UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

Transcription

1 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA IN RE ON-POINT TECHNOLOGY SYSTEMS, INC. SECURITIES LITIGATION This Document Relates To: Master File No. 00cv00812BTM(POR) CLASS ACTION ALL ACTIONS NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION AND SETTLEMENT HEARING TO: ALL PERSONS OR ENTITIES WHO PURCHASED OR OTHERWISE ACQUIRED THE SECURITIES OF ON-POINT TECHNOLOGY SYSTEMS, INC. DURING THE PERIOD FROM MAY 19, 1997 THROUGH APRIL 7, 2000, INCLUSIVE: PLEASE READ THIS NOTICE CAREFULLY. THIS NOTICE RELATES TO THE PENDENCY AND PROPOSED SETTLEMENT OF THIS CLASS LITIGATION AND, IF YOU ARE A CLASS MEMBER, CONTAINS IMPORTANT INFORMATION AS TO YOUR RIGHTS TO OBTAIN A SHARE OF THE SETTLEMENT FUND FURTHER DESCRIBED BELOW. CLAIMS DEADLINE: CLAIMANTS MUST SUBMIT PROOFS OF CLAIM, ON THE FORM ACCOMPANYING THIS NOTICE (POSTMARKED NO LATER THAN AUGUST 21, 2001). EXCLUSION DEADLINE: REQUESTS FOR EXCLUSION MUST BE SENT TO THE CLAIMS ADMINISTRATOR (POSTMARKED NO LATER THAN AUGUST 23, 2001). SECURITIES BROKERS AND OTHER NOMINEES: PLEASE SEE INSTRUCTIONS IN VIII, BELOW. YOU ARE HEREBY NOTIFIED, pursuant to Rule 23 of the Federal Rules of Civil Procedure, and an order of the United States District Court for the Southern District of California (the Court ), that a Settlement of the above-captioned action (the Federal Litigation or Litigation ), consisting of Three Hundred Eighty Five Thousand dollars ($385,000) in cash and Three Hundred Sixteen Thousand Six Hundred and Sixty-Six (316,666) shares of On-Point common stock (the Settlement Fund ), has been reached by the parties, which Settlement is subject to approval by the Court, and which, if approved, will result: (1) in the payment of the Settlement Fund, after certain deductions described below, to eligible Class Members who file timely and valid Proof of Claim forms and evidence a recognized loss and, (2) in the dismissal of the Litigation and the release of the Released Claims as against all Released Parties. 1 YOU ARE FURTHER NOTIFIED, pursuant to an Order of the Court, dated April 23, 2001, that a hearing (the Fairness Hearing ) will be held on September 6, 2001, at 2:30 p.m., before the Honorable Barry T. Moskowitz, United States District Judge, United States District Courthouse, 880 Front Street, San Diego, 1 All capitalized terms are defined in I below unless otherwise indicated.

2 California 92101, to consider: (1) whether the proposed settlement described above should be approved by the Court as fair, reasonable and adequate; (2) whether this Litigation should be dismissed on the merits with prejudice as set forth in the Agreements, on file with the Court; (3) whether the proposed Plan of Allocation of Settlement proceeds should be approved; (4) the reasonableness of the application of Lead Counsel for the payment of attorneys fees and reimbursement of costs and expenses, including the award to any Plaintiff serving on behalf of the Class of reasonable costs and expenses (including lost wages) directly relating to the representation of the Class, incurred in connection with the Litigation together with interest thereon; and (5) whether the Releases should be approved as fair, reasonable and adequate to the Class and the Defendants. This Notice is not intended to be, and should not be construed as, an expression of any opinion by the Court with respect to the truth of the allegations in the Litigation or the merits of the claims or defenses asserted or the fairness or adequacy of the proposed settlement. This Notice is merely to advise you of the pendency and proposed settlement of the Litigation and of your rights in connection with the Settlement. A. Statement of Plaintiffs Recovery Pursuant to the Settlement described herein, a Settlement Fund has been agreed to, consisting of (1) Fifty Thousand dollars ($50,000) in cash and Three Hundred Sixteen Thousand Six Hundred and Sixty-Six shares (316,666 shares) of On-Point common stock with an ultimate value of at least Nine Hundred Fifty Thousand dollars ($950,000), on behalf of On-Point and the Individual Defendants, and (2) Three Hundred Thirty Five Thousand dollars ($335,000) in cash on behalf of Deloitte. Plaintiffs estimate that there were approximately 13.6 million shares of On-Point securities purchased and/or acquired during the Class Period which were allegedly damaged as a result of the purported acts or omissions described below. Plaintiffs estimate that the average recovery per damaged share of On-Point securities under the Settlement will be $0.098 per share before the deduction of attorneys fees, costs and expenses, as approved by the Court. An individual Class Member may receive more or less than this average amount, depending on the number of claims filed, when the shares were purchased during the Class Period, whether those shares were held at the end of the Class Period, if sold, when they were sold, and the amounts awarded by the Court for attorneys fees, costs and expenses. A Class Member s distribution from the Settlement Fund will be governed by the description set forth herein. B. Parties Positions and Reasons for Settlement The Plaintiffs and counsel for Plaintiffs and the Class have agreed to settle these Actions pursuant to the provisions of the Agreements after considering such factors as: (1) the substantial benefits to Plaintiffs and the Class under the terms of the Agreements; (2) the attendant risks and uncertainty of litigation, especially in complex actions such as this, as well as the difficulties and delays inherent in such litigation; (3) the desirability of consummating the Agreements promptly, in order to provide effective relief to Plaintiffs and the Class; (4) On-Point s current financial circumstances; and (5) the need for On-Point to resolve these Actions quickly in order to allow for an infusion of capital into On-Point; provided, however, that the proposed settlement shall be subject to satisfactory completion of confirmatory discovery. The proposed settlement has been reviewed by an expert retained by Plaintiffs, and Plaintiffs and their counsel agree that the Agreements are fair, reasonable and adequate because they provide substantial benefits to the Class and are in the best interests of the Class. Defendants expressly deny any wrongdoing alleged in the pleadings and do not admit or concede any actual or potential fault, wrongdoing or liability in connection with any facts or claims that have been or could have been alleged against them in these Actions, but consider it desirable for the Action to be settled and dismissed because this Settlement will: (1) avoid further disruption of the management and operation of the Company s business due to the pendency and defense of the Actions; (2) finally put Plaintiffs claims and the underlying matters to rest; and (3) avoid the substantial expense, burdens and uncertainties associated with continued litigation of those claims. 2

