UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION MICHAEL MONAHAN, on behalf of himself And all persons similarly interested Civil Action No. 02-CV-496M Plaintiffs, v. ARTHUR ANDERSEN LLP, Defendant. NOTICE OF (i) PROPOSED SETTLEMENT OF CLASS ACTION, (ii) REQUEST FOR REIMBURSEMENT OF ATTORNEYS EXPENSES, AND (iii) SETTLEMENT FAIRNESS HEARING If you purchased or otherwise acquired Intelect Communications, Inc. n/k/a Teraforce Technology Common Stock between March 31, 1998 and November 17, 1998, inclusive, you could get a payment from a class action settlement. A federal court authorized this notice. This is not a solicitation from a lawyer. The Settlement will provide $1,650,000 to pay claims of investors who purchased or otherwise acquired shares of Intelect Communications, Inc. n/ka Teraforce Technology ( Intelect or the Company ) common stock between March 31, 1998 and November 17, 1998, inclusive (the Class Period ). The Settlement resolves a lawsuit over whether Defendant Arthur Andersen LLP ( Andersen or Defendant ) artificially inflated the price of the common stock of Intelect as a result of Defendant s alleged misrepresentations and non-disclosures regarding Intelect s financial statements for the year ended December 31, 1997. Your legal rights are affected whether you act or do not act. Read this notice carefully. YOUR LEGAL RIGHTS AND OPTIONS IN THIS SETTLEMENT SUBMIT A CLAIM FORM The only way to get a payment. OBJECT Write to the Court about why you like or do not like the Settlement. GO TO A HEARING Ask to speak in Court about the fairness of the Settlement. DO NOTHING Get no payment. Give up rights. These rights and options and the deadlines to exercise them are explained in this notice. The Court in charge of this case still has to decide whether to approve the Settlement. Payments will be made if the Court approves the Settlement and after appeals are resolved. Please be patient.
SUMMARY OF SETTLEMENT Statement of Plaintiff Recovery Pursuant to the Settlement described herein, a Settlement Fund consisting of $1,650,000 in cash, plus interest, has been established. Plaintiffs estimate that there were approximately 16.6 million shares of Intelect common stock traded during the Class Period which may have been damaged. Plaintiffs estimate that the average recovery, assuming that a claim will be filed for every eligible share, per damaged share of Intelect common stock under the Settlement is $.10 per damaged share before deduction of Court-awarded reimbursement of expenses. A Class Member s actual recovery will be a proportion of the Net Settlement Fund determined by his, her or its Recognized Claim as compared to the total Recognized Claims of all Class Members who submit acceptable Proofs of Claim. Statement of Potential Outcome of Case The parties disagree on both liability and damages and do not agree on the average amount of damages per share that would be recoverable if Plaintiffs were to have prevailed on each claim alleged. The Defendant denies that it is liable to the Plaintiff or the Class and denies that Plaintiff or the Class have suffered any damages. Statement of Attorneys Expenses Sought Plaintiffs Counsel intends to apply for reimbursement of expenses incurred in connection with the prosecution of this Action in the amount of 33 1/3% of the Gross Settlement Fund (or $544,500), plus interest thereon. This represents only a portion of the actual expenses incurred in the prosecution of the Action. Plaintiffs Counsel does not intend to seek an award of attorneys fees. The reimbursement of the requested expenses would amount to an average of $.03 per damaged share in total for expenses. Plaintiffs Counsel have advanced the expenses of the litigation, in the expectation that if they were successful in obtaining a recovery for the Class, they would be reimbursed from such recovery. In this type of litigation it is customary for counsel to be reimbursed for their expenses. Further Information Further information regarding the Action and this Notice may be obtained by contacting Plaintiffs Lead Counsel: Christine Fox at Kaplan Fox & Kilsheimer LLP, 805 Third Avenue, 22nd Floor, New York, NY 10022, Telephone (212) 687-1980. Please do not call any representative of Intelect, Andersen, or the Court. Reasons for the Settlement Plaintiffs believe that the proposed Settlement is a good recovery and is in the best interests of the Class. Because of the risks associated with continuing to litigate and proceeding to trial, there