IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA IN …

1 IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA IN AND FOR THE county OF marin Coordination Proceeding Special Title (Rule 1550(b) ) ) ) DFS CASES ) Judicial Council Coordination Proceeding No. 4227 ) Included Actions: ) Morrish, et al. v. DFS Credit Corp., et al. ) SUPERIOR COURT of CALIFORNIA , county of marin No. CV 012910 Dell Oca, et al. v. Vener, et al.

2 SUPERIOR COURT of CALIFORNIA , county of marin No. CV 012912 Ward, et al. v. Dynacorp Financial Strategies, Inc., ) SUPERIOR COURT of CALIFORNIA , county of marin No. CV 012914 et al. ) Aragon Financial, Inc. v. Chiao, Smith & Associates ) SUPERIOR COURT of CALIFORNIA , county of Orange No. 01CC07747 et al. ) ) Coordination Trial Judge: Honorable Lynn O Malley Taylor ) Courtroom L _____ NOTICE OF PROPOSED SETTLEMENT WITH THE BANK OF NEW YORK MELLON TRUST COMPANY, ( BNY ), PLAN OF ALLOCATION OF BNY SETTLEMENT PROCEEDS, AND APPLICATION FOR AN AWARD OF ATTORNEYS FEES AND EXPENSES TO.

3 MEMBERS OF THE PLAINTIFF CLASS CERTIFIED IN THE DELL OCA ACTION (THE CERTIFIED CLASS ) This notice is being sent to you pursuant to an Order of the SUPERIOR COURT of the STATE of CALIFORNIA in and for the county of marin (the COURT ). It contains important information about the status of this lawsuit, the history of proceedings involving the claims of the Certified Class against The Bank of New York Trust Company, ( , BNY ), a proposed settlement with BNY, the manner in which Class Counsel proposes to allocate the proceeds from that settlement, and Class Counsel s application for an award of attorneys fees and expenses relating to the settlement with BNY.

4 PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. YOUR RIGHTS MAY BE AFFECTED BY PROCEEDINGS IN THIS ACTION. PLEASE NOTE THAT IF YOU ARE A CERTIFIED CLASS MEMBER, YOU MAY BE ENTITLED TO SHARE IN THE PROCEEDS OF THE SETTLEMENT DESCRIBED IN THIS NOTICE AND MAY ALSO BE BARRED FROM PURSUING CERTAIN CLAIMS AGAINST BNY. I. BACKGROUND AND STATUS OF PRIOR SETTLEMENTS The Dell Oca Action is the lead case in these coordinated proceedings. It was filed following the suspension of interest payments in June, 2000 on roughly $50 million of notes (the Notes ) issued by three CALIFORNIA grantor trusts, , DFS Secured Healthcare Receivables Trust I ( Trust I ), DFS Secured Healthcare Receivables Trust II ( Trust II ) and DFS Secured Healthcare Receivables Trust IV ( Trust IV ) (collectively, the DFS Trusts ).

5 In June, 2003, the COURT certified the Dell Oca Action as a class action (the Certified Class ) and defined the Certified Class to include all persons (excluding the defendants and their officers, directors, family members, affiliates and representatives) who purchased or otherwise acquired and hold notes issued by the DFS Trusts and did not exclude themselves from this class action (collectively, Certified Class Members or Noteholders ). As you were advised in a previous notice, the plaintiffs in the Dell Oca Action ( plaintiffs or the Dell Oca Plaintiffs ) reached settlements of these coordinated proceedings with a number of the defendants, namely, 2defendants Buchanan Anderson & Pratt LLP and Chiao Smith Associates; Litchfield Financial Corporation and Ronald Rabidou; and DFS Credit Corporation, DynaCorp Financial Strategies, Inc.

6 And Robert Vener (the DFS Defendants ). Together, these settlements produced a principal recovery sum of $ million, which, after the payment of attorneys fees and expenses, was distributed in or about early 2006 to those class members whose claims were approved by the COURT . No further sums (or at least any material amount) from these settlement proceeds are expected to be available for any subsequent distribution. II. HISTORY OF PROCEEDINGS AGAINST REMAINING DEFENDANT BNY In September and October, 2004, the Dell Oca Plaintiffs went to trial against the only remaining non-settling defendant, BNY, the Indenture Trustee for the DFS Trusts.

7 On October 26, 2004, the jury rendered its verdict, finding that BNY breached its indenture contract with Trust IV and awarding damages in the amount of $15,788,750. With respect to Trust I and Trust II, however, the jury found that BNY did not breach its indenture contracts and thus awarded no damages. Following the jury s verdict, the Dell Oca Plaintiffs requested that the COURT award prejudgment interest on the jury s verdict, and, on January 7, 2005, the COURT issued an order granting that motion. Judgment subsequently was entered on the jury verdict, which included prejudgment interest in the amount of $6,198,707.

8 After trial and entry of judgment, BNY filed a motion with the COURT for judgment notwithstanding the verdict ( JNOV ), or, in the alternative, for a new trial as to Trust IV only. Plaintiffs moved the COURT for partial JNOV and for a new trial with respect to whether the evidence demonstrated contractual breaches by BNY as a matter of law as to Trusts I and II. As to this issue, plaintiffs alternatively sought a new trial. By Order dated July 14, 2005, the COURT denied plaintiffs post-trial motions. The COURT also denied BNY s motion for JNOV, finding that there was substantial evidence that BNY breached the indenture agreement for Trust IV by approving purchases of healthcare receivables by Trust IV from Trusts I and II, and that plaintiffs were damaged as a result, in that their investments were worth substantially less than the amounts paid.

9 As for BNY s motion for a new trial on the ground of excessive damages, however, the COURT conditionally granted that motion. In so doing, the COURT stated that the proper measure of damages for BNY s breaches was limited to the amount that the COURT concluded that Trust IV overpaid for the five inter-trust purchases of receivables that the COURT concluded formed the basis of the jury s finding against BNY for breach of the Trust IV Indenture, , $3,051, Accordingly, the COURT granted BNY s motion for a new trial subject to the condition that the motion would be denied if plaintiffs consented to a reduction in damages from $15,788,750 to $3,051,552.

10 Plus prejudgment interest. Plaintiffs rejected the reduced damage award. Thereafter, both the Dell Oca Plaintiffs and BNY appealed the COURT s rulings on their respective post-trial motions. The Dell Oca Plaintiffs challenged the granting of a new trial to BNY as to Trust IV, and the COURT s denial of their JNOV relative to the claims of breach as to the Trust I and II Indenture contracts. BNY appealed the COURT s denial of its JNOV motion, arguing that plaintiffs had failed to prove causation so as to entitle them to any damages, that the COURT s refusal to offset the prior settlement payments by the other defendants against the jury s verdict in favor of the Trust IV Noteholders was erroneous, and that the COURT erred in making certain evidentiary rulings, calculating prejudgment interest, and awarding costs to plaintiffs.