On May 26, 2000, the Court entered the Substitute Order and Final Judgment signed by U.S. District Judge John C. Lifland. The Court awarded plaintiffs’ counsel attorney fees from the Settlement and the case was closed. On February 15, 2001, the Court further entered the Order approving the distribution of the Settlement Fund.

According to the firm's 10-K filing dated 4/28/2000, the Company has reached an agreement in principle to resolve the federal securities class action litigation which was filed against the Company and others in the United States District Court for the District of New Jersey and the securities litigation filed in Superior Court of New Jersey, Essex County Division. The proposed settlements provide for the payment of $1.7 million in the aggregate and would be funded entirely from insurance proceeds. The proposed federal action settlement requires court approval.

As reported in the firm's 10-Q filing dated 9/14/1999, on October 16, 1997, Stephen Brosious and Rudy Pallastrone, who allegedly purchased shares of the Company's common stock in an initial public offering in September, 1997 (the "IPO"), filed a lawsuit against the Company, several of the Company's directors and officers, and the underwriters of the IPO (the "Defendants") in the United States District Court of the District of New Jersey (the "Court"). The named plaintiffs purport to maintain a class action on behalf of all persons, other than the Defendants, who purchased the Company's common stock issued in connection with the IPO on or about September 19, 1997 through October 13, 1997. The complaint alleges that the Defendants violated federal securities laws by making materially false or misleading statements and/or omissions in connection with the IPO. The plaintiffs seek monetary damages of an unspecified amount, rescission or rescissory damages and fees and costs. Since October 16, 1997, 15 additional putative class actions making substantially similar allegations and seeking substantially similar relief have been filed against some or all of the Defendants. On or about January 13, 1998, the 16 putative class actions were consolidated in the Court and on February 26, 1998, the plaintiffs served and filed their amended consolidated complaint. On April 16, 1998, the Defendants moved to dismiss the complaint. On September 4, 1998, the Court entered an Order granting the motion to dismiss in part and denying it in part. The Court also dismissed the case against the underwriters without prejudice. On October 5, 1998, the plaintiffs filed an amended complaint against all defendants including the underwriters. The Company filed its answer to the amended complaint on October 26, 1998. On August 23, 1999, the Court entered an Order granting in part and denying in part plaintiffs' motion for class certification. Defendants have filed a motion for reconsideration of that portion of the Order granting plaintiffs' motion. Discovery is ongoing.

The original complaint alleges that in connection with Children's Initial Public Offering on Sept. 18, 1997, Children's and three of its senior officers violated Sections 11 and 15 of the Securities Act of 1933 by issuing a materially false and misleading Registration Statement and Prospectus. The complaint charges defendants with concealing and misrepresenting facts concerning Children's new store sales and third quarter financial results.