Free Motion for Order - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 04-cv-0665 RPM DAVID HELLER, Individually and on behalf of all others similarly situated, Plaintiff, v. QUOVADX, INC., LORINE R. SWEENEY and GARY T. SCHERPING, Defendants. ********************************* Civil Action No. 04-cv-1006 RPM SPECIAL SITUATIONS FUND III, L.P., SPECIAL SITUATIONS CAYMAN FUND, L.P., SPECIAL SITUATIONS TECHNOLOGY FUND NEW, L.P., AND SPECIAL SITUATIONS TECHNOLOGY FUND II, L.P., on behalf of themselves and others similarly situated, Plaintiff, v. QUOVADX, INC., LORINE R. SWEENEY, GARY T. SCHERPING, JEFFERY M. KRAUSS, FRED L. BROWN, J. ANDREW COWHERD, JAMES B. HOOVER, CHARLES J. ROESSLEIN and JAMES A. GILBERT, Defendants.

[PROPOSED] CONSOLIDATED SCHEDULING ORDER

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1.

INTRODUCTION The parties hereto submit this [Proposed] Consolidate Scheduling Order pursuant to

D.C.COLO.L.Civ.R. 16.2(A). The purpose of this [Proposed] Consolidated Scheduling Order is to provide for consolidated discovery and coordinated pre-trial proceedings for the related matters of Heller v. Quovadx, Inc., et al., No. 04-cv-0665 RPM, and Special Situations, et al. v. Quovadx, Inc., et al., No. 04-cv-1006, both pending before this Court, as called for by this Court's direction that "discovery in [Civil Action No. 04-cv-0665 RPM] and in Civil Action No. 04-cv-1006 RPM will be consolidated and a joint scheduling conference in both actions after lead counsel has been selected and approved in Civil Action No. 04-cv-10006-RPM, is anticipated." June 22 Order at 1, Heller v. Quovadx, Inc., et al., No. 04-cv-0665 RPM. 2. APPEARANCES OF COUNSEL Appearances of counsel and the parties represented are as follows: For Lead Plaintiff David Heller: Ex Kano S. Sams II Lerach Coughlin Stoia Geller Rudman & Robbins LLP 100 Pine Street, Suite 2600 San Francisco, CA 94111 Telephone: 415-288-4545 For Lead Plaintiffs Special Situations Fund III, L.P., Special Situations Cayman Fund, L.P., Special Situations Technology Fund New, L.P., and Special Situations Technology Fund II, L.P. (collectively, "Special Situations"): Lawrence M. Rolnick Lowenstein Sandler PC 65 Livingston Avenue Roseland, NJ 07068 Telephone: 973/597-2500

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For Defendants Quovadx, Inc., Jeffery M. Krauss, Fred L. Brown, J. Andrew Cowherd, James B. Hoover, Charles J. Roesslein and James A. Gilbert: John P. Stigi III Wilson Sonsini Goodrich & Rosati, P.C. 650 Page Mill Road Palo Alto, CA 94304-1050 Telephone: 650-493-9300 For Defendants Lorine R. Sweeney and Gary T. Scherping: Frederick J. Baumann Rothgerber Johnson & Lyons LLP One Tabor Center, Suite 3000 1200 Seventeenth Street Denver, CO 80202-5855 Telephone: 303/628-9542 3. STATEMENT OF CLAIMS AND DEFENSES The parties' statements of claims and defenses are based upon their current knowledge and, given the nature of the case, may be subject to amendment. (a) Plaintiff David Heller's Statement of Claims

This is an action on behalf of purchasers of Quovadx, Inc. ("Quovadx" or the "Company") publicly traded securities during the period from October 22, 2003 to March 15, 2004 (the "Class Period"). On October 22, 2003, Quovadx announced its highest reported quarterly revenue in Company history. The majority of this tremendous increase was due to the signing of the largest software contract in its corporate history ­ an agreement with Infotech Network Group ("Infotech"), purportedly a consortium of 15 Indian information-technology companies. On November 3, 2003, less than two weeks later, Quovadx publicly-announced its intention to acquire Rogue Wave Software ("Rogue Wave") in a cash and stock transaction valued at $71 million. Discussions and negotiations concerning this potential acquisition,

