Document:

exv10w1

 

Exhibit
10.1

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.

 

SECOND
AMENDED STIPULATION OF SETTLEMENT

 

 

 

     This
Second Amended Stipulation of Settlement dated as of November 20, 2006 (the “Stipulation”), is
made and entered into pursuant to Rule 23 of the Federal Rules of Civil Procedure and contains the
terms of a settlement by and among the following Settling Parties (as defined further in Section IV
hereof) to the above-entitled Action: (i) the Lead Plaintiff (on behalf of himself and each of the
Class Members), by and through Lead Counsel; and (ii) the Defendants, by and through their counsel
of record in the Action. The Stipulation is intended by the Settling Parties to fully, finally and
forever resolve, discharge and settle the Released Claims, upon and subject to the terms and
conditions hereof. All capitalized terms in this Stipulation shall have the meanings specified for
them herein.

I. THE LITIGATION

     On April 5, 2004, the Action was filed in the United States District Court for the District of
Colorado as a securities class action on behalf of purchasers of Quovadx, Inc. publicly traded
securities between October 22, 2003 and March 15, 2004 (the “Action”). The operative complaint in
the Action is the First Amended Class Action Complaint for Violation of the Federal Securities Laws
(the “Complaint”), filed June 10, 2004. The Complaint alleges violations of §§10(b) and 20(a) of
the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 10b-5 promulgated thereunder on
behalf of a class of purchasers of Quovadx publicly traded securities between the period October
22, 2003 to March 15, 2004.

II. DEFENDANTS’ DENIALS OF WRONGDOING AND LIABILITY

     The Defendants have denied and continue to deny each and all of the claims and contentions
alleged by the Lead Plaintiff in the Action. The Defendants expressly have denied and continue to
deny all charges of wrongdoing or liability against them arising out of any of the conduct,
statements, acts or omissions alleged, or that could have been alleged, in the Action. The

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Defendants also have denied and continue to deny, inter alia, the allegations that the Lead
Plaintiff or the Class have suffered any damages, that the price of Quovadx common stock was
artificially inflated by reasons of alleged misrepresentations, non-disclosures or otherwise, and
that the Lead Plaintiff or the Class were harmed by the conduct alleged in the Complaint.

     Nonetheless, the Defendants have concluded that further conduct of the Action would be
protracted and expensive, and that it is desirable that the Action be fully and finally settled in
the manner and upon the terms and conditions set forth in this Stipulation. The Defendants also
have taken into account the uncertainty and risks inherent in any litigation, especially in complex
cases like this Action. The Defendants have, therefore, determined that it is desirable and
beneficial to them that the Action be settled in the manner and upon the terms and conditions set
forth in this Stipulation.

     This Stipulation, and any and all exhibits or documents referred to herein or therein, or any
terms or representations herein or therein, or any action taken to carry out this Stipulation, are
not, and shall in no event be construed or be deemed to be, evidence of, or an admission or a
concession by the Defendants of any fault, liability, or damages whatsoever. The Defendants deny
any and all wrongdoing of any kind, whatsoever and deny any liability to Lead Plaintiff or the
Class. The Defendants do not concede any infirmity in the defenses they have asserted in the
Action, nor are any such defenses waived. It is the intent of the Lead Plaintiff and the
Defendants that this Stipulation not be used for any purpose of any kind other than to enforce the
provisions of this Stipulation or the provisions of any related agreement, release, or exhibit
hereto, or in order to support a defense of res judicata, collateral estoppel, accord and
satisfaction, release, or other theory of claim or issue preclusion or similar defense. Therefore,
pursuant to this Stipulation, as ordered by

