Free Motion for Miscellaneous Relief - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 02-cv-2232-PSF-PAC ROBERT STUDER, and NICHOLAS IMPERATO, Derivatively On Behalf of eVISION INTERNATIONAL, INC., PAUL KINNEY, SAMY SAMY, and PHILIP CALDERONE, on behalf of themselves and all other persons similarly situated, Plaintiffs, v. HENG FUNG HOLDINGS LIMITED, a public company in Hong Kong, FAI CHAN, in his individual and corporate capacities, TONG WAN CHAN, in his individual and corporate capacities, ROBERT TRAPP, in his individual and corporate capacities, KWOK JEN FONG, in his individual and corporate capacities, GARY COOK, in his individual and corporate capacities, JEFFREY BUSCH, in his individual and corporate capacities, ROBERT JEFFERS, JR., in his individual and corporate capacities, DORSEY & WHITNEY LLP, a Minnesota limited liability partnership, and EHRHARDT, KEEFE, STEINER & HOTTMAN, PC, Defendants, eVISION INTERNATIONAL, INC., a Colorado corporation, Nominal Defendant.

JOINT MOTION FOR PRELIMINARY APPROVAL OF PARTIAL SETTLEMENT AND MEMORANDUM

Pursuant to Fed. R. Civ. P. 23 and 23.1 ("Rule 23.1"), Derivative Plaintiffs Robert Studer ("Studer") and Nicholas Imperato ("Imperato") (together, "Derivative Plaintiffs"), derivatively on behalf of eVision International, Inc. ("eVision") with Class Plaintiff Samy Samy ("Samy"),

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Class Plaintiff Calderone ("Calderone"), and former Class Plaintiff Paul Kinney (`Kinney") (together, "Class Plaintiffs") (jointly "Plaintiffs") and "Settling Defendants" eVision International, Inc. ("eVision") and the eVision Management Defendants (specifically Fai Chan, Tong Wan Chan, Kwok Jen Fong, Robert Trapp, Gary Cook, Jeffrey Busch, and Robert Jeffers, Jr.) (collectively, Plaintiffs and Settling Defendants are the "Settling Parties") respectfully request that the Court enter the Settling Parties' proposed Order Granting Preliminary Approval to Partial Settlement ("Preliminary Approval Order") that is attached hereto as Exhibit 1.1 This Motion is based upon the grounds stated below, the attached Settlement Agreement and the exhibits thereto, all pleadings and records on file with the Court in this action, and any oral argument to be offered by the Settling Parties' respective counsel at any hearing on this Motion. CERTIFICATION PURSUANT TO D.C.Colo.LCivR 7.1.A Pursuant to D.C.Colo.LCivR 7.1.A, counsel for the Settling Parties have conferred, by telephone and e-mail in June and July 2005, regarding this Motion and have stipulated hereto. Defendants Dorsey & Whitney, LLP and Ehrhardt, Keefe, Steiner & Hottman, P.C. are not parties to this agreement.2 Counsel for EKS&H and Dorsey have advised counsel for the moving parties that, while EKS&H and Dorsey generally consents to the concept of the settlement with the eVision management defendants, due to time filing constraints, counsel for the moving parties have not been able to circulate the motion and settlement papers to counsel for EKS&H

For purposes of this Joint Motion, the Settling Parties adopt all defined terms set forth in their Stipulation and Settlement Agreement dated July 5, 2005 (the "Settlement Agreement" or "Agreement"), which is attached hereto as Exhibit 2. On May 2, 2005, Derivative Plaintiffs and Defendants Dorsey & Whitney, LLP and Ehrhardt, Keefe, Steiner &Hottman filed a proposed settlement motion and associated pleadings with this Court. A hearing is scheduled for August 16, 2005. 2
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and Dorsey prior to filing with the Court. As such, EKS&H and Dorsey currently take no position on the motion for preliminary approval, and reserve the right to object in the event the terms of the settlement adversely affect EKS&H or Dorsey. INTRODUCTION The Settling Parties request that the Court enter their proposed Preliminary Approval Order, in the form which is attached as Exhibit 1 hereto (and as Exhibit C to the Settlement Agreement), by which the Court would accomplish all of the following: (1) Preliminarily approve the proposed partial settlement ("Settlement"), as

reflected in the Settlement Agreement, as fair, reasonable, and adequate to eVision; (2) Preliminarily approve Derivative Plaintiffs as the shareholder

representatives of eVision, pursuant to Rule 23.1; (3) Preliminarily approve Class Plaintiffs as the Settlement Class

Representatives pursuant to Rule 23; (4) Designate Strategic Claims Services, Inc. as the administrator of the

