According to the Thaxton Class Action settlement website, on October 31, 2006, the parties agreed on a Master Settlement Agreement that resolves all of the litigation. That settlement agreement was approved by the Thaxton bankruptcy court, by the Finova bankruptcy court, and by the Federal District Court in Anderson, South Carolina. In District Court, approval resulted in the preliminary certification of a class for settlement purposes, followed by a notice which most noteholders received, and then final approval on January 26, 2007.

According to a press release dated May 8, 2006, the Court has certified a class action against two defendants in that litigation. The Plaintiffs have agreed to settle with those two defendants, Cherry, Bekaert & Holland, L.L.P. ("CBH"), and Moore & Van Allen, PLLC ("MVA"). The Settlement Class consists of all holders of subordinated notes of The Thaxton Group, Inc. as of October 17, 2003 and all assignees of any rights or claims of such persons to the extent of the assignment. This proposed partial settlement will provide up to $9,350,000 additional funds to Thaxton for the sole purpose of paying claims of subordinated note holders or their assignees. This is a partial settlement that will resolve claims involving the two settling defendants. Litigation will continue as to the remaining defendant, Finova Capital Corporation ("Finova"). However, this remaining litigation against Finova is not being pursued on a classwide basis. Only individuals expressly named as plaintiffs in the litigation against Finova can recover any benefits of the litigation. The Court has granted preliminary approval of this settlement and the Settlement Class but still has to decide whether to grant final approval. The Court will hold a hearing on August 24, 2006, to determine whether the proposed settlements of the class actions involving the settling defendants, CBH and MVA, should be approved by the Court.

Several class actions were filed in on behalf of certain defined classes of people who had purchased subordinated notes from the Thaxton Group Inc. and several related entities (collectively the "Thaxton Entities"). The complaints by the subordinated noteholders allege claims of fraud, securities fraud, and various other civil conspiracy and business torts in the sale of the subordinated notes. Specifically, plaintiffs allege Finova funded Thaxton's aggressive expansion in the late 1990s by lending excessive amounts, garnering large profits but leaving itself undersecured. When Finova filed for bankruptcy in 2001, it wanted to collect on its debts as quickly as possible. Thaxton owes Finova about $110 million, according to bankruptcy court papers. The complaint alleges Finova conspired with Thaxton to sell subordinated notes mimicking bank CDs to unsophisticated investors, without revealing the true purpose of the notes was to pay off uncollectible portions of Thaxton's debt to Finova. There are approximately 6,800 holders of the subordinated notes issued in several states, with a total subordinated indebtedness of approximately $122 million.

In addition to Finova, the complaints each name as co-defendants Thaxton's accountants Cherry Bekaert & Holland, attorneys Moore & Van Allen, and several agents and/or employees of the Thaxton Entities who aided the scheme and helped inflate Thaxton's financial statements.

Under its loan agreement, Finova has a senior secured loan to the Thaxton Entities of approximately $108 million at March 31, 2004. The Thaxton Entities were declared in default under their loan agreement with Finova after they advised Finova that they would have to restate earnings for the first two fiscal quarters of 2003, and had suspended payments on their subordinated notes. As a result of the default, Finova exercised its rights under the loan agreement, and accelerated the indebtedness. The Thaxton Entities then filed a petition for bankruptcy protection under Chapter 11 of the federal bankruptcy code in the United States Bankruptcy Court for the District of Delaware on October 17, 2003, listing assets of approximately $206 million and debts of $242 million.

The case was originally filed in the Court of Common Pleas of Lancaster County, South Carolina, case no. 2003-CP-29-967, and was served on the Company on October 17, 2003. The action was properly removed to the United States District Court for the District of South Carolina on November 14, 2003. On June 28, 2004, similar cases from Districts of Southern Ohio, Western North Carolina, and Northern Georgia were transferred to the District of South Carolina.