UNITED STATES DISTRICT COURTWESTERN DISTRICT OF KENTUCKY

LOUISVILLE DIVISION

GEORGE M . LAWSON , et al., On Behalf ofThemselves and All Others Similarly Situated ,

Plaintiffs ,

V .

ADVANCED EQUITIES, INC ., et al . ,

Defendants .

US DISTRICT COURT CLERKWESTE Nr ," FK y

05 JUL 1 2 2:05PM

CIVIL ACTION NO . 3:000V-3 82 -s

STIPULATION AND AGREEMENT OF SETT EM NT

This Stipulation and Agreement of Settlement dated as of , 200 the

"Stipulation"), is made and entered into pursuant to Rule 23 of the Fed ral Rules of Civi l

Procedure, by and among the following parties : (i) the Representative Plaintiffs (on behalf of

themselves and the Class Members), (ii) Defendants Kring & Brown and Shefsky & Froelic h

z'rbIMM1iLTD (collectively referred to as the "Settling Defendants"), (iii) Philadelphia#nsurance Co ., and

(iv) CNA Casualty Company of California . This Stipulation is intended by the Settling Parties

(as defined in ¶1 .20) to fully, finally and forever resolve, discharge and se ttle the Released

Claims (as defined in ¶1 .16), upon and subject to the terms and conditions hereof subject to the

approval of the Court .

Nothing in this Stipulation should be read to act as a compromise of any claim the

Representative Plaintiffs have asserted, or may assert in the future, against Adam Michael Fenn e

(the "Non- Settling Defendant") .

I . THE LITIGATION

On or about June 30, 2000, this action was filed in the United States District Court ,

Western District of Kentucky at Louisville (the "Court"), as a securities cl ass action on behalf of

the persons who purchased the securities or held stock of Pixelon, Inc., a California corporation

("Pixelon" or the "Company") against certain Pixelon directors and other defendants (th e

"Action"). On December 21, 2001, the Court consolidated as part ofthe Action a related lawsui t

styled Wenk , et al . v. Advanced Equities, Inc., et al ., Civil Action No . 3:01-CV-544(H) (W .D .

Ky.), which had been originally filed in the United States District Court for the District of

California and subsequently was transferred to this Court .

The Consolidated Amended Complaint filed July 19, 2002 (the "Complaint") allege s

violations of Section 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, an d

Securities and Exchange Commission ("SEC") Rule l0b-5 promulgated thereunder . The Action

was brought on behalf of a class consisting of all persons and entities who purchased Series A

Convertible Preferred Stock ("Preferred Stock") of Pixelon in a private placement made pursuant

to the Amended and Restated Confidential Private Placement Memorandum dated August 25 ,

1999, and supplements thereto dated December 9, 1999 and March 6, 2000, during the perio d

from August 9, 1999 through April 19, 2000, i nclusive .

The Settling Defendants each filed motions to dismiss in response to the Complaint . On

June 19, 2003, the Court entered a Memorandum Opinion and an Order that granted the Settling

Defendants' motions to dismiss and held that the Complaint failed to state a claim .

On July 3, 2003, Plaintiffs filed Plaintiffs' Motion for Reconsideration of the Court' s

Order and Judgment of June 19, 2003 pursuant to Fed . R. Civ . Proc. 59(e), in which they argued

that they believed that the motions to dismiss had been held in abeyance due to ongoing

96236_2.DOC 2

settlement negotiations and that this belief caused them to forego the filing of another amende d

complaint . Settling Defendants opposed this motion , and the Court scheduled a status

conference .

At the status conference, Plaintiffs, as an alternative to their motion to reconsider,

requested that the Court set aside the Memorandum Opinion to allow the parties an opportunity

to attempt to negotiate an extra judicial resolution . The Court agreed to this proposal .

In the November 25, 2003 order that followed the status conference, the Court rescinde d

the Memorandum Opinion and the Order of July 3, 2003, granted the parties sixty days to

conduct further settlement negotiations, held that the motions to dismiss of the Settling

Defendants would be resubmitted at the conclusion of the sixty-day period, and established a

deadline for the Plaintiffs to file a motion to amend their complaint .

In an Order entered on February 3, 2004, the Court extended the settlement negotiation

period until March 25, 2004, ruled that the motions to dismiss would be resubmitted on that date ,

and extended the time for Plaintiffs to file a motion to amend their Complaint until April 1, 2004 .

During this period, counsel for the parties discussed a potential settlement of the litigatio n

with the assistance of United States Magistrate Judge James D. Moyer. Under the auspices of

Judge Moyer, a settlement was reached with respect to Plaintiffs' claims against Settling

Defendants .

H. TEMPORARY SETTLEMENT CLAS S

The Settling Defendants agree solely for the purposes of this Settlement and it s

implementation, that the Action shall proceed as a class action, but if such Settlement fails to b e

approved or otherwise fails to be consummated, then Settling Defendants retain all rights to

object to the maintenance of the Action as a class action and this Stipulation shall not be offered

96236_2.DOC 3

as evidence of any agreement, admission or concession on the part of the Settling Defendant s

that any plaintiff class should be certified in the Action .

III. SETTLING DEFENDANTS' DENIAL OF WRONGDOING AND LIABILITY

The Settling Defendants have denied and continue to deny each and every claim and

contention alleged by the Representative Plaintiffs, and this Stipulation shall in no event b e

construed or deemed to be evidence of or an admission or concession on the part of the Settling

Defendants with respect to any claim or of any fault, liability, wrongdoing or damage whatsoever

or any infirmity in the defenses that the Settling Defendants have asserted . The Settling

Defendants expressly have denied and continue to deny all charges of fault, wrongdoing, liability

or damage against them or any of them arising out of any of the conduct, statements, acts o r

omissions alleged , or that could have been alleged, in the Action. The Settling Defendants also

have denied and continue to deny, inter alia, the allegations that the Settling Defendants mad e

fraudulent statements and omissions, that the Representative Plaintiffs or Class Members hav e

suffered damage, that the price of the Pixelon Preferred Stock was artificially inflated by reaso n

of the alleged misrepresentations, non-disclosures or otherwise, or that the Representativ e

Plaintiffs or the Class Members were harmed by any of the conduct alleged in the Action.

Nonetheless, the Settling Defendants have concluded that further conduct of the Actio n

would be protracted and expensive, and desire that the Action be fully and finally settled in th e

manner and upon the terms and conditions set forth in this Stipulation . The Settling Defendants

have also taken into account the uncertainty and risks inherent in any litigation, especially i n

complex cases like this Action. The Settling Defendants have, therefore, determined that it i s

96236_2.DOC 4

desirable that the Action be settled in the manner and upon the terms and conditions set forth in

this Stipulation .

IV. CLAIMS OF THE REPRESENTATIVE PLAINTIFFS AND BENEFITS OFSETTLEMENT

The Representative Plaintiffs believe that the claims asserted in the Action have merit .

However, counsel for the Representative Plaintiffs recognize and acknowledge the expense and

length of continued proceedings necessary to prosecute the Action against the Defendants

through trial and appeal . Counsel for the Representative Plaintiffs also have taken into accoun t

the uncertain outcome and the risk of any litigation especially in complex actions like this

Action, as well as the difficulties and delays inherent in such litigation. Counsel for

Representative Plaintiffs are also mindful of the inherent problems of proof of, and possibl e

defenses to, the violations asserted in the Action, and the problems inherent in collection of any

judgment. Counsel for the Representative Plaintiffs believe that the settlement set forth in thi s

Stipulation confers substantial benefits upon and is in the best interests of the Class . Based upon

counsel for the Representative Plaintiffs' investigation relating to the claims and the underlyin g

events and transactions alleged in the Complaint, counsel for the Representative Plaintiffs hav e

concluded that the terms and conditions of this Stipulation are fair, reasonable and adequate t o

the Representative Plaintiffs and the Class, and in their best interests, and have agreed to settl e

the claims raised in the Action pursuant to the terms and provisions of this Stipulation, after

considering (a) the substantial benefits that the Representative Plaintiffs and the members of th e

Class will receive from settlement of this Action; (b) the attendant risks of litigation; and (c) the

desirability of permitting the settlement to be consummated as provided by the terms of thi s

Stipulation .

96236_2.DOC 5

V. TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT

NOW, THEREFORE, without any admission or concession of any liability o r

wrongdoing or lack of merit in the defenses whatsoever by the Settling Defendants, IT IS

HEREBY STIPULATED AND AGREED by and among the Representative Plaintiffs (fo r

themselves and the Class Members) and the Settling Defendants, by and through their respective

counsel or attorneys of record, and subject to the approval of the Court pursuant to Rule 23(e) of

the Federal Rules of Civil Procedure, in consideration of the benefits flowing to the parties

hereto from the Settlement, that all Settled Claims (as defined below) as against the Release d

Persons (as defined below) shall be finally and fully compromised, settled and released, and th e

Action shall be dismissed with prejudice, upon and subject to the terms and conditions of th e

Stipulation, as follows :

1. Definitions

As used in this Stipulation the following terms have the meanings specified below :

1 .1 "Authorized Claimant" means any Class Member whose claim for recovery has

been allowed pursuant to the terms of the Stipulation .

1 .2 "Claimant" means any Class Member who submits Proof of Claim and Release in

such form and manner, and within such time , as the Court shall presc ribe.

1 .3 "Claims Administrator" means the firm Heffler, Radetich & Saitta, L .L.P ., 151 5

Market Street, 17th Floor, Philadelphia, PA 19102-1964, 215-665-8870, www.heffler.com.

1 .4 "Class" means, for purposes of this Stipulation only, all persons and entities who

purchased or acquired the Preferred Stock of Pixelon during the Class Period . Excluded from the

Class are the defendants in the Action; any members of any individual defendant's family ; and

the heirs, successors and assigns of any excluded person or entity. Also excluded from the Class

96236_2.DOC 6

are any putative Class members who exclude themselves by filing a request for exclusion i n

accordance with the procedures set forth in the Notice .

1 .5 "Class Members," "Settlement Class Members" or "Members of the Class" mean s

Persons who fall within the definition of the Class as set forth in 11 .4 of the Stipulation .

1 .6 "Class Period" means the period commencing on April 1, 1998, through an d

including March 5, 2001 .

1 .7 "Effective Date" means the first date by which all of the events and conditions

specified in ¶7 .1 of the Stipulation have been met and have occurred .

1 .8 "Escrow Agent" means Berger & Montague, P .C .

1 .9 "Final" means: (a) the date of final affirmance of all appeals of the Bar Order

(defined below) and Order and Final Judgment (defined below), the expiration of the time for al l

petitions for a writ of certiorari to review the Bar Order and Order and Final Judgment and, if

one or more such petitions are filed, the date ofdenial of all such petitions and if certiorari i s

granted, the date of final affirmance of the Bar Order and Order and Final Judgment followin g

review pursuant to that grant; or (b) the date of final dismissal of all appeals from the Bar Order

and Order and Final Judgment or the final dismissal of all proceedings on certiorari to review th e

Bar Order and Order and Final Judgment ; or (c) if no appeal is filed, the expiration date of the

applicable time for the filing or noticing of any appeal from the Bar Order and Order and Fina l

Judgment. Any proceeding or order, or any appeal or petition for a writ of certiorari with respec t

to the issue of attorneys' fees or expenses, shall not in any way delay or preclude the Bar Order

and Order and Final Judgment from becoming final .

1 .10 "Order and Final Judgment" means the proposed order to be entered approving

the settlement substantially in the form attached as Exhibit A .

96236_2.DOC 7

1 .11 "Person" means an individual, corporation, limited liability corporation ,

professional corporation, limited liability partnership, 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 spouse, heirs, predecessors, successors, representatives, or assignees .

1 .12 'Plaintiffs' Counsel" means counsel who have appeared for any of the Plaintiffs

in the Action .

1 .13 "Plaintiffs' Settlement Counsel" means J . Bruce Miller, J . Bruce Miller Law

Group, 605 W . Main Street, Louisville, Kentucky 40202, (502) 587-0900, Kenneth L . Sales,

Sales, Tillman, Wallbaum, Catlett & Satterley, 1900 Waterfront Plaza, 325 West Main Street,

Louisville, Kentucky 40202, (502) 589-5600 and, Merrill G . Davidoff, Berger & Montague,

P.C., 1622 Locust Street, Philadelphia, Pennsylvania 19103, 215-875-3084 phone; (215) 875-

4671 fax .

1 .14 "Plan of Allocation" means a plan or plans or formula or formulae of allocation of

the Settlement Funds which shall be distributed to Authorized Claimants in the Class after

payment of expenses of notice and administration of the sett lement, Taxes and Tax Expenses and

such attorneys ' fees, expenses and interest and amounts as may be awarded by the Court . Any

Plan of Allocation is not part of the Stipulation , Defendants shall have no responsibility or

liability with respect thereto , and the Court ' s approval of the Stipulation shall not be contingent

upon the approval of any Plan of Allocation .

1 .15 "Released Claims" means any and all manner of actions, claims, causes of action ,

allegations or rights whatsoever, whether known or unknown, whether suspected or unsuspected ,

whether contingent or non-contingent, whether class, individual, or direct in nature, whether in

96236_2.DOC 8

law or in equity, whether based on federal, state, local, statutory or common law or any other

law, rule or regulation, whether based on events or actions occurring prior to or on the Effective

Date (as defined above), including claims in any bankruptcy proceeding, which any of the

Representative Plaintiffs or Class Members ever had, now have, or hereafter may have against

any or all of the Released Persons by reason of, based upon, arising out of or in connection with,

directly or indirectly, any allegation, fact, occurrence, matter, representation, transaction, o r

omission referred to, involved or set forth in or which could have been referred to or asserted in

the Complaint or any other pleading in the Action, or any public filing or statement of Pixelon ,

Advanced Equities or their officers and directors , whether known or unknown to the

Representative Plaintiffs, Class Members, Released Persons or any other party to this Stipulation

of Settlement, except that nothing in this Stipulation should be read to act as a compromise o f

any claim Representative Plaintiffs or any Class Members have asserted, or may assert in th e

future against any Non-Settling Defendant . Additionally, Representative Plaintiffs and eac h

member of the Class expressly release and covenant not to pursue any derivative claims o f

Pixelon against any Released Person .

Representative Plaintiffs or Class Members may hereafter discover facts in addition to o r

different from those which such Representative Plaintiffs or Class Members now know or

believe to be true with respect to the subject matter of the Released Claims, but it is the intention

of the parties hereto that each Representative Plaintiff and each Class Member upon the Effective

Date shall be deemed to have fully, finally and forever settled and released any and all Released

Claims respecting the Settling Defendants and Released Persons, whether known or unknown,

suspected or unsuspected, contingent or non-contingent, which now exist, may hereafter exist, o r

96236_2.DOC 9

heretofore have existed, and without regard to the subsequent discovery or existence of different

or additional facts .

With respect to any and all Released Claims, the parties to this Stipulation of Settlement

agree that , upon the Effective Date, Representative Plaintiffs and all Class Members shall be

deemed to have, and by operation of the Order and Final 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, which provides :

A general release does not extend to claims which the creditor doesnot know or suspect to exist in his favor at the time of executingthe release, which if known by him must have materially affectedhis settlement with debtor .

Representative Plaintiffs and Class Members understand and acknowledge the

significance and consequences of California Code §1542 and hereby elect to waive the benefit s

of its provisions , with the intent that this release and waiver of liability shall include claim s

known or unknown, including claims unknown and unsuspected .

1 .16 "Released Persons" means any and all of the Settling Defendants, their presen t

and former parents, subsidiaries, affiliates, divisions, and joint ventures, and its or their present

and former officers, directors, attorneys, agents, representatives, employees, shareholders,

associates, affiliated lawyers, insurers, partners, excess insurers, advisors, investment advisors,

trustees, escrowees, auditors, accountants, spouses and immediate family members, and the

predecessors, heirs, successors, and assigns of any of them, any Person or entity in which any

Released Person has or had a controlling interest or which is or was related to or affiliated with

any Released Person and any trust of which any Settling Defendant is the settlor or which is fo r

96236 2.DOC 10

the benefit of any Settling Defendant and/or member(s) of a Settling Defendant's family .

Provided, however, that nothing in this paragraph should be construed so as to include Non-

Settling Defendant, Adam Michael Fenne .

1 .17 "Representative Plaintiffs" means George M . Lawson, Marie Swift, William C .

Dugdale and H. Grant Hathaway.

1 .18 "Settlement Fund" means the principal amount of Eight hundred thousand dollar s

($800,000.00).

1 .19 "Settling Defendants" means (a) Kring & Brown LLP and (b) Shefsky & Froelic h

LTD.

1 .20 "Settling Parties" means, collectively each of the Sett ling Defendants, each of the

Representative Plaintiffs on behalf of themselves and the Members of the Class .

