NOTICE OF SETTLEMENT OF CLASS ACTION LAWSUIT PERTAINING TO ST.FRANCIS MEDICAL CENTER EMPLOYEES' RETIREMENT PLAN

YOU ARE NOT BEING SUED. This Notice is being sent to you because your rights may be affected by a proposed settlement of the lawsuit entitled Orlowski, et al., v. St. Francis et al., Civil Action No. GD 02-17811. PLEASE READ THIS NOTICE CAREFULLY.

The Settlement Agreement, dated as of October 20, 2003, for which Court approval is now sought, is between Plaintiffs THEODORE ORLOWSKI and LAWRENCE J. GLADORA (hereinafter "Plaintiffs") on behalf of themselves and the Class, and JOHN R. McGinley, JR. as LIQUIDATING RECEIVER of Defendants ST. FRANCIS HEALTH SYSTEM, ST. FRANCIS MEDICAL CENTER, ST. FRANCIS HOSPITAL CRANBERRY, and ST. FRANCIS HEALTH CARE SERVICES, INC. ("St. Francis Entities."), and Defendant RAYMOND J. KHOURY ("Khoury"). The Settlement Agreement is subject to approval of the Court of Common Pleas of Allegheny County, Pennsylvania (the "Court"). It will not become effective until approved by the Court.

In this Notice, we refer to the proposed settlement as the "Settlement Agreement." The purpose of this Notice is to inform you of the terms of the Settlement Agreement and of your rights with respect to it.

Records show that you are a vested participant in the St. Francis Medical Center Employees' Retirement Plan, which we refer to in this Notice as "Pension Plan." All vested participants in the Pension Plan (excluding participants for whom the Pension Plan previously purchased annuities) ("Vested Participants") are members of the proposed Class and will have their rights affected by the proposed settlement of this class action lawsuit.

If the Court approves the Settlement Agreement, all Class Members will be entitled to the benefits of the Settlement Agreement, will be bound by its terms, and will not be able to bring a separate claim against defendants based on any claim asserted in the lawsuit. Approval of the Settlement Agreement will mean that Class Members will not have a right to any further relief other than that set out in the Settlement Agreement. The complete terms of the Settlement Agreement are on file with the Court, and can be viewed in the Court Clerk's office, at 17th Floor, Frick Bldg., Grant Street & Forbes Ave., Pittsburgh, PA 15219. Also, at the St. Francis website (www.stfrancisorphanscourt.com) and the websites of Specter Specter Evans & Manogue, P.C., (www.ssem.com) and Stember Feinstein Krakoff (www.sfklaw.net) you can view a copy of this Notice, the Settlement Agreement itself, and the Petition for Termination filed in August 2003.

All Vested Participants are Class Members, and have a right to object to the Settlement Agreement, and any such objections must be in writing and delivered to the addresses below by November 21, 2003. The Court will consider any such objections at a hearing. That hearing on the proposed settlement is scheduled for November 26, 2003 at 10:00 a.m., at Frick Bldg., 17th Floor, Grant Street & Forbes Ave., Pittsburgh, PA 15219. YOU DO NOT NEED TO ATTEND IF YOU DO NOT OBJECT.

This Notice is not intended to be, and should not be construed as, an expression of any opinion by the Court with respect to the truth of the allegations in the litigation or the merits of the claims or defenses asserted.

BACKGROUND

In the class action complaint filed September 20, 2002 (the "Class Action"), Plaintiffs allege that they and others similarly situated are vested participants in the Pension Plan, and that St. Francis Entities and Khoury are obligated to provide all pension benefits promised to them. Plaintiffs further allege that St. Francis Entities and Khoury are failing to live up to this obligation by attempting to limit participants' pensions to the amount the employer and fiduciaries have chosen to deposit into the Pension Plan (which presently consists of approximately $49 million). Finally, Plaintiffs allege that the assets of the Pension Plan are insufficient to provide all of the benefits promised to participants.

