Free Settlement Agreement - District Court of Colorado - Colorado

Case 1:04-cv-00665-RPM

Document 95-3

Filed 08/22/2006

Page 1 of 17

EXHIBIT A-1

Case 1:04-cv-00665-RPM

Document 95-3

Filed 08/22/2006

Page 2 of 17

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 04-cv-00665-RPM DAVID HELLER, On Behalf of Himself and All Others Similarly Situated, Plaintiff, v. QUOVADX, INC., LORINE R. SWEENEY and GARY T. SCHERPING, Defendants. NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF CLASS ACTION EXHIBIT A-1

Case 1:04-cv-00665-RPM

Document 95-3

Filed 08/22/2006

Page 3 of 17

IF YOU PURCHASED OR ACQUIRED QUOVADX, INC. ("QUOVADX") COMMON STOCK BETWEEN OCTOBER 22, 20003 AND MARCH 15, 2004, YOU COULD GET A PAYMENT FROM A CLASS ACTION SETTLEMENT. A federal court authorized this Notice. This is not a solicitation from a lawyer. Security and Time Period: Quovadx common stock (NASDAQ:QVDX) purchased or acquired between October 22, 2003 and March 15, 2004. Settlement Fund: $10,000,000 in cash. This settlement applies to all claims arising under §10(b) of the Securities Act of 1934 and Rule 10b-5 promulgated therein for the above time period. Your recovery will depend on amount of stock purchased and the timing of your purchases and/or acquisition and any sales. Depending on the number of eligible shares that participate in the settlement and when those share were purchased or acquired and sold, the estimated average recovery per share will be approximately $1.00 before deduction of Court-approved fees and expenses. Reasons for Settlement: Avoids the costs and risks associated with continued litigation, including danger of no recovery. If the Case Had Not Settled: Continuing with the case could have resulted in dismissal or loss at trial. The two sides do not agree on the amount of money that could have been won if Lead Plaintiff prevailed at trial. The parties disagree about: (1) the method for determining whether Quovadx stock was artificially inflated during the relevant period; (2) the amount of any such inflation; (3) the extent that various facts alleged by Lead Plaintiff were materially false or misleading; (4) the extent that various facts alleged by Lead Plaintiff influenced the trading price of Quovadx common stock during the relevant period; and (5) whether the facts alleged were material, false, misleading or otherwise actionable under the securities laws. -1-

Case 1:04-cv-00665-RPM

Document 95-3

Filed 08/22/2006

Page 4 of 17

Attorneys' Fees and Expenses: Court-appointed Lead Counsel will ask the Court for attorneys' fees not to exceed 25% of the settlement fund and reimbursement of out-of-pocket expenses not to exceed $400,000 to be paid from the settlement fund. If the above amounts are requested and approved by the Court, the average cost per share will be $0.29. Lead Counsel have not received any payment for their work investigating the facts, conducting this litigation and negotiating the settlement on behalf of the Lead Plaintiff and the Settlement Class. Deadlines: Submit Claim: Request Exclusion: File Objection: December 26, 2006 November 9, 2006 November 9, 2006

Court Hearing on Fairness of Settlement: _____________, 2006 More Information: www.rg2claims.com or Claims Administrator: RG/2 Claims Administration LLC P.O. Box 59479 Philadelphia, PA 19102 Lead Counsel: Rick Nelson Shareholder Relations Lerach Coughlin Stoia Geller Rudman & Robbins LLP 655 West Broadway, Suite 1900 San Diego, CA 92101

·

Your legal rights are affected whether you act, or don't act. Read this Notice carefully. YOUR LEGAL RIGHTS AND OPTIONS IN THIS SETTLEMENT:

SUBMIT A CLAIM FORM EXCLUDE YOURSELF

The only way to get a payment. Get no payment. This is the only option that allows you to participate in another lawsuit against the Defendants relating to

-2-

Case 1:04-cv-00665-RPM

Document 95-3

Filed 08/22/2006

Page 5 of 17

the legal claims in this case. OBJECT GO TO A HEARING You may write to the Court if you don't like this settlement. You may ask to speak in Court about the fairness of the settlement. DO NOTHING · Get no payment.

These rights and options -- and the deadlines to exercise them -- are explained in this Notice.