2. The Settlement

a. Scope and Effect of Settlement

2.1 The obligations incurred pursuant to this Stipulation shall be in full and fina l

disposition of the Action against the Settling Defendants and any and all Released Claims as

against all Released Persons .

2.2 Pursuant to the Order and Final Judgment, upon the Effective Date of thi s

Stipulation, Representative Plaintiffs and Members of the Class on behalf of themselves, their

heirs, executors, administrators, successors and assigns shall, with respect to each and every

Released Claim, fully, finally and forever release, relinquish and discharge, and shall forever b e

enjoined from prosecuting any Released Claims against any ofthe Released Persons .

96236_2.DOC 11

b. The Settlement Fund

2.3 Shefsky & Froelich, Ltd . shall cause CNA Casualty Company of California to pay

Four Hundred Seventy-Five Thousand Dollars ($475,000 .00) into an escrow account maintaine d

by Berger & Montague, P .C. within fourteen (14) days following the signing of this Stipulation .I$wM?rI 1

Kring & Brown, L .L .P. shall cause Philadelphiayinsurance Company to pay the principal amoun t

of Three Hundred Twenty-Five Thousand Dollars ($325,000 .00) into an escrow account

maintained by Berger & Montague , P.C. within fourteen (14) days following the signing of this

Stipulation. The Settlement Fund shall be invested in United States Government Securities o r

their equivalent, with a maturity not to exceed one hundred twenty (120) days .

c. The Escrow Agent

2.4 The Escrow Agent shall invest the Settlement Fund deposited pursuant to ¶2 .3

above in U .S. Treasuries with no more than a six (6) month duration and/or in an interest bearing

account insured by the FDIC, at the then-current market rate.

2.5 The Escrow Agent shall not disburse the Settlement Fund except as provided i n

the Stipulation, by an Order of the Court, or with the written agreement of counsel for Settlin g

Defendants and Plaintiffs' Settlement Counsel .

2 .6 Subject to further order and/or direction as may be made by the Court, the Escrow

Agent is authorized to execute such transactions as are consistent with the terms of the

Stipulation .

2.7 All funds held by the Escrow Agent shall be deemed and considered to be i n

custodia legis of the Court, and shall remain subject to the jurisdiction of the Court .

2 .8 The Escrow Agent shall establish a "Notice and Administration Fund," an d

deposit $50,000.00 from the Settlement Fund into it. The Notice and Administration Fund shal l

96236 2.DOC 12

be used by Plaintiffs ' Settlement Counsel to pay Taxes and Tax Expenses (as defined in ¶2 .9(b)) ,

costs and expenses reasonably and actually incurred in connection with providing notice to th e

Class, identifying and locating Class Members , soliciting Class claims, assisting with the filing

of claims, administering and distributing the Net Settlement Fund, as defined below, to

Authorized Claimants, processing Proof of Claim and Release forms and paying escrow fees and

costs, if any. The Notice and Administration Fund shall also be invested and earn interest . Any

portion of the Notice and Administration Fund remaining after the payment of the aforesaid costs

and expenses shall revert to the Settlement Fund and become part of the Net Settlement Fund, as

defined below in 1 4 . 1 . In the event that the Effective Date does not occur, CNA Casualt y

Company of California and Philadelphia Insurance Co . will be refunded those sums remaining in

the Notice and Administration Fund, less any costs and expenses reasonably and actually

incurred in connection with providing Notice to the Class .

d. Taxes, Tax Expense and Related Matters

2 .9 Settling Parties and the Escrow Agent agree to treat the Settlement Fund as bein g

at all times a "qualified settlement fund" within the meaning of Treas . Reg. §§ 1 .468B-1 through

1 .468B-5 . In addition, the Escrow Agent shall timely make such elections as are necessary or

advisable to carry out the provisions of this ¶2 .9, including the "relation-back election" (a s

defined in Treas . Reg. § 1 .468B-1) back to the earliest permitted date. Such elections shall be

made in compliance with the procedures and requirements contained in such regulations . It shal l

be the responsibility of the Escrow Agent to timely and properly prepare and deliver th e

necessary documentation for signature by all necessary parties, and thereafter to cause th e

appropriate filings to occur .

96236_2.DOC 13

(a) For the purpose of §468B of the Internal Revenue Code of 1986, a s

amended, and the regulations promulgated thereunder, the "administrator" shall be the Escro w

Agent. The Escrow Agent shall timely and properly file all informational and other tax returns

necessary or advisable with respect to the Settlement Fund (including without limitation th e

returns described in Treas. Reg. § 1 .46B-2(k)(1)). Such returns (as well as the election described

in ¶2.9) shall be consistent with this ¶2 .9 and in all events shall reflect that all Taxes (includin g

any estimated Taxes, interest or penalties) on the income earned by the Settlement Fund shall b e

paid out of the Settlement Fund as provided in ¶2 .9(b) hereof.

(b) All (i) Taxes (including any estimated Taxes, interest or penalties) arising

with respect to the income earned by the Settlement Fund, including any Taxes or tax detriment s

that may be imposed upon the Settling Defendants, their insurers or their respective counsel with

respect to any income earned by the Settlement Fund for any period during which the Settlemen t

Fund does not qualify as a "qualified settlement fund" for federal or state income tax purpose s

("Taxes"), and (ii) expenses and costs incurred in connection with the operation an d

implementation of this ¶ 2 .9 (including, without limitation, expenses of tax attorneys and/o r

accountants and mailing and distribution costs and expenses relating to filing (or failing to file )

the returns described in this ¶ 2.9) ("Tax Expenses") shall be paid out of the Notice and

Administration Fund ; in all events the Settling Defendants, their insurers and their respectiv e

counsel shall not have any liability or responsibility for any Taxes or any Tax Expenses or the

filing of any tax returns or other documents with the Internal Revenue Service or any other state

or local taxing authority . The Escrow Agent shall indemnify and hold harmless Settling

Defendants, their insurers, and their respective counsel for Taxes and Tax Expenses (including ,

without limitation , Taxes payable by reason of any such indemnification .) Further, Taxes and

96236_2.DOC 14

Tax Expenses shall be treated as, and considered to be, a cost of administration of the Settlement

Fund and shall be timely paid by the Escrow Agent out of the Notice and Administration Fun d

without prior order from the Court . The Escrow Agent shall be obligated (notwithstanding

anything herein to the contrary) to withhold from distribution to Authorized Claimants any funds

necessary to pay such Taxes and Tax Expenses including the establishment of adequate reserve s

for any Taxes and Tax Expenses ( as well as any amounts that may be required to be withhel d

under Treas . Reg. §1 .468B-21(1)(2)) ; neither Settling Defendants, their insurers nor their

respective counsel are responsible nor shall they have any liability or responsibility therefor .

The parties hereto agree to cooperate with the Escrow Agent, each other, and their tax attorne y

and accountants to the extent reasonably necessary to carry out the provisions of this 12 .9 .

(c) For the purpose of this 12.9, references to the Settlement Fund shall

include both the Settlement Fund and the Notice and Administration Fund and shall also include

any earnings thereon.

e. Termination of Settlement

2.10 In the event that the Effective Date does not occur or the settlement is terminate d

for any reason, the Settlement Fund shall be refunded as desc ribed in ¶7.4 below.

3. Notice Order and Settlement Hearing

3.1 Promptly after execution of the Stipulation by all parties hereto, Plaintiffs '

Settlement Counsel shall submit the Stipulation together with its Exhibits to the Court and shal l

apply for entry of an Order (the "Notice Order"), substantially in the form of Exhibit B attached

hereto, requesting, inter alia , the preliminary approval of the settlement set forth in the

Stipulation, and approval for the mailing and publication of notice (the "Notice" and the

"Summary Notice," respectively), substantially in the forms of Exhibits 1 and 2 attached hereto ,

96236_2 .DOC 15

which shall include the general terms of the settlement set forth in the Stipulation, the general

terms of the Fee and Expense Application as defined in 16.1 below and the date of the Settlement

Hearing as defined below . Plaintiffs' Settlement Counsel shall be solely responsible for

providing Notice to the Class .

3 .2 Plaintiffs' Settlement Counsel shall request that, after Notice is given, the Cour t

hold a hearing (the "Settlement Hearing") and that it thereafter approve the settlement and

dismiss the Action with prejudice . At or after the Settlement Hearing, Plaintiffs ' Settlement

Counsel also will request that the Court approve the Plan of Allocation and the Fee and Expense

Application .

4. Administration and Calculation of Claims, Final Awards andSupervision and Distribution of the Settlement Fund .

4.1 The Claims Administrator, subject to such supervision and direction of the Cour t

and/or Plaintiffs' Settlement Counsel as may be necessary or as circumstances may require, shal l

administer and calculate the claims submitted by Class Members and shall oversee distributio n

of the Net Settlement Fund (defined below) to Authorized Claimants . Without setting out an

order of priority, the Settlement Fund shall be applied as follows:

(a) to pay all the costs and expenses reasonably and actually incurred in

connection with providing Notice, identifying and locating Class Members, soliciting Claims,

assisting with the filing of Claims, administering and distributing the Settlement Fund to

Authorized Claimants, processing Proof of Claim and Release forms and paying escrow fees and

costs, if any;

(b) to pay the Taxes and Tax Expenses described in ¶2 .9 above;

96236_2. DOC 16

(c) to pay the Plaintiffs' Counsel attorneys' fees and expenses with interest

thereon (the "Fee and Expense Award"), if and to the extent allowed by the Court ;

(d) to reimburse the time and expenses of the Representative Plaintiffs in th e

Action as provided by the PSLRA, 15 U .S.C. 78u-4(a)(4), if and to the extent allowed by the

Stipulation , the Plan of Allocation, or the Court ;

(e) subject to the provisions of ¶ 4.2(c) below, to distribute the balance of the

Settlement Fund (the "Net Settlement Fund") to Authorized Claimants as allowed by the

Stipulation, the Plan of Allocation, and the Court .

4.2 Upon the Effective Date and thereafter, and in accordance with the terms of th e

Stipulation, the Plan of Allocation, or such further approval and further order(s) of the Court a s

may be necessary or as circumstances may require, the Net Settlement Fund shall be distributed

to Authorized Claimants , subject to and in accordance with the following:

(a) Within ninety (90) days after the mailing of the Notice or such other tim e

as may be set by the Court, each Person claiming to be an Authorized Claimant shall be required

to submit to the Claims Administrator a completed Proof of Claim and Release, substantially in

the form of Exhibit 3 attached hereto, signed under penalty of perjury and supported by suc h

documents as specified in the Proof of Claim and Release and as are reasonably available to the

Authorized Claimant .

(b) Payment pursuant to this Stipulation shall be deemed final and conclusiv e

against all Class Members . Except as otherwise ordered by the Court, all Class Members wh o

fail to timely submit a Proof of Claim and Release within such period, or such other period as

may be ordered by the Court, or otherwise allowed, and all Class Members whose claims are not

approved by the Court (in the event the same are rejected in whole or in part by the Claim s

96236_2.DOC 17

Administrator and the Court resolves the dispute involved) shall be forever barred from receiving

any payment pursuant to this Stipulation and the settlement set forth herein, but will in all other

respects be subject to and bound by the provisions of this Stipulation, the releases containe d

herein, and the Order and Final Judgment and be enjoined and barred from bringing any action

against any of the Released Persons asserting any of the Released Claims .

(c) The Net Settlement Fund shall be distributed to the Authorized Claimants

substantially in accordance with a Plan of Allocation to be described in the Notice (or a

subsequent Notice) and approved by the Court. However, if there is any balance remaining in

the Net Settlement Fund after six (6) months from the date of distribution of the Net Settlement

Fund (whether by reason of tax refunds, uncashed checks or otherwise), such balance shall b e

donated to appropriate 501(c)(3) non-profit organizations to be recommended by Plaintiffs '

Settlement Counsel and approved by the Court with prior notice to Settling Defendants' Counsel .

4.3 The Released Persons shall have no responsibility for, interest in, or liabilit y

whatsoever with respect to the investment or distribution of the Settlement Fund, the Ne t

Settlement Fund, the Plan of Allocation, the determination, administration, or calculation of

claims, the payment or withholding of Taxes, the payment of Tax Expenses, the payment of any

attorneys' fees and expenses incurred on behalf of the Representative Plaintiffs and/or the Clas s

Members in the Action, or any losses incurred in connection therewith .

4.4 No Person shall have any claim against Representative Plaintiffs, Plaintiffs '

Settlement Counsel, Plaintiffs' Counsel, any Claims Administrator, any agent designated b y

Plaintiffs' Settlement Counsel, Settling Defendants or their respective counsel based on th e

investment or distributions made substantially in accordance with this Stipulation and the

settlement contained herein, the Plan of Allocation or further Orders of the Court .

96236_2.DOC 18

4.5 It is understood and agreed by the Settling Parties that the proposed Plan o f

Allocation including, but not limited to, any adjustments to an Authorized Claimant's claim se t

forth therein, is not a part of the Stipulation and is to be considered by the Court separately fro m

the Court's consideration of the fairness, reasonableness and adequacy of the settlement set forth

in the Stipulation, and any order or proceeding relating to the Plan of Allocation shall not operate

to terminate or cancel the Stipulation or affect the finality of the Court's Order and Fina l

Judgment approving the Stipulation and the settlement set forth therein, or any other orders

entered pursuant to the Stipulation . The Plan of Allocation shall be prepared by, and shall be the

responsibility of, Plaintiffs' Settlement Counsel and Settling Defendants shall have n o

responsibility or liability therefor .

5. Good Faith Hearing, Judgment Reduction, Contribution andIndemnification

5 .1 Promptly after execution of this Stipulation, Representative Plaintiffs and Settlin g

Defendants shall jointly move the Court for an order (the "Bar Order") in accordance with

Section 201(a) of the Private Securities Litigation Reform Act of 1995, 15 USC § 78u-

4(f)(7)(A), substantially in the form attached as Exhibit C hereto, finding that with respect to the

Released Claims in the Action, all claims for contribution, indemnification, or otherwise ,

however denominated, including all such claims brought or that may be brought as claims,

counterclaims, cross-claims or third party claims against the Settling Defendants, based upon

liability on any of the Released Claims, in favor of any Person, including the Non-Settling

Defendant, who is asserted to be a joint tortfeasor with the Settling Defendants or is otherwise

liable in any manner with respect to any of the Released Claims, are forever extinguished ,

discharged, satisfied, and/or otherwise barred and unenforceable .

96236_2.DOC 19

5.2 In the event that the Court declines to enter the Bar Order described in 1 5.1 ,

or the Bar Order is materially modified, overturned or vacated on appeal, each Settling

Defendant shall have the option to terminate this Stipulation by mailing or otherwis e

delivering notice to all Representative Plaintiffs and the other Settling Defendant of his ,

hers, its or their decision to terminate the Stipulation. In such event, the Settlement Fun d

shall be refunded as described in If 7.4 below.

5 .3 In the event that the Court declines to enter the Bar Order described in paragrap h

5.1, or the Bar Order is vacated, overturned or materially modified on appeal or by writ and none

of the Settling Defendants has terminated the Stipulation as described in 1 5.2, Representativ e

Plaintiffs and Settling Defendants shall jointly move the Court (or Courts) for an order requiring

that any claims, counterclaims, cross-claims or third-party claims by any other person against the

Settling Defendants or any of them for contribution, indemnity or otherwise, howeve r

denominated, based on the Released Claims be asserted only in the Action and not in any othe r

action or proceeding . Further, if the Stipulation is not terminated by any of the Settling

Defendants, this settlement shall continued in effect but shall automatically convert to a

judgment reduction settlement; i .e., any judgment obtained by the Representative Plaintiffs o r

any Class Member against a Non-Settling Defendant shall be automatically reduced dollar fo r

dollar by any amount that any of the Non-Settling Defendants recovers by way of contribution or

indemnity or otherwise against the Settling Defendants, or any of them. By way of illustration, if

Representative Plaintiffs or any Class Member obtains a judgment against a Non-Settling

Defendant, and that Non-Settling Defendant obtains a judgment against the Settling Defendants,

or any of them, for contribution or indemnity or for any other claim, however denominated,

based on or arising from the Released Claims, then the Representative Plaintiffs and/or Class

96236_2.DOC 20

Members shall automatically deduct from their judgment against the Non-Settling Defendant s

the amount that the Non-Settling Defendant obtained in judgment against the Settlin g

Defendants, or any of them. If Representative Plaintiffs' or Class Members' judgment against

the Non-Settling Defendants has already been satisfied, the Representative Plaintiffs and/or Class

Members shall remit to the Non-Settling Defendant the amount of the judgment obtained agains t

the Settling Defendants or any of them . In either event, the judgment against the Settling

Defendants, or any of them, obtained by that Non-Settling Defendant shall be fully extinguished

and satisfied by the Representative Plaintiffs and/or Class Members. The Representative

Plaintiffs and/or Class Members agree to indemnify the Settling Defendant and hold them

harmless with respect to any attorneys' fees and expenses incurred by the Settling Defendants in

defense of any such claims for contribution, indemnity or otherwise, and the Representative

Plaintiffs and Class Members shall have the right to control such defense .