was a danger that Plaintiffs would not have prevailed on any of their claims, in which case the Class would receive nothing. For example, Plaintiffs faced the possibility that all or many of the claims in this case could have been dismissed on a motion for summary judgment. In addition, the amount of damages recoverable by the Class was and is challenged by Andersen. Recoverable damages in this case are limited to losses caused by conduct actionable under applicable law and, had the Litigation gone to trial, Andersen intended to assert that all or most of the losses of Class Members were caused by non-actionable market, industry or general economic factors. Andersen would also assert that throughout the Class Period the uncertainties and risks associated with Intelect s business and financial condition were fully and adequately disclosed. Moreover, Andersen s financial condition is uncertain, and Andersen may not have the ability to pay any judgment awarded by a jury. In addition, there may not have been joint and several liability and a jury may have concluded that most of the fault was on the part of Intelect. Moreover, Intelect s financial statements for the fiscal year in question (1997) were never restated and, although Intelect restated its financial results for the quarter ended June 30, 1998, those financial statements were not audited by Andersen. 2
DEFINITIONS 1. Andersen means Arthur Andersen LLP and its past or present directors, officers, shareholders, administrators, employees, partners, members, member firms, principals, participating principals, national directors, managing or other agents, management personnel, servants, attorneys, accountants, auditors, advisors, insurers, reinsurers, representatives, associates, underwriters, trustees, consultants, investment bankers, investment advisors, predecessors, successors, parent companies, subsidiaries, divisions, assigns, and related or affiliated entities, and the successors, assigns, representatives, heirs, executors and administrators of each of them. 2. Authorized Claimant or Authorized Claimants means any member of the Class whose claim for recovery has been allowed pursuant to the terms of the Stipulation. 3. Claimant means any Class Member who files a Proof of Claim and Release in such form and manner, and within such time, as the Court shall prescribe. 4. Claims Administrator means the firm of Berdon Claims Administration LLC to be appointed by the Court to administer the Settlement as provided in the Stipulation. 5. Class means the Class certified by the Court by its order dated May 5, 2004: all persons who purchased or otherwise acquired shares of Intelect common stock between March 31, 1998 and November 17, 1998, inclusive, excluding Arthur Andersen LLP; and Herman Frietsch, Edwin J. Ducayet, Jr. and Peter Ianace, and members of their immediate families; Intelect Communications, Inc.; and any subsidiary, affiliate, or control person of any person or entity listed above. The Class excludes all persons and entities who excluded themselves from the Class pursuant to the Notice of Pendency previously disseminated. 6. Class Member means a Person who falls within the definition of the Class as set forth in 5 herein and who has not submitted a valid request for exclusion. 7. Class Period means the period beginning March 31, 1998 through and including November 17, 1998. 8. Defendant means Andersen. 9. Effective Date means the first date, if any, by which all of the events and conditions specified in 7.1 of the Stipulation have been met and have occurred. 10. Escrow Agent shall mean a neutral third party to be agreed upon by counsel for Lead Plaintiff and counsel for Andersen. 11. Final means the later of: (a) if there is an appeal, the date on which the Judgment, which has not been altered, amended or modified in any material respect by any Court without express consent by all parties, is no longer subject to any further judicial review or appeal whatsoever, whether by reason of affirmance by a court of last resort, lapse of time, voluntary dismissal of appeal or otherwise; or (b) if no appeal is filed, the expiration date of the time for the filing or noticing of any appeal from the Court s Judgment approving the Stipulation. For purposes of this paragraph, an appeal shall include any request for reargument or reconsideration or petition for a writ of certiorari or other writ that may be filed in connection with approval or disapproval of this Settlement. Notwithstanding anything to the contrary in the foregoing, any proceeding or order, or any appeal or petition for a writ of certiorari pertaining solely to any plan of distribution and/or application for reimbursement of expenses, shall not in any way delay or preclude the Judgment from becoming Final. 