Plaintiffs contend that the governing contractual document is the booklet provided to participants, which contains provisions stating benefits are to be paid in full, and which fails to advise that benefits could be cut in the manner Defendants propose. Plaintiffs also contend that the Pension Plan fiduciaries breached their duties.

St. Francis Entities and Khoury deny any wrongdoing, and contend that Plaintiffs are entitled to no recovery in excess of the amount of assets in the Pension Plan, since the booklet provided to Class Members reads: "This summary is not a contract but is intended to give you a short, non-technical description of your Plan. If there is any inconsistency between the description in this summary and the actual provisions of the Plan, the provisions of the Plan document will govern. The Plan document is available for examination at the Personnel Office during regular business hours." St. Francis Entities and Khoury further contend that Section 13.02 of the Pension Plan document limits Plaintiffs benefits to the amount in the pension fund (so that Plaintiffs are entitled to no more than the approximately $49 million in the fund). St. Francis Entities and Khoury also note that Section 13.04 of the Pension Plan document provides that if assets are insufficient to fund all benefits, then the benefits for participants will be reduced.

St. Francis Entities and Khoury moved to dismiss the Class Action on the basis of arguments set forth in Preliminary Objections, which are still pending before the Court.

The parties have investigated the facts and the law relating to the matters alleged in the Class Action complaint. Moreover, Plaintiffs served a number of discovery requests, to which St. Francis Entities and Khoury responded and/or initially objected. The Court held a hearing on a motion for protective order, and the St. Francis Entities and Khoury ultimately provided documents. The parties also engaged in an informal exchange of information.

The St. Francis Entities together with St. Francis Hospital of New Castle, St. Francis Foundation and St. Francis Plaza, Inc. (collectively, the "Receiver Entities") are collectively insolvent, have ceased all business operations, have liquidated all assets, and are under supervision of the Court and the Court-appointed Liquidating Receiver. Pending before the Court are competing motions to distribute the remaining assets to secured and unsecured creditors of the Receiver Entities. Plaintiffs (Pension Plan participants) are unsecured creditors. The total amount of Estate Assets of the Receiver Entities is approximately $104,000,000 (which does not include the approximately $49,000,000 which is now in the Pension Plan). Claims by allegedly secured and priority creditors are pending before the Court asserting they have a priority interest in approximately $90,000,000. Unsecured creditors (other than Pension Plan participants) have pending claims before the Court for approximately $45,800,000, not including unliquidated claims. The risks that Plaintiffs and other Pension Plan participants would obtain little or no money from the Estate's Assets should the Court grant the claims of these other creditors are substantial.

The parties participated in a mediation with a Court-appointed Special Master, and have engaged in extensive, arms length negotiations regarding the settlement of the claims alleged in the Class Action. Based upon analysis of the facts and the law applicable to the claims alleged in the Class Action, the burdens and expense of litigation, including the risks and uncertainties associated with protracted trials and appeals, the risks and uncertainties of recovering from an insolvent entity even in the event Plaintiffs were to prevail, the fact that the total amount of monthly payments currently being paid by the Pension Plan exceeds the amount of interest being earned, and the certainty and cost-efficiencies provided by the payments set forth in this Settlement Agreement, Plaintiffs and their counsel have concluded that this Settlement Agreement provides substantial benefits to the proposed Class. Plaintiffs and their counsel believe the Settlement Agreement is fair, reasonable, and in the best interest of the Class.

For their part, St. Francis Entities and Khoury have concluded that entering into this Settlement Agreement is desirable to avoid the time, risk, and expense of continued litigation of the claims alleged in the Class Action.