6. Plaintiffs ' Counsel Attorneys' Fees and Reimbursement ofExpenses and Reimbursement of Time and Expenses to theRepresentative Plaintiffs

6 .1 Plaintiffs' Settlement Counsel may submit an application or applications (the "Fe e

and Expense Application") for distributions from the Settlement Fund for: (a) an award of

attorneys' fees ; plus (b) reimbursement of expenses incurred in connection with prosecuting the

Action; (c) plus any interest on such attorneys' fees and expenses at the same rate and for the

same periods as earned by the Settlement Fund (until paid) as may be awarded by the Court ; and

(d) reimbursement of the time and expenses of the Representative Plaintiffs in prosecuting the

Action. Plaintiffs' Settlement Counsel reserve the right to make additional applications for fees

and expenses incurred .

96236_1DOC 21

6.2 The Fee and Expense Award shall be paid to Plaintiffs' Settlement Counsel fro m

the Settlement Fund, as ordered, immediately after the Court executes a written order awarding

such fees and expenses, notwithstanding the existence of any timely filed objections thereto, or

potential appeal therefrom, subject to the joint and several obligation of Plaintiffs' Settlement

Counsel to make appropriate refund repayments to the Settlement Fund as more particularly set

forth below in 16 .3 . Plaintiffs' Settlement Counsel shall thereafter allocate the attorneys' fee s

amongst Plaintiffs' Counsel in a manner in which Plaintiffs' Counsel in good faith believe

reflects the contributions of such counsel to the prosecution and settlement of the Action .

6.3 In the event that the Effective Date does not occur, or the Judgment or the order

making the Fee and Expense Award is reversed or modified, or the Stipulation is terminated fo r

any reason, and in the event that the Fee and Expense Award has been paid to any extent, then

Plaintiffs' Counsel shall, within five (5) business days from Plaintiffs' Settlement Counse l

receiving notice from Settling Defendants' counsel or from a court of appropriate jurisdiction ,

refund to the Settlement Fund, the fees and expenses previously paid to them from the Settlement

Fund, plus interest thereon at the same rate as earned by the Settlement Fund, in an amount

consistent with such reversal or modification . Each Plaintiff's Counsel's law firm, as a conditio n

of receiving such fees and expenses, on behalf of itself and each partner and/or shareholder of it,

agrees that the law firm and its partners and/or shareholders are subject to the jurisdiction of th e

Court for the purpose of enforcing the provisions of this paragraph. Without limitation, each

such law firm and its partners and/or shareholders agree that the Court may, upon application of

Settling Defendants and notice to Plaintiffs' Settlement Counsel, summarily issue orders ,

including, but not limited to, judgments and attachment orders, and may make appropriate

findings of or sanctions for contempt, against them or any of them should such law firm fai l

96236_2. DOC 22

timely to repay fees , expenses and interest pursuant to this ¶6.3 of this Stipulation. If and to the

extent any such law firm fails timely to repay fees, expenses and interest pursuant to this ¶6 .3 of

this Stipulation, in addition to all other rights and remedies provided for herein, Plaintiffs '

Settlement Counsel shall be jointly and severally liable to pay the same to the Settlement Fund .

6.4 The procedure for and the allowance or disallowance by the Court of any

applications by any of the Plaintiffs ' Counsel for attorneys ' fees and expenses to be paid out o f

the Settlement Fund, are not part of the settlement set forth in the Stipulation, and are to be

considered by the Court separately from the Court 's consideration of the fairness, reasonableness

and adequacy of the settlement set forth in the Stipulation, and any order or proceeding relatin g

to the Fee and Expense Application, or any appeal from any order relating thereto or reversal or

modification thereof, shall not operate to terminate or cancel the Stipulation, or affect or delay

the finality of the Order and Final Judgment approving the Stipulation and the settlement of the

Action set forth herein .

6.5 The Released Persons shall have no responsibility for, and no liability whatsoever

with respect to, any payment to Plaintiffs' Counsel, including any payment from the Settlemen t

Fund, and no Plaintiffs' Counsel shall have recourse to the Released Persons, or any of them, fo r

such payments .

6.6 The Released Persons shall have no responsibility for, and no liability whatsoever

with respect to the allocation among Plaintiffs' Counsel, and/or any other Person who may asser t

some claim thereto, of any Fee and Expense Award that the Court may make in the Action .

7. Conditions of Settlement, Effect of Disapproval, Cancellationor Termination

96236_2.DOC 23

7.1 The Effective Date shall be conditioned on the occurrence of all of the following

events :

(a) the contributions to the Settlement Fund have been timely made as required b y

¶2.1(a) above ;

(b) the Court has entered the Notice Order , as required by ¶3.1 above and the same

have been complied with ;

(c) Settling Defendants have not exercised their option to terminate the Stipulatio n

pursuant to ¶5 .2, ¶5 .3 and ¶7 .3 or any other provision hereof;

(d) the Court has entered the Notice Order substantially in the form of Exhibit B

attached hereto ;

(e) the Court has entered the Order and Final Judgment and Bar Order substantiall y

in the form of Exhibits A and C, respectively, and attached hereto; and

(f) each of the Orders and the Judgments has become Final, as defined in ¶1 .9 above .

7.2 If all the conditions speci fied in ¶7 .1 are not met, then the Stipulation shall b e

cancelled and terminated subject to ¶7 .4 , unless Plaintiffs' Settlement Counsel and counsel fo r

Settling Defendants mutually agree in writing to proceed with the settlement .

7.3 Either Settling Defendant shall have the option to terminate the Stipulation as i t

applies to the terminating Settling Defendant in the event that Class Member(s) who purchase d

Pixelon's shares during the Class Period choose to exclude himself, herself or itself from th e

Class in a magnitude set forth in a supplemental letter agreement (the "Supplementa l

Agreement") which is incorporated by reference but will not be filed with the Court . Copies of

all requests for exclusion from the Class shall be delivered by overnight delivery to Settlin g

Defendants' Counsel by Plaintiffs' Settlement Counsel or the Claims Administrator as soon as

96236_2.DOC 24

practical after received. A Settling Defendant shall be entitled to exercise the above option t o

withdraw from the settlement if it provides Plaintiffs' Settlement Counsel with written notice o f

its withdrawal from the settlement and files that notice with the Court within ten (10) busines s

days from the day it is advised by Plaintiffs' Settlement Counsel in writing of such event (whic h

notice Plaintiffs' Settlement Counsel shall be obligated to provide within five (5) business days

of the date by which Settlement Class Members may elect to be excluded .)

7.4 Unless otherwise ordered by the Court, in the event the Stipulation shall terminat e

or shall not become effective for any reason, within seven (7) business days after written

notification of such event is sent by counsel for either Settling Defendant or Plaintiffs '

Settlement Counsel to the Escrow Agent, the Settlement Fund (including accrued interest), plus

any amount then remaining in the Notice and Administration Fund (including accrued interest) ,

less expenses and any costs which have either been disbursed pursuant to ¶12.8 or 2.9 hereto, or

are chargeable to the Notice and Administration Fund, shall be refunded by the Escrow Agent o n

a pro rata basis to CNA Casualty Company of California an d Philadelphia Insurance Company.

At the request of either, the Escrow Agent or its designee shall apply for any tax refund owed t o

the Settlement Fund and pay the proceeds, after deduction of any reasonable fees or expenses

incurred in connection with such application(s) for refund , on a pro rata basis , to CNA Casualty

Company of California and Philadelphia Insurance Company .

7.5 In the event that the Stipulation is not approved by the Court or the settlement se t

forth in the Stipulation is terminated for any reason, the Settling Parties shall be deemed to have

reverted to their respective positions or status in the Action before the execution of thi s

Stipulation. In such event, the terms and provisions of the Stipulation shall have no further forc e

and effect with respect to the Settling Parties and shall not be used in the Action or in any other

96236_1DOC 25

proceeding for any purpose, the Settling Defendants shall retain all rights to object to the

maintenance of the Action as a class action and any judgment or order entered by the Court i n

accordance with the terms of the Stipulation shall be treated as vacated, nunc pro tunc. No order

of the Court or modification or reversal on appeal of any order of the Court concerning the Pla n

of Allocation or the amount of any attorneys' fees, expenses and interest awarded by the Court t o

Plaintiffs' Counsel shall constitute grounds for cancellation or termination of the Stipulation .

7 .6 If the Effective Date does not occur, or if the Stipulation is terminated for any

reason, neither Representative Plaintiffs nor any of their counsel shall have any obligation t o

repay any amounts actually and properly disbursed from or chargeable to the Notice and

Administration Fund . In addition, any expenses already incurred and properly chargeable to the

Notice and Administration Fund pursuant to 12 .8 hereof at the time of such termination or

cancellation but which have not been paid, shall be paid by the Escrow Agent in accordance wit h

the terms of the Stipulation prior to the balance being refunded .

8. Miscellaneous Provisions

8 .1 The Settling Parties (a) acknowledge that it is their intent to consummate the

terms and conditions of this Stipulation ; and (b) agree to cooperate to the extent reasonabl y

necessary to effectuate and implement all terms and conditions of the Stipulation and to exercis e

their best efforts to accomplish the foregoing terms and conditions of the Stipulation .

8.2 Each Settling Defendant warrants as to himself, herself or itself that, at the time

any of the payments provided for herein are made on behalf of himself, herself or itself, the

payment will not render him, her or it insolvent . This representation is made by each Settlin g

Defendant as to himself, herself or itself and is not made by any counsel for the Defendants .

96236_2.DOC 26

8 .3 The Settling Parties intend this settlement to be a final and complete resolution of

all disputes asserted or which could be asserted by Representative Plaintiffs and Class Members

against the Released Persons with respect to the Action . The settlement compromises claim s

which are contested and shall not be deemed an admission by any Settling Party as to the merit s

of any claim or defense . The Settling Parties agree that the amount paid to the Settlement Fun d

and the other terms of the settlement were negotiated in good faith by the Settling Parties, and

reflect a settlement that was reached voluntarily after consultation with competent legal counsel .

Each of the Settling Parties reserves his, her or its right to rebut, in a manner that such part y

determines to be appropriate, any contention made in any public forum that the Action was

brought, prosecuted or defended in bad faith or without a reasonable basis .

8 .4 Neither the Stipulation nor the settlement, nor an act performed or document

executed pursuant to or in furtherance of the Stipulation or the settlement : (a) is or may be

deemed to be or may be used as a presumption, concession, or admission of, or evidence of, th e

truth of any fact alleged by Plaintiffs, the validity of any Released Claims, or of any wrongdoing ,

negligence, fault or liability of the Released Persons; (b) shall be construed against Settling

Defendants or Representative Plaintiffs and the Class Members as an admission or concession

that the consideration to be given hereunder represents the amount which could be or would hav e

been recovered at trial ; and (c) is or may be deemed to be or may be used as a presumption ,

concession , or admission of, or evidence of, any fault , misrepresentation or omission of any of

the Released Persons in any civil, criminal or administrative proceeding in any court ,

administrative agency or other tribunal . Released Persons may file the Stipulation and/or th e

related Orders and Judgments in any action that may be brought against them in order t o

effectuate the liability protection granted them based on principles of res judicata, collatera l

96236_2.DOC 27

estoppel, release, good faith settlement, judgment bar or reduction or any other theory of clai m

preclusion or issue preclusion or similar defenses or counterclaims .

8.5 All agreements made and orders entered during the course of the Action relating

to the confidentiality of information shall survive this Stipulation .

8.6 All of the Exhibits to this Stipulation are material and integral parts hereof and ar e

fully incorporated herein by this reference .

8.7 This Stipulation may be amended or modified only by a written instrument signed

by or on behalf of all Settling Parties or their respective successors-in-interest .

8.8 This Stipulation, the Exhibits attached hereto, and the Supplemental Agreement

constitute the entire agreement among the Representative Plaintiffs and Settling Defendants, an d

no representations, warranties or inducements have been made to any party concerning th e

Stipulation, its Exhibits, or the Supplemental Agreement other than the representations ,

warranties and covenants contained and memorialized in such documents . Except as otherwise

provided herein, all parties shall bear their own attorneys' fees and costs .

8 .9 Counsel for the Settling Parties are expressly authorized by their respective client s

to take all appropriate actions required or permitted to be taken pursuant to the Stipulation to

effectuate its terms and conditions .

8.10 Each counsel or other Person executing this Stipulation or any of its Exhibits

hereto, or any related settlement documents, on behalf of any party hereto hereby warrants and

represents that such Person has the full authority to do so .

8.11 The Stipulation may be executed in one or more counterparts . All executed

counterparts, including facsimile counterparts, and each of them shall be deemed to be one and

the same instrument, provided that counsel for the parties to this Stipulation shall exchang e

96236~2.DOC 28

amongst themselves original and signed counterparts. A complete set of original executed

counterparts shall be filed with the Court by Plaintiffs' Settlement Counsel .

8.12 This Stipulation shall be binding upon , and inure to the benefit of, the Settling

Parties and their respective successors, assigns, heirs, executors, administrators and lega l

representatives.

8.13 The Court shall retain jurisdiction with respect to implementation an d

enforcement of the terms of the Stipulation, the Bar Order and Final Judgment, and the Settling

Parties hereto submit to the jurisdiction of the Court for purposes of implementing and enforcin g

the settlement embodied in the Stipulation, the Bar Order and Final Judgment .

8.14 This Stipulation and the Exhibits hereto shall be considered to have bee n

negotiated, executed and delivered, and to be wholly performed, in the State of Kentucky, and

the rights and obligations of the Settling Parties to the Stipulation shall be construed and

enforced in accordance with , and governed by, the internal , substantive laws of the State of

Kentucky without giving effect to the State's choice of law principles .

8 .15 The headings herein are used for the purpose of convenience only and are not

meant to have legal effect.

8.16 The waiver by one party of any breach of this Stipulation by any other party shal l

not be deemed a waiver of any other p rior or subsequent breach of this Stipulation.

8.17 This Stipulation shall not be construed more strictly against one party than

another merely by virtue of the fact that it, or any part of it, may have been prepared by counsel

for one of the parties, it being recognized that it is the result of arm's-length negotiations .

between the parties and all parties have contributed substantially and materially to the

preparation of this Stipulation .

96236_2.DOC 29

8.18 Plaintiffs' Settlement Counsel and Settling Defendants' Counsel agree t o

cooperate fully with one another in seeking Court approval of the Notice Order, the Bar Orde r

and the Order and Final Judgment, and to promptly agree upon and execute all such other

documentation as may be reasonably required to obtain final approval by the Court and as

necessary, the Bankruptcy Court, of the settlement.

Dated :

Mlchall J. KitchellJ. Br ce Miller Law605 West Main Streel

Kenttt L. galesSales, Tillman , Wa baum, Catlett &Satterley PLL C1900 Waterfront Plaza325 West Main StreetLouisville, KY 40202Co-Counsel for Plaintiffs

VS,,~ tA~

Elita~ eth Ulimer MendelWdAward , Hobson & Fulton, LLP2500 National City TowerLouisville, KY 40202Counsel for Kring & Brown, LLP

96236_2.DOC 30

Berger & Montague, P.C.162 just StreetPhi h a, PA 1903

Jon L. Fleischaker, Esq .R. Kenyon Meyer, Esq .Dinsmore & Shohi, LLP1400 PNC Plaza500 West Jefferson StreetLouisville, KY 40202Counsel for Shefsky & Froelich, LTD

CNA Casualty Company of Californi a

By: AL1111,L

Title : G Ct* (Y'6_ _ O I~ ►~°C ~Y

WW1jul~PhiladelphiInsurance o .

By:

Title : \ ~Q~J I

96236 2.DOC 31

EXHIBIT "A"

IN THE UNITED STATES DISTRICT COURTFOR THE WESTERN DISTRICT OF KENTUCKY

LOUISVILLE DIVISIO N

George W. Lawson, et al., on behalf ofThemselves and All Others Similarly Situate d

Plaintiffs,

vs.

Advanced Equities, Inc., et al ,

Defendants.

Civil Action No. 3 :00 CV 38 2

ORDER AND FINAL JUDGMENT

The Class Representatives and Settling Defendants , as those terms are defined in the

Stipulation and Agreement of Settlement dated 200_ (the "Stipulation"),

by and through their attorneys or their counsel of record, having executed and filed the

Stipulation; the Court having entered its Notice Order thereon on 200

directing that notice of the proposed Settlement of the Action be mailed to the . Class and

scheduling a Hearing to be held to determine whether the proposed Settlement should b e

approved as fair, reasonable and adequate ; to approve the allocation of the Gross and Net

Settlement Fund and to award Plaintiffs' Counsel Attorneys' Fees and Expenses ; said notice

having been given; a Hearing having been held on , at which all interested persons

were given an opportunity to be heard ; and the Court having read and considered all submissions

in connection with the proposed Se tt lement; and having reviewed and considered the files an d

records herein , the Court finds and concludes that :

1 . The above-captioned action was commenced on or about June 30, 2000, and the

Consolidated Amended Complaint (the "Complaint") was filed on July 17, 2002 .

