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Case Status:    SETTLED
On or around 03/30/2011 (Trial Verdict)

Filing Date: February 29, 1996

Health Management, Inc. provides integrated management services to patients with chronic medical conditions and to the general health care industry. Services offered by the company include distribution of prescription drugs, drug utilization review and patient compliance monitoring. In February 1996, the company announced that it would take significant write-offs for accounts receivable and inventory. The company also is alleged to have announced that it discovered certain accounting irregularities and that it might have to restate financial results for the fiscal year ending April 30, 1995 and interim financial results for the first and second quarters of 1996. After this information was disclosed to the market, the company's stock price allegedly fell from $10 7/8 to $2 3/4. The complaint alleges that the company and certain of its officers and directors made, and failed to correct, materially false statements regarding the company's net income and assets. In particular, the complaint alleges that accounts receivable, as well as other assets, were misstated as a result of material departures from generally accepted accounting principles. This course of conduct allegedly artificially inflated the price of the company's stock. Based on these allegations, the complaint asserts violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.

As summarized by the Company’s FORM 10-Q For Quarter Ended July 31, 1997, the Company has been named as a defendant in a consolidated stockholder class action lawsuit and as a nominal defendant in two derivative suits. With respect to the consolidated stockholder class action lawsuit, the Company entered into a Stipulation of Partial Settlement with the plaintiffs' counsel and on September 18, 1996 such Stipulation of Partial Settlement received preliminary court approval (the "Original Settlement"). The Original Settlement provided for, among other things, the payment by the Company of $2 million in cash, the issuance of 2,200,000 shares of Common Stock and warrants to purchase 2,200,000 shares of Common Stock. On December 19, 1996 the Company entered into an Amended Stipulation of Partial Settlement providing for, among other things, a $7.2 million cash payment. Preliminary approval of the Amended Stipulation of Partial Settlement was granted by the U.S. District Court for the Eastern District of New York, on December 20, 1996. As a condition to Transworld's obligation to consummate the Merger, the Amended Stipulation of Partial Settlement was further amended on April 23, 1997, to provide for a reduced cash settlement in the amount of $4.55 million, and court approval of such amended settlement was received on June 9, 1997. The Restated Stipulation of Partial Settlement provides for the settlement of the lawsuit as against the Company of $4.55 million in cash, of which $3.2 million was paid at the time the Restated Stipulation of Partial Settlement became final. The remaining $1.35 million is to be paid at the effective time of the Merger.

According to the docket we have posted on the site, the case was brought to trial before U.S. District Judge Arthur D. Spatt on October 6, 1999. On October 26, 1999, the jury deliberated and reached a unanimous verdict in favor of the defendants and against the plaintiffs.

By the Final Judgement and Order, dated January 3, 2000, the case resulted in a partial dismissal and partial settlement of the class action. The case was closed on May 25, 2000. Plantiffs’ counsel were awarded reimbursement of costs and disbursements of $561,930.06 to be paid from a Settlement Fund. A Notice of Appeal was filed, but the plaintiff later withdrew his appeal to the U.S. Court of Appeals for the Second Circuit.

On April 12, 2001, the Court granted a motion for an Order of stipulation of Settlement directing distribution from the Net Settlement Fund to class members whose proofs of claim were accepted.

On January 07, 2010, the Lead Plaintiffs' Motion for an Order Approving Distribution of the Remaining Net Settlement Fund was granted by the Court.

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