Settlement ("Settlement Administrator") and instruct the Settlement Administrator to disseminate, in accordance with the terms of the Settlement Agreement and the Preliminary Approval Order, the Settlement Notices to eVision's Shareholders and Class Members respectively; (5) Approve the proposed forms, contents, and methods of notice to be given

to eVision's Shareholders and the Class Members, respectively, as set forth in the Settlement Agreement;

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(6)

Order eVision to produce to Plaintiffs' Counsel, within 10 days after entry

of the Preliminary Approval Order, information within eVision's possession, custody, or control, including information within eVision's transfer agent's possession, custody, or control, that is in readable electronic format and is sufficient to identify those eVision Shareholders, including those Preferred B-1 shareholders who constitute the Settlement Class, who are known to eVision (or eVision's transfer agent) or who can be reasonably identified from eVision's (or eVision's transfer agent's) records; and further order eVision to cooperate with its transfer agent and with Plaintiffs' Counsel to facilitate the transfer of eVision's shareholder information to Plaintiffs' Counsel or the Settlement Administrator. (7) Establish procedures and schedule deadlines for persons to object to the

Settlement, the Settlement Agreement, or Plaintiffs' Counsel's "Application" for an award of attorneys' fees and reimbursement of costs to Plaintiffs' Counsel and special awards to Plaintiffs; (8) Schedule the final "Fairness Hearing" for a date approximately, but no

fewer than, 85 days after the date on which the Court enters the Preliminary Approval Order; (9) Schedule deadlines for the filing of: (a) papers in support of final approval

of the Settlement and final approval of Derivative and Class Plaintiffs, respectively, as the shareholder representatives of eVision and Class Representatives; (b) Plaintiffs' Counsel's Application; and (c) objections to the Settlement, the approval of Derivative and Class Plaintiffs, respectively, as the shareholder representatives of eVision and Class Representatives; and Plaintiffs' Counsel's Application; (10) Provide that any timely objection to the Settlement or to Plaintiffs'

Counsel's Application shall be heard and considered by the Court at the Fairness Hearing; and

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(11)

Provide that the Fairness Hearing may, without further notice to eVision's

Shareholders or the Class, be continued or adjourned by order of the Court. The proposed Settlement here is presumptively fair and satisfies the requirements for preliminary approval of a shareholder-derivative settlement and class settlement. Accordingly, the Settling Parties request that the Court grant this Motion and enter the proposed Preliminary Approval Order. RELEVANT BACKGROUND I. PLAINTIFFS' ALLEGATIONS Derivative Plaintiff Robert Studer commenced this action in November 2002. The action seeks damages and other relief from all Defendants related to the allegedly unlawful transfer of assets from eVision to Online Credit Limited ("Online Credit"), which is alleged by Plaintiffs to have been eVision's parent and largest shareholder. The asset-transfer transaction was submitted to eVision's shareholders for approval in November 2001 through the dissemination of an allegedly fraudulent proxy statement and proxy ("the Proxy Statement"). The eVision shareholders approved the asset-transfer transaction at a special meeting of eVision's shareholders held on November 28, 2001. On or before October 2001, Studer owned eVision common stock ("Common Stock"), and Imperato owned eVision Convertible Series B-1 Preferred Stock ("Preferred Stock"), and both continue to hold their stock. As holders of eVision stock, Plaintiffs assert claims on behalf of and for the benefit of eVision in connection with the allegedly unlawful transfer of assets and the dissemination of the Proxy Statement. Samy and Calderone, as putative class representatives, allege that preferred shareholders were sent

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improper Form 1099s by eVision, and did not receive their proper yearly dividend of stock and money, and were damaged thereby. Defendants include current or former eVision officers and directors Fai H. Chan, Tong Wan Chan, Kwok Jen Fong, Robert Trapp, Gary Cook, Robert Jeffers, Jr., and Jeffrey Busch. Plaintiffs allege that the eVision Management Defendants breached their fiduciary duties owed to eVision's shareholders by, among other things, causing eVision to unlawfully convey its assets to Online Credit, a company alleged to be controlled by several of the Defendants. Plaintiffs also allege that to secure eVision's minority shareholders' approval of the allegedly wrongful transfer, the Defendants issued to holders of eVision stock a Proxy Statement that allegedly contained false and misleading statements and omitted to state other material facts necessary to make the Proxy Statement not misleading, all in alleged violation of applicable federal and Colorado laws. In the Class portion of the case, Class Plaintiffs alleged eVision and the eVision Management defendants breached eVision's contractual obligations with preferred shareholders and acted fraudulently and negligently with respect to the Form 1099s, and dividends, and further, requested damages and specific performance. II. SETTLING DEFENDANTS' DEFENSES All Defendants have denied, and continue to deny, any liability or wrongdoing in connection with the claims alleged in the action. eVision and the eVision Management

Defendants, in particular, deny any liability and all allegations of wrongdoing and assert a variety of defenses to Plaintiffs' claims, including those defenses that were briefed by Settling Defendants for purposes of their motions to dismiss under Rule 12(b), their motion for partial summary judgment and their opposition to Class Plaintiffs' motion for class certification.

