According to the Company’s FORM 10-K for the fiscal year ended December 31, 2003, the Class Action Lawsuit was initially dismissed by the District Court for failure to comply with statutory requirements but an appeal was subsequently filed by the plaintiff. On January 5, 2004, the United States Court of Appeals for the Fourth Circuit affirmed its dismissal of the class action lawsuit.

As summarized by the docket, on March 2, 2001, the Court entered the Order signed by Judge Alexander Williams Jr. granting the plaintiffs’ motion for appointment of Lead Plaintiffs and approval of Lead Plaintiffs’ selection of Schatz & Nobel, P.C. as Lead Counsel and the Law Offices of Charles J. Piven, P.A. as Liaison Counsel. On May 4, 2001, the plaintiffs filed an Amended Complaint, and the defendants responded by filing a motion to dismiss the Amended Complaint. On April 1, 2002, the Court entered the Order granting the defendants’ motion to dismiss the Amended Complaint, with leave to file a Second Amended Complaint. On April 18, 2002, the plaintiffs filed a Second Amended Class Action Complaint and the defendants again responded by filing a motion to dismiss the Second Amended Complaint. On October 1, 2002, the Court entered the Memorandum Opinion and Order granting the motion to dismiss the Second Amended Complaint. On October 7, 2002, the Court entered Judgment dismissing the action with prejudice as to all defendants. The case was closed. On October 30, 2002, the plaintiffs filed a notice of appeal.

The original Complaint alleges that during the Class Period the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by, among other things, knowingly or recklessly making material misrepresentations concerning (i) Hanger's financial results for the quarter ended September 30, 1999 and (ii) the progress of Hanger's efforts to integrate the recently-acquired operations of Novacare Orthotics & Prosthetics, Inc. The Complaint further alleges that by making these material misrepresentations, the Defendants artificially inflated the price of Hanger common stock during the Class Period.