According to Company's Form 10-K for the fiscal year ended December 31, 1999, the Company and the individual defendants filed motions to dismiss the Consolidated Amended Complaint on March 5, 1999. Oral arguments on the motions were held on April 21, 1999 and the Court granted the Company's and the individual defendants' motions to dismiss the Consolidated Amended Complaint pursuant to an order dated June 1, 1999. The plaintiffs appealed the Court's order of dismissal. The Company contested the appeal and supported the Court's order of dismissal. In December, 1999, the parties agreed to settle the lawsuit. The Company received final approval on February 28, 2000 from the Court of the settlement of the action. The $2.8 million settlement became effective and the appeal period expired on March 29, 2000. The settlement was funded entirely by the Company's directors and officers liability insurer and the Company and the individual defendants received a full release and dismissal of all claims brought by the class during the class period.

The complaint alleges that defendants Peritus, the Chief Executive Officer of Peritus, the Chief Operating Officer and the Chief Financial Officer of the Company violated the federal securities laws (Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5) by, among other things, misrepresenting and/or omitting material information in a manner which concealed the adverse impact of its October 1997 merger with Millennium Dynamics Inc. (MDI). As a result of merger integration problems, which the Company failed to disclose, earnings for the third an fourth quarters of 1997 were materially overstated, and the Company's stock was artificially inflated as a result thereof. Upon disclosure by the Company, that revenues had been adversely effected by the merger, and that the Company would lose as much as $0.09 per share in the first quarter of 1998, and that the second quarter of 1998 would be burdened with a restructuring charge, the price of the stock dropped precipitously. Additionally, the complaint alleges that certain of the defendants, and Company insiders disposed of substantial quantities of Peritus common stock during the Class Period, immediately prior to the Company's negative announcements, while the price of Peritus common stock was still artificially inflated by the materially false and misleading statements alleged.