SUMMARY OF SETTLEMENT BENEFITS TO BE PROVIDED UNDER THE SETTLEMENT AGREEMENT

The Liquidating Receiver shall, pursuant to the Settlement Agreement, (i) cause $13,000,000 from the Estate's Assets to be contributed to the Pension Plan, (ii) amend and terminate the Pension Plan, and (iii) distribute the assets of the Pension Plan. This distribution shall be in accordance with the formula and methodology set forth in the Pension Plan at the time of termination.
Section 13.04 of the Pension Plan document provides that if assets are insufficient to fund all benefits within a class, then the benefits for persons in that class will be proportionately reduced so that the allocation completely exhausts the amount available, and no benefits shall be provided for persons in any succeeding class. The classes in descending order of priority are as follows:

Class 1: Participants who are retired and receiving a monthly benefit
(i.e., Participants already in pay status)

Class 2: Participants who are eligible for immediate normal
retirement (i.e., Participants who have attained age 65, but
have not yet commenced their benefit)

Class 3 : Participants who are eligible for immediate early retirement
(i.e., Participants who have attained age 55 and completed 10
years of service, but have not yet commenced their benefit)

Class 4: Participants who do not satisfy the requirements for classes 1
through 3, but nonetheless have a vested pension benefit
(i.e., Participants who satisfied the vesting schedule
applicable upon their termination of employment, but are not
yet eligible for early or normal retirement).

Accordingly, in the Receiver's Petition for Termination filed in August 2003, benefits for "Class 4" participants were reduced, so that the entire shortfall in the Pension Plan was borne by Class 4. Under the Settlement Agreement, the $13,000,000 will first be used to eliminate the shortfall for Class 4 (putting the members of that group on the same footing as other groups). Then the remainder of the $13,000,000 shall be divided among the Class Members on a pro rata basis, correlating to their respective shares of the Pension Plan assets as determined under the aforementioned formula and methodology.

In addition, if there are funds remaining after the wind up of the Estate in accordance with the global settlement reached with representatives of other claimants and Class Counsel, then Class Counsel may petition the Court for a distribution to the Class from any excess monies held by the Estate.

RELEASE
As part of the Settlement Agreement, Plaintiffs, on behalf of themselves and each Class Member, will release the Pension Plan, Khoury, the Liquidating Receiver, the Receiver Entities, the Sisters of St. Francis of Millvale, Pennsylvania, the Millvale Franciscans, Inc. and the St. Francis Entities, and affiliated entities and persons, from liability as to all claims that Plaintiffs (individually or as representatives of the Class) or any Class Member has against the Pension Plan, Khoury, the Liquidating Receiver, the St. Francis Entities and the affiliated entities and persons relating to the claims in this lawsuit for benefits from the Pension Plan. The release does not preclude any claim or lawsuit to enforce the terms of the Settlement Agreement.

ATTORNEYS' FEES AND EXPENSES
Under the terms of the Settlement Agreement, the $13,000,000 that will be contributed to the Pension Plan as the Class Members' recovery will not be reduced by the amount of the attorneys' fee and expense award. If Class Counsel's petition for fees is granted, Counsel will receive an award of fees and expenses of $850,000 - separate and apart from that $13,000,000 contributed to the Pension Plan. In percentage terms, this $850,000 is equal to just over 6% of the total amount of $13,850,000 paid as a result of the Settlement Agreement.

Defendants agree not to oppose any award of fees, costs and expenses to Class Counsel less than or equal to $850,000.00. Defendants further agree that all amounts awarded for attorneys' fees and expenses to Class Counsel less than or equal to $850,000.00 shall be paid from the Estate's Assets, and shall not be paid from the Pension Plan or from the $13,000,000 referred to above.

When counsel for plaintiffs settle class action lawsuits which result in benefits for a class of persons, those counsel are generally compensated through an award of a portion of the amounts recovered. This type of attorneys' fee award is called a "common fund" fee award, and the amount of such an award is commonly 15% to 35% of the amount recovered. As the amount recovered for class members here is $13,000,000, Plaintiffs' counsel believe that - if they petitioned for such an award - a court could legitimately award counsel fees from the $13 million in an amount ranging from $2 million to $4.5 million.