2 . The Complaint presents claims for violations of sections 10(b) and 20(a) of th e

Securities Exchange Act of 1934 , and Rule IOb-5 promulgated thereunder.

3 . The Class was certified and defined for purposes of the Settlement, and this Order

and Final Judgment ("Judgment"), by Order of the Court dated , 200

4. The Stipulation between and among Class Representatives and Settling

Defendants provides for the Settlement of the Action on behalf of the Class Representatives an d

all members of the Class with Settling Defendants, subject to the approval by this Court of its

terms and the entry of this Judgment . The Court scheduled a Hearing to consider the approval of

the Stipulation, and directed that notice of the proposed Settlement and Hearing be mailed to th e

members of the Class .

5 . In accordance with the Stipulation and Notice Order, entered o n

Plaintiffs' Settlement Counsel caused to be mailed to the members of th e

Class, a Notice dated and caused to be published once in the national editio n

of Investors' Business Daily , a Summary Notice of the proposed Settlement of the Action and o f

the opportunity to object to the Settlement.

6. The Notice and Summary Notice provided to the members of the Clas s

constituted the best and most practicable notice under the circumstances and included individua l

notice to all members of the Class identified by reasonable efforts . The affidavits an d

declarations of mailing filed with this Court on demonstrate that this Court's

Notice Order has been complied with and further, that the best notice practicable under th e

circumstances was in fact given and constituted valid, due and sufficient notice to members o f

2

the Class, complying fully with the Due Process Clause of the U.S. Constitution, Rule 23 of the

Federal Rules of Civil Procedure , and Section 21(D)(a)(7) of the Exch ange Act, 15 U.S.C . § 78u-

4(a)(7) as amended by the Private Securities Litigation Reform Act of 1995 .

7. Class Representatives and Settling Defendants have applied to the Court fo r

approval of the terms of the Stipulation and for the entry of this Judgment . Pursuant to the

Notice and Summary Notice, and upon notice to all parties, a Hearing was held before this Cour t

on , 200 , to consider whether the Sett lement set forth in the Stipulation shoul d

be approved by this Court as fair, reasonable, and adequate, to approve the allocation of the Net

Settlement Fund and to award Attorneys' Fees and Expenses to Plaintiffs' Counsel .

8. Approval of the Stipulation will result in substantial savings in time and money t o

the Court and the litigants and will further the interests of justice .

9. The Stipulation is the product of good faith arms-length negotiations by the

Signatories thereto .

NOW THEREFORE, GOOD CAUSE APPEARING, IT IS HEREBY ORDERED ,

ADJUDGED AND DECREED that :

10. This Final Judgment incorporates herein and makes a part hereof the Stipulatio n

dated , 200 , and filed with this Court on

200 and Exhibit 1 (the Class Notice Package) and Exhibit 2 (the Summary Notice) thereto .

11 . The Court has jurisdiction over the subject matter of this Action and all Pa rt ies in

this Action, including Class members .

12 . The Stipulation and Settlement, including all Exhibits thereto and relate d

settlement papers, are fair, reasonable and adequate as to, and in the best interests of, the

Plaintiffs and the Class, and are finally approved in all respects . The parties and Class Members

3

are here directed to implement and consummate the Stipulation according to its terms and

provisions .

13 . The members of the Class who have filed timely and valid requests for exclusion

are not bound by this Judgment . A listing of those persons is attached hereto as Exhibit A .

Members of the Class who are excluded may pursue their own individual remedies, if any .

14. All other persons and entities (other than Defendants, members of their immediate

families, and the heirs, successors and assigns of any such person or entity) who acquired

Pixelon Preferred Stock during the Class Period are bound by this Judgment and by the

Settlement, including the releases provided in this Judgment .

15 . This Court hereby decrees that neither the Judgment, the Stipulation (nor an y

document referred to herein or any action taken to carry out this Judgment), nor the fact of the

Settlement is, may be construed as, or may be used as an admission or concession by or against

Settling Defendants of the validity or invalidity of any claim in the Action or any actual or

potential liability, fault or wrongdoing whatsoever . Neither the Stipulation, nor this Judgment,

nor the fact of the Settlement, nor the settlement proceedings, nor the settlement negotiations ,

nor any related documents shall be offered, construed or deemed to be evidence of, or received in

evidence for any purpose, as an admission, concession, presumption or inference against any

party hereto in any action or proceeding in any court, administrative agency or other tribunal for

any purpose other than as evidence of the Settlement and to consummate or enforce the

Stipulation and this Judgment; provided, however, that this Judgment and the Stipulation

(including the exhibits thereto) may be filed in any action by or against Settling Defendants or

the Released Persons to support a defense of res judicata, collateral estoppel, release, good faith

4

settlement, judgment bar or reduction, full faith and credit, or any theory of claim preclusion o r

issue preclusion or similar defense or counterclaim .

16. Except for any individual claims of those persons and entities identified in Exhibi t

B hereto, this Court hereby dismisses on the merits and with prejudice the Released Claims (a s

defined in the Stipulation) against each and all of the Released Persons (as defined in th e

Stipulation), without fees or costs to any party, except as otherwise provided herein .

17. The Plaintiffs and each and every Member of the Class, whether directly or in an y

other capacity, their heirs, executors , administrators , beneficiaries , predecessors, successors,

assigns, officers, directors, agents, shareholders, employees, representatives, affiliates, trustees

and subsidiaries , are hereby forever barred and enjoined from commencing, instituting or

prosecuting, either directly or indirectly, the Settled and Released Claims or any action or othe r

proceeding against any of the Released Persons with respect to, based on, or arising from th e

Settled and Released Claims .

18. Each and all of the Released Persons are hereby and forever released and

discharged with respect to any and all of the Settled and Released Claims .

19. Pursuant to 15 U.S.C. § 78u-4(f)(7)(A), all claims for contribution with respect to ,

based on, or arising from the Settled and Released Claims against any of the Settling Defendant s

and Released Persons are hereby forever barred .

20. Pursuant to 15 U .S.C. § 78u-4(c)(1), the Court finds that all Part ies and their

Counsel have complied with each requirement of Federal Rule of Civil Procedure 11(b) as to al l

proceedings in this Action .

21 . Plaintiffs' Settlement Counsel are hereby awarded, all from the Gross Settlement

Fund, attorneys' fees in the amount of $ , and reimbursement of their expenses in the

5

amount of $ . These amounts are to be paid pursuant to the procedure set forth

in the Stipulation . Plaintiffs' Settlement Counsel are hereby authorized to distribute said fees i n

their sole discretion among all Plaintiffs' Counsel .

22. The Court reserves jurisdiction , without affecting the finality of this Judgment,

over: (a) implementing, administering and enforcing this Settlement and the Stipulation and an y

award or distribution of the Gross or Net Settlement Fund ; (b) disposition of the Gross or Net

Settlement Fund; and (c ) other matters related or ancillary to the foregoing .

23. An appeal of the portion of this Judgment which awards attorneys' fees or

expenses shall have no effect whatsoever on the finality of any other portion of this Judgment ,

and shall not affect the Effective Date of Settlement . Class Members appealing the Judgment or

any portion thereof, must first intervene pursuant to Rule 24 of the Federal Rules of Civi l

Procedure .

24. The proposed Plan of Allocation of the Net Settlement Fund, as set forth in th e

Stipulation, is approved .

25. All objections to the Settlement are overruled and denied in all respects .

26. In the event that the Settlement does not become effective or is canceled or

terminated in accordance with the terms of the Stipulation, then this Judgment shall be rendered

null and void and be vacated, except Paragraph 15, hereof, which shall survive, and all order s

entered in connection therewith by this Court shall be rendered null and void .

27 . Plaintiffs' Settlement Counsel are authorized and directed to execute on behalf of

the Class and any of their respective representatives, trustees , successors and assigns, al l

necessary documents for the benefit of the Released Persons releasing such Released Persons

from all Settled and Released Claims .

6

28. The Court finds that no just reason exists for delay in ente ring final judgment

pursuant to Rule 54(b) of the Federal Rules of Civil Procedure . Accordingly, the Clerk is hereb y

directed to enter this Judgment forthwith pursuant to Rule 54(b) .

Done this day of , 200

IT IS SO ORDERED :

JUDGE, UNITED STATES DISTRICT COUR T

TENDERED BY :

Merri ll G. DavidoffDouglas M . RisenBerger & Montague, P.C.1622 Locust StreetPhiladelphia, PA 19103215-875-300 0

J. Bruce MillerMichael J . KitchenJ. Bruce Miller Law Group605 West Main StreetLouisville, KY 40202502-587-090 0

Kenneth L. SalesSales, Tillman , Wallbaum,Catle tt & Satterley1900 Waterfront Plaza325 West Main StreetLouisville, Kentucky 40202502-589-5600Counsel for Plaintiffs and the Class

7

Elizabeth Ullmer MendelWoodward, Hobson & Fulton, LLP2500 National City TowerLouisville , Kentucky 40202Counsel for Kring & Brown, LLP

Jon L. FleischakerR. Kenyon MeyerDinsmore & Shohl LLP1400 PNC Plaz a500 West Jefferson StreetLouisville , Kentucky 4020 2Counsel for Shefsky & Froelich, LTD

99133v1

26785-1

8

EXHIBIT "B"

IN THE UNITED STATES DISTRICT COURTFOR THE WESTERN DISTRICT OF KENTUCKY

LOUISVILLE DIVISION

George W . Lawson, et al ., on behalf ofThemselves and All Others Similarly Situate d

Plaintiffs,

v.

Advanced Equities , Inc., et al ,

Defendants.

Civil Action No. 3:00 CV 382

ORDER OF PRELIMINARY APPROVAL OF SETTLEMENT WITHNOTICE OF SETTLEMENT TO THE CLAS S

WHEREAS, a consolidated action is pending before the Court entitled Lawson, et

al v. Advanced Equities , Inc ., et al , Civil Action No. 3:00-CV-382 ; and

WHEREAS, the Parties having made application , pursuant to Rule 23 (e) of the

Federal Rules of Civil Procedure, for an order preliminarily approving the Settlement of thi s

Action in accordance with the Stipulation and Agreement of Settlement date d

200 (the "Stipulation"), which together with the exhibits annexed thereto, set forth the term s

and conditions for a proposed Settlement of the Action and for dismissal of the Action with

prejudice upon the terms and conditions set forth therein; and the Court having read and

considered the Stipulation and the exhibits annexed thereto ;

IT IS HEREBY ORDERED :

I . For purposes of this Settlement (and only for such purposes and withou t

adjudication on the merits), the Court hereby certifies the following Plaintiff Class : All persons

and entities who purchased Series A Convertible Preferred Stock of Pixelon, Inc . during the

period from April 1, 1998 through and including March 5, 2001 .

2. The terms defined in the Stipulation are incorporated herein .

3. The Settlement of the Action, as set forth in the Stipulation, is pre liminarily

approved as fair, reasonable and adequate .

4. A Hearing shall be held before this Court on , 200 , at

in Courtroom , of the United States Courthouse, Louisville, KY 40202, to

determine: (i) whether the proposed Sett lement of the Action on the terms and conditions

provided for in the Stipulation is fair, reasonable, and adequate and should be approved by th e

Court; (ii) whether a Judgment should be entered herein ; (iii) whether the allocation of the

Settlement Fund as set forth in the Stipulation should be approved; and (iv) whether the

application of Plaintiffs' Settlement Counsel for the payments of Attorneys' Fees and Expenses

is reasonable and should be approved . The Court may adjourn the Hearing and later reconvene it

without further notice to the members of the Class.

5 . The Court approves, as to form and content , the Notice of Pendency and

Settlement of Class Action (the "Notice"), the Summary Notice of Pendency and Settlement of

Class Action ("Summary Notice"), and the Proof of Claim and Release form (the "Proof of

Claim"), annexed as Exhibits 1, 2, and 3 hereto, and finds that the publication, mailing an d

distribution of the Notice and Summary Notice substantially in the manner and form set forth in

this Order meets the requirements of Rule 23 of the Federal Rules of Civil Procedure, Sectio n

21(D)(a)(7) of the Exchange Act, 15 U.S.C. §78u-4(a)(7) Litigation Reform Act of 1995, Sectio n

1002931 -DOC 2

27 of the Securities Act of 1933, 15 U.S.C. §77z-1(a)(7), and the Due Process Clause of the U .S.

Constitution, and is the best notice practicable under the circumstances and shall constitute du e

and sufficient notice to all persons entitled thereto . Plaintiffs' Settlement Counsel is authorized

to issue such Notices and Proofs of Claim, in substantially their present form, to those member s

of the Class that can be identified through reasonable effort .

6. Plaintiffs' Settlement Counsel are hereby authorized to retain the firm of Heffle r

Radetich & Saitta LLP (the "Claims Administrator") to supervise and administer the notic e

procedure as well as the process of processing claims as more fully set forth below:

A. Not later than fifteen (15) days from the date hereof, Plaintiffs ' Settlement

Counsel shall cause a copy of the Notice and Proof of Claim, substantially in the form o f

Exhibits I and 3 annexed hereto, to be mailed by first- class mail to all Class members

reasonably identified by the stock transfer records of Pixelon Inc. ("Pixelon") that

Pixelon and its transfer agent shall provide and/or make available to the Claims

Administrator, in electronic format within five (5) days from the date hereof, at the Clas s

members' addresses listed on such transfer records . The date of such initial mailing shall

be referred to as the "Notice Date" ;

B. Not later than ten (10) business days after the Notice Date, Plaintiffs '

Settlement Counsel shall cause a Summary Notice, substantially in the form annexed as

Exhibit 2 hereto, to be published once in the national edition of The Investor's Busines s

Daily; and shall cause a copy of the Summary Notice to be published electronically on an

equally suitable on-line site ;

C. Plaintiffs' Settlement Counsel shall also cause copies of the Notice an d

Proof of Claim to be mailed as soon as practicable to persons who indicate, in response t o

100293_I.DOC 3

the Summary Notice or otherwise, that they acquired Pixelon Series A Convertible

Preferred Stock ("Preferred Stock") in a private placement made pursuant to the

Amended and Restated Confidential Private Placement Memorandum dated August 25 ,

1999, and supplements thereto dated December 9, 1999 and March 6, 2000 ;

D. Plaintiffs' Settlement Counsel shall use their best reasonable efforts to

obtain from all banks, brokerage firms or other nominees (the "Nominees") shown by the

transfer records of Pixelon to have held Pixelon Preferred Stock during the Class Period ,

the names and addresses of their customers for whom they held such shares as nominee

and who acquired Pixelon Preferred Stock during the Class Period, and to cause a copy o f

the Notice, together with a copy of the Proof of Claim, to be promptly mailed by first-

class mail to each such customer whose name and address is provided by any Nominee .

Alternatively, such Nominees may at their own election make such mailing themselves ;

E. At or p rior to the Hearing provided for in numbered paragraph 4 of thi s

Order, Plaintiffs' Settlement Counsel shall serve on Settling Defendants' Counsel and file

with the Court proof, by affidavit or declaration under penalty of perjury, of such

publication and mailing.

7. All reasonable costs incurred in identifying and notifying members of the Class as

well as administering the Settlement, shall be paid from the Gross Settlement Fund as set forth i n

the Stipulation.

8 . If the proposed Settlement is approved, all members of the Class, except thos e

who timely opt out, shall be bound by all determinations and judgments in the Action concernin g

the Settlement, whether favorable or unfavorable, and shall conclusively be deemed to hav e

released, and shall thereafter be barred from asserting against the Settling Defendants and other

100293_ 1.DOC 4

Released Persons (as defined in the Stipulation), any claims made or which could have bee n

made against the Settling Defendants and otherwise released in the Stipulation .

9. Members of the Class who wish to participate in the Net Settlement Fund shall

complete and submit Proofs of Claim in accordance with the instructions contained therein . All

Proofs of Claim must be postmarked or received no later than ninety (90) days from the Notic e

Date .

10. For purposes of facilitating the processing of claims, Plaintiffs' Settlemen t

Counsel and/or the Claims Administrator shall lease and maintain a numbered post office box .

