On December 5, 2006, the Court of Appeals issued an opinion, reversing the District Court’s order granting class certification and finding that plaintiffs cannot satisfy certain elements required for class actions. On June 25, 2007, in light of the Court of Appeals’ decision, the District Court entered an order terminating the proposed settlement based on a stipulation among the parties to the settlement. On August 14, 2007, the plaintiffs filed amended complaints in the focus cases, seeking to address the deficiencies raised in the Court of Appeals’ opinion. On September 27, 2007, plaintiffs moved to certify the classes in those focus cases.

According to the Company’s FORM 10-K for the fiscal year ended December 31, 2005, the action is being coordinated with approximately 300 other nearly identical actions filed against other companies that had initial public offerings of securities between the 1997 and 2000 time periods. The Company has approved a Memorandum of Understanding ("MOU") and related agreements which set forth the terms of a settlement between the Company, the plaintiff class and the vast majority of the other approximately 300 issuer defendants. Among other provisions, the settlement contemplated by the MOU provides for a release of the Company and the individual defendants for the conduct alleged in the action to be wrongful. The Company would agree to undertake certain responsibilities, including agreeing to assign away, not assert, or release certain potential claims the Company may have against its underwriters. It is anticipated that any potential financial obligation of the Company to plaintiffs pursuant to the terms of the MOU and related agreements will be covered by existing insurance. Therefore, the Company does not expect that the settlement will involve any payment by the Company. The MOU and related agreements are subject to a number of contingencies, including the negotiation of a settlement agreement and its approval by the Court. The Court will hold a Settlement Fairness Hearing at 10:00 a.m., on April 24, 2006, at the United States District Court for the Southern District of New York, 500 Pearl Street, New York, New York 10007. At this hearing, the Court will consider whether the Settlement is fair, reasonable and adequate. If there are objections, the Court will consider them. After the hearing, the Court will decide whether or not to approve the Settlement.

The complaint alleges that defendants violated the federal securities laws by issuing and selling Planetrx.com common stock pursuant to the 10/06/1999 IPO without disclosing to investors that at least two of the lead underwriters and two of the other underwriters in the offering had solicited and received excessive and undisclosed commissions from certain investors. In exchange for the excessive commissions, the complaint alleges, lead underwriters the Goldman Sachs Group, Inc., and BancBoston Robertson Stephens, Inc. and underwriters Merril Lynch, Pierce, Fenner & Smith, Inc. and Salomon Smith Barney, Inc. allocated Planet Rx.com shares to customers at the IPO price of $16 per share. To receive the allocations at $16, the defendant underwriters' brokerage customers had to agree to purchase additional shares in the aftermarket at progressively higher prices. The requirement that customers make additional purchases at progressively higher prices was intended to and did drive Planetrx.com's share up to artificially high levels. This artificial price inflation enabled both the underwriters and their customers to reap enormous profits by buying stock at the $16 IPO price and then selling it later for a profit at inflated aftermarket prices, which rose as high as $36.50 during its first day of trading.