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including the financial terms thereof, had been ongoing since at least July 2003. Quovadx completed the acquisition on December 19, 2003. Then, on March 15, 2004, less than five months after Quovadx announced its banner third quarter and its acquisition of Rogue Wave, Quovadx announced that it would be restating its previously-reported financial results to remove the revenue and income it recognized in connection with its agreement with Infotech, stating that collection was not probable as of September 30, 2003 ­ the close of the third quarter 2003. Quovadx admitted that third quarter software license revenue had been overstated by an astounding 143%, and fourth quarter software license revenues were overstated by approximately 118%. The Company reported that it would reverse the entire $11 million of reported income attributable to its contract with Infotech. The stock dropped more than 28% per share on this news, closing at $3.58 per share on March 16, 2004. Heller contends that the Company's massive restatement was not an innocent mistake. The Company's false financials had artificially inflated the price of its stock at a time when it was negotiating the purchase of Rogue Wave for a combination of cash and stock. Using its inflated stock as currency, Quovadx was able to acquire Rogue Wave on more favorable terms than it could have if it had properly reported its financial results. On April 12, 2004, the Company announced that after informally investigating the restatement, the Securities and Exchange Commission ("SEC") had decided to launch a formal investigation. At the same time, the Company announced that Quovadx's Chief Executive Officer ("CEO"), defendant Lorine R. Sweeney ("Sweeney"), and its Chief Financial Officer ("CFO"), defendant Gary T. Scherping ("Scherping") ­ individuals responsible for the Company's financial results and reposting ­ had suddenly resigned.

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Moreover, on May 13, 2004, the Company announced that two additional distributor agreements entered into in 2003, totaling $1 million, would "require further review," and that Quovadx's 2004 1Q04 Form 10-Q would therefore be delayed. In addition, according to an anonymous letter addressed to the SEC, there were three more contracts, worth in excess of $450,000, that were improperly recorded by Quovadx in the third quarter. The letter provided detailed information concerning these transactions, including the allegation that Quovadx employees prepared false shipping documents for the purposes of revenue recognition. The Company's audit committee also released its findings related to the Infotech contract that, plaintiff alleges, indicated that the transaction was fraudulent. These findings included: (i) prior to its agreement with Quovadx, Infotech had never been a software distributor or reseller; (ii) it could not be determined whether Infotech's purported line of credit ever existed; (iii) a separate outsourcing agreement with Infotech, along with discussions concerning a possible $10 million per year of additional outsourcing to be paid by Quovadx to Infotech, likely induced Infotech to enter into the unusual software transaction; and (iv) Quovadx prepaid millions of dollars to Infotech, including $2 million in March 2004, for the likely purpose of allowing Infotech to establish letters of credit necessary for it to pay Quovadx ­ demonstrating that, in effect, Quovadx was paying itself. The report further stated that Quovadx expected to receive payment from Infotech only if and when it received sufficient cash from the resale of the Company's products ­ thus, the entire contract was a contingent sale. On May 14, 2004, the Company announced that, as a result of its internal investigation of the circumstances relating to the restatement, it had terminated the Executive Vice President of Sales, severed relations with its former President and CEO Sweeney and CFO Scherping, discontinued further severance payments to these former executives, and demanded the return of

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severance payments already paid to them and the return of prior compensation, including bonuses. (b) Plaintiff Special Situations' Statement of Claims