All Notices to Class members and other communications regarding the proposed Settlement of

these actions shall designate the post office box as the return address . Plaintiffs' Settlement

Counsel and/or the Claims Administrator shall be responsible for preserving, for a period of tw o

years from the date of distribution of the proceeds of the Net Settlement Fund, all Proofs o f

Claim and any and all other written communications from Class members or any other person in

response to the Notice . Plaintiffs' Settlement Counsel and/or the Claims Administrator shall b e

responsible for responding to inquiries mailed to said post office box, but copies of all writte n

answers to such inquiries shall be maintained and made available for inspection by all counsel in

this Action .

11 . All members of the Class shall have the option to be excluded from the litigation.

Such exclusions shall be exercisable by mailing a timely and valid written request for exclusion ,

postmarked no later than sixty (60) days from the Notice Date, and mailed by first-class mail t o

the Claims Administrator pursuant to the instructions set forth in the Notice . A written request

for exclusion shall include the Class Member's name, address and telephone number . All

persons who timely file valid written requests for exclusion from the Class shall not be Class

100293 _1.DOC 5

members and shall have no rights with respect to the Settlement and have no interest in the Gros s

or Net Settlement Fund.

12. Plaintiffs' Settlement Counsel shall promptly provide Sett ling Defendants'

Counsel with a copy of all communications and documentation relating to members of the Clas s

who request exclusion therefrom .

13. Any member of the Class may enter an appearance in the Action, at his or her or

its own expense, individually or through counsel of his, her or its choice . If any member of the

Class does not enter an appearance, he, she or it will be represented by Plaintiffs' Settlemen t

Counsel .

14 . Any member of the Class who has not requested exclusion may appear with or

without counsel, and show cause if he, she, or it has any reason why the proposed Settlement of

the Action should or should not be approved as fair, reasonable and adequate , or why a Judgment

should or should not be entered thereon, or why Attorneys' Fees and Expenses should or shoul d

not be awarded to Plaintiffs' Settlement Counsel in the amount requested, or why the allocation

of the Gross or Net Settlement Fund should or should not be approved; provided that no later

than seventy (70) days from the Notice Date, such Class member: (i) has filed a written

statement of support or objection, together with copies of any papers and briefs, with the Clerk o f

the United States District Court for the Western District of Kentucky, Louisville Division, Gene

Snyder United States Courthouse , 601 W . Broadway, Louisville , KY 40202; and (ii) has se rved

copies of such papers by hand or first-class mail upon : Merrill G. Davidoff, Esquire, Berger &

Montague, P.C ., 1622 Locust Street, Philadelphia, PA 19103 ; J. Bruce Mi ller, Esquire , J. Bruce

Miller Law Group, 605 W . Main Street , Louisville, Kentucky, 40202 ; Kenneth L. Sales, Esquire,

Sales Tillman, Wallbaum , Catle tt & Satterley , 1900 Waterfront Plaza , 325 W . Main Street,

100293_1.DOC 6

Louisville, Kentucky, 40202 ; Elizabeth Ullmer Mendel, Woodward, Hobson & Fulton, LLP ,

2500 National City Tower, Louisville, Kentucky ; Jon L. Fleischaker, Dinsmore & Shohl LLP,

1400 PNC Plaza, 500 West Jefferson Street, Louisville, KY 40202 ; Janet P . Jakubowicz,

Esquire, Greenbaum Do ll & McDonald PLLC, 3300 National City Tower, 101 South Fifth

Street, Louisville, KY 40202-3197; Angela McNeal Hoyer, Esquire, Boehl Stopher & Graves ,

2300 Aegon Center, 400 West Market, Louisville, KY 40202 ; and Michael W . Robinson,

Esquire, Robinson & Wisbaum, Inc ., 361 Forrest Avenue, Suite 203, Laguna Beach, CA 92651 .

Such statement shall include the Class Member's name, address and telephone number, th e

specific reason(s), if any, for each objection, including any legal support, evidence, paper o r

briefs that the Class Member wishes the Court to consider . Any member of the Class who doe s

not timely file and serve a written objection pursuant to the terms of this paragraph shall b e

deemed to have waived such objection and shall forever be foreclosed from making any

objection to the proposed Settlement as incorporated in the Stipulation or any Judgment that ma y

be entered, to the award of Attorneys' Fees and Expenses to Plaintiffs' Settlement Counsel, and

to the Plan of Allocation, and any objection that is not timely made shall be barred, unless

otherwise allowed by the Court for good cause shown .

15 . Any response to any objection( s) to the proposed Settlement , Attorneys' Fees and

Expense application or Plan of Allocation shall be filed no later than two (2) days before, th e

Hearing.

16. Any Class Member who files and serves a timely w ritten objection pursu ant to the

terms of paragraph 14 of this Order and complies with the requirements of this paragraph ma y

also appear at the Hearing, either in person or through counsel retained at the Class Member' s

expense . Class Members or their attorneys intending to appear at the Hea ring must deliver to

100293_I.DOC 7

counsel for the Settlement Class and counsel for the Settling Defendants and file with the Court ,

at the addresses specified in paragraph 14 of this Order, no later than fourteen (14) days prior to

the Hearing, a notice of intention to appear, setting forth the case number and the name, addres s

and telephone number of the Class Member, and the name of the Class Member's attorney(s) ,

Class Members who intend to object to the settlement and Plaintiffs' counsels' application for a n

award of fees and expenses or the Plan of Allocation and who desire to present evidence at th e

Hearing must include in their written objection the identity of any witnesses they may call to

testify and exhibits they intend to introduce into evidence at the Hearing . Any Class Member

who does not timely file and serve a notice of intention to appear pursuant to the terms of thi s

paragraph shall not be permitted to appear, except for good cause shown . Class Members do not

need to appear at the Hearing or take any other action to indicate their approval .

17 . Upon the Effective Date, Class Representatives and all members of the Class, on

behalf of themselves and each of their predecessors, successors, parents , subsidiaries, affiliates ,

custodians, agents, assigns, representative, heirs, executors, trustees, administrators and any

other person or entity having any legal or beneficial interest in the Preferred Stock of Pixelon

purchased or acquired by any member of the Class during the Class Period, whether or not the y

file a Proof of Claim within the time provided for, and whether or not they participate in the Ne t

Settlement Fund, shall be deemed conclusively to have fully, finally, unconditionally and foreve r

released, settled and discharged the Released Persons, from and with respect to the Released

Claims, including Unknown Claims, and shall be forever barred and enjoined from commencing ,

instituting, or prosecuting the Released Claims or any action or other proceeding against any o f

the Released Persons, with respect to, based on, or arising from the Released Claims.

100293_I .DOC 8

18. All funds held by the Escrow Agent shall be held in custodia legis of the Court in

accordance with the Stipulation, and shall remain subject to the jurisdiction of the Court unti l

such time as such funds shall be distributed pursuant to the Stipulation, Plan of Allocation and/o r

further order(s) of the Court .

19. The payment of the Gross Settlement Fund to the Escrow Agent in accordance

with the terms and obligations of the Stipulation is approved ; and upon the Effective Date, n o

one other than Class Representatives, members of the Class or Plaintiffs' Counsel shall have an y

right to any portion of, or in distribution of, the Gross or Net Settlement Fund, unless otherwis e

ordered by the Court or otherwise provided in the Stipulation .

20. Neither the Stipulation, nor any of its terms or provisions, nor any negotiations or

proceedings connected with it, shall be construed as an admission or concession by Settlin g

Defendants of the truth of any of the allegations in the Action, or of any liability, fault or

wrongdoing of any kind. If the Settlement is disapproved, cancelled, or terminated in

accordance with the terms of the Stipulation, the Stipulation shall have no force or effect and al l

negotiations, proceedings and statements made in connection therewith shall be withou t

prejudice to the right of any persons, and the Parties to the Action shall be restored to their prio r

respective positions immediately before this Court entered this Order . In such event, the

Settlement and Stipulation shall become null and void and neither the Stipulation nor the Court' s

Orders relating thereto, including this Order, shall be used or referred to for any purpos e

whatsoever.

21 . All papers in support of the Settlement, the allocation of the Net Settlement Fund

and any application for Attorneys' Fees and Expenses shall be filed with the Court and served a t

least seven (7) days prior to the Hearing .

100293_I.DOC 9

22. At or after the Hearing, the Court will determine whether the application of

Plaintiffs' Settlement Counsel for the Class for an award of Attorneys' Fees and Expenses should

be approved .

23 . The Court reserves the right to adjourn the date of the Hearing and any

adjournment thereof without further notice to members of the Class, and retains jurisdiction t o

consider all further applications arising out of or connected with the proposed Settlement .

24. Only Class members shall have any rights with respect to approval of or objectio n

to the Settlement, the Plan of Allocation or the application of Plaintiffs' Settlement Counsel for

the payment of Attorneys' Fees and Expenses . Class members must formally intervene as a party

under Rule 24 of the Federal Rules of Civil Procedure if they appeal approval of the Settlemen t

or any part thereof.

Done this day of 200

TENDERED BY :

IYouglas M . RisenBerger & Montague, P.C.1622 Locust StreetPhiladelphia, PA 19103215-875-3000

IT IS SO ORDERED:

JUDGE, UNITED STATES DISTRICT COUR T

6 /-f--

100293 _1.DOC 10

502-587- 900

Keineth L. SatesSales , Tillma , Wallbaum,Catlett & Satterley1900 Waterfront Plaza325 West Main StreetLouisville, KY 40202502-589-5600Counsel for Plaintiffs and the Class

E~eth Ullmer Mendelward, Hobson & Fulton, LLP

2500 National City TowerLouisville, KY 40202Counsel for Kring & Brown, LLP

J n L. leis hakerR Kenyon MeyerDinsmore & Shohl LLP1400 PNC Plaz a500 West Jefferson StreetLouisville, KY 40202Counsel for Shefsky & Froelich, LTD

100293_1.DOC 11

J. Bruce Miller Law Group605 West Main StreetLouisville, KY 40202

EXHIBIT "C"

UNITED STATES DISTRICT COURTWESTERN DISTRICT OF KENTUCKY

LOUISVILLE DIVISION

George W. Lawson, et al ., onbehalf of Themselves and AllOthers Similarly Situated

Plaintiffs, : Civil Action No. 3 :00 CV 382

vs.

Advanced Equities, Inc .,et al,,

Defendants .

BAR ORDE R

On the motion of Plaintiffs, individually and in their capacity as Class Representatives of th e

putative Class ("Plaintiffs"), and Defendants Shefsky & Froelich Ltd. and Kring & Brown , L.L.P.

(collectively "Settling Defendants"), by counsel, for entry of this Bar Order, and the Court havin g

considered the memoranda of the parties and being otherwise sufficiently advised ;

IT IS HEREBY ORDERED, ADJUDGED AND DECREED that

1 . Members of the Class and the successors an d assigns of any of them are hereby

permanently barred and enjoined from instituting, commencing or prosecuting, either directly or i n

any other capacity, any and all claims, rights , demands , suits, matters, issues or causes of action,

whether known or unknown, against the Released Parties (as defined herein), whether under state or

federal law, including the federal securities laws and whether directly, indirectly, derivatively ,

representatively or in any other capacity, in connection with, based upon, arising out of, or relating to

1

any claim that has been or could be raised in this action or in connection with, based upon , arising

out of, or relating to any settlement of this action (but excluding any claims to enforce the terms of

the settlement)(hereinafter, "Settled Claims") against either or both of the Settling Defendants and/o r

their past or present subsidiaries, parents, affiliates, divisions, joint ventures, officers, directors ,

agents, representatives, shareholders, employees, partners, associates, affiliated lawyers, attorneys ,

auditors, insurers, excess insurers, accountants, advisors, trustees, escrowees, investment advisors ,

predecessors, successors, assigns, and any person, firm, trust, corporation, officer or director, or an y

other individual or entity of which either Settling Defendant has or had a controlling interest o r

which is or was related or affiliated with either Settling Defendant, and any trust of which eithe r

Settling Defendant is the settlor or which is for the benefit of either Settling Defendant (collectively,

"the Released Persons") . The Settled Claims are hereby compromised, settled, released, discharge d

and dismissed as against the Released Parties on the me rits and with prejudice by virtue of the

proceedings herein, the Stipulation and Agreement of Settlement dated , and the

Order and Final Judgment .

2 . In accordance with 15 U.S.C . §78u-4(f)(7)(A), each of the Released Parties is, by

virtue of the settlement, discharged from all claims for contribution based upon, relating to, or

arising out of the Settled Claims, that may hereafter be brought by any party to this action or by an y

other person or entity. Accordingly, all parties to this lawsuit and any other person or entity are

hereby permanently barred, enjoined, and restrained from instituting, commencing, prosecuting, o r

asserting any such claim for contribution against any Released Person based upon, relating to o r

arising out of the Settled Claims.

3. In accordance with 15 U .S.C. §78u-4(f)(7)(A), Settling Defendants are hereby

2

permanently barred, enjoined, and restrained from instituting, commencing, prosecuting or assertin g

all future claims for contribution, indemnification or otherwise, whether arising under state, federa l

or common law, against any Released Person based upon, relating to or arising out of the Settled

Claims .

4. All parties to this lawsuit as well as any other person or entity, including, but not

limited to Pixelon, Inc ., are also hereby permanently barred, enjoined, and restrained fro m

commencing, prosecuting, or asserting any other claim, however styled, whether for indemnification ,

contribution or otherwise, and whether arising under state, federal or common law, against the

Released Parties based upon, arising out of, or relating to the Settled Claims .

5. In accordance with 15 U.S.C . §78u-4(f)(7)(B), any final verdict or judgment that may

be obtained, by or on behalf of the Plaintiffs or the Class , shall be reduced by the greater of (a) an

amount that corresponds to the percentage or responsibility of the Settling Defendants and th e

Released Parties for the claims asserted by or on behalf of Plaintiffs or the Class or (b) the value o f

the consideration paid by or on behalf of the Settling Defendants to Plaintiffs and the Class i n

connection with their Settlement .

This is a final judgment pursuant to Rule 54 of the Federal Rules of Civil Procedure .

Done this day of , 2004.

JUDGE, UNITED STATES DISTRICT COURT

3

V

J. Bce* llerMichael J . Ki tYhenJ. BRUCE MILLER LAW GROUP605 W . Main StreetLouisville , Kentucky 40202(502) 587-9900 If

(215)

kffi L. SalA. Kron

19103-636 5

& WALLBAUM1900 Waterfront Plaza325 West Main StreetLouisville, Kentucky 40202(502) 589-5600

4

COUNSEL FOR PLAINTIFFS AND THE CLASS

on L. Flei hakerR. Kenyon MeyerDinsmore & Shohl LLP1400 PNC Plaz a500 West Jefferson StreetLouisville, Kentucky 40202(502) 540-2300

COUNSEL FOR DEFENDANT, SHEFSKY & FROELICH LTD .

4

LJVU61a. LV-L . 1~1 J1i11

BERGER & MONTAGUE, P .C.1622 Locust Street . -7

rolP(JC .G► uSI" kk,&-Q,Eliz th Uli er MendelWO WARD, HOBSON & FULTON, L .L.P .

2500 National City TowerLouisville , KY 40202-3175(502) 581-8000

COUNSEL FOR DEFENDANT, KRING & BROWN, LLP

91558vt26785-1

5

Exhibit 1

Defendants .

Civil Action No.3:00 CV 382

NOTICE OF PENDENCY OF CLASS ACTION AND OF SETTLE MENT

IN THE UNITED STATES DISTRICT COURTFOR THE WESTERN DISTRICT OF KENTUCKY

LOUISVILLE DIVISION

George W. Lawson, et al., on behalf ofThemselves and All Others Similarly Situated

Plaintiffs ,

vs .

Advanced Equities, Inc., et al,

TO: ALL PURCHASERS OF PIXELON, INC. ("PIXELON") SERIES ACONVERTIBLE PREFERRED STOCK ("PREFERRED STOCK") FROMAPRIL 1, 1998 THROUGH MARCH 5, 2001 , INCLUSIVE ( the "ClassPeriod) .

This Notice is given pursuant to Rule 23 of the Federal Rules of Civil Procedure and anOrder of the United States District Court for the Western District of Kentucky dated

a settlement with: (i)"Settling Defendants")respect to this lawsuit .

Its purpose is to inform you of the pendency of this litigation, and ofKring & Brown, LLP; and (ii) Shefsky & Froelich Ltd. (collectivelyfor $800,000.00, how it may affect your rights, and your options with

The purpose of this Notice is to inform you of the pendency and proposed Settlement ofthis Class Action (the "Action" or the "Litigation") and the hearing to be held by the UnitedStates District Court for the Western District of Kentucky (the "Court") to consider the fairness,reasonableness and adequacy of the proposed Settlement and to consider the application ofPlaintiffs' Settlement Counsel for attorneys' fees and reimbursement of expenses . The proposedSettlement, the terms of which are only summarized in this Notice, is embodied in a Stipulationand Agreement of Settlement dated , 200_ (the "Stipulation"), which hasbeen filed with the Court . Pursuant to Rule 23 of the Federal Rules of Civil Procedure and an

a ti

Order of the Court dated , 200_, a hearing (the "Settlement Hearing") toconsider whether the proposed Settlement is fair, reasonable and adequate and should beapproved, and to consider the plan of allocation and the application of Plaintiffs' SettlementCounsel for attorneys' fees and reimbursement of expenses, will be held before the HonorableCharles R. Simpson, III, United States District Judge, Western District of Kentucky, GeneSnyder United States Courthouse, 601 W . Broadway, Louisville, KY 40202 at M. on

1200 .