·

The Court in charge of this case must decide whether to approve the settlement. Payments will be made if the Court approves the settlement and, if there are any appeals, after appeals are resolved. Please be patient. BASIC INFORMATION 1. Why Did I Get This Notice Package?

You or someone in your family may have purchased or acquired shares of Quovadx common stock between October 22, 2003 and March 15, 2004. The Court sent you this Notice because you have a right to know about a proposed settlement of a class action lawsuit, and about all of your options, before the Court decides whether to approve the settlement. If the Court approves it and after any objections or appeals are resolved, the Claims Administrator appointed by the Court will make the payments that the settlement allows. This package explains the lawsuit, the settlement, your legal rights, what benefits are available, who is eligible for them, and how to get them. The Court in charge of the case is the United States District Court for the District of Colorado, and the case is known as Heller v. Quovadx, Inc. et al., Civil Action No. 04-cv-00665-3-

Case 1:04-cv-00665-RPM

Document 95-3

Filed 08/22/2006

Page 6 of 17

RPM. The person who sued is called the Lead Plaintiff, and the company and the individuals he sued, Quovadx, Lorine R. Sweeney and Gary T. Scherping, are called the Defendants. 2. What Is This Lawsuit About?

This case was brought as a class action alleging that the Defendants falsified Quovadx's financial results for the third quarter of 2003 and overstated its third and fourth quarter software license revenues, resulting in the artificial inflation of the price of Quovadx common stock between October 22, 2003 and March 15, 2004 in violation of §10(b) of the Securities Exchange Act and Rule 10b-5 promulgated thereunder. Defendants deny that they did anything wrong. 3. Why Is This a Class Action?

In a class action, one or more people called class representatives (in this case the Courtappointed Lead Plaintiff David Heller), sue on behalf of people who have similar claims. Here, all these people are called a Settlement Class or Settlement Class Members. One court resolves the issues for all Settlement Class Members, except for those who exclude themselves from the Settlement Class. Judge Richard P. Matsch is in charge of this class action. 4. Why Is There a Settlement?

The Court did not decide in favor of the Lead Plaintiff or Defendants. Instead, both sides agreed to a settlement. That way, they avoid the cost of a trial, and eligible Settlement Class Members who make valid claims will get compensation. The Lead Plaintiff and his attorneys think the settlement is best for all Settlement Class Members. WHO IS IN THE SETTLEMENT To see if you will get money from this settlement, you first have to determine if you are a Settlement Class Member.

-4-

Case 1:04-cv-00665-RPM

Document 95-3

Filed 08/22/2006

Page 7 of 17

5.

How Do I Know if I Am Part of the Settlement?

The Settlement Class includes all persons who purchased or acquired shares of Quovadx common stock between October 22, 2003 and March 15, 2004, except those persons and entities that are excluded, as described below. 6. What Are The Exceptions to Being Included?

You are not a Settlement Class Member if you are a Defendant or are one of Defendants' Related Parties as defined in the Proof of Claim received with this Notice. If you sold Quovadx common stock between October 22, 2003 and March 15, 2004, that alone does not make you a Settlement Class Member. You are a Settlement Class Member only if you purchased or acquired shares of Quovadx common stock between October 22, 2003 and March 15, 2004. 7. I'm Still Not Sure if I Am Included.

If you are still not sure whether you are included, you can ask for free help. You can call Rick Nelson at 619/231-1058 for more information. Or you can fill out and return the claim form described in question 10, to see if you qualify. THE SETTLEMENT BENEFITS -- WHAT YOU GET 8. What Does the Settlement Provide?

Defendants have agreed to pay $10 million in cash to be divided among all eligible Settlement Class Members who send in valid claim forms, after payment of Court-approved attorneys' fees and expenses and the costs of claims administration, including the costs of printing and mailing this Notice and the cost of publishing newspaper notice.

-5-

Case 1:04-cv-00665-RPM

Document 95-3

Filed 08/22/2006

Page 8 of 17

9.

How Much Will My Payment Be?