3 C. Statement of Attorneys Fees and Costs Lead Counsel intend to apply for an award of attorneys fees in an amount up to 30 % of the Settlement Fund (i.e., a maximum of approximately $0.029 per share), as well as reimbursement for out-of-pocket costs and expenses incurred in the prosecution of the Litigation of approximately $10,000 (i.e., approximately $ per share) excluding notice expenses. Defendants take no position on the application for attorneys fees, costs and expenses. D. Identification of Plaintiffs Lawyers Any questions regarding the Settlement should be directed to the following Lead Counsel for the Plaintiffs and the Class: Joseph H. Weiss, Esq. Kevin J. Yourman, Esq. James E. Tullman, Esq. Vahn Alexander, Esq. WEISS & YOURMAN Behram V. Parekh, Esq. 551 Fifth Avenue, Suite 1600 WEISS & YOURMAN New Yor, NY Wilshire Blvd, 24th Floor (212) Los Angeles, CA (310) I. DEFINITIONS USED IN THIS NOTICE As used in this Notice, the following terms have the meanings specified below: Action or Actions means the lawsuits captioned Israel Nekritz v. On-Point Technology Systems, Inc., et al., Case No. 00-CV-812 BTM (S.D. Cal.); Peter Ahrens, et al. v. Frederick Sandvick, et al., Case No. 00- CV-843 JM (S.D. Cal.); Robin Fernhoff, et al. v. On-Point Technology Systems, Inc., et al. Case No. 00-CV JM (S.D. Cal.); Stephen Glenn v. On-Point Technology Systems, Inc., et al., Case No. 00-CV-1403 BTM (S.D. Cal.); and any related lawsuits subsequently filed. Authorized Claimant means a Claimant whose claim has been allowed as provided by the terms of the Agreements and the Final Order and Judgment. Cash Escrow Account means the escrow account to be maintained by the Administrator at a financial institution selected by Lead Counsel and approved by the Parties for deposit of the cash portion of the Settlement Fund. Claimant means any Class Member who files a Proof of Claim in such manner and within such time as the Court shall prescribe. Claims Administrator, Administrator, or Escrow Agent means the third-party agent or administrator, appointed by Lead Counsel in consultation with On-Point and approved by the Court, to help implement the terms of the Agreements, who shall be exclusively authorized by the Court to withdraw and/or transfer funds and/or shares from the Escrow Accounts pursuant to the terms and conditions of the Agreements and/or pursuant to the order of the Court, and which is designated to be David Berdon & Co. LLP, One Jericho Plaza, Jericho, NY Class or Class Members means all Persons who purchased or otherwise acquired (based on transaction date) the securities of On-Point Technology Systems, Inc. during the Class Period, excluding On-Point, the Individual Defendants, Deloitte, the officers and directors of On-Point during the Class Period, members of their immediate families, and affiliates and subsidiaries, successors, and assigns of the On-Point Defendants or Deloitte. 3

4 Class Period means the period from May 19, 1997 through April 7, 2000, inclusive. Complaints means the complaints in the Actions filed by Israel Nekritz, Peter Ahrens, Robin Fernhoff and Stephen Glenn on April 20, 2000, April 25, 2000, May 22, 2000, and July 13, 2000, respectively. Court means the United States District Court for the Southern District of California. Date of Deposit shall be the first business day following the Settlement Effective Date. Date of Distribution means the date on which the Administrator mails to Authorized Claimants checks for their pro-rata share of the Net Settlement Fund and/or notice of the distribution of shares to Authorized Claimants of On-Point common stock. The Date of Distribution shall be at least thirty (30) days after the Settlement Effective Date, and as soon as practicable after the Settlement Effective Date. Defendants means On-Point, the Individual Defendants (referred to collectively as the On-Point Defendants ), and Deloitte. Defendants Counsel means the law firms of Gordon & Rees, LLP and McCutchen, Doyle, Brown & Ehersen, LLP. Deloitte means Deloitte & Touche USA LLP. Fairness Hearing or Settlement Hearing means the hearing at or after which the Court will make a final decision as to whether to approve the Agreements as fair, reasonable and adequate. Final Order and Judgment means the order approving the Settlement and the Agreements and the judgment entered pursuant to that order. Hearing Order means the order to be entered by the Court concerning notice, administration and the Fairness Hearing. Individual Defendants means, collectively, Frederick Sandvick, John H. Olbrich, Richard Mahan, Kenneth Hoitt, Sam W. Stearman, and Edgardo M. Bacani. Net Settlement Fund means the Settlement Fund, plus any interest earned or accrued thereon while deposited in the Escrow Accounts, less: (i) all attorneys fees and expenses; (ii) any experts fees; (iii) the costs of Notice Expenses; and (iv) any other related fees and expenses as may be authorized by the Agreements or the Court. Notice Expenses shall include all costs associated with printing and mailing the Class Notice, publishing the Publication Notice, reviewing and processing Proofs of Claim, and fees and expenses payable to the Administrator and bank selected by the Parties, but excluding any other fees, expenses or disbursements of Lead Counsel, or experts retained by Lead Counsel. On-Point or the Company means On-Point Technology Systems, Inc. and all of its predecessors, successors, parents, subsidiaries, divisions and related or affiliated entities. Parties or Party means Plaintiffs (in their individual and representative capacities) and Defendants collectively and, where applicable, their respective counsel. Plaintiffs means Peter Ahrens, Israel Nekritz, Robin Fernhoff, Stephen Glenn and any other Class Members added to the complaints or any subsequent pleading as named plaintiffs, in their individual and representative capacities. Plaintiffs Counsel or Lead Counsel means lead counsel for the Plaintiffs and Class in the Litigation: (1) Kevin J. Yourman, Vahn Alexander and Behram V. Parekh, Weiss & Yourman, Wilshire Blvd., 24 th Floor, Los Angeles, California, 90024; and (2) Joseph H. Weiss and James E. Tullman, Weiss & Yourman, 551 Fifth Avenue, New York, New York Person means an individual, corporation, partnership, limited partnership, association, joint stock 4

