According to the Company’s Form 10-Q/A for the quarterly period ended September 30, 2000, beginning in July 2001, the Company and certain of its current and former officers and directors were named as defendants in several class action shareholder complaints filed in the United States District Court for the Southern District of New York, collectively captioned In re Clarent Corp. Initial Public Offering Securities Litigation. On August 8, 2001, the IPO Lawsuits were consolidated for pretrial purposes before United States Judge Shira Scheindlin of the Southern District of New York. Judge Scheindlin held an initial case management conference on September 7, 2001, at which time she ordered, among other things, that the time for all defendants to respond to any complaint be postponed until further order of the Court. Thus, the Company has not been required to answer any of the complaints, and no discovery has been served on the Company. In accordance with Judge Scheindlin’s orders at further status conferences in March and April, the appointed lead plaintiffs’ counsel filed amended, consolidated complaints in the IPO Lawsuits on April 19, 2002. However, Judge Scheindlin does not expect any of the defendants to file motions to dismiss the amended, consolidated complaints until at least summer of 2002.

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 Prospectus was issued in connection with Clarent's initial public offering of 4,000,000 shares of common stock at $15.00 per share that was completed on or about July 1, 1999.

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 Clarent 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 Clarent shares in the after-market at pre-determined prices.