UNITED STATES DISTRICT COURT ° 'r F=DISTRICT OF MASSACHUSETTS

IN RE: NX NETWORKS SECURITIESLITIGATION (Rees Plaintiffs)

Civil Action No. 00-CV-11850 - JLT

ROY WERBOWSKI, LOUIS FURRIER,JOHN MARIANI, JOHN P . RAMAGE andPAT VARIANO, on behalf of themselves andall others similarly situated ,

Plaintiffs ,

V .

NX NETWORKS, INC ., STEVEN T.FRANCESCO AND PETER KENDRICK ,

Defendants .

Civil Action No . 01-CV-10377 - JLT

STIPULATION OF SETTLEMENT

On behalf of themselves and a putative class of investors in Nx Networks , Inc. ("Nx

Networks"), formerly known as Netrix Corporation, common stock (the "Class" as hereinafter

defined),' Lead Plaintiffs Tracy Rees and Christine Joyce in the first-captioned action and Lead

Plaintiffs Louis Furrier, John Mariani, John P . Ramage, and Pat Variano in the second-captioned

action hereby enter into the following stipulation and agreement of settlement (the "Stipulation")

with defendants Steven T . Francesco and Peter Kendrick (collectively, the "Defendants"), to be

submitted to the Court for approval pursuant to Rule 23(e) of the Federal Rules of Civil

Procedure .

1 Nx operated under the name Netrix Corporation until its merger with OpenROUTE on December 22, 1999 . OnDecember 23, 1999, it began doing business as Nx Networks, Inc . and traded on the Nasdaq under the ticker symbol"NTRX" until September 19, 2000 when it changed its symbol to "NXWX ."

WHEREAS

A. Beginning on or about September 13, 2000, two actions -- Tracy Rees and

Christine Joyce v . BryanHolley, et al . , Civil Action No. 00-11850-JLT, and Marc

Jacobsen v._ Bryan Holley, et al . , Civil Action No. 00-1 1999-JLT - were filed in this

Court. By an Order dated January 6, 2001, the Court consolidated the Rees and

Jacobsen actions under the caption, In re Nx Networks, Inc . Securities Litigation (Rees

Plaintiffs), Civil Action No . 00-CV-1 1850 - JLT (the "Rees Action"), appointed Tracy

Rees and Christine Joyce as Lead Plaintiffs, and appointed Schiffrin & Barroway LLP

and Berman DeValerio Pease Tabacco Burt & Pucillo as Co-Lead Counsel ;

B. On November 27, 2000, a related action, Roy Werbowski, et al . v. Nx

Networks, Inc. et al . , Civil Action No . 00-1967-A, was filed in the Eastern District of

Virginia, and was later transferred to this Court on February 16, 2001 under the caption

RoyWerbowski, et al . v. Nx Networks, Inc_ et al . , Civil Action No. 01-10377-JLT (the

"Werbowski Action") (the Rees Action and Werbowski Action are hereinafter referred

to as the "Actions") ;

C. Pursuant to the Consolidation Order, on or about May 4, 2001, Plaintiffs

in the Rees Action filed their "First Amended Consolidated Complaint" in that action

(the "Rees Complaint") and Plaintiffs in the Werbowski Action filed an Amended

Complaint in their action (the "Werbowski Complaint") (collectively, the Rees and

Werbowski Complaints are the "Complaints"). On May 8, 2001, the Court appointed

Louis Furrier, John Mariani, John P . Ramage, and Pat Variano as Lead Plaintiffs, an d

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appointed Abbey Gardy, LLP2 as Lead Counsel and Berman DeValario Pease Tabacc o

Burt & Pucillo as Liaison Counsel in the Werbowski Action;

D . The Complaints allege , among other things, that Defendants issued fals e

and misleading press releases and other statements regarding the availability of the

Company's products, and that their reported financial results overstated the Company' s

revenues and profitability during the Class Periods - December 8, 1999 through an d

including April 24, 2000 for the Rees Action, and July 27, 2000 through and includin g

November 2, 2000 for the Werbowski Action - in a scheme to artificially inflate the

value of Nx Networks' and Netrix's common stock. More specifically, the Rees

Complaint alleges that the Defendant stated that Nx Networks' new Series 300 0

product-line would begin shipping during the first quarter of 2000, knowing and/o r

recklessly disregarding the misleading nature of the statement . The Rees Complaint als o

alleges that Defendant further misled investors by stating that Nx Networks had alread y

booked $9.8 million by February 22, 2000, and alleged that the Company had booke d

only a small fraction of that amount as of that date, and ultimately booked $8 .9 million

in revenue for the entire quarter ;

E. The Werbowski Complaint alleges that Defendants misled investors wit h

respect to the Company's financial statements for the second quarter of 2000. That

Complaint alleges violations of GAAP claiming that Defendants had prematurely an d

improperly booked revenue for products that they had neither manufactured nor shippe d

before the close of the quarter . The Complaint also points to Nx Networks' restatement

2 At that time, Abbey Gardy' s predecessor firm, Abbey Gardy & Squitieri, represented Lead Plaintiffs .

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of their financial results for that quarter, decreasing reported revenues from $10.4 to

$8 .4 million in support of its claim that the Defendants made false statements ;

F. Both Complaints allege that Lead Plaintiffs and other members of th e

Class purchased or acquired the common stock of Nx Networks and Netrix during th e

Class Period at prices artificially inflated as a result of Defendants' dissemination of

materially false and misleading statements in violation of Sections 10(b) and 20(a) of th e

Securities Exchange Act of 1934, and Rule I Ob-5 promulgated thereunder ;

G. On June 8, 2001, Defendants moved to dismiss in their entirety both the

Rees and Werbowski Complaints . Defendants thereafter filed a motion to consolidate

the Rees and Werbowski Actions . On October 11, 2001, after briefing and oral

argument, the Court denied Defendants' motions to dismiss;

H. On or about November 5, 2001, Nx Networks filed for protection under

Chapter 11 in the United States Bankruptcy Court for the Eastern District of Virginia .