5 company, estate, legal representative, trust, unincorporated association, government or any political subdivision or agency thereof, and any business or legal entity, and their spouses, heirs, predecessors, successors, representatives, or assignees. Payable Claim means the amount allocated to each Authorized Claimant pursuant to the terms of the Agreements and the Final Order and Judgment. Postal Service means the United States Postal Service. Proof of Claim means the proof of claim form enclosed herewith. Recognized Loss or Your Loss means the amount paid for shares of On-Point securities purchased by Class Members during the Class Period, less either: (a) the amount realized from the sale of any such shares during the Class Period; or (b) the number of shares held as of April 7, 2000, multiplied by $ Release or Releases means the releases and waivers set forth or referenced in VII of the Agreements, including Exhibits F, G and H to the Agreements. Released Claims means all claims released pursuant to the Releases, including Exhs. F, G and H, which include but are not limited to any and all causes of action, claims, damages, awards, equitable, legal and administrative relief, interest, demands or rights, including, without limitation, claims for rescission, restitution or all damages of any kind, including those in excess of actual damages, and claims for mental anguish, whether based on federal, state or local law, statute, ordinance, regulation, contract, common law, or any other source, that have been, could have been, may be or could be alleged or asserted now or in the future, including Unknown Claims, by Plaintiffs or any Class Member against the Releasees or any of them in these Actions or in any other court action or before any administrative body (including any brought by or on behalf of any state attorney general or other regulatory entity or state prosecutorial or other organization), tribunal, arbitration panel, or other adjudicatory body on the basis of, connected with, arising out of, or related to, in whole or in part, the purchase or other acquisition of the securities of On-Point Technology Systems, Inc. Releasees or Released Parties as to On-Point and the Individual Defendants means the Defendants, including Frederick Sandvick, John H. Olbrich, Richard Mahan, Kenneth Hoitt, Sam W. Stearman, Edgardo M. Bacani, and On-Point, and each of their past, present and future parents (including intermediate and ultimate parents), subsidiaries (including without limitation e-point Technologies, Inc.), predecessors, successors, assigns, and/or acquirers or their counsel, and any of their respective past, present and future officers, directors, employees, agents, representatives, attorneys, heirs, administrators, executors, insurers, predecessors, successors and assigns, or any of them, including any Person or entity acting on behalf or at the direction of any of them; provided, however, that the term Releasees as applied to On-Point shall not include On-Point s auditors and/or accountants. Releasees or Released Parties as to Deloitte means Deloitte & Touche USA LLP (formerly known as Deloitte & Touche LLP, Deloitte & Touche, and Deloitte Haskins & Sells), Deloitte & Touche LLP (formerly known as D&T Partners LLP), Deloitte Consulting Holding LLC, and Deloitte Consulting L.P., successor to Deloitte Consulting LLC (formerly known as Deloitte & Touche Consulting Group LLC), and their past, present and future parent companies, subsidiaries, divisions, related or affiliated entities, predecessors (including without limitation Touche Ross & Co.) and successors, their respective present and former partners, principals, members, directors, officers, employees, stockholders, owners, agents, servants, subrogees, insurers and attorneys, and their respective representatives, heirs, executors, spouses, personal representatives, administrators, successors, transferees and assigns, and any and all Persons in natural or corporate privity with them or acting in concert with them or any of them, or acting on behalf of or at the direction of any of them. Settlement means the proposed settlement of these Actions, the terms for which are set out in the Agreements and herein. 5

6 Settlement Agreements, Agreements, or Stipulations means the Amended Stipulation of Settlement between Plaintiffs and On-Point and the Individual Defendants, and the Stipulation of Settlement between Plaintiffs and Deloitte, including any exhibits and subsequent amendments thereto and any exhibits to such amendments, which are filed with the Court. Settlement Effective Date means the date by which all of the following conditions have occurred: (i) final approval by the Court of the Settlement; (ii) entry of the Final Order and Judgment thereon; (iii) expiration of the time for appeal of such Final Order and Judgment or, if any appeal is taken, the expiration of three days after final determination, not subject to further review, appeal or petition for rehearing, of such appeal by the highest court before which appellate review is or could be sought; and (iv) final resolution of such appeal, if any, and entry of a final judgment in such manner as to permit the consummation of the Agreements in accordance with all of their terms and conditions, not subject to termination as a result of the contingencies set forth in the Agreements. Settlement Fund means: (1) $50,000 in cash and 316,666 shares of On-Point common stock on behalf of On-Point and the Individual Defendants; and (2) $335,000 in cash on behalf of Deloitte, which shall be required to settle