BAKER V. FAMILY CREDIT COUNSELING CORPORATION SETTLEMENT - CIVIL ACTION NO. 04-CV-5508-JD

Plaintiffs filed a class action lawsuit against defendants on November 23, 2004 in the United States District Court for the Eastern District of Pennsylvania captioned Baker v. Family Credit Counseling Corporation, et al., No. 04-CV-5508 (the "Lawsuit").

Plaintiffs alleged that defendants, among other things, violated the Racketeer Influenced and Corrupt Organizations Act ("RICO") and the Credit Repair Organization Act ("CROA") and sought certification of a nationwide class of all persons similarly situated.

Defendants have at all times denied, and continue to deny, that they committed any wrongful acts or violations of law of any nature whatsoever or that they have liability to the plaintiffs or the putative class.

Defendants provided to plaintiffs certain statements, including statements reflecting the ability of FCCC, DSF and CDME to pay any judgement as of December 2006 and defendants represent, to the best of their knowledge, that said financial statements are true and accurate.

Substantial uncertainty exists as to the potential liability of defendants in the Lawsuit and as to the nature and amount of relief, if any, to which plaintiffs and the members of the putative class may be entitled if liability is established, and the possibility for protracted litigation represents a great expense to defendants and to plaintiffs, including the time and costs of appellate litigation.

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