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Settling Defendants believe that at all relevant times they acted properly and in the best interests of eVision and that the action, in its entirety, has no merit. After several amendments to the pleadings, the Court granted in part and denied in part Defendants' respective motions to dismiss Plaintiffs' Third Amended Verified Derivative Complaint (the "Complaint"). In its order resolving the motions to dismiss, the Court ruled that Plaintiffs had adequately pled causes of action against eVision and the eVision Management Defendants for among other things, alleged breaches of fiduciary duty and violations of section 14(a) of the Securities Exchange Act of 1934 ("1934 Act") and Rule 14a-9 promulgated thereunder. Further, the Court did not dismiss putative class-action claims that are brought by and on behalf of holders of eVision Preferred Stock against eVision and the Defendants, alleging that the Preferred Stockholders had received from eVision one or more Internal Revenue Service Forms 1099 that improperly valued the shares of Preferred Stock that the holders had received as dividends, with resulting increased tax liability to such holders, but the Court dismissed Plaintiffs' claims that were asserted under the Colorado Uniform Fraudulent Transfer Act. Although the Court did not dismiss all of Plaintiffs' claims against Settling Defendants under Rule 12(b) standards for motions to dismiss, eVision and the eVision Management Defendants believe that, if this litigation were to proceed against them, they would prevail on summary judgment motions and at trial. III. THE PARTIES' DISCOVERY AND MOTIONS PRACTICE TO DATE This action has been hard fought by all parties. Plaintiffs, through Plaintiffs' Counsel, have conducted the action vigorously for the last two and one-half years. Plaintiffs' Counsel successfully defended in part, against the motions to dismiss the Complaint and have litigated

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other discovery and dispositive motions. Also, the putative class-action plaintiffs have filed and briefed a motion for class certification, which the Settling Defendants oppose and which the Court has not yet resolved. All parties have engaged in significant discovery, including written discovery, production and review of documents, and the taking of a limited number of depositions of fact witnesses. The parties, collectively, have produced and reviewed tens of thousands of pages of documents and litigated several discovery motions. Plaintiffs, and the Settling Defendants continued to engage in discovery and preparation for trial, including the taking of several depositions during the past weeks. The deadlines for completing expert and fact discovery are in July 2005. A three-week jury trial is scheduled to begin November 28, 2005. In addition, the Settling Defendants have moved for partial summary judgment, seeking dismissal of the derivative claims against the Defendants that are based on alleged violations of the 1934 Act. The Court has not yet ruled on the Defendants' motion for partial summary judgment. IV. THE SETTLEMENT NEGOTIATIONS Because this lawsuit was commenced more than two years ago, the parties have engaged in several settlement discussions, either in person or by telephone. Early negotiations led to the conclusion by the Settling Parties and their counsel that fact discovery would materially assist them in analyzing the legal and factual strengths and weaknesses of the claims and defenses for purposes of determining the fair settlement value of the case against Settling Defendants. Beginning in or about January 2005, however, the Settling Parties engaged in extensive arm's-length settlement discussions in person and by telephone to jointly explore the possibility

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of resolving Plaintiffs' claims against Defendants. Plaintiffs and Defendants Dorsey & Whitney, LLP, ("Dorsey"), and Ehrhardt, Keefe, Steiner & Hottman, P.C., ("EKS&H"), reached a settlement in April 2005, which was filed with this Court on May 20, 2005. A hearing on that settlement is set for August 16, 2005. The principal negotiations between Plaintiffs, on the one hand, and Settling Defendants, on the other, occurred over a period of approximately six weeks. In late June 2005, the settlement negotiations culminated in an agreement between Plaintiffs and Defendants. The Court was notified of the proposed settlement on July 1, 2005. Now, counsel for ALL Parties have conferred and determined that in the interests of efficiency and judicial economy, the Dorsey and EKS&H on the one hand and the Settling Parties on the other would retain separate settlement agreements and related set of documents to dispose of all of Plaintiffs' claims against either eVision and the eVision Management Defendants, and Dorsey and EKS&H that have been alleged or could have been alleged in the action. However, in the interests of the shareholders and Class members, the Parties wish to substitute two new distinct Settlement Notices ­ one for the derivative claims and one to class members ­ to be used for both Settlement Agreements. The Settling Parties believe, and continue to believe, that the Court and all parties would benefit from, and the interests of judicial economy would be served by, the Settling Parties' negotiation, preparation, execution, and filing of two parallel sets of settlement documents with two distinct notices but requesting a single set of proceedings in which the Court would consider whether to grant preliminary and final approval to the proposed settlements, the forms and methods of disseminating the settlement notices, and all of the other settlement terms. Thereafter, Plaintiffs and Settling Defendants negotiated the amount of attorneys' fees and costs to be requested by Plaintiffs' Counsel and either opposed or not opposed by Settling

