According to the firm's 10-K filing dated March 30, 2000, on August 10, 1999, the District Court approved an agreement settling all of the pending class actions in consideration primarily of (i) a payment of $2.75 million to be provided by the Company's insurer and (ii) the issuance of $5.25 million of convertible subordinated promissory notes (the "Convertible Subordinated Notes"). The $5.25 million of Convertible Subordinated Notes bear interest at the rate of 8% per annum, will be due on the earlier of August 1, 2005 or when the Company's presently outstanding Senior Notes are paid in full, and may be prepaid in cash by the Company at any time after issuance subject to the payment of a prepayment premium which begins at 8% and decreases over time. Additionally, the Convertible Subordinated Notes are convertible into shares of the Company's Common Stock beginning February 15, 2000 at a price per share equal to $2.62.

On February 9, 1998, the Honorable Joel Pisano, United States Magistrate Judge, entered an Order consolidating several class actions for all purposes. On March 31, 1998, the lead plaintiffs in the consolidated class actions served their Consolidated Class Action Complaint, asserting that the Company and the named defendants violated Section 10(b) of the Exchange Act, and that certain named defendants violated Sections 20(a) and 20A of the Exchange Act. On December 18, 1998, attorneys for the plaintiffs in the pending class actions reached an agreement in principle with the Company and certain of the other defendants to settle all of the
pending class actions

The original Complaint alleges that during the Class Period, MRII and certain of its directors and officers violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making misrepresentations and omissions of material fact about the Company's financial condition and operations. As alleged in the Complaint, throughout the Class Period, defendants misrepresented that MRII was achieving record revenues and profits from its expansion into additional medical imaging markets. In fact, defendants knew or were reckless in failing to know that the foregoing expansion was motivated primarily by a desire to pay affiliates of MRIIs Chairman excessive advisory, financing and acquisition fees, and that the terms of those payments were substantially more favorable than they would have been to an unrelated third party.