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EXHIBIT A-1
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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
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IF YOU PURCHASED QUOVADX, INC. ("QUOVADX") PUBLICLY TRADED SECURITIES ON THE OPEN MARKET DURING THE PERIOD FROM OCTOBER 22, 20003 TO 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 on the open market between October 22, 2003 and March 15, 2004. (Common stock was the only publicly traded security during this time period.) Settlement Fund: $9,000,000 in cash. This settlement applies to all claims arising under on the open market §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 on the open market and the timing of your purchases and any sales. Depending on the number of eligible shares that participate in the settlement and when those share were purchased and sold, the estimated average recovery per share will be approximately $1.125 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 for eligible shareholders. 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
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Quovadx common stock during the relevant period; and (5) whether the facts alleged were material, false, misleading or otherwise actionable under the securities laws. Attorneys' Fees and Expenses: If the Court approves the Settlement, 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 $0.33. 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 Class. Deadlines: Submit Claim: Request Exclusion: File Objection: March 15, 2007 January 29, 2007 January 29, 2007
Court Hearing on Fairness of Settlement: February 23, 2007 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
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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
The only way to get a payment.
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EXCLUDE YOURSELF
Get no payment. This is the only option that allows you to participate in another lawsuit against the Defendants relating to 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.
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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 Quovadx publicly traded securities on the open market during the period from October 22, 2003 to 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. -3-
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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-00665RPM. 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 publicly traded securities 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 Class or Class Members. One court resolves the issues for all Class Members, except for those who exclude themselves from the 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 Class Members who make valid claims will get compensation. The Lead Plaintiff and his attorneys think the settlement is best for all Class Members.
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WHO IS IN THE SETTLEMENT To see if you will get money from this settlement, you first have to determine if you are a Class Member. 5. How Do I Know if I Am Part of the Settlement?
The Class certified by the Court on April 12, 2005 consists of all persons who purchased Quovadx publicly traded securities on the open market during the period from October 22, 2003 to 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 Class Member if you are a Defendant, a member of the immediate family of a Defendant, a person, firm, trust, corporation, officer, director, or other individual or entity in which a Defendant has a controlling interest or which is related to or affiliated with a Defendant, or the legal representative, agent, affiliate, heir, successor-in-interest or assign of an excluded party.. If you sold Quovadx securities between October 22, 2003 and March 15, 2004, that alone does not make you a Class Member. You are a Class Member only if you purchased Quovadx publicly traded securities on the open market 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.
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THE SETTLEMENT BENEFITS -- WHAT YOU GET 8. What Does the Settlement Provide?
Defendants have agreed to pay $9 million in cash to be divided among all eligible 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. 9. How Much Will My Payment Be?
Your share of the fund will depend on the number of valid claim forms that Class Members send in and how many shares of publicly traded securities you purchased on the open market 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 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. held 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 $1.125 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 Class Members send in claim forms, you could get more money.
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The date of purchase or sale is the "contract" or "trade" date as distinguished from the "settlement" date. For 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 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 Class Member will be eligible to receive a distribution from the net settlement fund only if a Class Member had a net loss, after all profits from transactions on the open market in Quovadx publicly traded securities 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 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 March 15, 2007. 11. When Will I Get My Payment?
The Court will hold a hearing on February 23, 2007, 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. -7-
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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 Class?
Unless you exclude yourself, you are staying in the 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 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. 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 Class. This is called excluding yourself or is sometimes referred to as opting out of the Class. 13. How Do I Get Out of the Class?
To exclude yourself from the 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 publicly traded securities you purchased on the open market 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 January 29, 2007 to:
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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 January 29, 2007. 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 approved Lead Plaintiff's selection of counsel from the law firm of Lerach Coughlin Stoia Geller Rudman & Robbins LLP to represent the Class and recognized the appearance of Jeffrey W. Lawrence, Dennis J. Herman and Ex Kano S. Sams II. 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.
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17.
How Will the Lawyers Be Paid?
If the Settlement is approved, the Court will set a separate hearing to consider payment of attorneys' fees and expenses. Lead Counsel will ask the Court for attorneys' fees not to exceed 25% of the settlement fund (an average of $0.28 per share) and for reimbursement of their out-of-pocket expenses up to $400,000 ($0.05 per share), which were advanced in connection with the Action. The Lead Plaintiff may also seek reimbursement of his expenses incurred in representing the Class in the Action. Such sums as maybe approved by the Court will be paid from the settlement fund. 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 Class nor for their substantial out-of-pocket 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 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, - 10 -
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telephone number, your signature, the number of shares of Quovadx publicly traded securities purchased and sold on the open market 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 January 29, 2007: 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. Hugh Q. Gottschalk WHEELER TRIGG KENNEDY LLP 1801 California Street, Suite 3600 Denver, CO 80202 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 Class. Excluding yourself is telling the Court that you don't want - 11 -
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to be part of the Class. If you exclude yourself, you have no basis to object because the case no longer affects you. 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 February 23, 2007, 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 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 publicly traded securities purchased on the open market - 12 -
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between October 22, 2003 and March 15, 2004. Your notice of intention to appear must be received no later than January 29, 2007, 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 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 Second Amended Stipulation of Settlement dated as of November 20, 2006. You can get a copy of the Second Amended 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.
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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 publicly traded securities purchased on the open market 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 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 - 14 -
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DATED: __________________, 2006
BY ORDER OF THE COURT UNITED STATES DISTRICT COURT DISTRICT OF COLORADO
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