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Defendants. The Settling Parties agreed that the Court would determine, approve, and order the payment of attorneys' fees not to exceed $450,000 in total for the Action and costs to Plaintiffs' Counsel not to exceed $150.000 in total for the action and any special awards to Derivative Plaintiffs not to exceed $1,500 (inclusive of any costs reimbursed to the Derivative Plaintiffs from the Settlement Fund), all pursuant to an Application to be filed by Plaintiffs' Counsel. (See Ex. 2, ¶25.) For purposes of that determination, the Settling Defendants agreed that they will take no position on an Application that seeks (a) reimbursement of Plaintiffs' Counsel's costs incurred in connection with the action against Settling Defendants, in an amount that does not exceed $150,000 in total for the Action; (b) an award of attorneys' fees related to the Derivative Claims only in an amount that does not exceed $450,000, and (c) an incentive award to each Derivative Plaintiff in an amount that does not exceed $1,500.00 (inclusive of any costs reimbursed to the Derivative Plaintiffs from the Settlement Fund) from this Settlement, all to be paid from the Settlement Fund. V. THE SETTLEMENT AGREEMENT On July 5, 2005, the Settling Parties entered into a comprehensive Settlement Agreement describing the terms of the proposed Settlement. (See Ex. 2.) The total value of the proposed Settlement as it relates to the Derivative Claims is more than $1,365,000.00, which includes a payment of $865,000.00 in cash (i.e., the Cash Settlement Payment), and accruing interest from the date of funding until distribution to eVision (and such other persons as the Court directs) of the Settlement Fund. Also 6% of the issued and outstanding common stock in eBanker

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USA.Com, Inc. ("eBanker"), valued at $500,000.00, will be contributed to eVision.3 After the Settlement has been preliminarily approved by the Court, the Cash Settlement Payment will be deposited and maintained in an escrow, interest-bearing account, subject only to deductions or expenditures that are expressly provided in the Settlement Agreement and approved or ordered by the Court. The eBanker securities (or the additional cash payment in lieu thereof) will be transferred within 5 business days after the Effective Date of the Settlement. In addition, the Settlement Agreement requires the eVision Management Defendants to use reasonable efforts to cause eVision to nominate and elect two independent directors to the eVision Board of Directors within 18 months and to cause eVision to come current with any required Securities and Exchange Commission filings within 18 months. With respect to the Class Claims, the relief provided by the Settlement Agreement is injunctive in nature. The Settlement requires eVision to mail each Class Member a letter within 30 Days of the Effective Date of the Settlement advising Class Members of certain tax related issues with respect to previously declared in-kind dividends that eVision paid on its Convertible Series B-1 Preferred Stock. eVision has also agreed, to the extent it has not previously done so, to cause certificates evidencing all previously declared Series B-1 Preferred Stock dividends to be issued to Class Members as soon as practicable after the Effective Date of the Settlement. In addition, the Class Plaintiffs will acknowledge on behalf of themselves and the Class, that eVision's methodology for calculating the proper amount of Series B-1 Preferred Stock in

In their discretion, the eVision Management Defendants may make an additional cash payment of $500,000.00 to the Settlement Fund in lieu of contributing the eBanker securities 11

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connection with all previously declared Series B-1 Preferred dividends was appropriate and correct according to eVision's Articles of Incorporation. After the Court has granted final approval to the Settlement and dismissed with prejudice the claims against Settling Defendants, and after such order has become final and nonappealable, the following distributions or payments will be made from the Settlement Fund: (a) payment of any award of Plaintiffs' attorneys' fees and reimbursement of costs, in an amount to be determined by the Court but not to exceed $450,000 and $150,000, respectively; (b) payment of any special awards to Derivative Plaintiffs, in an amount not to exceed $1,500 (inclusive of any costs reimbursed to the Derivative Plaintiffs from the Settlement Fund); (c) payment of certain settlement Administration Expenses, including any unpaid costs of preparing and mailing the Settlement Notices to eVision's Shareholders and/or Class Members, and the costs of payment of any taxes assessed against the Settlement Fund; and (d) after payment of the foregoing fees and expenses, distribution to eVision (and such other persons as the Court directs) of any remaining balance in the Settlement Fund (i.e., the Net Settlement Fund). Because the cash portion of the Settlement is being paid in settlement of the Derivative Claims, ultimately the Net Settlement Fund will go directly to eVision. In consideration for the Settlement, Plaintiffs and eVision will release and discharge eVision and the eVision Management Defendants, and all of those persons and entities affiliated or associated with either of the Settling Defendants, from any and all claims that Plaintiffs or eVision has alleged or could have alleged in the Action including claims that relate to, or arise in whole or in part out of, the allegedly unlawful transfer of eVision's assets to Online Credit and the preparation and dissemination of the allegedly fraudulent Proxy Statement. The Settlement is