I. SUMMARY OF SETTLEMENT

The proposed settlement creates a fund in the amount of $800,000 in cash (the"Settlement Amount"), plus interest . Based on Plaintiffs' Settlement Counsels'(defined below)estimate of the number of shares entitled to participate in the settlement and the anticipatednumber of claims to be submitted by Class Members, the average distribution for Class Memberswould be approximately $ per share, before deduction of Court-approved fees andexpenses. However, your actual recovery from this fund may be more or less depending on anumber of variables, including your actual loss based on the share price paid for your ClassPeriod purchases of Pixelon Preferred Stock, the number of claimants, the amount of fees andcosts awarded by the Court to Plaintiffs' Counsel, the expense of administering the claimsprocess, and the timing of your purchases .

II. DESCRIPTION OF THE LITIGATION

1 . This Action is pending in the United States District Court for the Western Districtof Kentucky (the "Court") . The Action was brought pursuant to Sections 10(b) and 20(a) of theSecurities Exchange Act of 1934 (the "Exchange Act"), as well as Rule lOb-5 promulgatedthereunder, against: (i) former officers and directors of Pixelon, Inc . ("Pixelon" or the"Company"), to whit, Adam Michael Fenne (a .k.a. David Stanley), Paul C . Ward, Jr., StephenCurtis, and Bartley M. Moore; (ii) Advanced Equities, Inc . ; (iii) certain officers and/or boardmembers of Advanced Equities, Inc ., to whit, Lee Wiskowski, Keith Daubenspeck, and DwightBadger; (iv) Kring & Brown, LLP; and (v) Shefsky & Froelich Ltd . (collectively, "Defendants") .Pixelon has filed for bankruptcy and is not a party to this Action. A previous settlement for$2,650,000.00 was reached with Advanced Equities and its officers and directors on January 12,2004 .

2. This Action was commenced by the filing of a Class Action Complaint on orabout June 30, 2000, as a securities class action on behalf of persons who purchased thesecurities or held stock of Pixelon against certain Pixelon directors and other Defendants. OnDecember 21, 2001, the Court consolidated as part of the Action a related lawsuit styled Wenk, etaI. v. Advanced Equities, Inc ., et al., Civil Action No. 3:01-CV-544(H) (W .D. Ky.), which hadbeen originally filed in the United States District Court for the Central District of California andsubsequently was transferred to this Court. On July 3, 2002, the Court appointed George M .Lawson, Maria Swift, William C . Dugdale, and H . Grant Hathaway as lead plaintiffs for theClass (defined below) . On the same date, the Court also certified as Lead Counsel for the Class

2

a

the law firms of Berger & Montague, P .C., Sales Tillman & Wallbaum, and J . Bruce Miller LawGroup (collectively, "Plaintiffs' Settlement Counsel") .

3. Plaintiffs filed a Consolidated Amended Complaint (the "Complaint") on July 17,2002. The Complaint alleges that investors who purchased Series A Preferred Shares of Pixelonin a private placement were defrauded by certain Pixelon Directors and other Defendants . Theprimary business of Pixelon, an internet company, was to develop and market an internetbroadcasting network . In 2000, Pixelon filed for bankruptcy . In the Complaint, the Plaintiffsallege, inter alia, that they were defrauded in connection with their purchases of Pixelon stockbecause: (1) the value of the Company allegedly was overstated in the Private PlacementMemorandum; (2) the Defendants allegedly knew or should have known that the background ofDefendant Adam Michael Fenne (a/k/a David Stanley) ("Fenne"), the President and founder ofPixelon, was false and incomplete; (3) the Private Placement Memorandum allegedly failed tomake adequate disclosures regarding the ownership and development of Pixelon's technology ;and (4) Fenne's background and the reasons for his termination from Pixelon in November 1999were not explained to the investors .

4. The Settling Defendants filed motions to dismiss the Action which were grantedby the Court. The Court vacated the order dismissing the claim against the Settling Defendantsto permit the parties to determine whether the case could be settled . The Settling Defendantsdeny any wrongdoing or liability to the Plaintiffs . If the proposed Settlement is not approved,the Settling Defendants intend to reassert their motions to dismiss and assert various defenses tothe Class Action Complaint, and to demand judgment on the merits dismissing the Action .

5. The Settling Defendants are entering into the proposed Settlement to avoid theexpense and inconvenience of protracted continued litigation . The proposed Settlement does notconstitute an admission of any wrongdoing whatsoever by Settling Defendants .

6. On , the Court, solely for purposes of implementingthe proposed Settlement, and pursuant to Rule 23(b)(3) of the Federal Rules of Civil Procedure,certified a class consisting of all persons who, during the period from April 1, 1998 through andincluding March 5, 2001, inclusive (the "Class Period"), purchased the Series A ConvertiblePreferred Stock of Pixelon, Inc . (the "Class") . Excluded from the Class are the PixelonDefendants, and the members of their immediate families, and the heirs, successors and assignsof any excluded person .

THE COURT HAS DIRECTED THAT NOTICE SHOULD BE GIVEN TO ALLCLASS MEMBERS TO INFORM THEM OF THE LAWSUIT AND THEIR RIGHTS . THESENDING OF THIS NOTICE IS NOT AN EXPRESSION BY THE COURT OR THELITIGANTS OF ANY OPINION AS TO THE MERITS OF ANY CLAIM OR DEFENSE ORTHE LIKELIHOOD OF RECOVERY BY THE CLASS REPRESENTATIVES OR ANY OFTHE MEMBERS OF THE CLASS . NOTICE IS BEING PROVIDED SO THAT ALL' CLASSMEMBERS MAY MAKE A DECISION AS TO WHAT STEPS, IF ANY, THEY WISH T O

3

TAKE AS THIS MATTER PROCEEDS . NOTICE IS BEING SENT TO YOU BECAUSERECORDS INDICATE THAT YOU MAY BE A CLASS MEMBER .

III. DEFINITIONS USED IN THIS NOTICE

As used in this Notice, the following terms have the meanings specified below :

7. "Attorneys' Fees and Expenses" means the portion of the Settlement Amountapproved by the Court for payment to Plaintiffs' Settlement Counsel, including attorneys' fees,costs, litigation expenses, fees and expenses of experts .

8. "Authorized Claimant" means any Class Member whose claim for recovery hasbeen allowed pursuant to the terms of the Stipulation . Only those members of the Class filingvalid and timely Proofs of Claim shall be entitled to receive any distributions from the NetSettlement Fund.

9. "Claims Administrator" means the firm of Heffler, Radetich, & Saitta LLP, anindependent firm retained by Plaintiffs' Settlement Counsel to process Proofs of Claim and toprocess payments .

10. "Class Members" or "Members 'of the Class" means all Persons who fall withinthe definition of the Class as set forth in paragraph 6 above .

11 . "Class Period" means the period of time from April 1, 1998 through and includingMarch 5, 2001 .

12. "Class Representatives" means George M. Lawson, Maria Swift, William C .Dugdale, and H. Grant Hathaway.

13. "Effective Date" means the first date by which all of the events and conditionsspecified in paragraph 7 of the Stipulation have been met and have occurred and the Court'sFinal Judgment of Dismissal With Prejudice (the "Judgment") becomes final, which shall bedeemed to be when either of the following has occurred : (a) if an appeal or review is not soughtby any person from the Judgment, the day following the expiration of the time to appeal orpetition from the Judgment ; or (b) if an appeal or review is sought from the Judgment, the dayafter such Judgment is affirmed or the appeal or review is dismissed or denied and suchJudgment is no longer subject to further judicial review .

14. "Escrow Account" means the interest-bearing account to be established andmaintained by Plaintiffs' Settlement Counsel at Merrill Lynch, as to which Merrill G . Davidoff,Esquire is Escrow Agent for the purpose of holding all monies paid in this Settlement . At alltimes the Escrow Account shall be held in custodia legis , subject to the approval of the Court .

15 . "Escrow Agent" means Berger and Montague, P .C.

4

16. "Gross Settlement Fund" means the Settlement Amount plus all interest earnedthereon.

17 . "Net Settlement Fund" means the Gross Settlement Fund, less: (i) Attorneys' Feesand Expenses; (ii) Notice and Administration Expenses; (iii) taxes; and (iv) other fees andexpenses authorized by the Court.

18 . "Notice and Administration Fund" means the interest-bearing account to beestablished and maintained by Plaintiffs' Settlement Counsel . The Notice and AdministrationFund may be drawn upon by Plaintiffs' Settlement Counsel for Notice and AdministrationExpenses .

19. "Notice and Administration Expenses" means all expenses incurred (whether ornot paid) in connection with the preparation, printing, mailing, and publication of the notice tothe Class of the proposed Settlement, and all expenses of settlement administration ; provided,however, that none of these expenses shall be deemed to include attorneys' fees . All suchexpenses shall be paid from the Gross Settlement Fund .

20. "Person" means any individual, corporation, partnership, association, affiliate,joint stock company, trust, estate, unincorporated association, government and any politicalsubdivision thereof, and any other type of legal or political entity .

21 . "Plaintiffs' Counsel" means each law firm that represents a Plaintiff named in anyaction that was consolidated into Lawson, et al v. Advanced Equities, Inc ., et al , Civil Action No .3:00-CV-382 .

22 . "Plaintiffs' Settlement Counsel" means the law firms of Berger & Montague,P.C., Sales Tillman,Wallbaum, Catlett & Satterley, and J . Bruce Miller Law Group.

23 . "Recognized Claim" means the market loss for each Authorized Claimant asdefined in the Plan of Allocation (1 2) .

24. "Released Person" or "Released Persons" means any and all of the SettlingDefendants and their respective present and former parents, subsidiaries, affiliates, divisions, andjoint ventures, and its or their present and former officers, directors, employees, shareholders,partners, associates, affiliated lawyers, agents, representatives, attorneys, insurers, excessinsurers, advisors, investment advisors, trustees, escrowees, auditors, accountants, spouses andimmediate family members, and the predecessors, heirs, successors, and assigns of any of them,any Person or entity in which any Released Person has or had a controlling interest or which is orwas related to or affiliated with any Released Person and any trust of which any SettlingDefendant is the settlor or which is for the benefit of any Settling Defendant and/or member(s)of a Settling Defendant's family.

25 . "Released Claims" shall mean all manner of actions, claims, demands, rights,duties, remedies, liabilities and causes of action of every nature and description whatsoever ,

5

known or unknown, suspected or unsuspected, contingent or non-contingent, whether class,individual, or direct in nature, whether in law or in equity, whether based on federal, state, local,statutory or common law or any other law, rule or regulation, whether based on events or actionsoccurring prior to or on the Effective Date (as defined above), including claims in anybankruptcy proceeding, which any of the Class Representatives or Class Members ever had, nowhave, or hereafter may have against any and all of the Released Persons by reason of, basedupon, arising out of, or in connection with, directly or indirectly, any allegation, fact, occurrence,matter, representation, transaction or omission referred to, involved or set forth in, or whichcould have been referred to or asserted in the Complaint or any other pleading in the Action, orany public filing or statement of Pixelon, Advanced Equities or their officers and directors,whether known or unknown, to the Class Representatives, Class Members, Released Persons orany other party to the proposed Settlement . Additionally, the Class Representatives and eachmember of the Class expressly release and covenant not to pursue any derivative Claims against

any Released Person .

26. "Settling Defendants ' Counsel" means the law firms of Dinsmore & Shohl LLP

and Woodward, Hobson & Fulton LLP .

27. "Settlement" means the settlement contemplated by the Stipulation .

28. "Settlement Amount" is the sum of $800,000.

29. "Settlement Hearing" means the hearing to be held by the Court to determinewhether the proposed Settlement should be approved as fair, reasonable and adequate, whetherall Released Claims should be dismissed with prejudice, whether an order approving theSettlement should be entered thereon, whether the allocation of the Settlement Fund should beapproved, and to award counsel fees and reimbursement of expenses to Plaintiffs' Settlement

Counsel .

IV. THE DESCRIPTION OF THE PROPOSED SETTLEMENT

A. The Proposed Settlement

In full settlement of the Released Claims, Settling Defendants have agreed to pay$800,000 . This sum has been placed in an interest-bearing escrow account. Of this amount,

$50,000.00 has been placed in a separate fund to defray costs of Settlement Notice and

Administration .

A portion of the Gross Settlement Fund will be used for certain administrative expenses,including costs of printing and mailing this Notice, the cost of publishing a newspaper notice,payment of any taxes assessed against the Gross Settlement Fund or the Net Settlement Fund andcosts associated with the processing of claims submitted . In addition, as explained below, aportion of the Gross Settlement Fund may be awarded by the Court to counsel for Plaintiffs asattorneys' fees and for reimbursement of out-of-pocket expenses . The Net Settlement Fund,

6

comprised of the balance of the Gross Settlement Fund following the payment of administrativeexpenses, taxes, attorneys' fees and the reimbursement of expenses, will be distributed accordingto the Plan of Allocation, described below, to Class Members who submit valid and timely proofof claim forms.

B. Statement of Potential Outcom e

Class Representatives and Settling Defendants do not agree on the average amount ofdamages per share that would be recoverable if Class Representatives were to have prevailed oneach claim asserted. The issues on which the parties disagree include: (1) the appropriateeconomic model for determining the amount by which Pixelon Preferred Stock was allegedlyartificially inflated during the Class Period ; (2) the effect of various market forces influencingthe trading price of Pixelon Preferred Stock at various times during the Class Period ; (3) theextent to which external factors, such as general market conditions, influenced the trading priceof Pixelon Preferred Stock at various times during the Class Period ; (4) the extent to which thevarious matters that Class Representatives alleged were materially false or misleading (if at all)influenced (if at all) the trading price of Pixelon Preferred Stock at various times during the ClassPeriod; and (5) to the extent that any Class Members were damaged by violations of the federalsecurities laws, whether any entity other than Settling Defendants may be partially or completelyliable to the Class.

In determining to settle this Action, Class Representatives considered the substantial riskthat they and Members of the Class might not have prevailed on any or all of their claims andthat there were substantial risks that the decline in the price of Pixelon Preferred Stock could beattributed, in whole or in part, to factors other than the allegedly false and misleading statementsand that therefore, Class Representatives could have recovered nothing or substantially less thanthis amount, as well as the risk that this Litigation might be dismissed on motions to dismiss orfor summary judgment or at trial .

Settling Defendants deny that they are liable to the Plaintiffs and the Class .

C. Statement of Attorneys ' Fees and Costs Sought

If the settlement is approved by the Court, Plaintiffs' Settlement Counsel will apply to theCourt for attorneys' fees of up to 33% of the Gross Settlement Fund and reimbursement of out-of-pocket expenses, including fees and expenses of experts . If the maximum amount permittedby this Stipulation is requested and is approved by the Court, Plaintiffs' Settlement counselwould receive a total of $ , the average cost per share would be approximately$ . The effect of an award of Attorneys' Fees and Expenses (defined below) oneach Class member will depend on his or her particular recovery in the Plan of Allocation, a sdetailed below .

The fee requested by Plaintiffs' Settlement Counsel would compensate them for theirefforts in achieving the proposed Settlement for the benefit of the Class, and for their risk inundertaking this representation on a contingency basis . Plaintiffs' Settlement Counsel hav e

7

determined that the fee requested is within the range of fees awarded to plaintiffs' counsel undersimilar circumstances in litigation of this type .

D. Reasons for Settlement

Plaintiffs' Settlement Counsel believe that the proposed Settlement is fair, reasonable,and adequate, and is in the best interests of the Class . Because of the risks associated withcontinuing to litigate and proceeding to trial, there was a danger that plaintiffs would not haveprevailed on any of their claims, in which case the Class would receive nothing . For example,the Class faced the possibility that all or many of the claims in this case could have again beendismissed as a result of the Settling Defendants' motions to dismiss, motions for summaryjudgment, if any, after trial, or on appeal . In addition, the amount of damages recoverable by theClass was and is challenged by Settling Defendants . Recoverable damages in this case arelimited to losses caused by conduct actionable under applicable law and, had the Action gone totrial, Settling Defendants intended to assert that all or most of the losses of Class Members werecaused by the action of parties other than Settling Defendants, or by non-actionable marketfactors . The decision to enter into this Settlement was made with knowledge of the facts andcircumstances underlying Class Representatives' claims and the strengths and weaknesses ofthose claims . Plaintiffs' Settlement Counsel engaged in extensive and intensive arms-lengthnegotiations with counsel for Settling Defendants with respect to the Settlement and, indetermining to settle the Litigation, Plaintiffs' Settlement Counsel have evaluated the likelihoodof succeeding on the merits, damages, and issues of causation . Plaintiffs' Settlement Counselbelieve that the proposed Settlement is fair, reasonable and adequate to the members of theClass. They have reached this conclusion after investigating and considering, among otherthings, the strengths and weaknesses of Class Representatives' claims against SettlingDefendants and the uncertainties inherent in this complex litigation, as well as the substantialbenefit provided by the proposed Settlement to the members of the Class .