Your share of the fund will depend on the number of valid claim forms that Settlement Class Members send in and how many shares of common stock you purchased or otherwise acquired during the relevant period and when you bought and sold them. A claim will be calculated as follows: (a) For shares of Quovadx, Inc. common stock purchased or otherwise acquired

between October 22, 2003 and March 15, 2004, and (i) (ii) sold on or before March 15, 2004, the claim per share is $0.00. retained at the close of trading on March 15, 2004, the claim per share

is $1.45 (March 16, 2004 price decline). The payment you get will reflect your pro rata share after deduction of Court-approved fees and expenses. Depending on the number of eligible shares that participate in the settlement and when those shares were purchased and sold, the estimated average payment will be approximately $1.00 for each share before deduction of Court-approved fees and expenses. The number of claimants who send in claims varies widely from case to case. If fewer than anticipated Settlement Class Members send in claim forms, you could get more money. The date of acquisition or sale is the "contract" or "trade" date as distinguished from the "settlement" date. For Settlement Class Members who held Quovadx common stock at the beginning of the Class Period or made multiple purchases or sales during the Class Period, the first-in, first-out ("FIFO") method will be applied to such holdings, purchases and sales for purposes of calculating a claim. Under the FIFO method, sales of common stock during the Class Period will be matched, in -6-

Case 1:04-cv-00665-RPM

Document 95-3

Filed 08/22/2006

Page 9 of 17

chronological order, first against the common stock held at the beginning of the Class Period. The remaining sales of common stock during the Class Period will then be matched, in chronological order, against common stock purchased and/or acquired during the Class Period. A Settlement Class Member will be eligible to receive a distribution from the net settlement fund only if a Settlement Class Member had a net loss, after all profits from transactions in Quovadx common stock during the Class Period are subtracted from all losses. HOW YOU GET A PAYMENT -- SUBMITTING A CLAIM FORM 10. How Will I Get a Payment?

To qualify for payment, you must be an eligible Settlement Class Member and you must send in a claim form. A claim form is enclosed with this Notice. Read the instructions carefully, fill out the form, include all the documents the form asks for, sign it, and mail it in the enclosed envelope postmarked no later than December 26, 2006. 11. When Will I Get My Payment?

The Court will hold a hearing on _______________, 2006, to decide whether to approve the settlement. If Judge Matsch approves the settlement, there may be appeals. It is always uncertain whether these appeals can be resolved, and resolving them can take time, perhaps several years. Everyone who sends in a claim form will be informed of the determination with respect to their claim. Please be patient. 12. What Am I Giving Up to Get a Payment or Stay in the Settlement Class?

Unless you exclude yourself, you are staying in the Settlement Class, and that means that you cannot sue, continue to sue, or be part of any other lawsuit against the Defendants about the same legal issues in this case. It also means that all of the Court's orders will apply to you and legally

-7-

Case 1:04-cv-00665-RPM

Document 95-3

Filed 08/22/2006

Page 10 of 17

bind you and you will release your claims in this case against the Defendants. The terms of the release are included in the claim form that is enclosed. You should note that the release specifically excludes any claims arising under §§11 and 15 of the Securities Act of 1933, including the claims that are the subject of Henderson v. Quovadx, Inc., et al., Civil Action No. 04-cv-1006-RPM, which also is pending before Judge Matsch. EXCLUDING YOURSELF FROM THE SETTLEMENT If you don't want a payment from this settlement, but you want to keep the right to sue or continue to sue the Defendants on your own about the same legal issues in this case, then you must take steps to get out of the Settlement Class. This is called excluding yourself or is sometimes referred to as opting out of the Settlement Class. 13. How Do I Get Out of the Settlement Class?

To exclude yourself from the Settlement Class, you must send a letter by mail stating that you want to be excluded from Heller v. Quovadx, Inc., et al., Civil Action No. 04-cv-00665-RPM. You must include your name, address, telephone number, your signature, and the number of shares of Quovadx common stock you purchased or acquired between October 22, 2003 and March 15, 2004, the number of shares sold during this time period, if any, and the dates of such purchases and sales. You must mail your exclusion request postmarked no later than November 9, 2006 to:

-8-

Case 1:04-cv-00665-RPM

Document 95-3

Filed 08/22/2006

Page 11 of 17

Quovadx Securities Litigation Claims Administrator c/o RG/2 Claims Administration LLC P.O. Box 59479 Philadelphia, PA 19102 You cannot exclude yourself on the phone or by e-mail. If you ask to be excluded, you are not eligible to get any settlement payment, and you cannot object to the settlement. You will not be legally bound by anything that happens in this lawsuit. 14. If I Do Not Exclude Myself, Can I Sue the Defendants for the Same Thing Later?

