IN JANUARY 2006 REP SOLD CUSTOMERS MEDICAL CAPITAL NOTES, A PRIVATE PLACEMENT FOR ACCREDITED INVESTORS SEEKING HIGH DEGREE OF RETURN. INTEREST PAYMENTS WERE PAID TIMELY FOR THE AGREED UPON ONE YEAR TERM AND PRINCIPAL WAS RETURNED. IN JANUARY 2007 CUSTOMERS REINVESTED PROCEEDS AND, ALONG WITH ADDITIONAL CASH, PURCHASED MORE MEDICAL CAPITAL NOTES OF VARYING MATURITIES. IN JANUARY 2008 REP AGAIN SOLD CUSTOMERS ADDITIONAL MEDICAL CAPITAL NOTES. IN JULY 2009 MEDICAL CAPITAL WAS ACCUSED OF FRAUD BY THE SEC. AS A RESULT, THE COMPANY HAS BEEN PLACED UNDER COURT APPOINTED RECEIVERSHIP AND INTEREST PAYMENTS AND RETURN OF PRINCIPAL TO INVESTORS HAS CEASED. THESE CUSTOMERS ARE WORKING WITH THEIR ATTORNEY THROUGH FINRA ARBITRATION. CUSTOMERS CLAIM THEY WERE ENCOURAGED TO PURCHASE SPECULATIVE INVESTMENTS AND WERE MISLEAD AS TO THE DEGREE OF RISK INVOLVED. THEY REQUEST $250,000 IN ACTUAL DAMAGES, PUNITIVE DAMAGES, INTEREST LOSS DAMAGES AND ATTORNEY FEES.

$250,000.00

$115,000.00

WITHOUT ADMITTING LIABILITY AND SOLELY IN ORDER TO AVOID THE COSTS AND UNCERTAINTY OF LITIGATION, VALMARK AND COLES HAVE AGREED TO COMPROMISE AND A SETTLEMENT OF DISPUTES. IN ACCORDANCE WITH THE SETTLEMENT TERMS, VALMARK AGREED TO PAY A SUM OF $115,000.00 AND THE CLAIMANTS DISMISSED WITH PREJUDICE ANY AND ALL CLAIMS RELATING TO THE ARBITRATION.