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this Court, and pursuant to Federal Rule of Evidence 408, any other Federal Rule of Evidence,
the rules of evidence of the various states, the rules of evidence followed by any quasi-judicial
bodies, including regulatory and self-regulatory organizations, and any other applicable law, rule
or regulation, the Settling Parties agree that the fact of entering into or carrying out this
Stipulation, the exhibits hereto, and any negotiations and proceedings related herein, and the
settlement itself, shall not be construed as, offered into evidence as, or deemed to be evidence
of, an admission or concession of liability by or an estoppel against any Defendant, a wavier of
any applicable statute of limitations or repose, and shall not be offered by a party hereto into
evidence, or considered, in any action or proceeding against any Defendant in any judicial,
quasi-judicial, administrative agency, regulatory or self-regulatory organization, or other
tribunal, or proceeding for any purpose whatsoever, other than to enforce the provisions of this
Stipulation or the provisions of any related agreement, release, or exhibit hereto, or in order to
support a defense of res judicata, collateral estoppel, accord and satisfaction, release or other
theory of claim or issue preclusion or similar defense.

III. CLAIMS OF THE LEAD PLAINTIFF AND BENEFITS OF SETTLEMENT

     The Lead Plaintiff believes that the claims asserted in the Action have merit and that the
evidence developed to date supports the claims. However, the Lead Plaintiff and Lead Counsel
recognize and acknowledge the expense and length of continued proceedings necessary to prosecute
the Action against the Defendants through trial and appeals. The Lead Plaintiff and Lead Counsel
also have taken into account the uncertain outcome and the risk of any litigation, especially in
complex actions such as this Action, as well as the difficulties and delays inherent in such
litigation. The Lead Plaintiff and Lead Counsel also are mindful of the inherent problems of proof
under and

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possible defenses to the securities law violations asserted in the Action. The Lead Plaintiff
and Lead Counsel believe that the settlement set forth in the Stipulation confers substantial
benefits upon the Class. Based on their evaluation, the Lead Plaintiff and Lead Counsel have
determined that the settlement set forth in the Stipulation is in the best interests of the Lead
Plaintiff and the Class.

IV. TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT

     NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and among the Lead Plaintiff (for
himself and the Class Members) and the Defendants, by and through their respective counsel or
attorneys of record, that, subject to the approval of the Court, the Action and the Released Claims
shall be finally and fully compromised, settled and released, and the Action shall be dismissed
with prejudice, as to all Defendants, upon and subject to the terms and conditions of the
Stipulation, as follows.

     1. Definitions

     As used in the Stipulation the following terms have the meanings specified below:

     1.1 “Action” means Heller v. Quovadx, Inc., et al., Civil Action No. 04-cv-00665-RPM, filed in
the United States District Court for the District of Colorado.

     1.2 “Authorized Claimant” means any Class Member whose claim for recovery has been allowed
pursuant to the terms of the Stipulation.

     1.3 “Claimant” means any Class Member who files a Proof of Claim in such form and manner, and
within such time, as the Court shall prescribe.

     1.4 “Claims Administrator” means the firm of RG/2 Claims Administration LLC.

     1.5 “Class” means the Class certified by the Court on April 12, 2005 consisting of all Persons
who purchased Quovadx publicly traded securities on the open market during the period

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from October 22, 2003 to March 15, 2004, with the exception of the following: The Defendants,
members of the immediate family of each of the Defendants, any person, firm, trust, corporation,
officer, director, or other individual or entity in which any Defendant has a controlling interest
or which is related to or affiliated with any of the Defendants, and the legal representatives,
agents, affiliates, heirs, successors-in-interest or assigns of any excluded party.

     1.6 “Class Member” or “Member of the Class” mean a Person who falls within the definition of
the Class as set forth in ¶1.5 of the Stipulation.

     1.7 “Class Period” means the period commencing on October 22, 2003 through March 15, 2004,
inclusive.

     1.8 “Defendants” means Quovadx and the Individual Defendants.

     1.9 “Effective Date” means the first date by which all of the events and conditions specified
in ¶7.1 of the Stipulation have been met and have occurred.

     1.10 “Escrow Agent” means Lead Counsel.