No. Unless you exclude yourself, you give up any right to sue the Defendants for the claims resolved by this settlement. If you have a pending lawsuit against any of the Defendants, speak to your lawyer in that case immediately. Remember, the exclusion deadline is November 9, 2006. 15. If I Exclude Myself, Can I Get Money from This Settlement?

No. If you exclude yourself, do not send in a claim form. But, you may sue, continue to sue, or be part of a different lawsuit against the Defendants. THE LAWYERS REPRESENTING YOU 16. Do I Have a Lawyer in This Case?

The Court asked the law firm of Lerach Coughlin Stoia Geller Rudman & Robbins LLP to represent you and other Settlement Class Members. These lawyers are called Lead Counsel. You will not be charged for these lawyers. If you want to be represented by your own lawyer, you may hire one at your own expense. 17. How Will the Lawyers Be Paid?

Lead Counsel will ask the Court for attorneys' fees not to exceed 25% of the settlement fund (an average of $0.25 per share) and for reimbursement of their out-of-pocket expenses up to -9-

Case 1:04-cv-00665-RPM

Document 95-3

Filed 08/22/2006

Page 12 of 17

$400,000 ($0.04 per share), which were advanced in connection with the Action. The Lead Plaintiff may also seek reimbursement of his expenses incurred in representing the Settlement Class in the Action. Such sums as maybe approved by the Court will be paid from the settlement fund. Settlement Class Members are not personally liable for any such fees or expenses. The attorneys' fees and expenses requested will be the only payment to Lead Counsel for their efforts in achieving this settlement and for their risk in undertaking this representation on a wholly contingent basis. To date, Lead Counsel have not been paid for their services for conducting this litigation on behalf of the Lead Plaintiff and the Settlement Class nor for their substantial out-ofpocket expenses. The fee requested will compensate Lead Counsel for their work in achieving the settlement fund and is well within the range of fees awarded to class counsel under similar circumstances in other cases of this type. The Court may award less than this amount. OBJECTING TO THE SETTLEMENT You can tell the Court that you don't agree with the settlement or some part of it. 18. How Do I Tell the Court that I Don't Like the Settlement?

If you are a Settlement Class Member, you can object to the settlement if you don't like any part of it. You can give reasons why you think the Court should not approve it. The Court will consider your views. To object, you must send a letter saying that you object to the settlement in Heller v. Quovadx, Inc., et al., Civil Action No. 04-cv-00665-RPM. Be sure to include your name, address, telephone number, your signature, the number of shares of Quovadx common stock purchased or otherwise acquired and sold between October 22, 2003 and March 15, 2004, and the reasons you object to the settlement. Any objection to the settlement must be mailed or delivered such that it is received by each of the following no later than November 9, 2006: - 10 -

Case 1:04-cv-00665-RPM

Document 95-3

Filed 08/22/2006

Page 13 of 17

Court: Clerk of the Court UNITED STATES DISTRICT COURT DISTRICT OF COLORADO Alfred A. Arraj United States Courthouse 901 19th Street, Room A-105 Denver, CO 80294-3589 Counsel for Lead Plaintiff: Joy Ann Bull LERACH COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP 655 West Broadway, Suite 1900 San Diego, CA 92101 Counsel for Quovadx, Inc. Nina F. Locker WILSON SONSINI GOODRICH & ROSATI, P.C. 650 Page Mill Road Palo Alto, CA 94304-1050 Counsel for Sweeney and Scherping Frederick J. Baumann ROTHGERBER JOHNSON & LYONS LLP 1200 17th Street, Suite 3000 Denver, CO 80202 19. What's the Difference Between Objecting and Excluding?

Objecting is simply telling the Court that you don't like something about the settlement. You can object only if you stay in the Settlement Class. Excluding yourself is telling the Court that you don't want to be part of the Settlement Class. If you exclude yourself, you have no basis to object because the case no longer affects you.

- 11 -

Case 1:04-cv-00665-RPM

Document 95-3

Filed 08/22/2006

Page 14 of 17

THE COURT'S FAIRNESS HEARING The Court will hold a hearing to decide whether to approve the settlement. You may attend and you may ask to speak, but you don't have to. 20. When and Where Will the Court Decide Whether to Approve the Settlement?