12. Intelect means Intelect Communications, Inc. n/k/a Teraforce Technology, and its past or present directors, officers, employees, partners, members, shareholders, principals, agents, servants, attorneys, accountants, auditors, advisors, associates, underwriters, trustees, consultants, investment bankers, investment advisors, predecessors, successors, parents, subsidiaries, divisions, assigns, and related or affiliated entities, and the successors, assigns, representatives, heirs, executors and administrators of each of them. 3
13. Judgment means the Final Judgment and Order of Dismissal with Prejudice to be rendered by the Court. 14. Lead Plaintiff means Michael Monahan. 15. Person means an individual, corporation, partnership, limited partnership, association, joint stock 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, agents or assigns. 16. Plaintiffs Lead Counsel means Kaplan Fox & Kilsheimer LLP, 805 Third Avenue, 22nd Floor, New York, NY 10022, Telephone (212) 687-1980. 17. Plaintiffs Counsel means those firms that, at the direction of Lead Counsel, performed work in this Litigation, which includes Schwartz Junell Greenberg & Oathout LLP as Local Counsel. 18. Plan of Distribution means a plan or formula for distributing the Settlement Fund to Authorized Claimants after payment of expenses of notice and administration of the Settlement, Taxes and Tax Expenses, and such expenses and interest as may be awarded by the Court. Any Plan of Distribution is not part of the Stipulation and the Released Persons shall have no responsibility or liability with respect thereto. 19. Released Claims shall mean any and all direct, derivative, and/or representative claims, demands, rights, causes of action, suits, or liabilities, of every nature and description whatsoever, whether based in law or equity, on federal, state, local, statutory, or common law, or any other law, rule, or regulation, including both known claims and Unknown Claims (as defined in 23 below), that have been or could have been asserted in any forum by the Class Members, or any of them, or the successors or assigns of any of them, against the Released Persons, which arise out of, or relate in any way to, any of the allegations, transactions, facts, events, matters, occurrences, acts, representations, or omissions involved, set forth, alleged, or referred to, in the Complaint or the Litigation, or which could have been alleged based upon the facts alleged in the Complaint or the Litigation, and which arise out of, are based upon, or are related in any way to the purchase of any Intelect common stock by any Class Member during the Class Period. 20. Released Persons shall mean Andersen, AWSC Société Coopérative, en liquidation, and all of their past and present member firms, and all of their respective current and former partners, members, principals, participating principals, national directors, managing or other agents, management personnel, officers, directors, shareholders, administrators, servants, employees, consultants, advisors, insurers, reinsurers, attorneys, accountants, representatives, parent companies, subsidiaries, related entities, divisions, affiliates, predecessors, successors and assigns, along with the heirs, spouses, executors, administrators, insurers, reinsurers, representatives, estates, successors and assigns of any such person or entities. 21. Settlement Fund means: the principal amount of One Million Six Hundred Fifty Thousand dollars ($1,650,000) paid, in cash, pursuant to 2.1 of the Stipulation and delivered to the Escrow Agent, plus any interest. 22. Settling Parties means, collectively, the Defendant and the Lead Plaintiff on behalf of himself and the Class Members. 23. Unknown Claims means any and all Released Claims that the 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 Persons, which, if known by him, her, or it might have affected his, her or its decision(s) with respect to the Stipulation. With respect to any and all Released Claims, the Settling Parties stipulate and agree that upon the Effective Date, the Lead Plaintiff and Defendant 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 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 Cal. Civ. Code 1542, which provides: 4