This is a securities class action seeking remedies under Sections 11 and 15 of the Securities Act of 1933 for materially false and misleading statements made by the Defendants in a Form S-4 Registration Statement (the "Registration Statement") filed with the United States Securities and Exchange Commission ("SEC") for the issuance of securities in connection with an exchange offer (the "Exchange Offer") with Rogue Wave Software, Inc. ("Rogue Wave"), which became effective on or about December 19, 2003. The case is brought on behalf of all persons and entities, other than Defendants, who acquired Quovadx ("Quovadx" or the "Company") common stock in connection with the Exchange Offer. The plaintiffs allege that Quovadx's Registration Statement on Form S-4 was materially false and misleading and misrepresented material facts, including, among other things, Quovadx's financial results for the third quarter of 2003. On October 22, 2003, Quovadx announced the execution of a historic software, training, maintenance and support agreement with an Indian Conglomerate, InfoTech Network Group ("InfoTech"), pursuant to which Quovadx would realize gains of $7.6 million (the "InfoTech Contract"). Quovadx further announced that it had already recognized $4.6 million of the total amount of the InfoTech Contract during the third quarter of 2003 and expected to recognize the remainder over the next four quarters. On the same day, Quovadx announced its "highest quarterly revenue" in the Company's history. Only a few days later, on November 4, 2003, the Company announced its intention to acquire Rogue Wave in a cash and stock transaction valued at $71 million. Merger negotiations between Rogue Wave and Quovadx took place between July and November of 2003. On November 12, 2003 Quovadx filed a Registration Statement with 6

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the SEC on Form S-4 in connection with its offer to exchange the common stock of Rogue Wave. Quovadx incorporated by reference its Form 10-Q for the third quarter, ending on September 30, 2003 into the Registration Statement. The Company filed two subsequent amendments to the Registration Statement, the second one on December 10, 2003, which again, included Quovadx's financial results for the third quarter of fiscal year 2003. The acquisition was completed on December 19, 2003. On March 15, 2004, less than five months after announcing its "highest quarterly revenue" in the history of the Company and its acquisition of Rogue Wave, Quovadx announced it would be restating its previously reported 2003 third quarter financial results and revise its previously announced preliminary 2003 fourth quarter and full year financial results. Quovadx explained that the Company had not been able to collect funds from letters of credit opened by InfoTech, and as a result, it had to remove all revenue from sales to InfoTech from the Company's published financial reports for fiscal year 2003. As a result of the restatement of the 2003-third quarter financial results, software license revenues were reduced by $4.6 million to $3.2 million and total revenues were reduced from $19.9 million to $15.2 million. The Company further reported that it would reverse the entire $11 million of reported income it had recognized pursuant to the InfoTech Contract. Following the March 15 announcement, the price of Quovadx stock fell approximately 29%, closing at $3.58 per share on March 16, 2003. After March 15, 2003, as the Company issued frequent press releases updating the investing public on its investigation into the restatement and the extent of the accounting irregularities in connection with the InfoTech Contract, the price of Quovadx's stock steadily declined. On May 17, the date this suit was brought, the price of Quovadx stock was $1.03 per share.

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Lead Plaintiffs Special Situations contend that Defendants are liable under Section 11 for having prepared and signed a materially misleading registration statement pursuant to which they consummated the Exchange Offer with Rogue Wave. Indeed, Quovadx's false 2003-third quarter financial results artificially inflated the Company's income ­ and therefore its stock price ­ at the same time the Company was negotiating the acquisition of Rogue Wave. Because the price of its stock was higher than it should have been had Quovadx properly reported its financial results, the Company was able to acquire Rogue Wave on more favorable terms. (c) Statement of Defenses by Defendants Quovadx, Inc., Jeffery M. Krauss, Fred L. Brown, J. Andrew Cowherd, James B. Hoover, Charles J. Roesslein and James A. Gilbert

This suit arises out of Quovadx' announcement on March 15, 2004 that the Company would restate its third quarter 2003 ("3Q03") financial statements and revise its previously announced preliminary fourth quarter 2003 ("4Q03") and full year 2003 financial results. Quovadx disclosed that it was restating and revising these financial results to remove from its published financial reports for 2003 all revenue previously recognized in connection with transactions between the Company and Infotech Network Group ("Infotech"). Defendants believe that they has several meritorious defenses to plaintiffs' claims that the restatement of Quovadx 3Q03 financial statements and the revision of its preliminary 4Q03 and full year 20003 results was the result of securities fraud. First and foremost, defendants did not know, and in the exercise of reasonable care could not have known or had reasonable grounds to believe, that any misstatements or omissions of material fact existed in any of Quovadx's publicly filed annual or quarterly reports or in any statement issued in connection therewith. In addition, all the accounting matters alleged to form the basis for plaintiffs' claims were reviewed and approved by the Company's independent auditor, Ernst & Young. Defendants believe that the evidence will show that its management did not know collection from Infotech was not 8