The Bankruptcy Court issued a final order approving Nx Networks' plan of liquidation

on September 18, 2002.3 Accordingly, Plaintiffs dismissed Nx Networks from these

Actions on May 6, 2003 ;

I. On April 21, 2003, the parties entered into a Mediation and Procedura l

Agreement that provided for an informal exchange of relevant information and a schedul e

for exploration of settlement. As a result of this agreement, Defendants produced to

Plaintiffs 360 boxes of documents, which Plaintiffs reviewed and analyzed ;

J. On November 13, 2003, the parties appeared before the Court for a statu s

conference . On that same day, the Court granted Plaintiffs' motion to reopen and restor e

3 The Bankruptcy Court issued a final decree ending the bankruptcy on January 14, 2004 .

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the Actions to the active docket, and ordered that the parties would be permitted to

conduct discovery for six (6) months, before a June 15, 2004 trial date ;

K. Immediately following the Status Conference, the parties undertook

discovery, serving subpoenas for third-party discovery beginning December 1, 2003 .

Defendants then deposed each of Lead Plaintiffs . Plaintiffs noticed depositions for the

Defendants ;

L. On December 29, 2003, Defendants filed answers in both cases denying

liability and denying the Plaintiffs' allegations ;

M. On March 26, 2004, the parties participated in Mediation with the

Honorable Nicholas Politan, and reached an agreement in principle to settle the Actions

on May 25, 2004 .

N. As a result of the discovery discussed above, which involved reviewin g

tens of thousands of pages, reviewing Nx Networks' public filings, press releases and

other public statements, and interviewing witnesses, as well as the investigation that Lead

Plaintiffs' Counsel undertook prior to filing the Complaint, the research Lead Plaintiffs'

Counsel conducted of the applicable law with respect to the claims against Defendants

and the potential defenses thereto, the briefing of Defendants' motions to dismiss, and the

process of negotiating the proposed Settlement, including the preparation of a mediation

statement for the mediation before Judge Politan, and numerous telephonic conversations,

Lead Plaintiffs assert that they have sufficient information concerning the strengths and

weaknesses of their case to fully consider and evaluate the fairness of this settlement to

the Class;

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0 . In addition, Lead Plaintiffs and Lead Plaintiffs' Counsel recognize the

burden, expense, risks and uncertain outcome of litigating these Actions further, and

Lead Plaintiffs, on behalf of themselves and all other members of the Class, desire to

settle their claims against the Released Parties, on terms and conditions hereafter set fort h

and deem said Settlement to be fair, reasonable, adequate, and in the best interests of th e

Class ;

P. Defendants have vehemently denied and continue to deny any and al l

allegations of wrongdoing or liability or damage to the Plaintiffs and the Classes a s

asserted herein, and contend that at all times they acted properly. Nevertheless,

Defendants desire to settle and terminate the claims of the Lead Plaintiffs and the Classe s

so as to avoid lengthy and time -consuming litigation and the burden, inconvenience and

expense connected therewith, and to finally put to rest any and all claims that were o r

could have been asserted in the litigation, or arising out of the matters set forth in th e

pleadings, without in any way acknowledging any fault or liability . This Stipulation and

all related documents are not and should not be construed as an admission by Defendants

of any fault or liability or wrongdoing of or by them, or any of them or of any othe r

person;

Q. Lead Plaintiffs' Counsel have engaged in extensive discussions and arm' s

length negotiations with counsel for Defendants with respect to a compromise and

settlement of the claims against the Released Parties, as hereafter defined, with a view to

settling the issues in dispute and achieving the best relief possible consistent with the

interests of the Class . In agreeing to this Settlement, Plaintiffs do not concede that an y

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infirmities exist in their claims, nor do Settling Defendants concede any infirmities i n

their defenses to such claims, or that the claims are valid or have merit ; and,

R. Based upon their investigation and pretrial discovery as set forth above ,

Lead Plaintiffs' Counsel has concluded that the terms and conditions of this Stipulation

are fair, reasonable and adequate to Plaintiffs and the Class, and in their best interests ,

and Lead Plaintiffs have agreed to settle the claims raised in the Actions pursuant to the

terms and provisions of this Stipulation, after considering : (a) the substantial benefits

that Plaintiffs and the Class will receive from Settlement of the Actions, (b) the attendan t

risks of litigation, and (c) the desirability of permitting the Settlement to be consummate d

as provided by the terms of this Stipulation .

NOW THEREFORE, without any admission or concession on the part of Lead Plaintiffs

of any lack of merit of the Actions whatsoever, and without any admission or concession of an y

liability or wrongdoing or lack of merit in the defenses whatsoever by Defendants, it is hereb y

STIPULATED AND AGREED, by and among the parties to this Stipulation, through thei r

respective attorneys, subject to approval of the Court pursuant to Rule 23(e) of the Federal Rule s

of Civil Procedure, in consideration of the benefits flowing to the parties hereto from th e

Settlement, that all Settled Claims (as defined below) as against the Released Parties (as define d

below) shall be compromised, settled, released and dismissed with prejudice, upon and subject to

the following terms and conditions :

CERTAIN DEFINITION S

1 . As used in this Stipulation, the following terms shall have the following

meanings :

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(a) "Actions" means In re Nx Networks, Inc . Securities Litigation ,

Civil Action No. 00-CV-11850 - JLT and Roy Werbowski, et al . v . Nx Networks , Inc. e t

al ., Civil Action No. 01-10377-JLT .

(b) "Authorized Claimant" means a Class Member who submits a

timely and valid Proof of Claim form to the Claims Administrator.

(c) "Bankruptcy Court" means the United States Bankruptcy Cour t

for the Eastern District of Virginia .

(d) "Claims Administrator" means the firm designated by Lea d

Plaintiffs' Counsel to administer the Settlement .

