agencies. Their understanding was incorrect. Prior to December 14, 1999, Canadian insider reporting rules required insiders to report option grants within 10 days after the end of the month in which the grant was made; following December 14, 1999, insiders were required to report within 10 days of the grant. Under the rules of the Toronto Stock Exchange, RIM was required to report all option grants within 10 days after the end of the month in which the grant was made for all employees. (Note: as a “foreign private issuer” under U.S. securities laws, RIM is not subject to U.S. insider reporting rules).

In some cases, contemporaneous documentation or other action evidencing the grant date or the completion of the granting process with respect to particular options does not exist in a manner that would enable the Company to determine that the measurement date for accounting purposes was the same as the recorded grant date for an option, thereby requiring the Company to determine the measurement date based on the most objective evidence that is available.

The Special Committee determined that the Company failed to maintain adequate internal and accounting controls with respect to the issuance of options in compliance with the Company’s stock option plan, both in terms of how options were granted and documented, and the measurement date used to account for certain option grants. The grant process was characterized by informality and a lack of definitive documentation, and lacked safeguards to ensure compliance with applicable accounting, regulatory and disclosure rules.

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