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probable at the time the revenue was recognized on the sales to Infotech. Defendants also believe that the evidence will establish that management did not engage in a scheme to fraudulently inflate Quovadx financial results and increase its stock price in order to acquire Rogue Wave on more favorable terms. Second, in the matter of Heller v. Quovadx, et al., No. 04-cv-0665 RPM, Quovadx has raised additional affirmative defenses to plaintiff Heller's claims asserted under Sections 10(b) and 20(a) of the Securities Exchange Act, 15 U.S.C. §§ 78j(b) and 78t(a), and Rule 10b-5 promulgated thereunder by the SEC. As the First Affirmative Defense, Quovadx has alleged that Heller and the members of the putative Class are barred from claiming injury or damage, if any, because they failed to make reasonable efforts to mitigate such injury or damage, which would have prevented their injury or damages, if any. As the Second Affirmative Defense, Quovadx has alleged that Heller and the members of the putative class were expressly advised in Quovadx's public filings and otherwise regarding the material facts concerning their investments, and Heller therefore assumed the risk of any loss and is estopped from recovering any relief. As the Fourth Affirmative Defense, Quovadx has alleged that at the time Heller and other members of the purported class acquired Quovadx stock, Heller and other members of the purported class knew of the alleged untrue statements or omissions. As the Fifth Affirmative Defense, Quovadx has alleged that Heller claims are barred in whole or in part by the doctrines of waiver, estoppel, ratification and/or unclean hands. As the Sixth Affirmative Defense, Quovadx has alleged that any recovery for damages allegedly incurred by Heller, if any, is subject to offset in the amount of any tax benefits actually received by Heller through their investments. As the Ninth Affirmative Defense, Quovadx has alleged that Heller's claims are barred in part or in whole because plaintiff cannot demonstrate reliance on any allegedly untrue

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statement of material fact, omissions of material fact, misleading statements, or other actions allegedly made by Quovadx. Quovadx has withdrawn its Third, Seventh, Eighth and Tenth Affirmative Defenses to the amended complaint. Third, in the matter of Special Situations v. Quovadx, et al., No. 04-cv-1006 RPM, defendants Quovadx, Jeffery M. Krauss, Fred L. Brown, J. Andrew Cowherd, James B. Hoover, Charles J. Roesslein and James A. Gilbert have raised affirmative defenses to plaintiffs Special Situations' claims asserted under Sections 11 and 15 of the Securities Act of 1933, 15 U.S.C. §§ 77k and 77o. As the First Affirmative Defense, Quovadx has alleged that the amended complaint fails to state a claim upon which relief may be granted. As the Second Affirmative Defense, defendants have alleged that the amended complaint fails to plead fraud or its predicate acts with sufficient particularity. As the Third Affirmative Defense, defendants have alleged that the acts and omissions alleged in the amended complaint were done or omitted in good faith conformity with the rules and regulations of the SEC and, therefore, pursuant to Section 19(a) of the Securities Act of 1933, defendants have no liability for any act or omission so alleged. As the Fourth Affirmative Defense, defendants have alleged that they had, after reasonable investigation, reasonable grounds to believe and did believe, at the time the Registration Statement became effective, that the statements therein were true and that there was no material omission required or necessary to make the statements not misleading. As the Fifth Affirmative Defense, defendants have alleged that all or a portion of the losses and damages alleged by Special Situations and members of the purported class are attributable to causes other than any actions or omissions for which defendants are responsible. As the Sixth Affirmative Defense, defendants have alleged that some or all of the matters now claimed by the amended complaint to be the subject of misrepresentations and omissions were publicly disclosed or were in the