the Litigation. The $50,000 in cash shall be deposited by On-Point in the Cash Escrow Account within 30 days of the Court s preliminary approval of the Agreements. The $335,000 in cash shall be deposited by wire transfer on behalf of Deloitte in the Cash Escrow Account on the 30th day following the date of entry of the Hearing Order, unless that day is a weekend or legal holiday, in which case it shall be the first business day thereafter. The 316,666 On-Point shares shall be set aside for future distribution by On-Point on the Date of Deposit. If, at the end of 450th day after the Date of Deposit, or the next business day if the 450th day is a weekend or holiday, the value of the 316,666 On-Point shares set aside is less than $950,000, then additional cash or shares of On-Point common stock, determined at the sole discretion of On-Point, shall be deposited or set aside by On-Point on behalf of On-Point and the Individual Defendants in an amount equal to the difference between $950,000 and the value of the 316,666 On-Point shares. The value of the On-Point shares shall be determined by multiplying 316,666 by the closing price of On-Point s common stock on the 450th day after the Date of Deposit, or the next business day if the 450th day is a weekend or holiday, as listed in the Wall Street Journal or other mutually agreeable publication. In lieu of providing shares of On-Point common stock towards the Settlement Fund, and at the sole discretion of On-Point, On-Point may deposit $950,000 in cash into the Cash Escrow Account on behalf of Defendants at any time on or before the Date of Deposit. If the $950,000 in cash is deposited in the Cash Escrow Account on or before the Date of Deposit, no obligation shall exist to contribute shares of On-Point common stock towards the Settlement Fund. In the event On-Point s common stock should split before the Date of Deposit, the number of shares to be deposited pursuant to the Agreements shall be adjusted accordingly to reflect the stock split. Unknown Claims means any Released Claims which any Plaintiff, Class Member or other releasing Party 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 settlement with and release of the Released Parties, or might have affected his, her or its decision not to object to this Settlement. With respect to any and all Released Claims, upon the Settlement Effective Date, the Plaintiffs and each releasing Party shall expressly, and each of the Class Members (except a Class Member who has been properly excluded from the Class) and each releasing Party shall be deemed to have, and by operation of the Judgment shall have, waived and relinquished, to the fullest extent permitted by law, the provisions, rights, and benefits of 1542 of the California Civil Code, which provides: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXE- CUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. 6

7 The Plaintiffs, the Class Members (except a Class Member who has been properly excluded from the Class), and each releasing Party, upon the Settlement Effective Date, shall be deemed to have, and by operation of the Final Order and Judgment shall have, waived any and all provisions, rights and benefits conferred by any law of any state or territory of the United States, or principle of common law, which is similar, comparable or equivalent to 1542 of the California Civil Code. The Plaintiffs, Class Members (except a Class Member who has been properly excluded from the Class), and each releasing Party may hereafter discover facts in addition to or different from those which he, she or it now knows or believes to be true with respect to the subject matter of the Released Claims, but the Plaintiffs, each Class Member (except a Class Member who has been properly excluded from the Class), and each releasing Party, upon the Settlement Effective Date, shall be deemed to have, and by operation of the Final Order and Judgment shall have, fully, finally, and forever settled and released any and all Released Claims, known or unknown, suspected or unsuspected, contingent or non-contingent, whether or not concealed or hidden, which now exist, or heretofore have existed upon any theory of law or equity now existing or coming into existence in the future, including, but not limited to, conduct which is negligent, intentional, with or without malice, or a breach of any duty, law or rule, without regard to the subsequent discovery or existence of such different or additional facts. The Settling Parties acknowledge that the foregoing waiver was bargained for and a key element of the Settlement of which these releases are a part. II. COMMENCEMENT OF THE LITIGATION AND NATURE OF THE ACTION On January 14, 2000, Peter Ahrens filed a class action complaint captioned Peter Ahrens, et al. v. Frederick Sandvick, et al. (Case No. GIN ) in the California Superior Court, San Diego County. That complaint asserts, among other things, that On-Point and the Individual Defendants violated a fiduciary duty to Plaintiff and other public stockholders by failing actively to pursue the acquisition of On-Point by companies other than GTECH Holdings Corporation, or to conduct an adequate market check, and that On-Point thereby failed to maximize shareholder value. On April 20, 2000, Israel Nekritz filed a class action complaint captioned Israel Nekritz, et al. v. On-Point Technology Systems, Inc., et al. (Case No. 00-CV-812 BTM (POR)) in the United States District Court for the Southern District of California. On April 25, 2000, Peter Ahrens filed a class action complaint captioned Peter Ahrens, et al. v. Frederick Sandvick, et al. (Case No. 00-CV-843 JM) in the United States District Court for the Southern District of California. On May 22, 2000, Robin Fernhoff filed a complaint captioned Robin Fernhoff, et al. v. On-Point Technology Systems, Inc., et al. (Case No. 00-CV-1045 JM) in the United States District Court for the Southern District of California. On July 13, 2000, Stephen Glenn filed a complaint captioned Stephen Glenn v. On-Point Technology Systems, Inc., et al. (Case No. 00-CV-1403 BTM) in the United States District Court for the Southern District of California. The complaints (other than Case No. GIN ) assert claims relating to a restatement of earnings by On-Point for 1997 and The complaints allege, among other things, that: (i) during the Class Period, On-Point, the Individual Defendants (as to those Actions in which the Individual Defendants were named as defendants) and Deloitte (as to those Actions in which Deloitte was named as a defendant) disseminated or approved material misrepresentations that deceived the investing public; (ii) On-Point and the Individual Defendants artificially inflated and maintained the market price of On-Point common stock; and (iii) the Individual Defendants acted as controlling Persons of On-Point within the meaning of 20 of the Exchange Act. Before commencing these Actions and during settlement negotiations, counsel for Plaintiffs conducted a thorough examination and evaluation of the relevant law and facts to assess the merits of their claims and potential claims and to determine how best to serve the interests of Plaintiffs and the purported Class. 7