     1.11 “Final” means when the last of the following with respect to the Judgment approving the
Stipulation, substantially in the form of Exhibit B attached hereto, shall occur: (i) the
expiration of three (3) business days after the time to file a motion to alter or amend the
Judgment under Federal Rule of Civil Procedure 59(e) has passed without any such motion having been
filed; (ii) the expiration of three (3) business days after the time in which to appeal the
Judgment has passed without any appeal having been taken (which date shall be deemed to be
thirty-three (33) days following the entry of the Judgment), unless the date to take such an appeal
shall have been extended by Court order or otherwise, or unless the thirty-third (33rd) day falls
on a weekend or a Court holiday, in which case the date for purposes of this Stipulation shall be
deemed to be the next

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business day after such thirty-third (33rd) day; and (iii) if such motion to alter or amend is
filed or if an appeal is taken, three (3) business days after the determination of that motion or
appeal in such a manner as to permit the consummation of the settlement substantially in accordance
with the terms and conditions of this Stipulation. For purposes of this paragraph, an “appeal”
shall not include any appeal that concerns only the issue of attorneys’ fees and reimbursement of
expenses or the Plan of Allocation of the Settlement Fund.

     1.12 “Individual Defendants” means Lorine R. Sweeney and Gary T. Scherping.

     1.13 “Judgment” means the judgment to be rendered by the Court, substantially in the form
attached hereto as Exhibit B.

     1.14 “Lead Counsel” means Lerach Coughlin Stoia Geller Rudman & Robbins LLP, Joy Ann Bull, 655
West Broadway, Suite 1900, San Diego, California, 92101; Lerach Coughlin Stoia Geller Rudman &
Robbins LLP, Jeffrey W. Lawrence, 100 Pine Street, Suite 2600, San Francisco, California 94111.

     1.15 “Lead Plaintiff” means David Heller.

     1.16 “Person” means an individual, corporation, partnership, limited partnership, limited
liability partnership, limited liability company, association, joint stock company, estate, legal
representative, trust, unincorporated association, government or any political subdivision or
agency thereof, and any business or legal entity and their spouses, heirs, predecessors,
successors, representatives, or assignees.

     1.17 “Plan of Allocation” means a plan or formula of allocation of the Settlement Fund whereby
the Net Settlement Fund shall be distributed to Authorized Claimants after payment of expenses of
notice and administration of the settlement, Taxes and Tax Expenses and such attorneys’

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fees, costs, expenses and interest as may be awarded by the Court. Any Plan of Allocation is
not part of the Stipulation and Defendants and their Related Parties shall have no responsibility
therefore or liability with respect thereto.

     1.18 “Quovadx” means Quovadx, Inc.

     1.19 “Related Parties” means each of a Defendant’s past or present directors, officers,
employees, partners, insurers, co-insurers, reinsurers, agents, controlling shareholders,
attorneys, accountants or auditors, advisors, investment advisors, personal or legal
representatives, predecessors, successors, parents, subsidiaries, divisions, joint ventures,
assigns, spouses, heirs, related or affiliated entities, any entity in which a Defendant has a
controlling interest, any members of an Individual Defendant’s immediate family, or any trust of
which the Individual Defendant is the settlor or which is for the benefit of the Individual
Defendant’s family.

     1.20 “Released Claims” shall collectively mean all claims (including Unknown Claims as defined
in ¶1.24 hereof), demands, rights, liabilities and causes of action of every nature and description
whatsoever, known or unknown, whether or not concealed or hidden, asserted or that might have been
asserted (including, but not limited to, all claims arising out of or relating to any acts,
omissions, disclosures, financial statements, or statements by the Defendants, including without
limitation claims for negligence, gross negligence, constructive or actual fraud, negligent
misrepresentation, conspiracy, breach of duty of care and/or breach of duty of loyalty, fraud,
breach of fiduciary duty, or violations of any state or federal statutes, rules or regulations)
arising out of, relating to, or in connection with the purchase on
the open market of Quovadx common
stock by the Lead Plaintiff or any Class Member during the Class Period and the allegations that
have been or could have been asserted by any member of the Class in the Action against the
Defendants.