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public domain and, as such, were available to Special Situations Funds and other members of the purported class and were at all times reflected in the price of the Quovadx's common stock. As the Seventh Affirmative Defense, defendants have alleged that, if any false or misleading statement was made or if any material fact required to be stated or necessary to make any statement made not misleading was omitted, which the defendants deny, then Special Situations and the purported class were aware of that alleged misstatement or omission and did not rely upon it in acquiring Quovadx's common stock. As the Eighth Affirmative Defense, defendants have alleged that Special Situations and the members of the purported class were expressly advised in Quovadx's public filings and otherwise regarding the material facts and risks concerning their investments and they therefore assumed the risk of any loss and are estopped from recovering any relief. As the Ninth Affirmative Defense, defendants have alleged that Special Situations and the members of the purported class are barred from claiming injury or damage, if any, because they failed to make reasonable efforts to mitigate such injury or damage, which would have prevented their injury or damages, if any. As the Tenth Affirmative Defense, defendants have alleged that any recovery for damages allegedly incurred by Special Situations and members of the purported class, if any, is subject to offset in the amount of any tax benefits or other benefits received by Special Situations or members of the purported class through their investments. As the Eleventh Affirmative Defense, defendants have alleged that Special Situations and members of the purported class do not have standing under Section 11 of the Securities Act of 1933 to the extent they did not acquire their shares pursuant to or traceable to the Exchange Offer. As the Twelfth Affirmative Defense, defendants have alleged that Special Situations and members of the purported class also do not have standing under Section 11 of the Securities Act of 1933 because they acquired their shares of Quovadx stock without any

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investment decision caused by or in reliance upon any statement or omission in the Registration Statement. (d) Statement of Defenses by Defendants Lorine R. Sweeney and Gary T. Scherping

Defendants Lorine R. Sweeney and Gary T. Scherping, the former CEO and CFO, respectively, of Quovadx, join in the Statement of Defenses submitted by Quovadx. Sweeney and Scherping deny that they have any liability to plaintiffs in this action. To that end, they will mount several defenses to plaintiffs' claims that the restatement of Quovadx 3Q03 financial statements and the revision of its preliminary 4Q03 and full year 2003 results were caused by securities fraud. To the extent that Sweeney and Scherping even participated in decisions to enter into agreements with the Infotech Network Group ("Infotech") and to recognize revenue on those contracts, they acted at all times in good faith and without knowledge or reason to believe that collection from Infotech was not probable at the time the revenue was recognized on the sales to Infotech. Moreover, Sweeney and Scherping did not attempt to fraudulently inflate Quovadx financial results and increase its stock price in order to acquire Rogue Wave on more favorable terms. All the accounting matters alleged to form the basis of plaintiffs' claims were reviewed and approved by various experts, including inside and outside counsel for Quovadx and their independent auditor, Ernst & Young. Thus, any losses or damages that plaintiffs suffered could not have been caused by Sweeney and Scherping's actions or omissions. In the matter of Heller v. Quovadx, et al., No. 04-cv-0665 RPM, Sweeney and Scherping have raised the additional affirmative defenses to plaintiff Heller's claims asserted under Sections 10(b) and 20(a) of the Securities Exchange Act, 15 U.S.C. §§ 78j(b) and 78t(a), and Rule 10b-5 promulgated thereunder by the SEC: (1) that Sweeney and Scherping acted in good faith and had no knowledge of or reasonable grounds to believe in the existence of the facts by