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intended to settle all claims covered by the release in the Settlement Agreement. Further, in consideration for the Settlement, eVision and the eVision Management Defendants, will release and discharge Plaintiffs, eVision, and all agents, consultants, and experts employed by Plaintiffs or Plaintiffs' Counsel in connection with this action as against eVision and the eVision Management Defendants, from any claims arising out of, referring, or relating to the institution, prosecution, or resolution of this action, except for the eVision Management Defendants' respective rights: (i) to enforce the Agreement; (ii) to recover, in the event the Settlement is terminated, any amounts paid or Securities transferred by or on behalf of the eVision Management Defendants under the Settlement; or (iii) to seek indemnification from eVision under, and only in strict compliance with, C.R.S. § 7-109-101, et seq.. In accordance with Colorado law, because there are several settling defendants in the Action each of who has reached a separate settlement, the Settlement Agreement provides for a proportionate credit and discharge and contribution bar in favor of both eVision and the eVision Management Defendants to the extent any of the settlements with other defendants is disapproved and the Action proceeds to trial on any claim. The purpose of the credit and discharge is to ensure that any Nonsettling Defendant does not pay to Plaintiffs more than the Nonsettling Defendant's own proportionate share of fault and to enable the settling defendants to obtain a dismissal of any potential contribution, indemnification, or other claims brought by any Nonsettling Defendant for overpayment of that Nonsettling Defendant's proportionate share of liability to Plaintiffs. Plaintiffs and their counsel reached this Settlement after weighing the risks and benefits to eVision of the Settlement compared with those of continuing the protracted litigation. The

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factors that Plaintiffs' Counsel considered include the uncertainty and delay associated with continued litigation, a trial, and any appeals, and the uncertainty of particular legal issues that have been, or are yet to be, determined by the Court. Plaintiffs' Counsel balanced these and other substantial risks in determining that the proposed Settlement is fair, reasonable, and adequate in light of all circumstances and in the best interests of eVision. Plaintiffs, therefore, have agreed to settle their derivative and class claims against eVision and the eVision Management Defendants, pursuant to the terms of the Settlement Agreement. eVision and the eVision Management Defendants also reached this Settlement after weighing the risks and benefits of the Settlement compared with those of continuing the protracted litigation. The factors that Settling Defendants and their attorneys considered include the uncertainty and risks inherent in any litigation, especially complex shareholder-derivative and class action litigation, and the substantial expense and length of time necessary to defend this action through discovery, summary judgment motions, a possible trial, possible post-trial motions, and possible appeals. Based upon their consideration of all of these factors, eVision and the eVision Management Defendants wish to settle the action on the terms and conditions set forth in the Settlement Agreement, to avoid the burden, inconvenience, and expense of continued protracted litigation and to finally end any and all claims that are or could have been asserted in the action including claims arising out of or relating or referring to Plaintiffs' allegations. In agreeing to the Settlement, eVision and the eVision Management Defendants expressly disclaimed, and continue to disclaim and deny, any wrongdoing or liability to Plaintiffs or eVision.

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ARGUMENT I. THE STANDARDS FOR TRIAL COURT REVIEW OF DERIVATIVE AND CLASS SETTLEMENTS The settlement of disputed claims is favored by the federal courts. See, e.g., Williams v. First Nat'l Bank, 216 U.S. 582, 595 (1910); Oppenlander v. Standard Oil Co., 64 F.R.D. 597, 624 (D. Colo. 1974); Isby v. Bayh, 75 F.3d 1191, 1196 (7th Cir. 1996). Derivative settlements must be approved by the trial court after notice to the shareholders "in such manner as the court directs." Fed. R. Civ. P. 23.1. Class settlements require the court to "direct notice in a