8 III. CLAIMS OF THE PLAINTIFFS AND BENEFITS OF SETTLEMENT Plaintiffs believe that the claims asserted in the Litigation have merit and that the evidence developed to date supports the claims asserted. However, Plaintiffs and Lead Counsel recognize and acknowledge the expense and length of continued proceedings necessary to prosecute the Litigation against Defendants through trial and through appeals. Plaintiffs and Lead Counsel also are mindful of the inherent problems of proof under and possible defenses to the federal securities law violations and other claims asserted in the Litigation. Based upon their investigation and evaluation of the facts and law relating to the matters alleged in the pleadings, Plaintiffs and counsel for Plaintiffs and the Class have agreed to settle these Actions pursuant to the provisions of the Agreements after considering such factors as: (i) the substantial benefits to Plaintiffs and the Class under the terms of the Agreements; (ii) the attendant risks and uncertainty of litigation, especially in complex actions such as this, as well as the difficulties and delays inherent in such litigation; (iii) the desirability of consummating the Agreements promptly, in order to provide effective relief to Plaintiffs and the Class; (iv) On-Point s current financial circumstances; and (v) the need for On-Point to resolve these Actions quickly in order to allow for an infusion of capital into On-Point; provided, however, that the proposed settlement shall be subject to satisfactory completion of confirmatory discovery. The proposed settlement has been reviewed by consultants and experts retained by Plaintiffs, and Plaintiffs and their counsel agree that the Agreements are fair, reasonable and adequate because they provide substantial benefits to, and are in the best interests of, the Class. IV. ON-POINT S AND THE INDIVIDUAL DEFENDANTS STATEMENT AND DENIALS OF WRONGDOING AND LIABILITY On-Point and the Individual Defendants expressly deny any wrongdoing alleged in the pleadings and do not admit or concede any actual or potential fault, wrongdoing or liability in connection with any facts or claims that have been or could have been alleged against them in these Actions, but consider it desirable for the Actions to be settled and dismissed because this Settlement will: (i) provide substantial benefits to Class Members; (ii) avoid further disruption of the management and operation of the Company s business due to the pendency and defense of the Actions; (iii) finally put Plaintiffs claims and the underlying matters to rest; and (iv) avoid the substantial expense, burdens and uncertainties associated with continued litigation of those claims. V. DELOITTE S STATEMENT AND DENIALS OF WRONGDOING AND LIABILITY Deloitte has asserted and continues to assert that all claims and contentions raised in the Actions are without merit as to it, and has denied and continues to deny all charges of wrongdoing or liability with respect to each and all of the claims and contentions that were alleged or that could have been alleged by the Class in the Actions, including all contentions concerning Deloitte s conduct, as well as contentions that such conduct constitutes wrongdoing or gives rise to legal liability or has caused damage to the Class. In addition, Deloitte has asserted and continues to assert many defenses to the Class claims and contentions, and, notwithstanding the Agreements, Deloitte expressly asserts that its defenses have merit and that it has no liability to the Class. Nonetheless, Deloitte considers it desirable for the Actions to be settled and dismissed because this Settlement will finally put Plaintiff s claims against Deloitte to rest, and will avoid the substantial expense, inconvenience, burdens and uncertainties associated with continued litigation of those claims. VI. DISTRIBUTION OF THE PROPOSED SETTLEMENT A. Upon approval of the Settlement by the Court, and when the Final Order and Judgment has become final and all other conditions to the Settlement are satisfied, the Settlement Fund shall be distributed as follows: 1. Subject to the approval and further Order(s) of the Court, the Settlement Fund shall be used to pay Lead Counsel, on behalf of all Plaintiffs counsel, attorneys fees and expenses. It is agreed that the pro- 8

9 ceedings for, and the allowance or disallowance by the Court of, any applications by any of the counsel to the Plaintiffs for attorneys fees and expenses to be paid out of the Settlement Fund are not part of the Agreements, and any order or proceeding relating thereto shall not operate to terminate or cancel the Agreements or to affect their finality and enforceability. 2. All Notice Expenses paid by the Administrator or advanced to the Administrator shall be deducted from or reimbursed from the Settlement Fund. 3. After payment of the foregoing amounts, to the extent there are sufficient funds and/or shares of On-Point common stock in the Net Settlement Fund, each Authorized Claimant will receive an amount equal to the Authorized Claimant s Recognized Loss. If, however, the amount in the Net Settlement Fund is not sufficient to permit payment of the total Recognized Loss of each Authorized Claimant, then each Authorized Claimant shall be paid the percentage of the Net Settlement Fund that the Authorized Claimant s Recognized Loss bears to the total of the Recognized Loss of all Authorized Claimants. 