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     1.21 “Released Persons” means each and all of the Defendants and each and all of their Related
Parties.

     1.22 “Settlement Fund” means the principal amount of Nine Million Dollars ($9,000,000) in
cash, plus all interest earned thereon pursuant to this Stipulation.

     1.23 “Settling Parties” means, collectively, each of the Defendants and the Lead Plaintiff on
behalf of himself and Class Members.

     1.24 “Unknown Claims” shall collectively mean all claims, demands, rights, liabilities, and
causes of action of every nature and description which the Lead Plaintiff or any Class Member does
not know or suspect to exist in his, her or its favor at the time of the release of the Released
Persons which, if known by him, her or it, might have affected his, her or its settlement with and
release of the Released Persons, or might have affected his, her or its decision not to object to
this settlement. With respect to any and all Released Claims, the Settling Parties stipulate and
agree that, upon the Effective Date, the Lead Plaintiff shall expressly waive, and each of the
Class Members shall be deemed to have waived, and by operation of the Judgment shall have waived,
the provisions, rights and benefits of California Civil Code §1542, which provides:

     A general release does not extend to claims which the creditor does not know or
suspect to exist in his or her favor at the time of executing the release, which if
known by him or her must have materially affected his or her settlement with the
debtor.

The Lead Plaintiff shall expressly and each of the Class Members shall be deemed to have, and by
operation of the Judgment shall have, expressly waived any and all provisions, rights and benefits
conferred by any law of any state or territory of the United States, or principle of common law,
which is similar, comparable or equivalent to California Civil Code §1542. The Lead Plaintiff and
Class Members may hereafter discover facts in addition to or different from those which he, she or
it

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now knows or believes to be true with respect to the subject matter of the Released Claims, but the
Lead Plaintiff shall expressly fully, finally and forever settle and release, and each Class
Member, upon the Effective Date, shall be deemed to have, and by operation of the Judgment shall
have, fully, finally, and forever settled and released, any and all Released Claims, known or
unknown, suspected or unsuspected, contingent or non-contingent, whether or not concealed or
hidden, which now exist, or heretofore have existed, upon any theory of law or equity now existing
or coming into existence in the future, including, but not limited to, conduct which is negligent,
intentional, with or without malice, or a breach of any duty, law or rule, without regard to the
subsequent discovery or existence of such different or additional facts. The Lead Plaintiff
acknowledges, and the Class Members shall be deemed by operation of the Judgment to have
acknowledged, that the foregoing waiver was separately bargained for and a key element of the
settlement of which this release is a part.

     2. The Settlement

          a. The Settlement Fund

     2.1 The principal amount of $9,000,000 in cash was transferred by or on behalf of Defendants
to the Escrow Agent before April 18, 2006.

          b. The Escrow Agent

     2.2 The Escrow Agent may invest the Settlement Fund deposited pursuant to ¶2.1 hereof in
instruments backed by the full faith and credit of the United States Government or fully insured by
the United States Government or an agency thereof and shall reinvest the proceeds of these
instruments as they mature in similar instruments at their then-current market rates. The Escrow
Agent shall bear all risks related to investment of the Settlement Fund.

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     2.3 The Escrow Agent shall not disburse the Settlement Fund except as provided in the
Stipulation, by an order of the Court, or with the written agreement of counsel for Defendants.

     2.4 Subject to further order and/or direction as may be made by the Court, the Escrow Agent is
authorized to execute such transactions on behalf of the Class Members as are consistent with the
terms of the Stipulation.

     2.5 All funds held by the Escrow Agent shall be deemed and considered to be in custodia legis
of the Court, and shall remain subject to the jurisdiction of the Court, until such time as such
funds shall be distributed pursuant to the Stipulation and/or further order(s) of the Court.