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 executing the release, which if known by him must have materially affected his settlement with the debtor. Lead Plaintiff and Defendant acknowledge, and Class Members by operation of law shall be deemed to have acknowledged, that the inclusion of Unknown Claims in the definition of Released Claims was separately bargained for and was a material element of the Settlement. BASIC INFORMATION 1. Why did I get this notice package? You or someone in your family may have purchased or otherwise acquired shares of Intelect common stock between March 31, 1998 and November 17, 1998, inclusive. The Court directed that this Notice be sent to you because you have a right to know about a proposed Settlement of a class action lawsuit, and about all of your options, before the Court decides whether to approve the Settlement. If the Court approves the Settlement and after objections and appeals are resolved, an administrator appointed by the Court will make the payments that the Settlement allows. This package explains the lawsuit, the Settlement, your legal rights, what benefits are available, who is eligible for them, and how to get them. The Court in charge of the case is the United States District Court for the Northern District of Texas, and the case is known as Michael Monahan v. Arthur Andersen LLP, Case No. 02-CV-496M. The people who sued are called Plaintiffs, and the entity they sued, Arthur Andersen LLP. 2. What is this lawsuit about? The lawsuit claimed that the price of Intelect s common stock was artificially inflated as a result of Defendant s allegedly false audit opinion for Intelect for the year ended December 31, 1997. The lawsuit alleged Defendant s audit for that year was conducted in violation of generally accepted auditing standards ( GAAS ), in that Defendant falsely represented that Intelect s financial statements for the year ended December 31, 1997 were presented in conformity with generally accepted accounting principles ( GAAP ) and that they had been audited in accordance with GAAS. Andersen denies that it did anything wrong and further denies that anything that Andersen did or failed to do caused any negative reaction to the price of Intelect s common stock. 3. Why is this a class action? In a class action, one or more people called Class Representatives sue on behalf of people who have similar claims. All these people are a Class or Class Members. One court resolves the issues for all Class Members, except for those who exclude themselves from the Class. U.S. District Judge Barbara M. G. Lynn is in charge of this class action. 4. Why is there a Settlement? The Court did not decide in favor of Plaintiffs or the Defendant. Instead, both sides agreed to a settlement. That way, they avoid the cost of a trial, and the people affected will get compensation. The Lead Plaintiff and the attorneys think the Settlement is best for all Class Members. 5
WHO IS IN THE SETTLEMENT To see if you will get money from this Settlement, you first have to decide if you are a Class Member. 5. How do I know if I am part of the Settlement? Judge Lynn decided that everyone who fits this description is a Class Member: all persons who purchased or otherwise acquired shares of Intelect common stock between March 31, 1998 and November 17, 1998, inclusive. 6. Are there exceptions to being included? You are not a Class Member if you are a Defendant, an Intelect officer or director, or a member of a Defendant s family, parent company, subsidiary, affiliate, heir, successor, assign, or any other entity in which Intelect has a controlling interest. Also excluded are certain people who previously requested exclusion from the Class in response to the prior Notice of Pendency. If you sold Intelect stock during the period from March 31, 1998 through November 17, 1998, that alone does not make you a Class Member. You are a Class Member only if you purchased or otherwise acquired shares during the period between March 31, 1998 and November 17, 1998, inclusive. 