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reason of which their liability is alleged to exist, and therefore, pursuant to Section 20(a) of the Securities Exchange Act of 1934, the Officer Defendants have no liability for any act or omission so alleged; (2) that Plaintiff's claims are barred in whole or in part because Plaintiff cannot establish the primary liability necessary to assert a control person liability claim; (3) that every act or omission alleged in the Complaint was done or omitted in good faith conformity with the rules and regulations of the Securities and Exchange Commission, and there is no liability for any such act or omission alleged; (4) that Plaintiff cannot demonstrate reliance on any allegedly untrue statement of material fact, omissions of material fact, misleading statements, or other actions allegedly made by Sweeney or Scherping; and (5) that any recovery for damages allegedly incurred by Plaintiff and members of the Purported Class, if any, is subject to offset in the amount of any tax benefits received by Plaintiff or members of the Purported Class through their investments. Sweeney and Scherping have withdrawn their Third, Fourth, Fifth, and Ninth Affirmative Defenses to the amended complaint. In the matter of Special Situations v. Quovadx, et al., No. 04-cv-1006 RPM, defendants Sweeney and Scherping have raised the following affirmative defenses to plaintiffs Special Situations' claims asserted under Sections 11 and 15 of the Securities Act of 1933, 15 U.S.C. §§ 77k and 77o: (1) that the Complaint fails to state a claim on which relief may be granted; (2) that the plaintiffs and the purported class have failed to plead fraud or its predicate acts with sufficient particularity; (3) that every act or omission alleged in the Complaint was done or omitted in good faith conformity with the rules and regulations of the Securities and Exchange Commission, and there is no liability for any such act or omission alleged; (4) that Sweeney and Scherping had, after reasonable investigation, reasonable grounds to believe and did believe, at the time the Registration Statement became effective, that the statements therein were true and

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that there was no material omission required or necessary to make the statements not misleading; (5) that all or a portion of the losses and damages alleged by plaintiffs and the purported class are attributable to causes other than any actions or omissions for which Sweeney and Scherping are alleged responsible; (6) that some or all of the matters now claimed by the Complaint to be the subject of misrepresentations and omissions were publicly disclosed or were in the public domain and, accordingly, were available to plaintiffs and the purported class and were at all times reflected in the price of Quovadx's common stock; (7) that, if any false or misleading statement was made or if any material fact required to be stated or necessary to make any statement made not misleading was omitted, which the defendants deny, then plaintiffs and the purported class were aware of that alleged misstatement or omission and did not rely upon it in acquiring Quovadx's common stock; (8) that plaintiffs and the purported class were expressly advised in Quovadx's public filings and otherwise regarding the material facts and risks concerning their investments, and that, therefore, plaintiffs and the purported class therefore assumed the risk of any loss and are estopped from recovering any relief; (9) that plaintiffs and the purported class are barred from claiming injury or damage, if any, because they failed to make reasonable efforts to mitigate such injury or damage, which would have prevented their injury or damages, if any; (10) that any recovery for damages allegedly incurred by plaintiffs and the purported class, if any, is subject to offset in the amount of any tax benefits or other benefits received by plaintiffs and the purported class through their investments; (11) that Sweeney and Scherping acted in good faith and had no knowledge of or reasonable grounds to believe in the existence of the facts by reason of which their liability is alleged to exist, and therefore, pursuant to Section 15 or the Securities Act of 1933, Sweeney and Scherping have no liability for any act or omission so alleged; (12) plaintiffs and the purported class do not have standing under Section

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11 of the Securities Act of 1933 to the extent that they did not acquire their shares pursuant to or traceable to the Exchange Offer; and (13) plaintiffs and the purported class do not have standing under Section 11 of the Securities Act of 1933 because they acquired their shares of Quovadx stock without any investment decision caused by or in reliance upon any statement or omission in the Registration Statement. 4. UNDISPUTED FACTS The following facts are undisputed: · · Quovadx is a global platform software and vertical solutions company. The Company's software and services help healthcare, insurance and other companies integrate their technology systems and business processes. · Quovadx is comprised of two primary divisions: the Rogue Wave Software division and the Enterprise Application division. · · Quovadx acquired the Rogue Wave Software division during the Class Period. Jurisdiction is conferred by §27 of the Securities Exchange Act of 1934 ("1934 Act") and venue is proper under the 1934 Act because defendants conducted business in this District. · · Sweeney was President, CEO and a director of Quovadx during the Class Period. Scherping was Executive Vice President of Finance and CFO of Quovadx during the Class Period. Scherping assisted in the preparation of the Company's financial statements. 5. COMPUTATION OF DAMAGES Plaintiff Heller seeks compensatory damages, pre-judgment interest, post-judgment interest, reasonable attorneys' fees, expert witness fees and other costs. Plaintiff Heller also