     2.6 Within five (5) calendar days after payment of the Settlement Fund to the Escrow Agent
pursuant to ¶2.1 hereof, the Escrow Agent may establish a “Class Notice and Administration Fund,”
and may deposit up to $100,000 from the Settlement Fund in it. The Class Notice and Administration
Fund may be used by Lead Counsel to pay costs and expenses reasonably and actually incurred in
connection with providing notice to the Class, locating Class Members, assisting with the filing of
claims, administering and distributing the Settlement Fund to Authorized Claimants, processing
Proof of Claim and Release forms and paying escrow fees and costs, if any. The Class Notice and
Administration Fund may also be invested and earn interest as provided for in ¶2.2 of this
Stipulation. In no event shall Defendants or their Related Parties have any responsibility for or
liability with respect to the Escrow Agent or its actions or the Class Notice and Administration
Fund.

          c. Taxes

     2.7 (a) Settling Parties and the Escrow Agent agree to treat the Settlement Fund as being at
all times a “qualified settlement fund” within the meaning of Treas. Reg. §1.468B-1. In

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addition, the Escrow Agent shall timely make such elections as necessary or advisable to carry
out the provisions of this ¶2.7, including the “relation-back election” (as defined in Treas. Reg.
§1.468B-1) back to the earliest permitted date. Such elections shall be made in compliance with
the procedures and requirements contained in such regulations. It shall be the responsibility of
the Escrow Agent to timely and properly prepare and deliver the necessary documentation for
signature by all necessary parties, and thereafter to cause the appropriate filing to occur.

          (b) For the purpose of §468B of the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder, the “administrator” shall be the Escrow Agent. The Escrow
Agent shall timely and properly file all informational and other tax returns necessary or advisable
with respect to the Settlement Fund (including without limitation the returns described in Treas.
Reg. §1.468B-2(k)). Such returns (as well as the election described in ¶2.7(a) hereof) shall be
consistent with this ¶2.7 and in all events shall reflect that all Taxes (including any estimated
Taxes, interest or penalties) on the income earned by the Settlement Fund shall be paid out of the
Settlement Fund as provided in ¶2.7(c) hereof.

          (c) All (a) Taxes (including any estimated Taxes, interest or penalties) arising with respect
to the income earned by the Settlement Fund, including any Taxes or tax detriments that may be
imposed upon the Defendants or their Related Parties with respect to any income earned by the
Settlement Fund for any period during which the Settlement Fund does not qualify as a “qualified
settlement fund” for federal or state income tax purposes (“Taxes”), and (b) expenses and costs
incurred in connection with the operation and implementation of this ¶2.7 (including, without
limitation, expenses of tax attorneys and/or accountants and mailing and distribution costs and
expenses relating to filing (or failing to file) the returns described in this ¶2.7) (“Tax
Expenses”),

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shall be paid out of the Settlement Fund; in no event shall the Defendants or their Related
Parties have any responsibility for or liability with respect to the Taxes or the Tax Expenses.
The Escrow Agent shall indemnify and hold each of the Defendants and their Related Parties harmless
for Taxes and Tax Expenses (including, without limitation, Taxes payable by reason of any such
indemnification). Further, Taxes and Tax Expenses shall be treated as, and considered to be, a
cost of administration of the Settlement Fund and shall be timely paid by the Escrow Agent out of
the Settlement Fund without prior order from the Court and the Escrow Agent shall be obligated
(notwithstanding anything herein to the contrary) to withhold from distribution to Authorized
Claimants any funds necessary to pay such amounts including the establishment of adequate reserves
for any Taxes and Tax Expenses (as well as any amounts that may be required to be withheld under
Treas. Reg. §1.468B-2(1)(2)); neither the Defendants nor their Related Parties are responsible
therefore nor shall they have any liability with respect thereto. The parties hereto agree to
cooperate with the Escrow Agent, each other, and their tax attorneys and accountants to the extent
reasonably necessary to carry out the provisions of this ¶2.7.