reasonable manner to all class members who would be bound by a proposed settlement, voluntary dismissal or compromise." Fed. R. Civ. P. 23(e)(1)(B). The purpose of requiring court approval of a settlement is to ensure that the settlement is fair, reasonable, and adequate to the corporation. Jones v. Nuclear Pharmacy, Inc., 741 F.2d 322, 324 (10th Cir. 1984); see also Wolf v. Barkes, 348 F.2d 994, 996 (2d Cir. 1965)("[T]he prime `mischief and defect' the rule was intended to prevent, to wit, `private settlements under which the plaintiff stockholder and his attorney got the sum paid in settlement and the corporation got nothing.'" (quoting Craftsman Fin. & Mortgage Co. v. Brown, 64 F.Supp. 168, 178 (S.D.N.Y. 1945))). "The authority to approve a settlement of a class or derivative action is committed to the sound discretion of the trial court." Nuclear Pharmacy, 741 F.2d at 324. A trial court's "fairness" inquiry generally is a two-step process: First, the court conducts a preliminary evaluation of the fairness of the settlement; second, the court holds a formal fairness hearing at which the arguments for and against the settlement are made.4 Manual for
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Complex Litigation (Third) § 30.41 at 236-37 (1995). At the preliminary approval stage, this Court should merely examine whether the settlement is within the range of possible final approval because the Court, as well as any objectors, will have the opportunity to consider all the relevant factors at the Fairness Hearing. See Horton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 855 F. Supp. 825, 827 (E.D.N.C. 1994). A court's preliminary approval of the settlement and permission to disseminate the notice "is at most a determination that there is what might be termed `probable cause'" to submit the settlement proposal the shareholders or class members. In re Traffic Executive Ass'n v. E. R.Rs., 627 F.2d 631, 634 (2d Cir. 1980). In conducting this determination, the court should grant preliminary approval of a settlement if, among other things, it has been reached through arm's-length bargaining and after sufficient investigation and discovery of the claims and defenses in the case. In re Southern Ohio Correctional Facility, 173 F.R.D. 205, 211 (S.D. Ohio 1997). II. THE PROPOSED SETTLEMENT SHOULD BE PRELIMINARILY APPROVED AS FAIR, REASONABLE, AND ADEQUATE The proposed Settlement here is presumptively fair and satisfies the requirements for preliminary approval of a shareholder-derivative and class action settlement.

(1) whether the proposed settlement was fairly and honestly negotiated; (2) whether serious questions of law and fact exist, placing the ultimate outcome of the litigation in doubt; (3) whether the value of an immediate recovery outweighs the mere possibility of future relief after protracted and expensive litigation; and (4) the judgment of the parties that the settlement is fair and reasonable. Nuclear Pharmacy, 741 F.2d at 324. 16

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A.

The Settlement Agreement Provides for a Formal Fairness Hearing.

The Settlement Agreement provides for a formal Fairness Hearing to be set for approximately, but no less than, 85 days after the entry of an order preliminarily approving the settlement. (Ex. 2, ¶1(J)) In addition, the Settlement Agreement provides for mailed notices and publication notice of the Fairness Hearing to eVision's Shareholders including those who are Class Members. (Id.,¶¶ 7 and 11.) At the Fairness Hearing, the Court will consider, among other things, whether to grant final approval to the Settlement and the terms of the Settlement Agreement and whether to grant Plaintiffs' Counsel's Application for attorneys' fees and costs and special awards, as well as any objections to Settlement, Settlement Agreement, or Plaintiffs' Counsel's Application. (Id., §I.V.) These provisions of the proposed Settlement and Preliminary Approval Order satisfy "[t]he essence of procedural due process . . . that the parties be given notice and opportunity for a hearing." Nuclear Pharmacy, 741 F.2d at 325 (affirming the trial court's approval of a

derivative settlement where the objecting shareholder "was afforded the full panoply of procedural due process when he received adequate notice of the settlement hearing and had the significant opportunity to be heard by submitting an extensive memorandum to the court prior to the hearing detailing his objection to the settlement"). B. The Settlement Was Reached Through Arm's-length Negotiations.

The primary factor relevant to the determination whether the parties have established the presumptive fairness of a proposed shareholder-derivative or class settlement is whether the settlement was reached through arm's-length negotiations among the parties. See Southern Ohio Correctional Facility, 173 F.R.D. at 211; see also Nuclear Pharmacy, 741 F.2d at 324 (the first

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factor for approval is "whether the proposed settlement was fairly and honestly negotiated"). In this case, the settlement was reached after many weeks of arm's-length negotiations. (See Relevant Background, Part IV, supra.) In late February 2005, the negotiations between Plaintiffs and EKS&H culminated in an agreement in principle regarding the essential terms of a settlement between Plaintiffs and EKS&H only. Several weeks later, in mid-April 2005, Plaintiffs and Dorsey's settlement

negotiations culminated in an agreement in principle regarding the essential terms of a settlement between Plaintiffs and Dorsey. Thereafter, in June and early July, 2005, the Settling Parties negotiated the terms of a single, comprehensive Settlement Agreement and related documents. In addition, after the essential terms of the Settlement had been agreed upon, the Settling Parties negotiated the amount of attorneys' fees and costs to be requested by Plaintiffs' Counsel and opposed or not opposed by Settling Defendants. The Settling Parties, however, have agreed that the amounts of any attorneys' fees and costs to Plaintiffs' Counsel and special awards to Plaintiffs shall be in the sole discretion of this Court, to the extent they do not exceed $450,000.00 in fees and $150,000 in costs (Ex. 2, ¶25) and considered by the Court separately from the Court's consideration of the fairness, reasonableness, and adequacy of the Settlement itself (Id.,¶27). Further, any order relating to the award of attorneys' fees and costs to Plaintiffs' Counsel or incentive awards to Plaintiffs will not be or become part of the Settlement Agreement, shall not operate to terminate or cancel the Agreement, and shall not affect the validity or finality of any order entered by this Court that grants final approval to the Settlement itself. (Id.)