4. Lead Counsel shall distribute the Net Settlement Fund to Authorized Claimants in accordance with the terms of the Agreements and the Final Order and Judgment. 5. Payment in the manner set forth above shall be deemed conclusive as to the claims of all Class Members (except a Class Member who has been properly excluded from the Class). Unless the Court orders otherwise, Class Members who do not submit timely Proofs of Claims, or whose Proofs of Claims are not approved, shall be barred from participating in distributions from the Settlement Fund, but otherwise shall be bound by all terms of the Agreements, including the terms of the Releases contained therein or as exhibits thereto and the Final Order and Judgment, unless they have been properly excluded from the Class. B. Plan of Allocation - Subject to the approval and further Order(s) of the Court as may be necessary, the balance of the Settlement Fund (the Net Settlement Fund ) shall be distributed to Authorized Claimants pursuant to the following Plan of Allocation: 1. Each Class Member (except a Class Member who has been properly excluded from the Class) shall be required to submit a Proof of Claim supported by such documents as are specified therein or such additional documents or proof as Lead Counsel or the Administrator, in their discretion, may deem necessary. 2. All Proofs of Claim must be submitted to the Administrator by the date specified on the Proof of Claim, unless such period is extended by Order of the Court. Any Class Member (except a Class Member who has been properly excluded from the Class) who is not entitled to file a Proof of Claim or who fails to file a Proof of Claim by such date shall be forever barred from receiving any payment pursuant to the Agreements or the Final Order and Judgment (unless, by Order of the Court, a later filed Proof of Claim by such Class Member is approved prior to the Date of Distribution) but shall in all other respects be bound by the terms of the Agreements and by the Releases contained therein or as exhibits thereto and the Final Order and Judgment entered in the Litigation. A Proof of Claim shall be deemed to have been submitted by the later of: (a) its actual receipt by the Administrator or; (b) provided that a postmark is indicated on the envelope and the Proof of Claim is mailed first-class postage prepaid and addressed in accordance with the instructions thereon, when posted. 3. Each Proof of Claim shall be submitted to and reviewed by the Administrator who shall determine, under the supervision of Lead Counsel, and in accordance with the Agreements and the Hearing Order, the extent, if any, to which each claim shall be allowed, in the sole discretion of Lead Counsel, subject to final review by the Court. Copies of submitted Proofs of Claim shall be made available to Defendants Counsel for examination at their expense and upon their request. Following the Date of Distribution, the Administrator shall retain all Proofs of Claim and other related documents for a period of one (1) year, at which time all Proofs of Claim and other related documents may be destroyed or, at On-Point s expense and option, delivered to On-Point or its designee. 9

10 4. The Administrator shall reject Proofs of Claim that do not meet the requirements set forth herein and in the Hearing Order. The Administrator shall notify all Claimants whose Proofs of Claim have been rejected in whole or in part, setting forth the reasons therefor, and shall indicate in such notice that the Claimant whose claim is finally rejected has the right to review by the Court if the Claimant complies with the requirements set forth herein and in the Hearing Order. 5. Any Claimant whose claim has been finally rejected in whole or in part (and which rejection in the judgment of the Administrator has not been cured) and who desires to contest such final rejection must, within twenty (20) days after the date of mailing of the notice of final rejection of the Proof of Claim, serve upon Lead Counsel, by certified mail, a notice and statement of reasons indicating the Claimant s grounds for contesting the final rejection, along with any supporting documentation, and requesting a review thereof by the Court if the additional information provided by such Claimant is not sufficient to permit resolution of the claim. Any such notice and statement shall be deemed served when actually received by Lead Counsel. Lead Counsel shall thereafter present all such unresolved requests, if any, for review to the Court. Defendants shall not have standing to assert any position with respect to the acceptance or rejection of submitted Proofs of Claims or with respect to any controversy arising therefrom. 6. Each Claimant shall be deemed to have submitted to the jurisdiction of the Court with respect to the Claimant s claim, and the Claimant shall be subject to investigation and discovery by Lead Counsel under the Federal Rules of Civil Procedure, provided that such investigation and discovery shall be limited to that Claimant s status as a Class Member, the amount and circumstances of the Claimant s claim, and the contents of the Proof of Claim as submitted. 7. All proceedings with respect to the Settlement described by the Agreements and the determination of all controversies relating thereto, including disputed questions of law and fact with respect to the validity of claims, shall be subject to the continuing jurisdiction of the Court. 8. The Administrator, acting on behalf of the Class, and subject to the supervision, direction and approval of Lead Counsel and the Court, shall review the Proofs of Claim, administer and calculate the claims submitted by Class Members and oversee distribution of that portion of the Settlement Fund finally awarded by the Court to Authorized Claimants. 