          (d) For the purpose of this ¶2.7, references to the Settlement Fund shall include both the
Settlement Fund and the Class Notice and Administration Fund and shall also include any earnings
thereon.

          d. Termination of Settlement

     2.8 In the event that the Stipulation is not approved, or is terminated, canceled, or fails to
become effective for any reason, the Settlement Fund (including accrued interest) less expenses
actually incurred or due and owing in connection with the settlement provided for herein shall be
deposited into an escrow account to be designated jointly by Defendants’ counsel within ten (10)

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calendar days from the date on which the Court declines to approve the settlement or on which
the settlement is terminated.

     3. Notice Order and Settlement Hearing

     3.1 Promptly after execution of the Stipulation, Lead Counsel shall submit the Stipulation
together with its exhibits to the Court and shall apply for entry of an order (the “Notice Order”),
substantially in the form of Exhibit A attached hereto, requesting, inter alia, the preliminary
approval of the settlement set forth in the Stipulation, the certification of the Class for
settlement purposes only, and approval for mailing the Notice of Pendency and Proposed Settlement
of Class Action (the “Notice”) substantially in the form of Exhibit A-1 attached hereto and
publication of a summary notice substantially in the form of Exhibit A-3 attached hereto. The
Notice shall include the general terms of the settlement set forth in the Stipulation, the proposed
Plan of Allocation, the general terms of the Fee and Expense Application and the date of the
Settlement Hearing as defined below.

     3.2 Lead Counsel shall request that after notice is given, the Court hold a hearing (the
“Settlement Hearing”) and approve the settlement of the Action as set forth herein. At or after
the Settlement Hearing, Lead Counsel also will request that the Court approve the proposed Plan of
Allocation and the Fee and Expense Application.

     3.3 Quovadx shall provide or cause to be provided to the Claims Administrator its shareholder
lists as appropriate for providing notice to the Class.

     4. Releases

     4.1 Upon the Effective Date, as defined in ¶1.9 hereof, the Lead Plaintiff and each of the
Class Members shall be deemed to have, and by operation of the Judgment shall have, fully, finally,

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and forever released, relinquished and discharged all Released Claims against the Released
Persons, whether or not such Class Member executes and delivers a Proof of Claim and Release form.

     4.2 The Proof of Claim and Release form to be executed by Class Members shall release all
Released Claims against the Released Persons and shall be substantially in the form contained in
Exhibit A-2 attached hereto.

     4.3 Upon the Effective Date, as defined in ¶1.9 hereof, each of the Released Persons shall be
deemed to have, and by operation of the Judgment shall have, fully, finally, and forever released,
relinquished and discharged each and all of the Lead Plaintiff, Class Members and Lead Counsel from
all claims (including Unknown Claims) arising out of, relating to, or in connection with the
institution, prosecution, assertion, settlement or resolution of the Action or the Released Claims.

5. Administration and Calculation of Claims, Final Awards and Supervision
and Distribution of Settlement Fund

     5.1 The Claims Administrator, subject to such supervision and direction of the Court and/or
Lead Counsel as may be necessary or as circumstances may require, shall administer and calculate
the claims submitted by Class Members.

     5.2 The Settlement Fund shall be applied as follows:

          (a) to pay Lead Counsel’s attorneys’ fees and expenses with interest thereon (the “Fee and
Expense Award”), if and to the extent allowed by the Court;

          (b) to pay all the costs and expenses reasonably and actually incurred in connection with
providing notice, locating Class Members, assisting with the filing of claims, administering and
distributing the Settlement Fund to Authorized Claimants, processing Proof of Claim and Release
forms and paying escrow fees and costs, if any;

          (c) to pay the Taxes and Tax Expenses described in ¶2.7 hereof; and

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          (d) to distribute the balance of the Settlement Fund (the “Net Settlement Fund”) to Authorized
Claimants as allowed by the Stipulation, the Plan of Allocation, or the Court.