(e) "Class" and "Class Members" means, for the purposes of thi s

Settlement only: all persons and entities who purchased or otherwise acquired th e

common stock of Nx Networks, Inc ., formerly known as Netrix Corporation, between

December 8, 1999 and April 24, 2000, inclusive, or July 27, 2000 and November 2, 2000 ,

inclusive. Excluded from the Class are Nx Networks, its subsidiaries and affiliates, an d

its officers and directors, and members of their immediate families, the Defendants ,

members of the immediate families of each of the Defendants, any entities in which any

of the Defendants have a controlling interest, and the legal representatives, heirs ,

successors, predecessors in interest, affiliates or assigns of any of the Defendants . Also

excluded from the Class are any putative Class Members who exclude themselves b y

filing a request for exclusion in accordance with the requirements set forth in the Notice .

(f) "Class Period" means the class periods set forth in the Complaint s

(December 8, 1999 through and including April 24, 2000 for the Rees Action, and Jul y

27, 2000 through and including November 2, 2000 for the Werbowski Action) .

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(g) "Defendants," "Individual Defendants" or "Settling Defendants "

mean Defendants Steven T . Francesco and Peter Kendrick .

(h) "Defendants ' Counsel" means the law firm of Arnold & Porte r

LLP .

(i) "Effective Date of Settlement" or "Effective Date" means the dat e

upon which the Settlement contemplated by this Stipulation shall become effective, as set

forth in ¶ 24 below .

6) "Gross Settlement Fund" means the fund described in ¶ 4 below.

(k) "Lead Plaintiffs" means Tracy Rees , Christine Joyce, Louis

Furrier, John Mariani, John P. Ramage and Pat Variano .

(1) "Lead Plaintiffs' Counsel" or "Lead Counsel" means the law firms

of Berman DeValerio Pease Tabacco Burt & Pucillo, Schiffrin & Barroway, LLP, an d

Abbey Gardy LLP .

(m) "Net Settlement Fund" means the Gross Settlement Fund, net o f

any taxes and costs of the notice and administration of the Gross Settlement Fund, and

the attorneys' fee and expense award.

(n) "Notice" means the Notice of Pendency of Class Action, Hearin g

On Proposed Settlement and Attorneys' Fee Petition and Right to Share in Settlemen t

Fund, which is to be sent to members of the Class substantially in the form attache d

hereto as Exhibit 1 to Exhibit A .

(o) "Order and Final Judgment" means the proposed order to b e

entered approving the Settlement substantially in the form attached hereto as Exhibit B .

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(p) "Plaintiffs" means Lead Plaintiffs and all other persons or entitie s

identified as plaintiffs in the Complaints .

(q) "Plaintiffs' Counsel" means all attorneys representing Plaintiffs

listed at the end of this Stipulation .

(r) "Preliminary Approval Order" means the proposed order

preliminarily approving the Settlement and directing notice thereof to the Clas s

substantially in the form attached hereto as Exhibit A .

(s) "Preliminary Approval Date" means the date upon which th e

Court signs the Preliminary Approval Order .

(t) "Proof of Claim" means a Proof of Claim and Release

substantially in the form attached hereto as Exhibit 2 to Exhibit A .

(u) "Publication Notice" means the summary notice of propose d

Settlement and hearing for publication substantially in the form attached as Exhibit 3 t o

Exhibit A .

(v) "Released Parties" means the Defendants (and their assigns,

spouses , heirs, or family members), or any person or entity acting on behalf of at the

direction of either of them, Nx Networks (which has been liquidated in a bankruptc y

proceeding), Nx Networks' estate , and each of Nx Networks' current, future or former

directors, officers, employees, agents, underwriters, financial advisors, counsel, insurers ,

co-insurers, reinsurers, controlling shareholders, attorneys, solicitors, banks or investmen t

banks, legal representatives, predecessors, successors, parents, subsidiaries or affiliates .

(w) "Settled Claims" means any and all direct, derivative, and/or

representative claims, debts, demands, rights or causes of action or liabilities whatsoever

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(including, but not limited to, any claims for damages, interest, attorneys' fees, expert or

consulting fees, and any other costs, expenses or liability whatsoever), whether based o n

federal, state, local, statutory or common law or any other law, rule or regulation,

whether fixed or contingent, accrued or un-accrued, liquidated or un-liquidated, at law o r

in equity, matured or un-matured, whether class or individual in nature, including both

known claims and Unknown Claims (as defined below), that have been or could hav e

been asserted in these Actions or in any forum by the Class Members (excluding an y

persons or entities who timely and properly excluded themselves from the class) or any o f

them against any of the Released Parties by the Class Members or any of them agains t

any of the Released Parties which arise out of or are based upon the allegations ,

transactions, facts, matters or occurrences, representations or omissions involved, set

forth, or referred to in the Complaints and relate to the purchase of shares of the commo n

stock of Nx Networks or Netrix during the Class Period (except for claims to enforce th e

Settlement) .

(x) "Settlement" means the settlement contemplated by thi s

Stipulation.

(y) "Unknown Claims" means any and all Settled Claims which an y

Lead Plaintiff or Class member does not know or suspect to exist in his, her or its favor at

the time of the release of the Released Parties, which if known by him, her or it might

have affected his, her or its decision(s) with respect to the Settlement . With respect to

any and all Settled Claims, the parties stipulate and agree that upon the Effective Date ,

Lead Plaintiffs shall expressly, and each Class Member shall be deemed to have, and by

operation of the Judgment shall have, expressly waived any and all provisions , rights and

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benefits conferred by any law of any state or territory of the United States , or principle o f

common law, which is similar, comparable , or equivalent to Cal . Civ. Code § 1542 ,

which provides :

A general release does not extend to claims which the creditor does not know or suspectto exist in his favor at the time of executing the release, which if known by him musthave materially affected his settlement with the debtor ; and any and all provisions, rights,and benefits of any similar state or federal law .

SCOPE AND EFFECT OF SETTLEMENT

2. The obligations incurred pursuant to this Stipulation shall be in full an d

final disposition of the Actions and any and all Settled Claims as against all Release d

Parties or their attorneys .