V. YOUR SHARE OF THE SETTLEMENT FUND AMOUNT

If the proposed Settlement becomes effective, Class Members will be entitled to share inthe distribution of the proceeds of the Settlement Amount allocated to the Class, after payment oftaxes, attorneys' fees, expenses, and expenses of the settlement administration, to the extentallowed by the Court .

Payments and distributions from the Net Settlement Fund on claims submitted by ClassMembers shall be made in accordance with a Plan of Allocation (the "Plan of Allocation")approved by the Court .

VI. PROPOSED PLAN OF ALLOCATION

The Settlement Fund, net of the costs of the notice and administration of the Settlement,taxes, and attorneys' fees and expenses as may be awarded by the Court, shall be distributed toClass Members who timely submit valid Proof of Claim forms .

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The Net Settlement Fund will be allocated among all Authorized Claimantsproportionately, on a pro rata basis, according to their Recognized Claim compared to theaggregate claims of all Authorized Claimants . For purposes of determining the amount anAuthorized Claimant may recover under the Plan of Allocation, Plaintiffs' Settlement Counselhave consulted with their damages expert, and Plaintiffs' Counsel have determined that the Planof Allocation reflects an assessment of the damages that Plaintiffs' Settlement Counsel believecould have been recovered if Plaintiffs had been entirely successful in establishing liabilityagainst the Settling Defendants .

Because Class Members were damaged by different amounts, depending on when theypurchased and/or acquired their Pixelon Preferred Stock, Plaintiffs' Counsel have determinedthat the Recognized Claims vary depending on the date of purchase and whether the shares wereheld until the end of the Class Period. Plaintiffs' Counsel have determined that Pixelon PreferredStock was worthless as of April 19, 2000 .

Pursuant to this analysis, the amount of each claim will be calculated as follows :

An Authorized Claimant 's "Recognized Claim ," will be calculated for purposes of theSettlement as follows :

For Pixelon Preferred shares purchased and sold during the Class Period,the "Recognized Claim" shall mean the purchase price (includingcommissions) less the sales proceeds received (net of commissions) ;

2 . For Pixleon Preferred shares purchased during the Class Period and heldthrough April 19, 2000, the "Recognized Claim" shall mean the purchaseprice (net of commissions) .

Each Authorized Claimant shall be allocated a pro rata share of the Net Settlement Fund basedon his, her or its "Recognized Claim" as compared to the total "Recognized Claim" of allAuthorized Claimants.

General Provision s

The distribution to each Class member may be rounded to the nearest dollar . Only claimsthat result in payments of $5 or more will be paid . The Plan of Allocation may be modified onlyupon further order of the Court and may be so modified without further notice to Class Members .Class Members who desire to be informed of any modification of the Plan of Allocation mustrequest further notification by writing to the Claims Administrator at . Pixelon SecuritiesLitigation, c/o Heffler, Radetich & Saitta L.L.P., Claims Administrator, P .O. Box 58788,Philadelphia, PA 19102-8788 .

The date of acquisition or purchase is the "contract" or "trade" date as distinguished fromthe "settlement" date .

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Transactions resulting in a gain shall be netted against other Recognized Claim amounts .In the event a Class Member has more than one purchase or sale of Pixelon securities, allpurchases and sales shall be matched on a First-In/First-Out ("FIFO") basis .

"Short" sales of Pixelon's stock shall not be recognized for any amount of loss on thecover, purchase or closing transaction and no Recognized Claim will be computed for any suchcovering purchase or closing transaction .

Shares "transferred into," delivered into," or received into" the claimant's account, shallNOT be considered as purchased shares unless claimant submits documents supporting that theoriginal purchase of the shares occurred during the Class Period . Also, shares purchased andsubsequently "transferred out" or "delivered out" of claimant's account will NOT be consideredpart of claimant's claim, as the right to file for those shares belongs to the person or partyreceiving the shares .

The receipt or grant of a gift of Pixelon stock during the Class Period shall not be deemedto be a purchase of Pixelon stock during the Class Period . However, the recipient of Pixelonstock as a gift or as a distribution from an estate shall be eligible to file a Proof of Claim formand participate in the Settlement to the extent that particular donor or decedent as the actualpurchaser of Pixelon stock would have been eligible, based upon the circumstances of suchpurchase within the Class Period ; however, the donee and donor may not both claim with regardto the same Pixelon stock . If both the donor and donee make such a claim, only the claim filedby the donee will be honored.

Class Members who do not file acceptable Proofs of Claim, a copy of which is attached,will not share in the settlement proceeds. Class Members who either do not file a request forexclusion or file unacceptable Proofs of Claim will nevertheless be bound by the Judgment(defined below) and the proposed Settlement .

The proposed Settlement will become effective, if approved by the Court, after theJudgment entered by the Court becomes final . All persons within the Class who have notrequested to be excluded will be released, and be forever barred from suing the SettlingDefendants and other Released Persons (as defined above) from all Released Claims (as definedabove). This release will bind all persons within the Class who do not request to be excluded,regardless of whether they seek and receive settlement funds .

The Settlement is also conditioned on the entry by the Court of a Bar Order barringcertain claims for contribution and/or indemnity against the Settling Defendants and the ReleasedPersons. The Bar Order may result in a reduction of any recovery which Plaintiffs and anyMembers of the Class may obtain against third parties.

This Notice is not intended to be a complete description of the Stipulation . TheStipulation contains the full and complete terms of the proposed Settlement, and is available asset forth below .

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VII. RIGHTS OF CLASS MEMBERS

If you fall within the definition of the Class, you will remain a Class Member unless youelect to be excluded from the Class . If you do not request to be excluded from the Class, youwill be bound by any judgment entered with respect to the proposed Settlement in the Actionwhether or not you file a Proof of Claim.

VIII. THE RIGHT TO EXCLUDE FROM THE SETTLEMENTAND THE CLASS ACTION

If you remain a Class Member, you may, at your own expense, enter an appearance inthis lawsuit personally, or through a lawyer of your choice. If you do not enter an appearance,your interests will be represented by the Class Representatives through Plaintiffs' SettlementCounsel .

If you remain a Class member you will not be asked to make any out-of-pocket paymentfor attorneys' fees or expenses . Plaintiffs' Settlement Counsel will file a petition with the Courtfor an award of appropriate attorneys' fees and expenses to be paid out of any recovery.

IF YOU DO NOT WISH TO REMAIN IN THE CLASS, YOU MUST REQUESTEXCLUSION IN THE MANNER AND BY THE DEADL INE SET FORTH BELOW .

If you exclude yourself from the Class : (1) you will not be entitled to share in anyrecovery that may be obtained for the Class from either Settling Defendants or any otherDefendant; (2) you will not be bound by any judgment, whether favorable to the Class or not,that may be entered in this Action; and (3) you may pursue any claims you may have againstSettling Defendants and any and all other Defendants with respect to the claims asserted onbehalf of the Class .

If you do not wish to remain a member of the Class, you must mail a written request forexclusion, postmarked no later than sixty days from the date of this notice to : Pixelon SecuritiesLitigation, c/o Heffler, Radetich & Saitta L .L.P., Claims Administrator, P .O. Box 58788,Philadelphia, PA 19102-8788 . You must state the following information: (a) the full name,address and telephone number of the beneficial owner or the person or entity requestingexclusion; (b) the number and type of Pixelon Preferred Stock purchased or sold by thebeneficial owner during the Class Period ; and (c) the price and the date(s) on which saidsecurities were purchased or sold . If the stock was acquired or sold by, or on behalf of, jointbeneficial owners, all such owners should sign the request and provide such information . Anyrequest for exclusion made by a representative on behalf of a Class Member must state thecapacity in which the representative is acting .

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IX. THE RIGHT TO OBJECT AND BE HEARD AT THE HEARIN G

Any Class Member who has not validly and timely requested to be excluded from theClass, and who objects to any aspect of the Settlement, the Plan of Allocation, or the applicationfor attorneys' fees, costs, and reimbursement expenses, may appear and be heard at theSettlement Hearing . To object, you must file the following documents : a written statementsetting forth the basis of your objections, any supporting memoranda or other papers,documentary proof of membership in the Class, and a written statement signed by the objectorsetting forth: (a) the name, address, and telephone number of the objector ; and (b) the number oramount, and price of Pixelon Preferred Stock purchased or acquired by the objector during theClass Period and the date of each such transaction with proof thereof . Such objection must beserved and filed so that it is received no later than seventy days from the date of this notice byeach of the following:

Clerk of the CourtUnited States District Court

Western District of KentuckyGene Snyder U.S . Courthouse

601 W. BroadwayLouisville, KY 40202

Merrill G. Davidoff, Esq.Berger & Montague, P .C .

1622 Locust StreetPhiladelphia, PA 19103-636 5

J. Bruce Miller, Esq .J. Bruce Miller Law Group

605 W. Main StreetLouisville, KY 40202

12

Kenneth L . Sales, Esq .Sales Tillman,Wallbaum , Catlett & Satterley

1900 Waterfront Plaza325 W . Main Street

Louisville , KY 40202

Plaintiffs' Settlement Counsel for the Class

Elizabeth Ullmer Mendel, Esq .Woodward, Hobson & Fulton LLP

2500 National City TowerLouisville, KY 40202

Jon L. Fleischaker, Esq .Dinsmore & Shohi LLP

1400 PNC Plaza500 West Jefferson Street

Louisville, KY 40202

Janet P. Jakubowicz, Esq .Greenebaum Doll & McDonald PLLC

3500 National City Tower101 South Fifth StreetLouisville, KY 40202

Angela McNeal Hoyer, EsquireBoehl Stopher & Grave s

2300 Aegon Center400 West Market

Louisville, KY 4020 2

Michael W. Robinson, EsquireRobinson & Wisbaum, Inc .

361 Forrest Avenue, Suite 203Laguna Beach, CA 9265 1

Counsel for Settling Defendants

Class Members or their attorneys intending to appear at the Hearing must also deliver tocounsel for the Class and counsel for the Settling Defendants and file with the Court, at theaddresses specified above, no later than sixty days from the date of this notice, a Notice ofIntention to Appear, setting forth the case number and the name, address and telephone numberof the Class Member, and the name of the Class Member's attorney(s) . Class Members whointend to object to this settlement and Plaintiffs' Settlement Counsel's application for an awardof fees and expenses or the Plan of Allocation and who desire to present evidence at th e

13

Settlement Hearing must include in their written objection the identity of any witnesses they maycall to testify and exhibits they intend to introduce into evidence at the Hearing .

The failure to file an objection in a timely manner, as described above, may bar theobjector from being heard, absent relief from the Court, on any objections, including anyobjection to the fairness, reasonableness or adequacy of the proposed Settlement, or to the entryof the judgments contemplated by the proposed Settlement .

You may file an objection without having to appear at the Settlement Hearing . Classmembers who approve of the proposed Settlement do not need to appear at the SettlementHearing to indicate their approval, although they must file a Proof of Claim to participate in theSettlement .

ANY CLASS MEMBER WHO DOES NOT OBJECT IN THE MANNER DESCRIBEDHEREIN WILL BE DEEMED TO HAVE WAIVED ANY OBJECTION, AND SHALL BEFOREVER FORECLOSED FROM MAKING ANY OBJECTION TO THE PROPOSEDSETTLEMENT .

X. DISMISSAL AND RELEASES

If the proposed Settlement is approved, the Court will enter a Final Judgment and Orderof Dismissal (the "Order and Final Judgment") . The Order and Final Judgment will dismiss theReleased Claims with prejudice as to the Settling Defendants .

The Order and Final Judgment will provide that all Class Members who do not validlyand timely request to be excluded from the Class shall be deemed to have, fully, finally, andforever, released, settled and discharged, in accordance with the terms of the Stipulation, theReleased Persons from and with respect to the Released Claims, whether or not such Classmembers execute and deliver a Proof of Claim and Release .

XI. CONDITIONS FOR SETTLEMENT

The proposed Settlement shall be subject to the following conditions and, except asprovided in paragraph 7 (seven) of the Stipulation, shall not be canceled and terminated unless :

1 . The Court fails to enter the Notice Order ; or

2. The Court fails to enter the Order and Final Judgment and Bar Order ; or

3. The Effective Date shall not have occurred; or

4. Persons who would otherwise be Class members property submit timelyrequests for exclusion from the Class and a Settling Defendant invokes theprovisions of paragraph 7 .3 of the Stipulation .

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Upon occurrence of all of the events referenced above, each of the Class Representativesand Class members, shall hereby have deemed to have, and by operation of the Judgment shallthereby be deemed to have, fully, finally, and forever, released, settled and discharged, inaccordance with the terms of the Stipulation, the Released Persons (as defined above) from andwith respect to the Released Claims (as defined above), whether or not such Class membersexecute and deliver a Proof of Claim and Release .

XIL EFFECT OF DISAPPROVAL, CANCELLATION OR TERMINATION

If any of the foregoing conditions, as described in paragraph 7 of the Stipulation, are notsatisfied, or if. (i) the Court does not enter the Order and Final Judgment and Bar Order, or (ii)the Court enters the Order and Final Judgment and Bar Order and appellate review is sought andon such review the Order and Final Judgment or Bar Order is materially modified or reversed, or(iii) Settling Defendants exercise their right to withdraw from the Settlement under paragraph 7 .3of the Stipulation, then this proposed Settlement shall be terminated unless Plaintiffs' SettlementCounsel, and Settling Defendants' Counsel, within ten (10) business days from the receipt ofsuch ruling or written notice of such circumstances, agree in writing to proceed with theStipulation. Such notice shall be provided on behalf of the parties to this Stipulation only by

their counsel . Neither a modification nor a reversal on appeal of any amount of fees, costs, andexpenses awarded by the Court to any of Plaintiffs' Settlement Counsel shall be deemed amaterial modification of the Order and Final Judgment, the Bar Order or the Stipulation .

If either (a) the Effective Date does not occur, or (b) this Stipulation is canceled orterminated pursuant to its terms, or (c) the Settlement does not become final for any reason, thenthe Gross Settlement Fund (less any taxes, fees or charges and any Notice and AdministrationExpenses paid or owing with respect to the Gross Settlement Fund), plus any amount thenremaining in the Notice and Administration Account, including both interest paid and accrued,shall be refunded to Settling Defendants and insurance carriers by the Escrow Agent withinseven (7) business days of such cancellation or termination .

If the Effective Date does not occur, or if the Stipulation is disapproved, canceled orterminated pursuant to its terms, all of the parties to this Stipulation shall be deemed to havereverted to their respective status prior to the execution of the Stipulation, and they shall proceedin all respects as if the Stipulation had not been executed and the related orders had not beenentered, preserving in that event all of their respective claims and defenses in the Action .

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XIII. NOTICE TO BANKS. BROKERS AND OTHER NOMINEES

Because the deadline for requesting exclusion is sixty days from the date of this notice,each bank, brokerage firm or other nominee who purchased Pixelon Preferred Stock during theClass Period for a beneficial owner ("Nominees") should, within ten (10) days of receipt of thisNotice, provide a list of the names and addresses of such beneficial owners of the stockpurchased or sold during the Class Period to the Pixelon Securities Litigation ClaimsAdministrator at the address set forth below, who will then mail Notices to them :

Pixelon Securities Litigationc/o Heffler, Radetich & Saitta L .L.P .

Claims AdministratorP.O. Box 58788

Philadelphia, PA 19102-878 8

XIV. FURTHER INFORMATION AVAILABLE

This Notice is a summary of the Action and certain provisions of the proposedSettlement, and is not intended , and should not be construed, as a complete statement of theproposed Settlement or of the Action . For further information concerning the Action, you mayrefer to the pleadings and other papers, all of which may be inspected at the office of the Clerk ofthe Court, U.S. District Court for the Western District of Kentucky, 601 W . Broadway,Louisville, KY 40202, during normal business hours .

PLEASE DO NOT CONTACT THE COURT OR THE CLERK'S OFFICE FORINFORMATION . ANY INQUIRIES SHOULD BE DIRECTED TO THE PLAINTIFFS'SETTLEMENT COUNSEL .