7. What if I m still not sure if I am included? If you are still not sure whether you are included, you can ask for free help or more information by contacting the Claims Administrator by phone at (800) 766-3330, by email from their website at www.berdonllp.com/claims, or by fax at (516) 931-0810. Be sure to refer to the class action Intelect Securities Litigation. THE SETTLEMENT BENEFITS: WHAT YOU GET 8. What does the Settlement provide? Defendant has agreed to create a $1,650,000 fund to be divided among all Class Members who send in a valid claim form. 9. How much will my payment be? Your share of the fund will depend on the total number of valid claim forms that Class Members send in, how many shares of Intelect stock you bought, and when you bought and sold them. The proposed Plan of Distribution is set forth on page 9 of this Notice. You can calculate what is called your Recognized Claim by reading how Recognized Claims will be calculated in the Plan of Distribution section on page 9 of this Notice. It is unlikely that you will get a payment for all of your Recognized Claim. After all Class Members have sent in their claim forms, the payment you get will reflect your Recognized Claim in relation to the total of everyone s Recognized Claim. See the description on page 10 for more information on your Recognized Claim. Generally, those who bought more shares and have a larger Recognized Claim will get more money, and those who bought fewer shares and have a smaller Recognized Claim will get less. The number of claimants who send in claims varies widely from case to case. If less than 100% of the Class sends in a claim form, you could get more money. 6
HOW YOU GET A PAYMENT: SUBMITTING A CLAIM FORM 10. How can I get a payment? To qualify for payment, you must send in a claim form. A claim form ( Proof of Claim and Release ) accompanies this Notice. Read the instructions carefully, fill out the form, include all the documents the form asks for, sign it, and mail it postmarked no later than August 8, 2005. YOU WILL BEAR ALL RISKS OF DELAY OR NON-DELIVERY OF YOUR CLAIM. 11. When would I get my payment? The Court will hold a hearing on July 25, 2005, to decide whether to approve the Settlement. Even if Judge Lynn approves the Settlement after that, there may be appeals. It is always uncertain whether these appeals can be resolved, and resolving them can take time, perhaps more than a year. It will also take time to process the Proofs of Claim submitted by all Class Members. Please be patient. 12. What am I giving up to get a payment? Class Members will release the Released Claims as defined in the accompanying Proof of Claim and Release form, which describes exactly the legal claims that you give up. ORDER CERTIFYING THE CLASS On May 5, 2004, the Court issued an Order certifying a Class in this Litigation consisting of all persons who purchased or otherwise acquired common stock of Intelect between March 31, 1998 and November 17, 1998, inclusive, excluding Andersen; and Herman Frietsch, Edwin J. Ducayet, Jr. and Peter Ianace, and members of their immediate families; Intelect Communications, Inc.; and any subsidiary, affiliate, or control person of any person or entity listed above. On and after July 7, 2004, notice was disseminated to the Class both by mail and by publication, and Class Members were advised of their right to exclude themselves from the Class. 13. If I did not previously exclude myself, can I sue Arthur Andersen LLP for the same thing now? Later? Neither. Unless you previously excluded yourself, you gave up any rights to sue Arthur Andersen LLP for the claims that this Settlement resolves. If you have a pending lawsuit, speak to your lawyer in that case immediately. You must have previously excluded yourself from this Class to continue your own lawsuit. 14. If I did previously exclude myself, can I get money from this Settlement? No. If you previously excluded yourself, do not send in a claim form to ask for any money. IF YOU DO NOTHING 15. What happens if I do nothing at all? If you do nothing, you will get no money from this Settlement. And you will not be able to start a lawsuit, continue with a lawsuit, or be part of any other lawsuit against the Defendant about the legal issues in this case, ever again. 7