3. (a) Pursuant to the Order and Final Judgment, upon the Effective Dat e

of this Settlement, Lead Plaintiffs (on behalf of themselves , their heirs , executors ,

administrators, successors and assigns, the Class, and any and all other persons the y

represent , in their capacities as purchasers or acquirers of and Nx Networks and Netri x

common stock, and any and all corporate, representative, and other capacities) wil l

forever be barred and enjoined from commencing, instituting, prosecuting or continuing

to prosecute any action or other proceeding an any court of law or equity, arbitratio n

tribunal, administrative forum, or any other forum, asserting against any of th e

Defendants, any claims that relate to or constitute any Settled Claim that was brought o r

could have been brought in the Actions .

(b) Pursuant to the Order and Final Judgment, upon the Effective Dat e

of this Settlement, each of Defendants shall release any claims, known or unknown ,

against Lead Plaintiffs, Lead Plaintiffs' Counsel, and Counsel of Record arising from the

Actions .

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THE SETTLEMENT CONSIDERATIO N

4. Payment In Full Settlement Of Plaintiffs' Claim s

(a) In full and complete settlement of the Settled Claims as to th e

Released Parties, and subject to the terms and conditions of the Stipulation, Defendants '

insurers, on behalf of Defendants shall pay $6,300,000 (the "Cash Settlement Amount" )

within thirty (30) days of the Preliminary Approval Order into an interest-bearing escrow

account designated by Lead Plaintiffs (the "Settlement Fund") . The Plaintiffs

acknowledge that this payment will constitute a payment that fully satisfies all of thei r

claims and that they do not expect, not are they entitled to, any additional money from

any of the Released Parties .

(b) The Cash Settlement Amount and any interest earned thereon shal l

be the "Gross Settlement Fund ."

(c) The Parties acknowledge that as a result of Nx Networks '

bankruptcy as discussed herein, Nx Networks has no funds to contribute to thi s

Settlement.

5 . Use and Distribution Of Payment In Full Settlement Of Plaintiffs' Claim s

(a) The Gross Settlement Fund, net of any Taxes (as defined below)

on the income thereof, shall be used to pay (i) the notice and administration costs referre d

to in 17 hereof, (ii) the attorneys' fee and expense award referred to in 18 hereof; and

(iii) the remaining administration expenses referred to in ¶ 9 hereof. The balance of the

Gross Settlement Fund after the above payments shall be the "Net Settlement Fund, "

which shall be distributed to the Authorized Claimants as provided in 11 10-12 hereof.

Any sums required to be held in escrow hereunder shall be held by Berman DeValeri o

Pease Tabacco Burt & Pucillo , Schiffrin & Barroway LLP, and Abbey Gardy, LLP as

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Escrow Agents for the Settlement Fund. A ll funds held by the Escrow Agent shall be

deemed to be in the custody of the Court and shall remain subject to the jurisdiction of

the Court until such time as the funds shall be distributed or returned to the Defendants '

insurers pursuant to this Stipulation and/or further order of the Court . The Escrow Agent

shall invest any funds in excess of $100,000 in short-term United States Agency or

Treasury Securities (or a mutual fund invested solely in such interests), and shall collec t

and reinvest all interest accrued thereon .

(b) Pending the Order and Final Judgment approving the Settlement ,

all payments out of the Gross Settlement Fund escrow account, excepting payout under ¶

7 below, shall require a signature from the Escrow Agents and a signature of Arnold &

Porter LLP (counsel for Defendants) to release deposited funds. After final approval, no

signature from Defendants' counsel shall be required .

(c) The parties hereto agree that the Settlement Fund is intended to b e

a Qualified Settlement Fund within the meaning of Treasury Regulation § 1 .468B-1 an d

that the Escrow Agent, as administrator of the Settlement Fund within the meaning o f

Treasury Regulation § 1 .468B-2(k)(3), shall be responsible for filing tax returns for the

Settlement Fund and paying from the Settlement Fund any Taxes owed with respect t o

the Settlement Fund. Counsel for Defendants agree to cooperate with Lead Plaintiffs '

Counsel in preparing the statement described in Treasury Regulation § 1 .468B-3(e) by

providing Lead Plaintiffs' Counsel with the name (s), address(es), taxpayer identificatio n

number(s), and signature(s) for the transferor(s) .

(d) All (i) taxes on the income of the Gross Settlement Fund and (ii )

expenses and costs incurred in connection with the taxation of the Gross Settlement Fun d

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(including, without limitation, expenses of tax attorneys and accountants) (collectivel y

"Taxes") shall be paid out of the Gross Settlement Fund, shall be considered to be a cos t

of administration of the Settlement and shall be timely paid by the Escrow Agent withou t

prior Order of the Court .

ADMINISTRATIO N

6. The Claims Administrator shall administer the Settlement under Lea d

Plaintiffs' Counsel's supervision and subject to the jurisdiction of the Court . Defendants

and Defendants' Counsel shall have no responsibility, liability or obligation of any kind

whatsoever in connection with the distribution of the Settlement Fund, the determination ,

administration, calculation, processing or payment of claims, the payment or withholdin g

of taxes, or any losses or liabilities incurred in connection therewith .

7. Following execution of the Preliminary Approval Order and after paymen t

of the Cash Settlement Amount, Lead Plaintiffs' Counsel shall establish a fund from the

proceeds of the Gross Settlement Fund for the purpose of paying the reasonable costs and

expenses associated with the administration of the Settlement, including without

limitation, the costs of identifying members of the Class and effecting mail Notice and

Publication Notice (the "Notice Fund"), when such costs are incurred . Such amount s

shall include, without limitation, the actual costs of publication, printing and mailing th e

Notice, reimbursements to nominee owners for forwarding notice to their beneficia l

owners, and the administrative expenses incurred and fees charged by the Claim s

Administrator in connection with providing Notice and processing Proof of Claims . Lead

Plaintiffs will deposit $150,000 from the Gross Settlement Fund into the Notice Fund t o

pay the costs and expenses described above, and no signature from the Escrow Agent o r

Defendants' counsel shall be required to release monies from the Notice Fund . Any

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additional costs for the administration and settlement will be paid from the Gros s

Settlement Fund at the time of the Court's execution of the Order permitting distributio n

of the Net Settlement Fund to the Class Members who have submitted valid claims, an d

upon submission of invoices to Lead Plaintiffs' Counsel . Any balance (including

interest) remaining in the Notice Fund upon Final Approval, less expenses incurred but

not yet paid, shall be returned to the Gross Settlement Fund .