The Court will hold a fairness hearing at ____ a.m., on _____________, 2006, at the Byron White United States Courthouse, 1823 Stout Street, Denver, Colorado. At this hearing the Court will consider whether the settlement is fair, reasonable, and adequate. If there are objections, the Court will consider them. Judge Matsch will listen to people who have asked to speak at the hearing. The Court will also consider how much to pay to Lead Counsel. The Court may decide these issues at the hearing or take them under consideration. We do not know how long these decisions will take. 21. Do I have to Come to the Hearing?

No. Lead Counsel will answer questions Judge Matsch may have. But, you are welcome to come at your own expense. If you send an objection, you don't have to come to Court to talk about it. As long as you mailed your written objection on time, the Court will consider it. You may also pay your own lawyer to attend, but it is not necessary. 22. May I Speak at the Hearing?

You may ask the Court for permission to speak at the Fairness Hearing. To do so, you must send a letter saying that it is your intention to appear in Heller v. Quovadx, Inc., et al., Civil Action No. 04-cv-00665-RPM. Be sure to include your name, address, telephone number, your signature, and the number of shares of Quovadx common stock purchased and/or otherwise acquired between October 22, 2003 and March 15, 2004. Your notice of intention to appear must be received no later - 12 -

Case 1:04-cv-00665-RPM

Document 95-3

Filed 08/22/2006

Page 15 of 17

than November 9, 2006, by the Clerk of the Court, Lead Counsel, and Defendants' counsel, at the four addresses listed in question 18. You cannot speak at the hearing if you exclude yourself from the Settlement Class. IF YOU DO NOTHING 23. What Happens if I Do Nothing at All?

If you do nothing, you'll get no money from this settlement. But, unless you exclude yourself, you won't be able to start a lawsuit, continue with a lawsuit, or be part of any other lawsuit against the Defendants about the same legal issues in this case. GETTING MORE INFORMATION 24. Are There More Details About the Settlement?

This Notice summarizes the proposed settlement. More details are in the Stipulation of Settlement dated as of April 4, 2006. You can get a copy of the Stipulation of Settlement by writing to Rick Nelson, c/o Lerach Coughlin Stoia Geller Rudman & Robbins LLP, 655 West Broadway, Suite 1900, San Diego, CA 92101 or from the Clerk's office at the United States District Court for the District of Colorado, Alfred A. Arraj United States Courthouse, 901 19th Street, Room A-105, Denver, Colorado during regular business hours.

- 13 -

Case 1:04-cv-00665-RPM

Document 95-3

Filed 08/22/2006

Page 16 of 17

25.

How Do I Get More Information?

You can call 619/231-1058 or write to Rick Nelson, Lerach Coughlin Stoia Geller Rudman & Robbins LLP, 655 West Broadway, Suite 1900, San Diego, CA 92101 or visit the website at www.rg2claims.com. SPECIAL NOTICE TO NOMINEES If you hold shares of Quovadx common stock purchased between October 22, 2003 and March 15, 2004 as nominee for a beneficial owner, then, within ten (10) calendar days after you receive this Notice, you must either: (1) send a copy of this Notice by first class mail to all such Persons; or (2) provide a list of the names and addresses of such Persons to the Claims Administrator: Quovadx Securities Litigation Claims Administrator c/o RG/2 Claims Administration LLC P.O. Box 59479 Philadelphia, PA 19102 If you choose to mail the Notice and Proof of Claim yourself, you may obtain from the Claims Administrator (without cost to you) as many additional copies of these documents as you will need to complete the mailing. Regardless of whether you choose to complete the mailing yourself or elect to have the mailing performed for you, you may obtain reimbursement for or advancement of reasonable administrative costs actually incurred or expected to be incurred in connection with forwarding the

- 14 -

Case 1:04-cv-00665-RPM

Document 95-3

Filed 08/22/2006

Page 17 of 17

Notice and which would not have been incurred but for the obligation to forward the Notice, upon submission of appropriate documentation to the Claims Administrator. DO NOT TELEPHONE THE COURT REGARDING THIS NOTICE

DATED: __________________, 2006

BY ORDER OF THE COURT UNITED STATES DISTRICT COURT DISTRICT OF COLORADO

S:\Settlement\Quovadx.set\(v1) A1-00030498.doc

- 15 -