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seeks any other further relief as the Court deems just and proper, including any extraordinary, equitable and/or injunctive relief as permitted by law or equity to attack, impound or otherwise restrict defendants' assets to assure that plaintiff has an effective remedy. Plaintiff Heller has not yet retained a testifying expert on damages and, therefore, has not yet computed the total amount of damages claimed in this action. Plaintiff Heller need not disclose an expert damage analysis until the time required by Fed. R. Civ. P. 26(a)(2). Plaintiffs Special Situations seek damages together with interest thereon pursuant to the statutory measure set forth in Section 11 of the Securities Act of 1933. Special Situations also seeks an award of costs and expenses incurred in the litigation, including reasonable attorneys' fees, accountants' fees and experts' fees, and other costs and disbursements. Finally, Special Situations seeks all equitable, injunctive or other relief as the Court deems just and proper under the circumstances. Special Situations has not yet retained an expert witness on damages, and thus, has not yet computed the total amount of damages claimed in this action. Special Situations need not disclose an expert damage analysis until the time required by Fed. R. Civ. P. 26(a)(2). 6. REPORT OF PRECONFERENCE DISCOVERY AND MEETING UNDER FED. R. CIV. P. 26(f) The defendants' production of documents in response to plaintiff Heller's document requests, which was shared with plaintiffs Special Situations, satisfies defendants' obligations, in connection with both actions, to provide a copy or description of documents pursuant to Fed. R. Civ. P. 26(a)(1)(B).

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7.

CASE PLAN AND SCHEDULE (a) Class Certification for Special Situations Funds, et al. v. Quovadx, et al., No. 04-cv-1006 RPM

Lead plaintiffs Special Situations shall file a motion for class certification on or before November 4, 2005. Lead plaintiffs Special Situations, subject to availability, shall make themselves available for a deposition related to class certification on or before November 23, 2005. Special Situations shall provide non-privileged information responsive to discovery requests related to class certification before its deposition, provided such requests are served on a date which would enable it sufficient time to respond before the deposition. Defendants shall file an opposition, if any, to Special Situations' motion for class certification on or about December 7, 2005, with Special Situations to file a reply in support of the motion for class certification, if any, on December 21, 2005. (b) Deadline for Joinder of Parties and Amendment of Pleadings

Given the complex nature of these actions, the parties will join other parties and amend all pleadings in connection with each action after they have had the opportunity to conduct sufficient discovery regarding such issues. This provision does not eliminate the necessity to file an appropriate motion and to otherwise comply with Fed. R. Civ. P. 15. (c) Discovery Cut-off Date

Fact discovery shall conclude by February 28, 2006. All motions related to fact discovery shall be filed no later than May 12, 2006. (d) Dispositive Motion Schedule

Dispositive motions shall be filed on or before June 30, 2006.

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(e)

Expert Witness Disclosure

Expert witness disclosure shall occur no later than April 26, 2006. Each separately represented party my designate up to three experts. Expert witness disclosures shall be coordinated based upon the parties' respective burdens of proof, and the parties shall meet and confer regarding the scheduling of such disclosures. Notwithstanding the provisions of Fed. R. Civ. P. 26(a)(2)(B), no exception to the requirements of the Rule will be allowed unless approved by this Court. (f) Proposed Deposition Schedule

Lead plaintiff Heller has noticed the following depositions: Mark Benjamin, Afshin Cangarlu, Christopher Conte, Cory Isaacson, Juan Perez, Ann Ting, Lona Collins, Mark Rangell, David Nesvisky, Methodist Hospital System, Ronald Renjilian, Banner Health, Micro Star Inc., Gary Scherping, Lorine Sweeney, Dennis Pryor, Madhavan Pillai, Jim Wilson and Arlyn Dozeman. The parties shall meet and confer to determine the exact dates of these depositions. (g) Schedule for Requests for Production of Documents, Interrogatories and Requests for Admissions