In addition, certain statutes-such as a Pennsylvania statute under which Plaintiffs sued-allow for payment of plaintiffs' attorneys' fees at a market hourly rate separate and apart from a "common fund" fee award. This type of attorneys' fee award is called a "statutory" fee award.

Again, the proposed $850,000 award of fees and expenses represents (1) statutory fees and expenses and (2) a common fund fee award attributable to the benefits Class Members' counsel secured by preserving or creating rights to pension benefits.

HEARING ON PROPOSED SETTLEMENT AND RIGHT TO OBJECT
At a hearing, the Court will decide whether to give final approval to the Settlement Agreement (subject, of course, to any appeals). The Court will also decide whether the lawsuit is an appropriate class action, and whether a class as defined in the Settlement Agreement should be certified. If you have views you wish the Court to consider as to the terms of the Settlement Agreement, including fees and expenses, you should present them in the manner described in this section.

Again, the hearing to consider final approval of the Settlement Agreement will be held on November 26, 2003 at 10:00 a.m., at Frick Bldg., 17th Floor, Grant Street & Forbes Ave., Pittsburgh, PA 15219. Attendance at the hearing is not required in order to receive the benefits of the Settlement Agreement. However, class members wishing to have their objections to the Settlement Agreement heard and considered must timely file written objections in the manner discussed below.

Class Members who support the Settlement Agreement do not need to appear at the hearing and do not need to take any other action to indicate their approval. They may, however, indicate their support in writing or at the hearing if they so wish.

Your Right To Object: If you choose to you may object in writing to the Settlement Agreement, and the Court will consider such objection in deciding whether to approve the Settlement Agreement as fair, reasonable, and adequate, and whether the attorneys' fees sought should not be awarded in whole or in part. Any Class Member receiving this Notice who objects in writing to the Settlement Agreement may appear at the November 26, 2003 hearing to voice such objection, and such Member (although not required to do so)is free to hire independent counsel in connection with such objection.

However, no Class Member's objection shall be heard or considered (and no papers or briefs submitted in support of such objection shall be considered) unless, by November 21, 2003, the objection in writing and copies of all supporting papers and briefs are delivered upon counsel at the following addresses:

Class Counsel for vested participants of the Pension Plan
Specter Specter Evans & Manogue, P.C.
The 26th Floor, Koppers Building
Pittsburgh, PA 15219

Counsel for the Liquidating Receiver
Eckert Seamans Cherin & Mellott, LLC
U.S. Steel Tower
600 Grant Street, 44th Floor
Pittsburgh, PA 15219

Counsel for the St. Francis Entities
Kirkpatrick & Lockhart LLP
Henry W. Oliver Bldg
535 Smithfield St.
Pittsburgh, PA 15222

Any Class Member who fails to timely object in the manner described in this paragraph shall be deemed to have waived such objection, shall be forever barred from raising such objection in this action, and shall be bound by the judgment.

Additional Information. Any questions Class Members have about the matters contained in this Notice should NOT be directed to the Court but should be directed in writing to Class Counsel at any of the following addresses:

Joseph N. Kravec, Jr., Esquire
Specter Specter Evans & Manogue, P.C.
The 26th Floor, Koppers Building
Pittsburgh, PA 15219

John Stember, Esquire
Stember Feinstein Krakoff
1705 Allegheny Building
Pittsburgh PA 15219

William T. Payne, Esquire
1007 Mt. Royal Boulevard
Pittsburgh, PA 15223-1027

Edward A. Olds, Esquire
1007 Mt. Royal Boulevard
Pittsburgh PA 15223-1027

Any correction or changes of name or address should NOT be directed to the Court, but should be directed in writing to the Liquidating Receiver at the following address:

Liquidating Receiver
P.O. Box 2606
Pittsburgh, PA 15230-2606

Dated: October 20, 2003

Prothonotary of the Court of Common
Pleas of Allegheny County
City-County Building
Grant Street and Forbes Avenue
Pittsburgh, PA 15219

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