9. To the extent there are sufficient funds in the Net Settlement Fund, each Authorized Claimant will receive an amount equal to the Authorized Claimant s claim, as defined below. If, however, the amount in the Net Settlement Fund is not sufficient to permit payment of the total claim of each Authorized Claimant, then each Authorized Claimant shall be paid the percentage that each Authorized Claimant s claim bears to the total of the Claims of all Authorized Claimants. A claim will be computed as follows: the amount paid for shares of On-Point securities purchased by Class Members during the Class Period, less either (a) the amount realized from the sale of any such shares during the Class Period, or (b) the number of shares held as of April 7, 2000, multiplied by $ The following definitions apply to this procedure: (a) the date of purchase or sale is the contract or trade date as distinguished from the settlement date; (b) for Class Members who made multiple purchases or multiple sales during the Class Period, the earliest sale shall be matched with the earliest purchase and chronologically thereafter for purposes of the claim calculations; (c) all profits shall be subtracted from all losses to determine the net claim of each Class Member; and (d) the Court will reserve jurisdiction to allow, disallow or adjust the claim of any Class Member on equitable grounds. VII. FINAL ORDER AND JUDGMENT After the Fairness Hearing, and upon the Court s approval of the Agreements, the Parties shall seek and obtain from the Court a Final Order and Judgment. The Final Order and Judgment shall, among other things: A. find that the Court has personal jurisdiction over all Class Members and that the Court has subject matter jurisdiction to approve the Agreements and all exhibits thereto; 10

11 B. approve the Agreements and the proposed settlement as fair, reasonable and adequate, consistent and in compliance with all applicable requirements of the Federal Rules of Civil Procedure, the United States Constitution (including the Due Process Clause), the Rules of Court and any other applicable law, and in the best interests of each of the Parties and the Class Members; direct the Parties and their counsel to implement and consummate the Agreements according to their terms and provisions, including payment of the Settlement Fund on the Date of Deposit; and declare the Agreements to be binding and, as to all claims and issues that have or could have been raised in these Actions, to have res judicata and other preclusive effect in all pending and future lawsuits or other proceedings encompassed by the Releases maintained by or on behalf of Plaintiffs and all other Class Members (except a Class Member who has been properly excluded from the Class), as well as their heirs, executors and administrators, successors and assigns; C. finally certify the Class; D. find that the Class Notice, the Publication Notice and the notice methodology implemented pursuant to the Agreements: (i) constituted the best practicable notice; (ii) constituted notice that was reasonably calculated to apprise Class Members of the pendency of these Actions, their right to object to or exclude themselves from the proposed settlement and their right to appear at the Fairness Hearing; (iii) were reasonable and constituted due, adequate and sufficient notice to all Persons entitled to receive notice; and (iv) met all applicable requirements of the Federal Rules of Civil Procedure, the United States Constitution (including the Due Process Clause), the Rules of Court and any other applicable law; E. find that Lead Counsel and the Class representatives have adequately represented the Class for purposes of entering into and implementing the Settlement; F. dismiss these Actions as against the Defendants (including all individual claims and Class claims presented thereby) on the merits and with prejudice, without fees or costs to any Party except as provided in the Agreements; G. incorporate the Releases set forth in VII of the Agreements and Exhibits F, G and H thereto, make the Releases effective as of the date of the Final Order and Judgment, and forever discharge the Releasees, the Released Parties and each of them, from any claims or liabilities arising from or related to the Released Claims; H. permanently bar and enjoin all Class Members who have not been timely excluded from the Class from: (i) filing, commencing, prosecuting, intervening in, participating in (as Class Members or otherwise), or receiving any benefits or other relief as against the Defendants or the Released Parties from any other lawsuit, arbitration, or administrative, regulatory or other proceeding or order in any jurisdiction based on or relating to the claims and causes of action, or the facts and circumstances relating thereto, in these Actions and/or the Released Claims; and (ii) organizing such nonexcluded Class Members into a separate class for purposes of pursuing as a purported class action (including by seeking to amend a pending complaint to include class allegations, or by seeking class certification in a pending action) any lawsuit against the Defendants or the Released Parties, or any of them, based on or relating to the claims and causes of action, or the facts and circumstances relating thereto, in these Actions and/or the Released Claims; I. authorize the Parties, without further approval from the Court, to agree to and adopt such amendments, modifications and expansions of the Agreements and all exhibits attached thereto as (i) are consistent with the Final Order and Judgment, and (ii) do not limit the rights of Class Members under the Agreements; J. without affecting the finality of the Final Order and Judgment for purposes of appeal, retain jurisdiction as to all matters relating to the administration, consummation, enforcement and interpretation of the Agreements and the Final Order and Judgment, and for any other necessary purpose; K. pursuant to 21D of the Securities Exchange Act of 1934, as amended, 15 U.S.C. 78u-4(f)(7), and Franklin v. Kaypro Corp., 884 F.2d 1222 (9th Cir. 1989), finally discharge any and all Defendants obligations to Plaintiffs arising out of these Actions and bar and permanently enjoin all Persons, from instituting 11