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Neither the substantive terms of the proposed Settlement nor its provision regarding attorneys' fees and costs to be paid to Plaintiffs' Counsel indicate that the Settlement Agreement is the product of fraud, collusion, or Plaintiffs' or their attorneys' abandonment of the interests of eVision. Thus, the primary factor in favor of preliminary approval of the Settlement is satisfied. C. Investigation and Discovery Have Been Sufficient to Allow Counsel and the Court to Act Intelligently in Evaluating the Settlement.

An additional factor to be considered, if briefly at the preliminary approval stage, is the judgment of the parties that the settlement is fair and reasonable. Cf. Nuclear Pharmacy, 741 F.2d at 324. Here, the Settling Parties reached the Settlement Agreement not only after extensive arm's-length bargaining, but also after vigorous litigation, both formal and informal discovery, and a thorough development and analysis of the claims and defenses in this case. (See Relevant Background, Parts II & III, supra.) The various settling and nonsettling parties have exchanged several sets of interrogatories, requests for admissions, and requests for production of documents. eVision, eVision Management Defendants, Dorsey, and EKS&H produced to

Plaintiffs tens of thousands of pages of documents, and Plaintiffs, in turn, produced a smaller number of documents. In addition, the parties have taken ten depositions. In short, the investigation, discovery, and analysis to date are more than sufficient for the Settling Parties and the Court to make informed decisions about the proposed Settlement. See Nuclear Pharmacy, 741 F.2d at 324. The judgment of the Settling Parties and their respective counsel that the proposed Settlement is fair, reasonable, and adequate is entitled to deference by the Court, especially at the preliminary approval stage. Cf. Alvarado Partners, 723 F. Supp. at 548 ("The views and experience of counsel are legitimate factors to consider. Courts have

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consistently refused to substitute their business judgment for that of counsel and the parties." (internal citation omitted)). D. Derivative Plaintiffs Can Fairly and Adequately Represent the Interests of eVision's Shareholders in Enforcing the Rights of eVision.

Rule 23.1 requires that Derivative Plaintiffs be able to represent fairly and adequately the interests of eVision's Shareholders. Fed. R. Civ. P. 23.1 ("The derivative action may not be maintained if it appears that the plaintiff does not fairly and adequately represent the interests of the shareholders or members similarly situated in enforcing the right of the corporation or association."). See also Brooks v. Land Drilling Co., 564 F. Supp. 1518, 1521 (D. Colo. 1983) ("The plaintiff stockholders in a derivative action must fairly and adequately represent the interest of the other shareholders similarly situated."). For purposes of effecting the proposed Settlement, eVision and the eVision Management Defendants, have withdrawn their objections to Derivative Plaintiffs and have stipulated that Derivative Plaintiffs owned their eVision stock at the commencement of the litigation and continue to hold their stock, will fairly and adequately represent the interests of eVision's similarly situated shareholders and that Derivative Plaintiffs and their attorneys have no interests that conflict with, or are adverse to, eVision's similarly situated shareholders.5 Furthermore, Plaintiffs' Counsel are experienced in prosecuting complex shareholder-derivative, class-action, and securities litigation. Accordingly, Derivative Plaintiffs should be preliminarily approved as the shareholder representatives of eVision.

Several of the Defendants are shareholders of eVision and cannot be considered similarly situated with respect to Plaintiffs and the other minority shareholders of eVision who are not defendants in the action. 20

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E. Class Plaintiffs Can Fairly and Adequately Represent the Interests of Class Members in Enforcing the Rights of eVision Rule 23(a) requires that Samy and Calderone will fairly and adequately protect the interests of the Settlement Class. The inquiry into whether Plaintiffs are adequate Class

representatives involves assessing whether any of their interests are antagonistic to or otherwise conflict with those of the Class, and whether they will vigorously prosecute the action on behalf of the Class. Universal Service Fund, 219 F.R.D. at 668 (citations omitted). Any conflict that may exist, however, must be irreconcilable. Kerns, 2003 U.S. Dist. LEXIS 11711 at *16. Plaintiffs have no irreconcilable conflict with the Settlement Class. Courts have often collapsed the typicality and adequacy inquiries into one, reasoning that if a plaintiff's claims are typical of the members of the class she represents, she is an adequate class representative. See Jones Intercable, 213 F.R.D. at 583 (a class member whose claims are atypical cannot adequately represent the class). Further, Samy and Calderone have demonstrated their willingness to vigorously prosecute this action by coming to Denver to be deposed, and keeping informed about the proceedings. III. THE SETTLING PARTIES' PROPOSED FORMS OF NOTICE AND METHODS OF NOTICE DISSEMINATION SATISFY RULES 23AND 23.1 AND DUE PROCESS Under Rule 23(e)(1)(B), "[t]he court must direct notice in a reasonable manner to all class members who would be bound by a proposed settlement, voluntary dismissal or compromise." Under Rule 23.1, "notice of the proposed dismissal or compromise shall be given to shareholders or members in such manner as the court directs." The notice should adequately describe the claims and defenses, the terms of the settlement, and the right of the shareholders to object to the proposed settlement. See, e.g., In re

