According to the Company’s Form 10-Q for the quarterly period ended June 30, 2006, on June 11, 2004, the Company and the individual defendants, as well as many other issuers named as defendants in the class action proceeding, entered into an agreement-in-principle to settle this matter, and on June 14, 2004, this settlement was presented to the court. The district court granted a preliminary approval of the issuers' settlement on February 15, 2005, subject to certain modifications to the proposed bar order, to which plaintiffs and issuers agreed. On August 31, 2005, the court issued a preliminary order further approving the modifications to the settlement and certifying the settlement classes. The court appointed Garden City Group as the notice administrator for the settlement and ordered that notice of the settlement be distributed to all settlement class members beginning on November 15, 2005 and completed by January 15, 2006. The deadline for filing objections to the settlement was March 24, 2006, and the fairness hearing was April 26, 2006. Pursuant to the terms of the proposed settlement, in exchange for a termination and release of all claims against the Company and the individual defendants and certain protections against third-party claims, the Company will assign to the plaintiffs certain claims the Company may have as an issuer against the underwriters, and the Company’s insurance carriers, along with the insurance carriers of the other issuers, will ensure a floor of $1 billion for any underwriter-plaintiff settlement.

As summarized by the same SEC filing, beginning July 11, 2001, the Company was served with several class action complaints that were filed in the United States District Court for the Southern District of New York against the Company and several of its officers, directors, and former officers and directors, as well as against the investment banking firms that underwrote the Company’s November 10, 1999 initial public offering of common stock and our March 9, 2000 secondary offering of common stock. The complaints were filed on behalf of persons who purchased the Company’s common stock during different time periods, all beginning on or after November 10, 1999 and ending on or before December 6, 2000. The complaints are similar to each other and to hundreds of other complaints filed against other issuers and their underwriters, and allege violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 primarily based on the assertion that there was undisclosed compensation received by the Company’s underwriters in connection with our public offerings and that there were understandings with customers to make purchases in the aftermarket. The plaintiffs have sought an undetermined amount of monetary damages in relation to these claims. On September 4, 2001, the cases against the Company were consolidated. On October 9, 2002, the individual defendants were dismissed from the litigation by stipulation and without prejudice.

The complaint charges defendants with violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 for issuing a Registration Statement and Prospectus (the"Prospectus") that contained materially false and misleading information and failed to disclose material information. The complaint alleges that the Prospectus was false and misleading because it failed to disclose (i) the Underwriter Defendants' agreement with certain investors to provide them with significant amounts of restricted iBasis shares in the IPO in exchange for exorbitant and undisclosed commissions; and (ii) the agreement between the Underwriter Defendants and certain of its customers whereby the Underwriter Defendants would allocate shares in the IPO to those customers in exchange for the customers' agreement to purchase iBasis shares in the after-market at pre- determined prices.