12 or prosecuting any action or proceeding against Defendants, or any of them, for equitable, partial, comparative, or complete contribution, apportionment, exoneration, subrogation, reimbursement, or indemnity, however denominated, under federal, state, or other applicable law, arising out of or in any way relating to the Released Claims, and find that any such claims are extinguished, discharged, satisfied, barred, and made unenforceable; L. order that all claims, however, denominated, which have been asserted, could have been asserted, or could be asserted against the Released Parties, or any of them, by any Person or entity who is, could be or could have been named or added as a defendant in the Action and/or the Released Claims, and, to the extent legally permissible, by or on behalf of any other Person, which arise from, are based on, are in any way related to, or are in connection with the claims in or subject matter of the Actions, whether arising under federal, state or local law, including those based in tort, contract, or under any statute or body of law, including without limitation claims for equitable, partial, comparative, or complete contribution, apportionment, exoneration, subrogation, reimbursement, or indemnity, however denominated, are extinguished, discharged, satisfied, dismissed with prejudice, barred, and otherwise made unenforceable, and the future filing of any such claims are permanently enjoined; and M. incorporate any other provisions that the Court deems necessary and just. VIII. SPECIAL NOTICE TO BANKS, BROKERS, AND OTHER NOMINEES Banks, brokerage firms, institutions, and other Persons who are nominees who purchased or otherwise acquired the securities of On-Point for the beneficial interest of other Persons during the Class Period, are directed, within ten (10) days of receipt of the Notice, to: (1) provide the Claims Administrator with the names and addresses of such beneficial owners, preferably on computer-generated mailing labels or, if there are more than 2,000, on a 3 1 2" diskette, CD-ROM or ZIP/JAZ media; or (2) forward copies of this Notice and the Proof of Claim and Release to each such beneficial owner and the Claims Administrator with written confirmation that the Notice has been so forwarded. Additional copies of the Notice may be requested in writing from the Claims Administrator for forwarding to such beneficial owners. You are entitled to reimbursement of any reasonable expenses you actually incurred in connection with the foregoing upon submission of a request and the appropriate supporting documentation to the Claims Administrator. All correspondence should be addressed as follows: Claims Administrator In Re On-Point Technology Systems, Inc. Securities Litigation c/o David Berdon & Co. LLP P.O. Box 9014 Jericho, NY Fax: (516) Website: IX. APPLICATION FOR ATTORNEYS FEES AND COSTS Lead Counsel will apply to the Court, at the conclusion of the Settlement Hearing described below, for an aggregate award of counsel fees of up to thirty percent (30%) of the Settlement Fund, current litigation expenses of approximately $10,000, and actual notice expenses, together with interest earned on said sums at the same rate and for the same periods as earned by the Settlement Fund. Such awards as may be granted by the Court will be paid from the Settlement Fund and Lead Counsel have reserved the right to make additional applications for fees and expenses incurred relating to the Settlement. The fees sought by Lead Counsel are customary in actions brought on a contingency fee basis and Lead Counsel believe they are justified by the time and effort already invested in the prosecution of the Litigation, 12

13 and the result achieved, as well as the time and effort that will be required of Lead Counsel prior to and after final approval of this Settlement. The expense reimbursement sought by Lead Counsel consists of expenses actually incurred in the prosecution of the Litigation to date. X. CONDITIONS OF SETTLEMENT The Settlement Hearing will be held on September 6, 2001, at 2:30 p.m., before the Honorable Barry T. Moskowitz, United States District Judge, United States District Courthouse, 880 Front Street, San Diego, California The Settlement is conditioned upon the occurrence of a number of events, any of which may be waived by the mutual agreement of the Settling Parties. Those events include, among other things: (1) entry of the Final Judgment by the Court, as provided for in the Stipulations; (2) dismissal with prejudice of the Litigation; and (3) expiration of the time to appeal from the Final Order and Judgment. If, for any reason, any one of the conditions described in the Stipulations is not met, the Stipulations and the Settlement they propose might be terminated and, if terminated, will become null and void. XI. THE RIGHTS OF CLASS MEMBERS If you are a Member of the Class, you may receive the benefit of, and you will be bound by, the terms of the proposed settlement described in this Notice, upon approval of the Settlement by the Court. If you are eligible to be a Class Member (that is, if you purchased or otherwise acquired On-Point securities during the Class Period), you have the following options: A. You may file a Proof of Claim and Release. If you choose this option, you will remain a Class Member, you will share in the proceeds of the proposed settlement if your claim is timely and validly filed and if the proposed settlement is finally approved by the Court, and you will be bound by the Judgment and Release. B. If you do not wish to be included in the Class, and you do not wish to participate in the proposed settlement described in this Notice, you may request to be excluded. To do so, you must state in writing that you wish to be excluded from the proposed settlement. Your written request for exclusion must also set forth the name of this Litigation, In re On-Point Technology Systems, Inc. Securities Litigation, Case No. 00-cv BTM, your name, address and telephone number, and the name, address and telephone number of the record owner of On-Point securities if different from your own. The exclusion request must also state the number of shares of On-Point securities you purchased or otherwise acquired during the Class Period, and the number of shares of On-Point securities you sold during the Class Period, along with the dates of your purchase(s) and sale(s). The written exclusion request should be sent to: Claims Administrator In Re On-Point Technology Systems, Inc. Securities Litigation c/o David Berdon & Co. LLP P.O. Box 9014 Jericho, NY Fax: (516) TO BE CONSIDERED VALID, THE EXCLUSION REQUEST MUST BE POST- MARKED NO LATER THAN AUGUST 23, NO REQUEST FOR EXCLUSION WILL BE CONSIDERED VALID UNLESS ALL OF THE INFORMATION DESCRIBED ABOVE IS INCLUDED IN THE REQUEST. 13