ATTORNEYS' FEES AND EXPENSES AND COMPENSATORY AWAR D

8. (a) Lead Plaintiffs' Counsel will apply to the Court for an award from th e

Gross Settlement Fund of attorneys' fees not to exceed one-third (33 1/3%) of the Gross

Settlement Fund and reimbursement of expenses no greater than $240,000, plus interest .

The procedure for, and the allowance or disallowance by the Court of, any application fo r

an award of attorneys' fees and reimbursement of expenses to be paid out of the Gros s

Settlement Fund are not part of the Settlement, and are intended to be considered by the

Court separately from the Court's consideration of the fairness, reasonableness and

adequacy of the Settlement .

(b) Attorneys' fees, expenses , and interest as are awarded by the Court

shall be payable from the Gross Settlement Fund to Lead Plaintiffs' Counsel upon entry

of an Order and Final Judgment subject to the obligation of Plaintiffs' counsel to make

appropriate refunds or repayments to the Settlement Fund, if and when, as a result of an y

objection, appeal and/or further proceedings on remand, or successful collateral attack ,

the fee or cost award is reduced or reversed . In the event the Effective Date does no t

occur, or the judgment or order making the fee and expense award is reversed o r

modified on appeal, and in the event that the fee and expense award has been paid to an y

extent, then Lead Plaintiffs' Counsel and all other Plaintiffs' Counsel who received an y

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fees shall be obligated, without receiving notice from Defendants' Counsel or from a

court of appropriate jurisdiction, to refund to the Settlement Fund the fees, expenses an d

costs previously paid to them from the Settlement Fund plus interest thereon at the sam e

net rate as earned by the Settlement Fund in an amount consistent with such reversal or

modification. An undertaking to be signed by Lead Plaintiffs' Counsel before any such

fees are disbursed reflecting their agreement to return the money to Defendants' insurer s

under appropriate circumstances has been attached to this Stipulation as Exhibit C .

(c) Lead Plaintiffs' Counsel shall allocate the attorneys ' fees amongst

Plaintiffs' Counsel in a manner Lead Plaintiffs' Counsel deems appropriate based upon

the work performed at the request of Lead Plaintiffs' Counsel and the contribution mad e

to the litigation of the Actions .

(d) Lead Plaintiffs' Counsel will also apply to the Court for an awar d

from the Gross Settlement Fund to be paid to Lead Plaintiffs for reasonable costs an d

expenses directly relating to Lead Plaintiffs' representation of the Class. Lead Plaintiffs '

Counsel shall allocate this sum among Lead Plaintiffs in accordance with costs an d

expenses incurred directly relating to the Lead Plaintiffs' representation of the Class .

(e) Costs and expense awards as are awarded by the Court shall b e

payable from the Gross Settlement Fund to Lead Plaintiffs' Counsel immediately upon

entry of an Order and Final Judgment subject to the obligation of Plaintiffs' counsel t o

make appropriate refunds or repayments to the Settlement Fund, if and when, as a result

of any objection, appeal and/or further proceedings on remand, or successful collatera l

attack, the fee or cost award is reduced or reversed . All counsel fees and expenses

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awarded to Plaintiffs Counsel shall be paid solely out of and shall not be in addition t o

the Gross Settlement Fund.

ADMINISTRATION EXPENSES

9. Lead Plaintiffs' Counsel will apply to the Court, on notice to Defendants '

Counsel, for an order (the "Class Distribution Order") approving the Claims

Administrator's administrative determinations concerning the acceptance and rejection o f

the claims submitted herein and approving any fees and expenses not previously applie d

for, including the fees and expenses of the Claims Administrator, and, if the Effectiv e

Date has occurred, directing payment of the Net Settlement Fund to Authorize d

Claimants .

DISTRIBUTION TO AUTHORIZED CLAIMANT S

10. The Claims Administrator shall determine each Authorized Claimant's pr o

rata share of the "Net Settlement Fund" based upon each Authorized Claimant' s

Recognized Claim (as defined in the Plan of Allocation described in the Notice annexed

hereto as Exhibit 1 to Exhibit A, or in such other Plan of Allocation as the Court

approves) .

11 . The Plan of Allocation proposed in the Notice is not a necessary term o f

this Stipulation and it is not a condition of this Stipulation that that Plan of Allocation b e

approved .

12. Each Authorized Claimant shall be allocated a fro rata share of the Ne t

Settlement Fund based on his, her, or its Recognized Claim compared to the tota l

Recognized Claims of all accepted claimants . This is not a claims-made settlement.

Defendants shall have no involvement in reviewing or challenging claims . Defendants

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will not have a reversionary interest in the Settlement Fund . If the funds remaining in the

Settlement Fund following pro rata distribution(s) to all Authorized Claimants do no t

exceed $10,000, then such remaining funds, after payment of any further claim s

administration/tax expense, shall be contributed to the nonprofit corporation the Federal

Judicial Center Foundation . If the funds remaining in the Settlement Fund excee d

$10,000, but are still not sufficient to make a complete distribution to all Authorize d

Claimants, then such remaining funds, after payment of any further claim s

administration/tax expense, including any projected claims administration/tax expense ,

shall be distributed to all Authorized Claimants on a pro rata basis, but excluding an y

Authorized Claimant whose recognized loss is below a dollar threshold that Lea d

Plaintiffs' Counsel determines at such time, in consultation with the Claims

Administrator, would not allow for a final efficient distribution of the remaining funds i n

the Settlement Fund .

ADMINISTRATION OF THE SETTLEMENT

13. Any member of the Class who does not submit a valid Proof of Claim wil l

not be entitled to receive any of the proceeds from the Net Settlement Amount but wil l

otherwise be bound by all of the terms of this Stipulation and the Settlement, includin g

the terms of the Final Order and Judgment to be entered in the Actions and the release s

provided for herein, and will be barred from bringing any action against the Released

Parties concerning the Settled Claims.