     5.3 Upon the Effective Date and thereafter, and in accordance with the terms of the
Stipulation, the Plan of Allocation, or such further approval and further order(s) of the Court as
may be necessary or as circumstances may require, the Net Settlement Fund shall be distributed to
Authorized Claimants, subject to and in accordance with paragraphs 5.4-5.9.

     5.4 Within ninety (90) days after the mailing of the Notice or such other time as may be set
by the Court, each Person claiming to be an Authorized Claimant shall be required to submit to the
Claims Administrator a completed Proof of Claim and Release form, substantially in the form of
Exhibit A-2 attached hereto, signed under penalty of perjury and supported by such documents as are
specified in the Proof of Claim and Release and as are reasonably available to the Authorized
Claimant.

     5.5 Except as otherwise ordered by the Court, all Class Members who fail to timely submit a
Proof of Claim and Release form within such period, or such other period as may be ordered by the
Court, or otherwise allowed, shall be forever barred from receiving any payments pursuant to the
Stipulation and the settlement set forth herein, but will in all other respects be subject to and
bound by the provisions of the Stipulation, the releases contained herein, and the Judgment.

     5.6 The Net Settlement Fund shall be distributed to the Authorized Claimants substantially in
accordance with a Plan of Allocation to be described in the Notice and approved by the Court. If
there is any balance remaining in the Net Settlement Fund after six (6) months from the date of
distribution of the Net Settlement Fund (whether by reason of tax refunds, uncashed checks or
otherwise), Lead Counsel shall, if feasible, reallocate such balance among Authorized Claimants

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in an equitable and economic fashion. Thereafter, any balance which still remains in the Net
Settlement Fund shall be donated to Colorado-based non-sectarian, non-profit organization(s)
providing legal services or otherwise in the appropriate public interest as determined by Lead
Counsel.

     5.7 This is not a claims-made settlement and, if all conditions of the Stipulation are
satisfied and the settlement becomes Final, no portion of the Settlement Fund will be returned to
the Defendants. The Defendants and their Related Parties shall have no responsibility for,
interest in, or liability whatsoever with respect to the distribution of the Net Settlement Fund,
the Plan of Allocation, the determination, administration, or calculation of claims, the payment or
withholding of Taxes or Tax Expenses, or any losses incurred in connection therewith.

     5.8 No Person shall have any claim against Lead Counsel, the Claims Administrator or other
entity designated by Lead Counsel based on distributions made substantially in accordance with the
Stipulation and the settlement contained herein, the Plan of Allocation, or further order(s) of the
Court. No Person shall have any claim whatsoever against Defendants, Defendants’ counsel, or any
Released Persons arising from or related to any distributions made, or not made, from the
Settlement Fund.

     5.9 It is understood and agreed by the Settling Parties that any proposed Plan of Allocation
of the Net Settlement Fund including, but not limited to, any adjustments to an Authorized
Claimant’s claim set forth therein, is not a part of the Stipulation and is to be considered by the
Court separately from the Court’s consideration of the fairness, reasonableness and adequacy of the
settlement set forth in the Stipulation, and any order or proceeding relating to the Plan of
Allocation shall not operate to terminate or cancel the Stipulation or affect the finality of the
Court’s

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Judgment approving the Stipulation and the settlement set forth therein, or any other orders
entered pursuant to the Stipulation. Defendants will take no position with respect to any proposed
Plan of Allocation or any such plan as may be approved by the Court.

     6. Lead Counsel’s Attorneys’ Fees and Reimbursement of Expenses

     6.1
After the Court approves the Settlement, Lead Counsel may submit an application or applications (the “Fee and Expense Application”)
for distributions to them from the Settlement Fund for: (a) an award of attorneys’ fees; plus (b)
reimbursement of actual expenses, including the fees of any experts or consultants, incurred in
connection with prosecuting the Action, plus any interest on such attorneys’ fees and expenses at
the same rate and for the same periods as earned by the Settlement Fund (until paid), as may be
awarded by the Court. Lead Counsel reserve the right to make additional applications for fees and
expenses incurred.