THE LAWYERS REPRESENTING YOU 16. Do I have a lawyer in this case? The Court ordered that the law firm of Kaplan Fox & Kilsheimer LLP, in New York, NY will represent you and other Class Members. This firm is called Lead Counsel. You will not be charged for these lawyers. If you want to be represented by your own lawyer, you may hire one at your own expense. 17. How will the lawyers be paid? Plaintiffs Counsel is not seeking an award of attorneys fees in this case. Plaintiffs Counsel intends to apply only for reimbursement of expenses incurred in connection with the prosecution of this Action in the amount of 33 1/3% of the Gross Settlement Fund (or $544,500), plus interest thereon. This represents only a portion of the actual expenses incurred in the prosecution of the Action. Class Members are not personally liable for any such expenses. To date, Plaintiffs Counsel has not been reimbursed for their out-of-pocket expenses. OBJECTING TO THE SETTLEMENT You can tell the Court that you do not agree with the Settlement or some part of it. 18. How do I tell the Court whether I like or do not like the Settlement? If you are a Class Member, you can object to the Settlement if you do not like any part of it. You can give reasons why you think the Court should not approve it. The Court will consider your views. To object, you must send a letter saying that you object to the Settlement in Michael Monahan v. Arthur Andersen LLP (Civil Action No. 02-CV-0496M). Be sure to include your name, address, telephone number, your signature, and the reasons you object to the Settlement. Mail the objection to each of the following three different places postmarked no later than July 5, 2005: COURT Clerk of the Court United States District Court Northern District of Texas Dallas Division 14A20 Earle Cabell Federal Bldg. 1100 Commerce Street, Room 1572 Dallas, TX 75242 CLASS COUNSEL DEFENSE COUNSEL KAPLAN FOX & KILSHEIMER LLP WEIL, GOTSHAL & MANGES LLP Christine Fox, Esq. Vance Beagles, Esq. 805 Third Avenue 200 Crescent Court 22nd Floor Suite 300 New York, NY 10022 Dallas, TX 75201-6950 THE COURT S FAIRNESS HEARING The Court will hold a hearing to decide whether to approve the Settlement. You may attend and you may ask to speak, but you do not have to. 8
19. When and where will the Court decide whether to approve the Settlement? The Court will hold a Fairness Hearing on July 25, 2005, at 1:30 p.m., before the Honorable Barbara M. G. Lynn, United States District Judge of the Northern District of Texas Dallas Division, 1100 Commerce Street, Dallas, TX. At this hearing the Court will consider whether the Settlement is fair, reasonable and adequate, whether the Plan of Distribution should be approved and whether to award Plaintiffs Counsel reimbursement of expenses. If there are objections, the Court will consider them. Judge Lynn will listen to people who have asked to speak at the hearing. After the hearing, the Court will decide whether to approve the Settlement. We do not know how long these decisions will take. 20. Do I have to come to the hearing? No. Class Counsel will answer any questions Judge Lynn may have. But, you are welcome to come at your own expense. If you send an objection, you do not have to come to Court to talk about it. As long as you mailed your written objection on time, the Court will consider it. You may also pay your own lawyer to attend, but it is not necessary. 21. May I speak at the hearing? You may ask the Court for permission to speak at the Fairness Hearing. To do so, you must send a letter saying that it is your Notice of Intention to Appear in Michael Monahan v. Arthur Andersen LLP (Civil Action No. 02-CV-0496M). Be sure to include your name, address, telephone number, and your signature. Your Notice of Intention to Appear must be postmarked no later than July 5, 2005, and be sent to the Clerk of the Court, Class Counsel, and Defense Counsel, at the three addresses following question 18 above. You cannot speak at the hearing if you excluded yourself. GETTING MORE INFORMATION 22. Are there more details about the Settlement? This Notice summarizes the proposed Settlement. More details are in the Settlement Agreement. You can get a copy of the Settlement Agreement by writing to Christine Fox at Kaplan Fox & Kilsheimer LLP, 805 Third Avenue, 22nd Floor, New York, NY 10022. 23. How do I get more information or additional copies of the Notice and Proof of Claim? You can contact the Claims Administrator: by mail at Intelect Securities Litigation, c/o Berdon Claims Administration LLC, P.O. Box 9014, Jericho, NY 11753-8914; by fax at (516) 931-0810; by toll-free telephone at (800) 766-3330; or by visiting the website at www.berdonllp.com/claims. PLAN OF DISTRIBUTION OF NET SETTLEMENT FUND AMONG CLASS MEMBERS The Settlement Fund will be distributed to Class Members who submit valid, timely Proof of Claim and Release forms ( Authorized Claimants ) under the Plan of Distribution described below. The $1,650,000 Settlement Amount and the interest earned thereon shall be the Gross Settlement Fund. The Gross Settlement Fund, less all taxes and approved expenses (the Net Settlement Fund ), shall be distributed to members of the Class who file timely and acceptable Proof of Claim and Release forms. The Plan of Distribution provides that you will be eligible to participate in the distribution of the Net Settlement Fund only if you have a net Recognized Claim on all transactions in Intelect common stock purchased or otherwise acquired during the Class Period. 