14 . Lead Plaintiffs' Counsel shall be responsible for supervising th e

administration of the Settlement and disbursement of the Net Settlement Fund by the

Claims Administrator . Except for their obligations to cause the Defendants' insurers to

pay the Settlement Amount, and to cooperate with Plaintiffs as required pursuant to

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Paragraph 5(c) and Paragraph 41, as provided herein, Defendants and Defendants '

Counsel shall have no liability, obligation or responsibility for anything in connection

with this Settlement, including but not limited to the administration of the Settlement o r

disbursement of the Net Settlement Fund . Lead Plaintiffs' Counsel shall have the right ,

but not the obligation, to waive what they deem to be formal or technical defects in an y

Proofs of Claim submitted in the interests of achieving substantial justice .

15 . For purposes of determining the extent, if any, to which a Class Member

shall be entitled to be treated as an "Authorized Claimant," the following conditions shal l

apply:

(a) Each Class Member shall be required to submit a Proof of Clai m

(see attached Exhibit 2 to Exhibit A), supported by such documents as are designated

therein, including proof of the Claimant's loss , or such other documents or proof as Lead

Plaintiffs' Counsel, in their discretion, may deem acceptable ;

(b) All Proofs of Claim must be submitted by the date specified in th e

Notice unless such period is extended by Order of the Court . Any Class Member who

fails to submit a Proof of Claim by such date shall be forever barred from receiving an y

payment pursuant to this Stipulation (unless , by Order of the Court, a later submitte d

Proof of Claim by such Class Member is approved), but shall in all other respects b e

bound by all of the terms of this Stipulation and the Settlement including the terms of the

Judgment to be entered in the Actions and the releases provided for herein, and will b e

barred from bringing any action against the Released Parties concerning the Settle d

Claims . Provided that it is received before the motion for the Class Distribution Order i s

filed, a Proof of Claim shall be deemed to have been submitted when posted, if receive d

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with a postmark indicated on the envelope and if mailed by first-class mail and addresse d

in accordance with the instructions thereon . In all other cases, the Proof of Claim shall b e

deemed to have been submitted when actually received by the Claims Administrator ;

(c) Each Proof of Claim shall be submitted to and reviewed by th e

Claims Administrator, under the supervision of Lead Plaintiffs' Counsel, who shal l

determine in accordance with this Stipulation the extent , if any, to which each claim shal l

be allowed, subject to review by the Court pursuant to subparagraph (e) below ;

(d) Proofs of Claim that do not meet the submission requirements may

be rejected. Prior to rejection of a Proof of Claim, the Claims Administrator shall

communicate with the Claimant in order to remedy the curable deficiencies in the Proo f

of Claims submitted . The Claims Administrator, under supervision of Lead Plaintiffs '

Counsel, shall notify, in a timely fashion and in writing, all Claimants whose Proofs o f

Claim they propose to reject in whole or in part, setting forth the reasons therefor, an d

shall indicate in such notice that the Claimant whose claim is to be rejected has the right

to a review by the Court if the Claimant so desires and complies with the requirements o f

subparagraph (e) below ;

(e) If any Claimant whose claim has been rejected in whole or in part

desires to contest such rejection, the Claimant must, within twenty (20) days after th e

date of mailing of the notice required in subparagraph (d) above, serve upon the Claim s

Administrator a notice and statement of reasons indicating the Claimant's grounds for

contesting the rejection along with any supporting documentation, and requesting a

review thereof by the Court . If a dispute concerning a claim cannot be otherwise

21

resolved, Lead Plaintiffs' Counsel shall thereafter present the request for review to th e

Court ; and

(f) The administrative determinations of the Claims Administrato r

accepting and rejecting claims shall be presented to the Court, on notice to Defendants '

Counsel, for approval by the Court in the Class Distribution Order .

16. Each Claimant shall be deemed to have submitted to the jurisdiction of th e

Court with respect to the Claimant' s claim, and the claim will be subject to investigatio n

and discovery under the Federal Rules of Civil Procedure, provided that suc h

investigation and discovery shall be limited to that Claimant's status as a Class Membe r

and the validity and amount of the Claimant's claim .

17. Payment pursuant to this Stipulation shall be deemed final and conclusiv e

against all Class Members . All Class Members whose claims are not approved by th e

Court shall be barred from participating in distributions from the Net Settlement Fund ,

but otherwise shall be bound by all of the terms of this Stipulation and the Settlement ,

including the terms of the Judgment to be entered in the Actions and the releases

provided for herein, and will be barred from bringing any action against the Release d

Parties concerning the Settled Claims.

18. All proceedings with respect to the administration, processing and

determination of claims described by ¶ 15 of this Stipulation and the determination of al l

controversies relating thereto, including disputed questions of law and fact with respect t o

the validity of claims , shall be subject to the ju risdiction of the Court .

19. The Net Settlement Fund shall be distributed to Authorized Claimants b y

the Claims Administrator only after the Effective Date and after : (i) all timely Claim s

22

have been processed, and all Claimants filing timely Claims whose Claims have bee n

rejected or disallowed, in whole or in part, have been notified and provided th e

opportunity to be heard concerning such rejection or disallowance ; (ii) all objections with

respect to all rejected or disallowed claims have been resolved by the Court, and al l

appeals therefrom have been resolved or the time therefor has expired ; ( iii) all matters

with respect to attorneys' fees, costs, and disbursements and compensatory awards hav e

been resolved by the Court, all appeals there from have been resolved or the time therefor

has expired; and (iv) all costs of administration have been paid.

TERMS OF PRELIMINARY APPROVAL ORDE R

20. Promptly after this Stipulation has been fully executed , Lead Plaintiffs '

Counsel and Defendants' Counsel jointly shall apply to the Court for entry of a

Preliminary Approval Order, in all material respects in the form annexed hereto as

Exhibit A .