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Gen. Tire & Rubber Co. Sec. Litig., 726 F.2d 1075, 1086 (6th Cir. 1984); Maker v. Zapata Corp., 714 F.2d 436, 451 (5th Cir. 1983). Accordingly, the Settling Parties have submitted proposed Settlement Notices, a proposed Publication Notice, and a plan for the dissemination of the notices to eVision's Class Members and Shareholders, respectively. (See Ex. 2, ¶¶5-12, and Ex.'s 3 through 5.) The Settling Parties' proposed Settlement Notices, among other things, fairly, accurately, and reasonably informs eVision's Shareholders and/or Class Members, respectively, of the nature of the litigation and the essential terms of the Settlement Agreement, including information regarding attorneys' fees; how to obtain additional information regarding this matter and the Settlement Agreement; how to challenge the Settlement or Plaintiffs' Application; how to appear and be heard at the Fairness Hearing, assuming they wish and are eligible to do so; and the time and place of the Fairness Hearing. Cf. generally Manual for Complex Litigation (Third) § 30.212 (1995) (describing requirements of settlement notice). Thus, the Settling Parties

request that the Court approve the proposed Settlement Notices, in the forms attached hereto as Exhibits 3 and 4. Plaintiffs' Counsel will cause the Settlement Administrator to send, by first-class United States Mail, to every eVision shareholder and/or class member whose address can be identified by eVision or (eVision's transfer agent) a copy of the appropriate Settlement Notice. (Ex.'s 3 and 4.) This method of individual notice constitutes the "best notice practicable under the circumstances." Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 176 (1975). Thus, the Settling Parties request that the Court approve their plan for dissemination of the Settlement Notices.

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Further, even though the number of shareholders who will not receive individual notice is likely to be small, and even though publication notice is not required in such circumstances, the Settling Parties also have agreed to publish their proposed Publication Notice over a nationwide news wire service, such as PR Newswire or Business Wire. The Settling Parties believe that there is no additional mode of distribution that would be reasonably likely to notify eVision's Shareholders including those who are class members who will not receive notice pursuant to the proposed distribution plan. Thus, the Settling Parties request that the Court approve the

proposed Publication Notice, in the form attached hereto as Exhibit 5, and the plan for publication of that notice. Taken together, the Settlement Notices, the Publication Notice, and the plan for dissemination and publication of those notices clearly satisfy the Federal Rules of Civil Procedure and due process. CONCLUSION For the reasons above and those stated in the Settlement Agreement and related documents, the Settling Parties respectfully request that the Court enter their proposed Preliminary Approval Order, attached hereto as Exhibit 1.

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Dated: July 18, 2005. Respectfully submitted,

Charles W. Lilley s/_______________________________ Charles W. Lilley Karen Cody-Hopkins Lilley & Garcia, LLP 1600 Stout Street, Suite 1100 Denver, Colorado 80202 Telephone: (303)293-9800 Facsimile: (303) 298-8975 [email protected] [email protected] Jacob A. Goldberg Jacob A. Goldberg, Esq. LLC P.O. Box 30132 Elkins Park, PA 19027 Attorneys for Plaintiffs

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Allan L. Hale s/__________________________________ Allan L. Hale Scott A. Hyman Hale Friesen, LLP 1430 Wynkoop Street, Suite 300 Denver, Colorado 80202 Telephone: (720) 904-6000 Facsimile: (720) 904-6006 [email protected] [email protected] Attorneys for Defendants Fai Chan, Robert Trapp, Tong Wan Chan, Kwok Jen Fong, Gary Cook, Jeffrey Busch, and Robert Jeffers, and Nominal Defendant eVision International, Inc

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CERTIFICATE OF SERVICE I hereby certify that on July 18, 2005, I electronically filed the foregoing JOINT MOTION FOR PRELIMINARY APPROVAL OF PARTIAL SETTLEMENTS AND MEMORANDUM with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following email addresses: [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] Allan L. Hale s/__________________________________ Allan L. Hale Scott A. Hyman Hale Friesen, LLP 1430 Wynkoop Street, Suite 300 Denver, Colorado 80202 (720) 904-6000 (720) 904-6006 [email protected] [email protected]

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