The parties have reached a tentative $3 million settlement in several consolidated actions filed against manufacturer and distributor of digital subscriber line (DSL) products Paradyne Networks, Inc. (Nasdaq:PDYN) and certain of its officers and directors by stockholders who purchased the company's common stock between March 20, 2000, and September 28, 2000. The actions allege that the defendants misled stockholders about its future earnings in violation of federal securities laws. Persons eligible to participate in the settlement must file a proof of claim postmarked no later than July 12, 2004.

The proposed plan of allocation is based on the proposition that the price of Paradyne common stock was artificially inflated from March 20, 2000, until September 28, 2000, when Paradyne issued a press release announcing that it expected lower financial results and that it would have a one-time charge of $30 to $35 million relating to writing down inventory. Following the announcement the price of Paradyne common stock dropped approximately $4.09 per share from $10.00 per share on September 27, 2000 to close at $5.91 on September 28, 2000.

The Claims Administrator will determine each claimant’s pro rata share of the net settlement fund in the following manner:

Class members who purchased during the class period and held those shares on or after the September 28, 2000, announcement will have their claims recognized for $4.09 per share. To reflect a discount for the potential offset of the inflation received on the sale, class members who sold their shares at a loss prior to the September 28, 2000, announcement will have their claims recognized for the lesser of $1.02 per share (one quarter of the $4.09 price drop), or one-quarter of the difference between the purchase price paid and the sales proceeds received.

Sales during the class period will be matched first against any shares held prior to the class period and then against purchases during the class period on a First-In-First-Out (‘‘FIFO’’) basis. Transactions resulting in a gain will not be included.

Distributions will be made only after all claims have been processed and after the court has finally approved the settlement. If any funds remain in the settlement fund after the claims administrator has made reasonable and diligent efforts induce class members cash their distribution checks, any balance remaining in the settlement fund one year after the initial distribution of such funds shall be re-distributed to class members who have cashed their checks and who would receive at least $10.00 from the re-distribution.

The settlement will not be effective until the court grants it final approval. The court has scheduled a hearing on the matter for June 11, 2004.