TERMS OF ORDER AND FINAL JUDGMEN T

21 . If the Settlement contemplated by this Stipulation is approved by th e

Court, counsel for the parties shall request that the Court enter an Order and Fina l

Judgment substantially in the form annexed hereto as Exhibit B .

OPTION TO TERMINATE STIPULATIO N

22. If, prior to the Final Approval Hearing, persons who otherwise would be

members of the Class have filed timely and proper requests for exclusion from the Clas s

in accordance with the provisions of the Notice, and such persons in the aggregate

purchased a number of shares during the Class Period in an amount greater than the

threshold number of shares specified in the separate Supplemental Agreement betwee n

the parties, then Defendants shall have the option to terminate this Stipulation i n

23

accordance with the procedures set forth in the Supplemental Agreement .

Notwithstanding the foregoing, the Stipulation shall not become null and void as a resul t

of the election by Defendants to exercise their option to withdraw from the Stipulation

pursuant to the Supplemental Agreement until the conditions set forth in th e

Supplemental Agreement have become effective .

23 . This Settlement is conditioned on Lead Plaintiffs' Counsel' s

understanding that the Individual Defendants do not have the financial ability t o

materially contribute to the Settlement . Lead Plaintiffs' Counsel will undertake an

investigation into this matter . If Lead Plaintiffs' Counsel investigation reveals otherwise ,

Plaintiffs shall have the option to terminate this Stipulation . Lead Plaintiffs' Counse l

shall complete their investigation and notify Defendants' Counsel of any intention t o

exercise their option to terminate this Stipulation by the close of business on Septembe r

10, 2004 or the execution of the Preliminary Approval Order, whichever occurs later .

EFFECTIVE DATE OF SETTLEMENT, WAIVER OR TERMINATIO N

24. The Effective Date of Settlement shall be the date when all the following

shall have occurred :

(a) entry of the Preliminary Approval Order in all material respects in

the form annexed hereto as Exhibit A ;

(b) approval by the Court of the Settlement, following notice to th e

Class and a hearing, as prescribed by Rule 23 of the Federal Rules of Civil Procedure ;

and

(c) entry by the Court of an Order and Final Judgment , in all material

respects in the form set forth in Exhibit B annexed hereto, and the expiration of any tim e

for appeal or review of such Order and Final Judgment, or, if any appeal is filed and not

24

dismissed, after such Order and Final Judgment is upheld on appeal in all material

respects and is no longer subject to review upon appeal or review by writ of certiorari .

25 . In the event any conditions under the Stipulation of Settlement are no t

satisfied , the Stipulation of Settlement does not received final approval, the terms of th e

Settlement are reversed or modified, or the Settlement is cancelled, terminated or fails to

become effective for any other reason , then the pa rties to this Stipulation sha ll be deemed

to have reverted to their respective positions existing immediately prior to the execution

of this Stipulation and, except as otherwise expressly provided, the parties shall procee d

in all respects as if this Stipulation had not been executed and any related orders had no t

been entered, and any portion of the Cash Settlement Amount previously paid by

Defendants, together with any interest earned thereon, less any Taxes due with respect t o

such income, and less costs of administration and notice actually incurred, shall b e

returned to the Defendants' insurers without written notice from counsel to Defendants .

NO ADMISSION OF WRONGDOING

26. Defendants have denied and continue to deny any and all allegations of

wrongdoing or liability or damage to the Plaintiff and the Classes as asse rted herein, and

contend that at all times they acted properly . This Stipulation and all related document s

are not and should not be construed as an admission by Defendants of any fault o r

liability or wrongdoing of or by them, or any of them or of any other perso n

27. This Stipulation, whether or not consummated, and any proceedings taken

pursuant to it :

(a) shall not be offered or received against Defendants as evidence of

or construed as or deemed to be evidence of any presumption, concession, or admissio n

by any of Defendants with respect to the truth of any fact alleged by Lead Plaintiffs or th e

25

validity of any claim that had been or could have been asserted in the Actions or in an y

litigation, or the deficiency of any defense that has been or could have been asserted i n

the Actions or in any litigation, or of any liability, negligence, fault, or wrongdoing o f

Defendants;

(b) shall not be offered or received against Defendants as evidence of

a presumption, concession or admission of any fault, misrepresentation or omission wit h

respect to any statement or written document approved or made by any Defendant, o r

against Lead Plaintiffs and the Class as evidence of any infirmity in the claims of Lea d

Plaintiffs and the Class ;

(c) shall not be offered or received against Defendants or against Lea d

Plaintiffs or the Class as evidence of a presumption, concession or admission with respec t

to any liability, negligence, fault or wrongdoing, or in any way referred to for any othe r

reason as against any of the parties to this Stipulation, in any other civil, criminal o r

administrative action or proceeding, other than such proceedings as may be necessary t o

effectuate the provisions of this Stipulation; provided, however, that if this Stipulation i s

approved by the Court, Defendants may refer to it to effectuate the liability protectio n

granted them hereunder ;

(d) shall not be construed against Defendants or Lead Plaintiffs and

the Class as an admission or concession that the consideration to be given hereunde r

represents the amount which could be or would have been recovered after trial ; and

(e) shall not be construed as or received in evidence as an admission ,

concession or presumption against Lead Plaintiffs or the Class or any of them that any of

26

their claims are without merit or that damages recoverable under the Complaints woul d

not have exceeded the Settlement Fund .

MISCELLANEOUS PROVISIONS

28. All of the exhibits attached hereto are hereby incorporated by reference as

though fully set forth herein .

