According to the docket posted, on June 22, 2004, the Court entered the Order by U.S. District Judge M. M. McKeown granting the motion for final approval of settlement and approval of the plan of allocation of settlement proceeds. The Court further awarded lead plaintiffs' counsel 25 percent of the settlement fund and reimbursement of expenses in the amount of $397,916.74. The case is dismissed on the merits and with prejudice.

By the Notice of Pendency and Proposed Settlement of Class Action, a settlement hearing will be held on June 21, 2004 at 11:00 a.m., before the Honorable Judith N. Keep in the United States District Courthouse, 880 Front Street, San Diego, CA 92101, Courtroom 16 (the “Settlement Hearing”). The purpose of the Settlement Hearing will be to determine: (1) whether the settlement consisting of $5,500,000 in cash, plus accrued interest, should be approved as fair, reasonable and adequate to the Class, and therefore whether the Litigation should be dismissed with prejudice; (2) whether the proposed plan to distribute the settlement proceeds (the “Plan of Allocation”) is fair and equitable to the Class Members; and (3) whether the application by Lead Counsel for an award of attorneys’ fees, expenses and interest thereon should be approved.

As reported by the Company’s FORM 10-K for the fiscal year ended December 31, 2003, several class action complaints were filed in the United States District Courts for the Southern District of New York and for the Southern District of California on behalf of purchasers of our common stock alleging violations of the federal securities laws in connection with our initial public offering in November 2001. These actions were later consolidated into a single action, In re DJ Orthopedics, Inc. Securities Litigation, Case No. 01-CV-2238-K (RBB) (S.D. Cal.). The complaint seeks unspecified damages and following the filing of a motion to dismiss that eliminated all but one alleged omission, continues to assert that defendants violated Sections 11, 12, and 15 of the Securities Act of 1933 by failing to disclose allegedly material intra-quarterly sales data in the registration statement and prospectus. On July 22, 2003, the Court appointed Louisiana School Employees’ Retirement System as substitute lead plaintiff following the withdrawal of Oracle Partners L.P. who was the original lead plaintiff, and on November 17, 2003, the Court certified the class. The parties have reached a tentative settlement of the case and entered into a Memorandum of Understanding confirming the settlement and the terms thereof.

The original complaint has been filed alleging that defendants violated Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, by issuing a Registration Statement and Prospectus in connection with an initial public offering of common stock (the "IPO"), which contained materially false and misleading statements and omissions. Specifically, the complaint alleges that shortly after the commencement of trading on November 15, 2001, the IPO share price dropped precipitously from $17 per share upon news that analysts adjusted downward Orthopedics' fourth quarter earnings forecast. Fourth quarter earnings estimates were touted by defendants in "road shows" to investors prior to the IPO. Defendants did not halt the IPO or trading in the stock, even though the Registration Statement and Prospectus failed to disclose, inter alia, that the fourth quarter estimates were adjusted downward.

The news drove the price of the Company's shares down by at least 10%, to close at $15.25 per share, on heavy trading volume of 7.3 million shares. By its third full day of trading, the Company's shares were down to $13.16 per share, or over 22% off the IPO price.