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 of the Net Settlement Fund that each Authorized Claimant s claim bears to the total of the claims of all Authorized Claimants. Recognized Claims will be calculated for purposes of the Settlement as follows: 1. For shares purchased during the period between March 31, 1998 and August 17, 1998, the following claims for damages shall be allowed: a. For shares sold on or before August 17, 1998, no damages shall be allowed; b. For shares sold after August 17, 1998 and before November 17, 1998, damages for each share shall be the inflation per share at the time of purchase as determined in Table 1 (below) less the inflation per share at the time of sale as determined in Table 1 (if damages per share are negative, then such gains shall be offset against any claimed damages); c. For shares sold or held after November 17, 1998, allowed damages per share shall be the inflation per share at the time of purchase as determined in Table 1. 2. For shares purchased during the period between August 18, 1998 and November 17, 1998, the following claims for damages shall be allowed: a. For shares sold after August 17, 1998 and before November 17, 1998, damages for each share shall be the inflation per share at the time of purchase as determined in Table 1 less the inflation per share at the time of sale as determined in Table 1 (if damages per share are negative, then such gains shall be offset against any claimed damages); b. For shares sold or held after November 17, 1998, allowed damages per share shall be the inflation per share at the time of purchase as determined in Table 1. General Provisions: 1. The date of purchase or sale is the contract or trade date as distinguished from the settlement date. 2. In processing claims, the first-in, first-out basis ( FIFO ) will be applied to purchases and sales. 3. Brokerage commissions should be excluded from the purchase and sale price of Intelect shares. 4. The date of covering a short sale is deemed to be the date of purchase of Intelect common stock. The date of a short sale is deemed to be the date of sale of Intelect common stock. Shares originally sold short prior to the Class Period will have a zero Recognized Claim. 5. No payment will be made on any claim where the potential distribution amount is $10 or less, but the Authorized Claimant will otherwise be bound by the final judgment entered by the Court. 6. Class Members who do not file timely and acceptable Proofs of Claim will not share in the Settlement proceeds but will nevertheless be bound by the Judgment and the Settlement. 7. Each Authorized Claimant will be allocated a pro rata share of the Net Settlement Fund based on his, her or its Recognized Claim as compared to the total Recognized Claims of all Authorized Claimants. 8. No person shall have any claim against Plaintiffs Counsel, the claims Administrator or other agents designated by Plaintiffs Counsel, or any defendant or any Defendant s counsel based on the distribution made substantially in accordance with the Stipulation and the Plan of distribution or further Orders of the Court. 9. The Court has reserved jurisdiction to allow, disallow or adjust the claim of any Class Member on equitable grounds. 10
1 Table 1 1 Inflation Inflation Inflation Date per Share Date per Share Date per Share 03/31/1998 $ 1.882 06/17/1998 $ 2.143 09/02/1998 $ 0.695 04/01/1998 $ 1.899 06/18/1998 $ 2.123 09/03/1998 $ 0.588 04/02/1998 $ 1.907 06/19/1998 $ 2.023 09/04/1998 $ 0.588 04/03/1998 $ 1.865 06/22/1998 $ 2.053 09/08/1998 $ 0.588 04/06/1998 $ 1.763 06/23/1998 $ 2.033 09/09/1998 $ 0.569 04/07/1998 $ 1.645 06/24/1998 $ 2.023 09/10/1998 $ 0.505 04/08/1998 $ 1.678 06/25/1998 $ 2.003 09/11/1998 $ 0.551 04/09/1998 $ 1.645 06/26/1998 $ 1.889 09/14/1998 $ 0.625 04/13/1998 $ 1.611 06/29/1998 $ 1.792 09/15/1998 $ 0.569 04/14/1998 $ 1.560 06/30/1998 $ 1.639 09/16/1998 $ 0.542 04/15/1998 $ 1.712 07/01/1998 $ 1.676 09/17/1998 $ 0.772 04/16/1998 $ 1.628 07/02/1998 $ 1.676 09/18/1998 $ 0.955 04/17/1998 $ 1.678 07/06/1998 $ 1.600 09/21/1998 $ 0.955 04/20/1998 $ 1.755 07/07/1998 $ 1.390 09/22/1998 $ 1.185 04/21/1998 $ 