According to Curative Health Services, Inc.’s Form 10-Q for the quarterly period ended June 30, 2002, on July 11, 2002, the United States District Court for the Eastern District of New York ordered a final judgment approving the settlement. Pursuant to the terms of the settlement, the Company made the final payment of $6.5 million in an aggregate of 421,044 shares of the Company's common stock on August 2, 2002 and August 5, 2002. The remaining $4 million was previously paid from insurance proceeds.

As summarized in the Notice of Proposed Settlement, by Order dated May 22, 2000, the Court directed that this action proceed as a class action on behalf of all purchasers of Curative common stock during the Class Period. The Court set April 29, 2002, as the trial date in this matter. On October 12, 2001, the Court issued an Order Directing Notice of Pendency of Class Action. In late fall 2001, as the fact discovery was being completed, the parties' counsel began to discuss a settlement of the action. The settlement conference was held before Magistrate Judge Lindsay on December 7, 2001. The settlement negotiation was not successful, and plaintiffs began actively preparing for trial. In accordance with the Court's schedule, plaintiffs and defendants each prepared and served motions for summary judgment on February 13, 2002. Pursuant to consent of the parties, on March 4, 2002, the action was dismissed against Gerardo Canet. The parties' counsel again began to discuss a settlement of the action. The parties retained the Honorable Nicholas Politan (U S D J, Retired) as mediator, and a mediation session was held on March 7, 2002. The parties agreed to the principal terms of the Settlement set forth in the Stipulation. The parties executed the formal Stipulation embodying the Settlement on April 12, 2002.

On August 20, 1999, a Consolidated Amended Class Action Complaint was filed.
Defendants moved pursuant to Fed R Civ P 9(b) and 12(b)(6) to dismiss the action in its entirety. On November 17, 1999, the Court denied the defendant's motion to dismiss. On June 8, 2001, an Amended Consolidated Class Action Complaint ("Amended Complaint"), which superseded all prior pleadings, was filed with the Court.

In April 1999 four (4) class action complaints were filed pursuant to Fed. R Civ P 23 against Curative and certain of its officers and directors, on behalf of all purchasers of Curative common stock during the Class Period. By motion dated June 14, 1999, plaintiffs moved to consolidate the four actions, and for appointment of lead plaintiffs and lead counsel. By Order dated August 2, 1999, the Court consolidated the four actions, certified plaintiffs Richard H. Yung, Mike A. Alden, Neil Brandt, Robert Greenwaldt, Robert Newhouse, Carole Ryan and Michael L. Ryan as lead plaintiffs, and appointed lead counsel.

The original complaint charges that Curative Health engaged in improper practices which resulted in illegal Medicare reimbursements which caused the company's publicly reported revenues and earnings to be materially overstated. The lawsuit, which seeks class action status, is brought for violations of 10(b) of the Securities Exchange Act of 1934 on behalf of purchasers of Curative Health Service's common stock during the period June 28, 1996 through April 9, 1999. On April 7, 1999 it was announced that the United States Department of Health and Human Services had issued a subpoena to Curative Health Services seeking documents relating to its Medicare billing practices. On April 9, 1999 it was revealed that the United States Department of Justice had joined in a lawsuit charging Curative Health Services with Medicare fraud. According to the government, Curative Health was engaging in improper patient referrals and charging excessive fees to Columbia/HCA which were reimbursed by Medicare. Curative Health Service's common stock price plummeted in reaction to this news falling from its closing price of $11 æ per share before the disclosure of the subpoena to close at $4 11/16 on April 12, 1999, a 60% decline.