According to the docket, on April 27, 2004, the Court entered the Partial Final Judgment and Order of Dismissal with Prejudice by Judge Mariana R. Pfaelzer. The Court approved the settlement set forth in the Stipulation, and the case was terminated.

By the Notice of Partial Settlement of Class Action, the parties reached an agreement-in-principle to settle the action. The proposed partial settlement creates a fund in the amount of $4,500,000 in cash and will include interest that accrues on the fund prior to distribution. The partial settlement resolves the claims against the Individual Defendants. Depending on the number of eligible shares purchased by Settlement Class Members who elect to participate in the distribution of the Settlement Fund and when those shares were purchased and sold, the estimated average distribution per share will be approximately $0.16 before deduction of Court-approved fees and expenses.

The operative complaint in the Litigation is the Third Amended Class Action Complaint for Violations of the Federal Securities Laws (the "Complaint") filed on August 13, 2001. The Complaint alleges violations of §§10(b) and 20(a) and Rule 10b-5 promulgated thereunder on behalf of a class of purchasers of PHP common stock during the period July 27, 1995 through November 19, 1998 against Individual Defendants and PwC. On January 9, 2003, the Court entered a final judgment dismissing the Complaint with prejudice as to PwC. On November 19, 1998, PHP filed for bankruptcy in the United States Bankruptcy Court for the District of Delaware ("Bankruptcy Court"), pursuant to Chapter 11 of the Bankruptcy Code. Lead Plaintiffs' and the Settlement Class's claims against PHP were extinguished in its bankruptcy proceedings.

The original complaint charges PHP Healthcare Inc. and certain current and former officers and directors of the Company during the relevant time period with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, by, among other things, issuing to the investing public false and misleading financial statements and press releases concerning PHP's income and earnings, including the financial results of PHP's wholly owned HMO subsidiary, Chartered Health Plan. Because of the issuance of a series of false and misleading financial statements and press releases concerning PHP's income and earnings, the price of PHP common stock was artificially inflated during the Class Period. The Complaint alleges that PHP improperly booked millions of dollars in receivables and revenues in excess of what Chartered had actually received from the District of Columbia under prepaid Medicaid contracts when PHP knew that the District did not have the ability or the intention of paying the receivables. As a result, PHP's earnings and assets were materially overstated during the Class Period. The complaint also alleges that PHP manipulated its reserves for medical claims payable to improperly boost earnings during the Class Period by artificially lowering the reserves during unaudited periods in fiscal 1997. On March 11, 1998, PHP announced in a press release that it was taking a "$10 million" charge "related to the write-off of certain receivables attributable to claims against the District of Columbia" and would no longer recognize revenues on the contracts with the District until payment was actually made. In response to this announcement, the price of PHP common stock dropped precipitously falling to $9.125 per share on heavy trading volume.