According to closing Order, dated March 27, 1998, from the U.S. District Judge Thomas W. Thrash of the U.S. District Court for the Northern District of Georgia, the case was dismissed with prejudice of all parties to consolidated actions, including Settlement Class and Settlement Sub-Class members.

Following the announcement of the investigation by the United States Attorney's Office for the Central District of California, Medaphis, various of its current and former officers and directors and the lead underwriters associated with Medaphis' public offering of Common Stock in April 1995, were named as defendants in putative shareholder class action lawsuits filed in the United States District Court for the Northern District of Georgia. In general, these lawsuits alleged violations of the federal securities laws in connection with Medaphis' public statements and filings under the federal securities acts, including the registration statement filed in connection with Medaphis' public offering of Common Stock in April 1995. On October 13, 1995, the named plaintiffs in these lawsuits filed a consolidated class action complaint (the "Consolidated Complaint"). On January 3, 1996, the court denied defendants' motion to dismiss the Consolidated Complaint, which argued that the Consolidated Complaint failed to state a claim upon which relief may be granted. On April 11, 1996, certain of the named plaintiffs to the Consolidated Complaint voluntarily dismissed with prejudice all of their claims. As a result of these dismissals, the Consolidated Complaint no longer contained any claims based on the Securities Act of 1933, as amended (the "1933 Act"), and the Company's underwriters and outside directors were no longer named as defendants. On June 26, 1996, the court denied plaintiffs' motion to certify plaintiffs' class. One of Medaphis' directors and officers' liability insurance carriers has paid $3.7 million of the 1995 Class Action Settlement. The Company accrued approximately $1.2 million in the quarter ended December 31, 1996 for the anticipated balance of the 1995 Class Action Settlement and to pay certain fees incident thereto. On November 6, 1997, the Company paid the remaining $1.05 million balance of the settlement.

The original complaint charges Medaphis and certain of its officers with violations of
the federal securities laws (Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934), among other things, by misrepresenting and/or omitting
material facts concerning the extent of the problems affecting the re-
engineering and consolidation of the Company's largest operating subsidiary,
Medaphis Physician Services Corp., and the existence of serious management,
operational and other problems at the Company's Imonics subsidiary. On August
14, 1996, Medaphis announced, among other things, that it expects to report a
loss in the range of 28 to 33 cents per share in the current quarter, including
charges in the range of $35 million to $40 million.