29. If a case is commenced in respect of any Defendant (or any Insurers contributin g

funds to the Cash Settlement Amount on behalf of any Defendant) under Title 11 of the Unite d

States Code (Bankruptcy), or a trustee, receiver, conservator, or liquidator is appointed under an y

similar law, and (a) a court of competent jurisdiction enters a final order determining the transfe r

of money to the Settlement Fund or any portion thereof by or on behalf of such Defendant to be a

preference, voidable transfer, fraudulent transfer or similar transaction and any portion thereof i s

required to be returned ("Fund Return Order"), and either (b)(i) such amount is still deposited i n

the Settlement Fund such that the Settlement Fund is obligated to return to the Defendant' s

insurer the amount of the Fund Return Order; or (ii) at the time of the Fund Return Order,

insufficient or no amounts are still deposited in the Settlement Fund such that the amount of th e

Fund Return Order must be returned by Lead Defendant's insurer ; then the parties shall jointl y

move the Court to vacate and set aside the releases given and Judgment entered in favor of tha t

Defendant pursuant to this Stipulation, which releases and Judgment shall be null and void, an d

the parties shall be restored to their respective positions existing immediately prior to th e

execution of this Stipulation and any cash amounts in the Settlement Fund shall be returned a s

provided in 1 25 above.

30. The parties to this Stipulation intend the Settlement to be a final and

complete resolution of all disputes asserted or which could be asserted by the Clas s

Members against the Released Parties with respect to the Settled Claims. Accordingly ,

27

Lead Plaintiffs and Defendants agree not to assert in any forum that the litigation was

brought by Lead Plaintiffs or defended by Defendants in bad faith or without a reasonabl e

basis. The parties hereto shall assert no claims of any violation of Rule 11 of the Federa l

Rules of Civil Procedure, or any other Court rule or statute relating to any claims,

defenses or settlement of the Actions . The parties agree that the amount paid and the

other terms of the Settlement were negotiated at arm's length in good faith by the parties ,

and reflect a settlement that was reached voluntarily after consultation with experience d

legal counsel . The parties and their counsel agree that they will refrain from disparagin g

each other in any public statements .

31 . This Stipulation may not be modified or amended , and none of it s

provisions may be waived except by a writing signed by all parties hereto or thei r

successors-in-interest .

32 . The headings herein are used for the purpose of convenience only and ar e

not meant to have legal effect .

33. The administration and consummation of the Settlement as embodied i n

this Stipulation shall be under the authority of the Court and the Court shall retai n

jurisdiction for the purpose of entering orders providing for awards of attorneys' fees and

expenses to Plaintiffs' Counsel and compensatory awards, and enforcing the terms of thi s

Stipulation .

34. One party's waiver of any other party's breach of this Stipulation shall not

be deemed a waiver of any other prior or subsequent breach of this Stipulation .

35. This Stipulation and its exhibits and the Supplemental Agreemen t

constitute the entire agreement among the parties hereto concerning the Settlement of th e

28

Actions, and no representations, warranties, or inducements have been made by any party

hereto concerning this Stipulation and its exhibits and the Supplemental Agreement othe r

than those contained and memorialized in such documents .

36. This Stipulation may be executed in one or more counterparts . All

executed counterparts shall be deemed to be one and the same instrument provided tha t

counsel for the parties to this Stipulation shall exchange among themselves original

signed counterparts .

37. This Stipulation shall be binding upon, and inure to the benefit of, th e

successors and assigns of the parties hereto .

38 . The construction, interpretation, operation, effect and validity of this

Stipulation, and all documents necessary to effectuate it, shall be governed by the interna l

laws of the Commonwealth of Massachusetts without regard to conflicts of laws, except

to the extent that federal law requires that federal law governs .

39. This Stipulation shall not be construed more strictly against one party tha n

another merely by virtue of the fact that it, or any part of it, may have been prepared b y

counsel for one of the parties, it being recognized that it is the result of arm's-lengt h

negotiations between the parties and all parties have contributed substantially an d

materially to the preparation of this Stipulation .

40 . All counsel and any other person executing this Stipulation and any of the

exhibits hereto, or any related settlement documents, warrant and represent that they hav e

the full authority to do so and that they have the authority to take appropriate action

required or permitted to be taken pursuant to the Stipulation to effectuate its terms .

29

41 . Lead Plaintiffs' Counsel and Defendants' Counsel agree to cooperate full y

with one another in seeking Court approval of the Preliminary Approval Order, the

Stipulation and the Settlement , and to promptly agree upon and execute all such othe r

documentation as may be reasonably required to obtain final approval by the District

Court of the Settlement .

30

DATED : September, 2004 BERMAN DEVALERIO PEASETABACCO BURT & PUCILLO

No an Berman, BBO No. 040460Ni le R. Starr, BBO No . 654848One Liberty SquareBoston , MA 02109(617) 542-8300

Co-Lead Counsel for Rees andLiaison Counse l for Werbowski Plaintiffs

SCHIFFRIN & BARROWAY LLP

Mich el I YarnofKay E . SicklesBenjamin J. Sweet3 Bala Plaza East, Suite 400Bala Cynwyd, PA 19004(610) 667-7706

Co- Lead Counsel for Rees Plaintiffs

ABBEY GARDY LLP

Joshua N. RubinMeagan A . Zapotocky212 East 39th StreetNew York, NY 10016(212) 889-3700

Lead Counsel for Werbowski Plaintiffs

31

DATED: September , 2004

ECERTIFICATE OF SER1,103I hereby certify that or! L~

a true copy of the above document wasserved by mail/by hand upon the attorneyof reco each other party per theattach ce list .

~ I ~/~.

B1 AN DEVALERIO PEASETA3ACCO BURT a fllCU Lo

N=sn Berman, HBO No. 040460Neale R Six, 13DO No . 6S4$48On Liberty SqumBOM 34 MA 02109(617) 542-8300

Co-Lead Counsel forRe= andEidson Counsel for Wcrbowski Piointj

9C ' RM & BAICROWAY LL

MICJ3a l K. Y+unoffKay E. SicklesBonjan J. Sweet3 Bala Plaza Beat, Suite 400Bala Cynwyd, PA 19004(610) 667-7706

Co- Lead Counsel

Ma"A.212 But 39th s-ctNew York, NY 10016(212) 889-3700

Lewd Coined for Werbowskl Plaintiffs

31

PO

7r;JoYdi A. FreedmanMara V .J. Senn555 Twelfth Street, NWWashington, DC 20004-1206(202) 942-5000

Counsel for Defendants Steven T.Francesco and Peter Kendrick

32