CLERK OF THE UNITED STATES DISTRICTCOURT FOR THE WESTERN DISTRICT OFKENTUCKY

Dated: 1200

100287026785-1

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EXHIBIT 2

IN THE UNITED STATES DISTRICT COURTFOR THE WESTERN DISTRICT OF KENTUCK Y

LOUISVILLE DIVISIO N

George W. Lawson, et al ., on behalf ofThemselves and All Others Similarly Situate d

Plaintiffs, Civil Action No. 3:00 CV 382

v.

Advanced Equities , Inc., et al,

Defendants .

SUMMARY NOTICE OF PENDENCYAND SETTLE MENT OF CLASS ACTION

TO: ALL PURCHASERS OF PIXELON, INC. ("PIXELON") SERIES ACONVERTIBLE PREFERRED STOCK ("PREFERRED STOCK") FROMAPRIL 1, 1998 THROUGH MARCH 5 , 2001 , INCLUSIVE

YOU ARE HEREBY NOTIFIED, pursuant to Rule 23 of the Federal Rules of Civi l

Procedure and an Order of the United States District Court for the Western District of Kentuck y

dated , 200, that a hearing will be held on , 200, at

_.m. in the United States District Court for the Western District of Kentucky, Unite d

States Courthouse, Louisville , KY 40202 to determine ( 1) whether a proposed settlement (the

"Settlement") of the above- entitled class action with (i) Kring & Brown LLP and (ii) Shefsky &

Froelich Ltd. for Eight Hundred Thousand Dollars ($800,000 .00) in cash plus accrued interest

(the "Settlement Fund") should be approved by the Court as fair, reasonable, and adequate ; (2)

whether the application of plaintiffs' counsel for an award of attorneys ' fees and reimbursement

of expenses should be approved; and (3) whether the action should be dismissed with prejudice .

Statement of Class Recovery

Pursuant to the proposed Settlement, a fund in the amount of $800,000 in cash (th e

"Settlement Amount"), plus interest will be created .

Statement of Potential Outcome of Cas e

The parties disagree on both liability and damages and do not agree on the average

amount of damages per share that would be recovered if Plaintiffs were to have prevailed on th e

claims alleged . Settling Defendants deny that they are liable to the Plaintiffs or the Class and

deny that Plaintiffs or the Class have suffered any damages .

Statement of Attorneys' Fees and Costs Sough t

If the settlement is approved by the Court, Plaintiffs' Counsel will apply to the Court fo r

attorneys' fees of up to 33% of the Settlement Fund and reimbursement of out-of-pocke t

expenses, including fees and expenses of experts. The fee requested by Plaintiffs' Counsel

would compensate them for their efforts in achieving the Settlement for the benefit of the Clas s

and for their risk in undertaking this representation on a contingency basis . Plaintiffs' Counsel

have determined that the fee requested is within the range of fees awarded to Plaintiffs' Counse l

and under similar circumstances in litigation of this type .

Further Information

Further information regarding the Action, this Summary Notice and the Notice may b e

obtained by contacting Plaintiffs ' Co-Lead Counsel .

2

Merrill G . Davidoff, Esq. J. Bruce Miller, Esq .Berger & Montague, P .C. J. Bruce Miller Law Group1622 Locust Street 605 W . Main S treetPhiladelphia, PA 19103-6365 Louisville, KY 40202(215) 875-3000 (502) 587-0900

Reasons for Settlement

Kenneth L. SalesSales, Tillman, Wallbaum,Catle tt & Satterley1900 Waterfront Plaza325 W . Main StreetLouisville , KY 40202(502) 589-5600

Plaintiffs' Counsel believe that the proposed Settlement is fair , reasonable and adequate,

and is in the best interest of the Class .

C'nnrlneinn

IF YOU ACQUIRED PIXELON PREFERRED STOCK IN THE PERIOD DESCRIBED

ABOVE, YOUR RIGHTS MAY BE AFFECTED BY THE SETTLEMENT OF THIS ACTION .

To share in the distribution of the Settlement Fund, you must establish your rights by filing a

Proof of Claim and Release form on or before 200

If you desire to be excluded from the Class, you must file a request for exclusion b y

200 in the manner and form explained in the detailed notice referred t o

below. All members of the Class who have not requested exclusion from the Class will be bound

by the Settlement and any judgment and release entered in the Action even if they do not file a

timely Proof of Claim and Release Form.

If you have not yet received the Notice of Pendency and Settlement of Class Action ,

which more completely described the Settlement and your rights thereunder, and a Proof o f

Claim and Release Form, you may obtain copies of these documents by identifying yourself as a

member of the Class and by writing to Claims Administrator ,

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or by calling ( - . Inquiries should NOT be directed to the Court, or the Clerk o f

the Court .

Dated 200

BY ORDER OF THE UNITED STATES DISTRICTCOURT FOR THE WESTERN DISTRICT OFKENTUCKY

99139v1

26785-1

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Exhibit 3

IN THE UNITED STATES DISTRICT COURTFOR THE WESTERN DISTRICT OF KENTUCK Y

LOUISVILLE DIVISION

George W. Lawson, et al ., on behalf ofThemselves and All Others Similarly Situate d

Plaintiffs, Civil Action No. 3 :00 CV 38 2

vs.

Advanced Equities , Inc., et al,

Defendants .

PROOF OF CLAIM AND RELEASE FORM

1 . GENERAL INSTRUCTION S

1 . To recover as a Member of the Class (as defined in the Notice of Pendency andSettlement of Class Action) based on your claims in the above-captioned action (the "Action"),you must complete and, on page hereof, sign this Proof of Claim and Release . If you fail tofile a properly addressed (as set forth in paragraph 3 below) Proof of Claim and Release, yourclaim may be rejected and you may be precluded from any recovery from the Settlement Fund(as defined in the Notice of Pendency and Settlement of Class Action) created in connection withthe proposed Settlement of the Action .

2 . Submission of this Proof of Claim and Release , however, does not assure that youwill share in the proceeds of settlement in the Action .

3 . YOU MUST MAIL YOUR COMPLETED AND SIGNED PROOF OFCLAIM AND RELEASE POSTMARKED ON OR BEFOREADDRESSED AS FOLLOWS :

Pixelon Securities Litigationc/o Heffler, Radetich & Saitta L.L.P .

Claims Administrato rP.O. Box 58788

Philadelphia, PA 19102-878 8If you are NOT a Member DO NOT submit a Proof of Claim and Release Form .

4. If you are Member and you do not timely request exclusion, you are bound by theterms of any judgment entered in the Action, REGARDLESS OF WHETHER OR NOT YOUSUBMIT A PROOF OF CLAIM AND RELEASE .

II . CLAIMANT IDENTIFICATIO N

5. If you purchased and/or acquired the Series A Convertible Preferred Stock("Preferred Stock") of Pixelon, Inc . ("Pixelon") during the "Class Period" (as defined in theNotice of Pendency and Settlement of Class Action) and held the certificate(s) in your name, youare the beneficial owner as well as the record owner. If, however, you purchased and/or acquiredPreferred Stock and the certificate(s) were registered in the name of a third party, such as anominee or brokerage firm, you are the beneficial owner and the third party is the record owner .

6. Use Part I of this form entitled "Claimant Identification" to identify each holder ofrecord ("nominee"), if different from the beneficial holder of Pixelon Preferred Stock whichforms the basis of this claim . THIS CLAIM MUST BE FILED BY THE ACTUALBENEFICIAL OWNER OR OWNERS OR THE LEGAL REPRESENTATIVE OF SUCHOWNER OR OWNERS OF PIXELON PREFERRED STOCK UPON WHICH THIS CLAIM ISBASED .

7. All joint owners must sign this claim . Executors, administrators, guardians,conservators and trustees must complete and sign this claim on behalf of Persons represented bythem and their authority must accompany this claim; and their titles or capacities must be stated.The Social Security (or employer identification) number and telephone number of the beneficialowner may be used in verifying the claim . Failure to provide the foregoing information coulddelay verification of your claim or result in rejection of the claim .

III. CLAIM FORM

8. Use Part II of this form entitled "Schedule of Transactions in Pixelon PreferredStock" to supply all required details of your transaction(s) in Pixelon Preferred Stock . If youneed more space or additional schedules, attach separate sheets giving all of the requiredinformation in substantially the same form. Sign and print or type your name on each additionalsheet .

9. On the schedules, provide the requested information with respect to all of yourpurchases and all of your sales of Pixelon Preferred Stock which took place at any timebeginning April 1, 1998, through and including March 5, 2001, whether such transactionsresulted in a profit or a loss . Failure to report all such transactions may result in the rejection ofyour claim .

10. List each transaction in the Class Period separately and in chronological order,beginning with the earliest . You must accurately provide the month, day, and year of eachtransaction you list .

2

11 . Brokers' confirmations or other documentation of your transactions in PixelonPreferred Stock should be attached to your claim . Failure to provide this documentation coulddelay verification of your claim or result in rejection of your claim.

3

UNITED STATES DISTRICT COURTWESTERN DISTRICT OF KENTUCKY

Lawson, et al v . Advanced Equities , Inc ., et al ,

Civil Action No. 3 :00-CV-382

PROOF OF CLAIM AND RELEASE

Must be Postmarked No Later Than :

Please Type or Print

PART I: CLAIMANT IDENTIFICATION

Owner's Name (First, Middle, Last)

Street Address

City, State, Zip Code

Foreign Province, Foreign Country

Identify whether Beneficial Owner is an Individual or a Corporation/Other

Beneficial

Social Security Number or Taxpayer Identification Number

work) Area Code Telephone Number

(home) Area Code Telephone Number

Record Owner's Name (if different from Beneficial Owner listed above)

4

PART II : SCHEDULE OF TRANSACTIONS IN PIXELON PREFERRED STOC K

A. Number of shares of Pixelon Preferred Stock held at the close of trading on March31, 1998 :

Trade Date(Mo. Day Year)

No. of SharesPurchased Price Per Share

1 . 1. 1.2. 2. 2.3. 3. 3.

B. Purchases of Pixelon Preferred Stock in the April 1, 1998, through March 5, 2001Class Period:

Trade Date No. of Shares(Mo. Day Year) Purchased Price Per Share

1. 1. 1.2. 2. 2.3. 3. 3.

C . Sales of Pixelon Preferred Stock in the April 1, 1998 through March 5 , 2001 ClassPeriod:

Trade Date(Mo. Day Year) No. of Shares Sold Price

Per Share

1. 1. 1.2. 2. 2.

3. 3. 3.

D. Numbers of shares of Pixelon Preferred Stock held at the close of trading onMarch 5, 2001 :

If you require additional space, photocopy this page or attach extra schedules in the sameformat as above and check here ❑ . Sign and print your name on each additional page .

5

YOU MUST READ AND SIGN THE RELEASE BELOW

PART III . SUBMISSION TO JURISDICTION OF COURTAND ACKNOWLEDGMENT S

I submit this Proof of Claim and Release under the terms of the Stipulation andAgreement of Settlement described in the Notice. I also submit to the jurisdiction of the UnitedStates District Court for the Western District of Kentucky with respect to my claim as a ClassMember and for purposes of enforcing the release set forth herein. By submitting this Proof ofClaim, I agreed to be bound by and subject to the terms of any judgments and orders of the Courtthat may be entered in the Action, and to furnish such additional information or proof toPlaintiffs' Settlement Counsel to support this claim if required to do so. I have not submitted anyother claim covering the same purchases and/or acquisition of Pixelon Preferred Stock during theClass Period in connection with this Settlement and know of no other Person having done so onmy behalf.

PART IV. RELEASE

12. By signing this Proof of Claim and Release Form, and in consideration of thepayment by the Settling Defendants of $800,000 .00 into the Settlement Fund pursuant to theStipulation of Settlement, and for other valuable consideration, the receipt of which is herebyacknowledged, on behalf of myself, and on behalf of my heirs, executors, administrators,successors, custodians, representatives, assigns and all other persons who may claim by orthrough the undersigned, do hereby release, remise and forever discharge each SettlingDefendant and their respective present and former parents, subsidiaries, affiliates, divisions, andjoint ventures, and their respective present and former officers, directors, attorneys, partners,associates, affiliated lawyers, agents, representatives, employees, insurers, excess insurers,advisors, investment advisors, trustees, escrowees, auditors, accountants, spouses and immediatefamily members, and the predecessors, heirs, successors, and assigns of any of them, and anyperson or entity in which any of the Settling Defendants has or had a controlling interest orwhich is or was related or affiliated with any Settling Defendants and any trust of which anySettling Defendant is the settlor or which is for the benefit of any Settling Defendant and/ormember(s) of a Settling Defendant's family, of and from all manner of actions, claims, causes ofaction, allegations or rights whatsoever, whether known or unknown, whether suspected orunsuspected, whether contingent or non-contingent, whether class, individual, or direct in nature,whether in law or in equity, whether based on federal, state, local, statutory or common law orany other law, rule or regulation, whether based on events or actions occurring prior to or on theEffective Date (as defined in the Notice and Stipulation of Settlement), including claims in anybankruptcy proceeding, which I ever had, now have, or hereafter may have by reason of, basedupon, or arising out of or in connection with, directly or indirectly, any allegation, fact,occurrence, matter, representation, transaction, or omission referred to, involved or set forth in orwhich could have been set forth or asserted in the Complaint or any other pleading in the Action,or any public filing or statement of Pixelon, Advanced Equities or their officers and directors,whether known or unknown .

6

13. This release shall be of no force or effect unless and until the Court approves theStipulation and Agreement of Settlement and the Stipulation becomes effective on the Effective

Date (as defined in the Stipulation) .

14. 1 (we) hereby warrant and represent that I (we) have not assigned or transferred orpurported to assign or transfer, voluntarily or involuntarily, any matter released pursuant to thisrelease or any other part or portion thereof.

15 . I (we) hereby warrant and represent that I (we) have included information aboutall of my (our) transactions in Pixelon Preferred Stock that occurred during the Class Period .

I affirm under the penalties of perjury that the foregoing statements are true, correct andcomplete .

DATED: , 2004

CLAIMANT'S SIGNATURE

(Type or Print Claimant's Name)

JOINT CLAIMANT'S SIGNATURE, IF ANY

(Type or Print Joint Claimant 'S Name If Any )

TITLE OR POSITION IF SIGNING INREPRESENTATIVE CAPACITY ON BEHALFOF THE CLASS MEMBER

7

SUBSTITUTE FORM W-9

Request for Taxpayer Identification Number (TIN) and Certificatio n

PART I

NAME :

Check appropri ate box :Individual/Sole Proprietor

-CorporationIRA

Pension Plan_ Partnership

OtherTrust

Enter TIN on appropriate line.For individuals, this is your social security number ("SSN") .

For sole proprietors, you must show your individual name, but you may also enter yourbusiness or "doing business as" name . You may enter either your SSN or your Employer

Identification Number ("EIN")

For other entities , it is your EIN .__ or ---------Social Security Number

Employer identification NumberPART II - From Payees Exempt From Backup Withholding

If you are exempt from backup withholding, enter your correct TIN in Part I and write"exempt" on the following line .

PART III CertificationUNDER THE PENALTIES OF PERJURY, I (WE) CERTIFY THAT :

(1) The number shown on this form is my correct Taxpayer Identification Number ; and(2) I (We) certify that I am (we are) NOT subject to backup withholding under the provisions

of Section 3406 (a)(1) of the Internal Revenue Code because : (a) I am (we are) exemptfrom backup withholding ; or (b) I (we) have not been notified by the Internal RevenueService that I am (we are) subject to backup withholding as a result of a failure to reportall interest or dividends, or (c) the IRS has notified me (us) that I am (we are) no longersubject to backup withholding .

NOTE: If you have been notified by the IRS that you are subject to backupwithholding, you must cross out the word "not" in item 2 above and checkhere 0.

NOTE : If you require instructions or completing Substitution W-9, please make awritten request to us at : Pixelon Securities Litigation, c/o Heffler,Radetich & Saitta L.L.P., Claims Administrator, P .O. Box 58788,

8

Philadelphia, PA 19102-8788 . Please note that your accountant shouldalso be able to provide you with the Instructions or you may retrieve themfrom www.irs.gov.

I declare under penalty of perjury under the laws of the United States of America that theforegoing information supplied by the undersigned is true and correct .

Executed this day of , in(Month / Year) (City)

(State / Country)

(Signature of person whose TIN appears above)ACCURATE CLAIMS PROCESSING TAKES A SIGNIFICANT AMOUNT OF TIME .

THANK YOU FOR YOUR PATIENCE .

Reminder Checklist :

1 . Please sign the above release on page 9 and the Substitute W-9 on page 10 .

2 . Remember to attach copies of supporting documentation .

3 . Do not send original or copies of stock certificates .

4. Keep a copy of your claim form for your records .

5 . If you desire an acknowledgment of receipt of your claim form, please send itCertified Mail, Return Receipt Requested .

6. If you move, please send us your new address .

500288vI

26785-1

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