According to the Company’s FORM 10-KSB For the Fiscal Year Ended December 31, 2002, the settlement was approved by the court in July 2002. Under the terms of the settlement, all claims against the Company and all other defendants were dismissed without admission of liability or wrongdoing. The shareholder class received a cash payment of $2.5 million, of which $1.3 million was paid by VantageMed in December 2001, representing its portion of the settlement.

By the Notice of Pendency and Proposed Settlement of Class Action, a settlement hearing will be held on July 18, 2002, at 9:00 a.m., before the Honorable Milton L. Schwartz, United States District Judge, at the United States District Court, Eastern District of California, 501 I Street, Courtroom 3, Sacramento, California (the "Settlement Hearing"). The purpose of the Settlement Hearing will be to determine: (1) whether the settlement consisting of $2,500,000 in cash (plus accrued interest) should be approved as fair, just, reasonable and adequate to each of the parties; (2) whether the proposed plan to distribute the settlement proceeds (the "Plan of Allocation") is fair, just, reasonable, and adequate; (3) whether Representative Plaintiffs' Counsel have adequately represented the class; (4) whether the application by Representative Plaintiffs' Counsel for an award of attorneys' fees and expenses should be approved; and (5) whether the Litigation should be dismissed with prejudice. The Court may adjourn or continue the Settlement Hearing without further notice to the class.

Earlier, according to the Notice, on May 12, 2000, Plaintiffs filed their Motion to Be Appointed Lead Plaintiff Pursuant to §27(a)(3)(B) of the Securities Act of 1933 and to Approve Lead Plaintiff's Choice of Counsel. On July 14, 2000, the Court appointed Lead Plaintiffs and Milberg Weiss Bershad Hynes & Lerach LLP and Schiffrin & Barroway, LLP as Lead Plaintiffs' Counsel. On or about July 13, 2000, the Court ordered each of the five related cases to be consolidated. On or about August 24, 2000, plaintiffs filed their first Consolidated Amended Complaint, which alleged defendants' violation of §§11, 12(a)(2) and 15 of the 1933 Act and §§10(b) and 20(a) of the Securities Exchange Act of 1934. On or about October 12, 2000, the Company and Underwriter Defendants filed separate motions to dismiss the consolidated complaint. Before the Court ruled on these defendants' motions to dismiss, plaintiffs moved to file an amended complaint. Plaintiffs' motion for leave to amend was granted, and on March 19, 2001, plaintiffs filed their Second Amended Consolidated Complaint that alleged violations of §§11 and 15 of the 1933 Act and added VantageMed's independent auditor, Arthur Andersen LLP, as a defendant. On or about May 24, 2001, the Company Defendants, the Underwriter Defendants and Arthur Andersen filed separate motions to dismiss. Plaintiffs filed opposition briefs to each motion to dismiss. Before the motions to dismiss were decided, the parties agreed that private mediation with the Honorable J. Lawrence Irving (Ret.) would be beneficial. Accordingly, counsel met with Judge Irving on November 2, 2000. The initial mediation was not successful. However, settlement negotiations between the parties continued. After these continued arm's length and highly contentious negotiations, the parties reached an agreement in principle to settle the Litigation on terms set forth in a Memorandum of Understanding dated December 5, 2001.

The original complaint charges VantageMed and certain of its officers, directors and its underwriters with violations of the Securities Act of 1933. VantageMed provides healthcare information system and services to automate administrative, financial, clinical and management functions for physicians, dentists, and other healthcare providers and provider organizations. On February 15, 2000, VantageMed completed an IPO of 3,000,000 shares of stock at $12 per share pursuant to a Registration Statement/Prospectus. The offering provided that VantageMed would receive $33.48 million in net proceeds and the underwriters would receive $2.52 million. The complaint alleges that the Registration Statement/Prospectus was false and misleading, failing to describe the fact that the Company had been delayed in introducing a new version of its most important product, Ridgeway medical management, which delay would adversely affect the Company's future results. On March 9, 2000, VantageMed revealed information that showed that the positive statements in the Registration Statement/Prospectus were false when made. On March 9, 2000, VantageMed issued a press release which disclosed that 1stQ 2000 results would be below forecasts due to a delay in the market introduction of the new version of its Ridgemark product, a medical management system. The Company also filed the press release with the SEC as a supplement to its Prospectus. While this supplement corrected the Prospectus it did not do so until after public shareholders had paid millions for VantageMed stock based on a defective Prospectus. VantageMed's stock price reacted swiftly and negatively to these revelations, falling to as low as $4-1/2 on huge volume of 3 million shares, $7-1/2 below the offering price just three and a half weeks earlier. Public investors who purchased shares in the IPO based on VantageMed's representations, paying $12 per share for VantageMed stock, have suffered tens of millions of dollars in damages.