All requests for production of documents, interrogatories and requests for admissions shall be served no later than January 17, 2006. (h) Discovery Limitations

Plaintiffs in both actions collectively are limited to 30 depositions (in addition to the depositions of parties and designated experts), subject to a showing of good cause for additional depositions. Defendants in both actions collectively are also limited to 30 depositions (in addition to the depositions of parties and designated experts), subject to a showing of good cause for additional depositions. The presumptive limits on the time allotted for each deposition as set by the Federal Rules of Civil Procedure shall apply, subject to a showing of good cause for

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additional time. The presumptive limits on written discovery as set by the Federal Rules of Civil Procedure also shall apply. 8. COMPLIANCE WITH FED. R. CIV. P. 26(f) The parties are ordered to participate in a joint mediation no later than December 15, 2005. All of the insurance carriers whose directors and officers insurance policies are or may be used for coverage in connection with the claims asserted in these actions are ordered to attend such mediation. 9. OTHER SCHEDULING ISSUES Plaintiffs anticipate a 21-day jury trial. Defendants anticipate a ten day jury trial. 10. AMENDMENTS TO SCHEDULING ORDER This scheduling order may be altered or amended only upon a showing of good cause. It is so ORDERED, DATED this __________ day of ____________, 2005. BY THE COURT:

THE HONORABLE RICHARD MATSCH UNITED STATES DISTRICT JUDGE

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Submitted by, Dated: November 2, 2005 DILL DILL CARR STONBRAKER & HUTCHINGS, P.C. John A. Hutchings Adam P. Stapen /s/ Adam P. Stapen ADAM P. STAPEN 455 Sherman Street, Suite 300 Denver, CO 80203 Telephone: 303/777-3737 303/777-3823 (fax) WILSON SONSINI GOODRICH & ROSATI, P.C. Nina F. Locker John P. Stigi III Kent W. Easter Krisana M. Hodges 650 Page Mill Road Palo Alto, CA 94304-1050 Telephone: 650/493-9300 650/493-6811 (fax) Counsel for Defendants Quovadx, Inc., Jeffery M. Krauss, Fred L. Brown, J. Andrew Cowherd, James B. Hoover, Charles J. Roesslein and James A. Gilbert Dated: November 2, 2005 ROTHGERBER JOHNSON & LYONS LLP Frederick J. Baumann /s/ Frederick J. Bauman FREDERICK J. BAUMAN One Tabor Center, Suite 3000 1200 Seventeenth Street Denver, CO 80202-5855 Telephone: 303/628-9542 303/623-9222 (fax) WILMER CUTLER PICKERING HALE & DORR LLP Charles E. Davidow Christopher Davies Michael Mugmon 2445 M Street, N.W. Washington, DC 20037 Telephone: 202/663-6000 Counsel for Defendants Lorine R. Sweeney and Gary T. Scherping

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Case 1:04-cv-00665-RPM

Document 80-2

Filed 11/02/2005

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Dated: November 2, 2005

LERACH COUGHLIN STOIA GELLER RUDMAN & ROBBINS LLP Jeffrey W. Lawrence Dennis J. Herman Ex Kano S. Sams II /s/ Ex Kano S. Sams II EX KANO S. SAMS II 100 Pine Street, Suite 2600 San Francisco, CA 94111 Telephone: 415/288-4545 415/288-4534 (fax) Lead Counsel for Plaintiff David Heller

Dated: November 2, 2005

LOWENSTEIN SANDLER PC Lawrence M. Rolnick Gavin J. Rooney Marcela A. Kirberger /s/ Lawrence M. Rolnick LAWRENCE M. ROLNICK 65 Livingston Avenue Roseland, New Jersey 07068 Telephone: 973/597.2500 973/597.2400 (fax) Lead Counsel for Plaintiffs Special Situations Fund III, L.P., Special Situations Cayman Fund, L.P., Special Situations Technology Fund New, L.P., and Special Situations Technology Fund II, L.P.

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