1.848 07/08/1998 $ 1.166 09/23/1998 $ 1.139 04/22/1998 $ 1.831 07/09/1998 $ 1.054 09/24/1998 $ 0.964 04/23/1998 $ 1.746 07/10/1998 $ 1.740 09/25/1998 $ 0.992 04/24/1998 $ 1.763 07/13/1998 $ 1.706 09/28/1998 $ 0.790 04/27/1998 $ 1.746 07/14/1998 $ 1.651 09/29/1998 $ 0.817 04/28/1998 $ 1.746 07/15/1998 $ 1.651 09/30/1998 $ 0.817 04/29/1998 $ 1.729 07/16/1998 $ 1.728 10/01/1998 $ 0.808 04/30/1998 $ 1.763 07/17/1998 $ 1.773 10/02/1998 $ 0.808 05/01/1998 $ 1.746 07/20/1998 $ 1.651 10/05/1998 $ 0.772 05/04/1998 $ 1.729 07/21/1998 $ 1.662 10/06/1998 $ 0.716 05/05/1998 $ 1.628 07/22/1998 $ 1.651 10/07/1998 $ 0.680 05/06/1998 $ 1.585 07/23/1998 $ 1.640 10/08/1998 $ 0.615 05/07/1998 $ 1.973 07/24/1998 $ 1.573 10/09/1998 $ 0.625 05/08/1998 $ 1.923 07/27/1998 $ 1.485 10/12/1998 $ 0.726 05/11/1998 $ 1.923 07/28/1998 $ 1.463 10/13/1998 $ 0.698 05/12/1998 $ 1.913 07/29/1998 $ 1.485 10/14/1998 $ 0.698 05/13/1998 $ 1.933 07/30/1998 $ 1.485 10/15/1998 $ 0.744 05/14/1998 $ 2.053 07/31/1998 $ 1.463 10/16/1998 $ 0.790 05/15/1998 $ 2.163 08/03/1998 $ 1.518 10/19/1998 $ 0.873 05/18/1998 $ 2.063 08/04/1998 $ 1.418 10/20/1998 $ 0.900 05/19/1998 $ 2.123 08/05/1998 $ 1.396 10/21/1998 $ 1.010 05/20/1998 $ 2.083 08/06/1998 $ 1.352 10/22/1998 $ 1.056 05/21/1998 $ 2.083 08/07/1998 $ 1.451 10/23/1998 $ 1.065 05/22/1998 $ 2.103 08/10/1998 $ 1.463 10/26/1998 $ 0.826 05/26/1998 $ 2.083 08/11/1998 $ 1.385 10/27/1998 $ 0.777 05/27/1998 $ 2.003 08/12/1998 $ 1.418 10/28/1998 $ 0.760 05/28/1998 $ 2.183 08/13/1998 $ 1.396 10/29/1998 $ 0.760 05/29/1998 $ 2.363 08/14/1998 $ 1.330 10/30/1998 $ 0.744 06/01/1998 $ 2.203 08/17/1998 $ 1.285 11/02/1998 $ 0.760 06/02/1998 $ 2.243 08/18/1998 $ 0.974 11/03/1998 $ 0.727 06/03/1998 $ 2.263 08/19/1998 $ 0.984 11/04/1998 $ 0.752 06/04/1998 $ 2.213 08/20/1998 $ 1.004 11/05/1998 $ 0.909 06/05/1998 $ 2.163 08/21/1998 $ 0.994 11/06/1998 $ 0.793 06/08/1998 $ 2.243 08/24/1998 $ 0.896 11/09/1998 $ 0.785 06/09/1998 $ 2.238 08/25/1998 $ 0.876 11/10/1998 $ 0.768 06/10/1998 $ 2.183 08/26/1998 $ 0.828 11/11/1998 $ 0.768 06/11/1998 $ 2.093 08/27/1998 $ 0.692 11/12/1998 $ 0.760 06/12/1998 $ 2.073 08/28/1998 $ 0.560 11/13/1998 $ 0.760 06/15/1998 $ 1.983 08/31/1998 $ 0.713 11/16/1998 $ 0.760 06/16/1998 $ 2.043 09/01/1998 $ 0.714 11/17/1998 $ 0.000 The estimates in Table 1 were calculated considering the liability claims asserted in the Complaint and the movements of Intelect s share price and were based upon a detailed event study which specifically identified share proce movements attributable to the allegations in the Complaint. 11
SPECIAL NOTICE TO NOMINEES If you hold any Intelect common stock purchased or otherwise acquired during the Class Period as nominee for a beneficial owner, then, within ten (10) days after you receive this Notice, unless done so pursuant to the Notice of Pendency of Class Action, you must either: (1) provide a list of the names and addresses of such beneficial owners to the Claims Administrator (* following the instructions below); or (2) send a copy of this Notice and the Proof of Claim and Release (collectively, the Notice ) by first class mail to all such beneficial owners and provide the Claims Administrator with written confirmation of having done so. * The names and addresses of beneficial owners should be provided on computer-generated labels. Alternatively, the claims Administrator will accept MS Word or WordPerfect address-label files (label size: Avery 5162), or an MS Excel data table containing the following information: (1) title or registration; (2) street address; (3) city, state and zip. Should you have any questions regarding the electronic submission of labels, please contact the Claims Administrator. If you choose to mail the Notice yourself, you may obtain (without cost to you) as many additional copies as you will need to complete the mailing by contacting the Claims Administrator at: Intelect Securities Litigation c/o Berdon Claims Administration LLC P.O. Box 9014 Jericho, NY 11753-8914 Telephone: (800) 766-3330 Fax: (516) 931-0810 Website: www.berdonllp.com/claims Whether you choose to complete the mailing yourself or elect to have the mailing performed for you, you may obtain reimbursement for reasonable administrative costs actually incurred in connection with forwarding the Notice which would not have been incurred but for the obligation to forward the Notice, after submission of appropriate documentation to the Claims Administrator. Dated: May 10, 2005 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS 12