     6.2 The attorneys’ fees and expenses, as awarded by the Court, shall be paid to Lead Counsel
from the Settlement Fund, as ordered, immediately after the Court executes an order awarding such
fees and expenses. In the event that the Effective Date does not occur, or the Judgment or the
order making the Fee and Expense Award is reversed or modified, or the Stipulation is canceled or
terminated for any other reason, and in the event that the Fee and Expense Award has been paid to
any extent, then Lead Counsel shall within ten (10) business days from receiving notice from
Defendants’ counsel or from a court of appropriate jurisdiction, refund to the Settlement Fund the
fees and expenses previously paid to them from the Settlement Fund plus interest thereon at the
same rate as earned on the Settlement Fund in an amount consistent with such reversal or
modification.

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     6.3 The procedure for and the allowance or disallowance by the Court of any applications by
Lead Counsel for attorneys’ fees and expenses, including the fees of experts and consultants, to be
paid out of the Settlement Fund, are not part of the settlement set forth in the Stipulation, and
are to be considered by the Court separately from the Court’s consideration of the fairness,
reasonableness and adequacy of the settlement set forth in the Stipulation, and any order or
proceedings relating to the Fee and Expense Application, or any appeal from any order relating
thereto or reversal or modification thereof, shall not operate to terminate or cancel the
Stipulation, or affect or delay the finality of the Judgment approving the Stipulation and the
settlement of the Action set forth therein.

     6.4 Defendants and their Related Parties shall have no responsibility for or liability with
respect to any payment of attorneys’ fees and expenses to Lead Counsel that the Court may make in
this Action.

     7. Conditions of Settlement, Effect of Disapproval, Cancellation or
Termination

     7.1 The Effective Date of the Stipulation shall be conditioned on the occurrence of all of the
following events:

          (a) Defendants have timely made their contributions to the Settlement Fund as required by ¶2.1
hereof;

          (b) Defendants have not exercised their option to terminate the Stipulation pursuant to ¶7.6
hereof;

          (c) the Court has entered the Notice Order, as required by ¶3.1 hereof;

          (d) the Court has entered the Judgment, or a judgment substantially in the form of Exhibit B
attached hereto; and

 - 18 - 

 

          (e) the Judgment has become Final, as defined in ¶1.11 hereof.

     7.2 Upon the occurrence of all of the events referenced in ¶7.1 hereof, any and all remaining
interest or right of Defendants in or to the Settlement Fund, if any, shall be absolutely and
forever extinguished. If all of the conditions specified in ¶7.1 hereof are not met, then the
Stipulation shall be canceled and terminated subject to ¶7.4 hereof unless Lead Counsel and counsel
for Defendants mutually agree in writing within thirty (30) calendar days of their receipt of
notice of any failed condition to proceed with the Stipulation.

     7.3 Unless otherwise ordered by the Court, in the event the Stipulation shall terminate, or be
canceled, or shall not become effective for any reason, within ten (10) calendar days after the
occurrence of such event and in accordance with the terms of ¶2.8 hereof, the Settlement Fund
(including accrued interest), plus any amount then remaining in the Class Notice and Administration
Fund (including accrued interest), less expenses and any costs which have either been disbursed
pursuant to ¶2.6 hereof or are determined to be chargeable to the Class Notice and Administration
Fund, shall be deposited by the Escrow Agent into an escrow account to be designated jointly by
Defendants’ counsel within ten (10) calendar days from the date on which the Court declines to
approve the settlement or on which the settlement is terminated. At the request of counsel for
Defendants, the Escrow Agent or its designee shall apply for any tax refund owed on the Settlement
Fund and pay the proceeds, after deduction of any fees or expenses incurred in connection with such
application(s) for refund, pursuant to written direction from counsel for Defendants.

     7.4 In the event that the Stipulation is not approved by the Court or the settlement set forth
in the Stipulation is terminated or fails to become effective in accordance with its terms, the
Settling Parties shall be restored to their respective positions in
the Action as of November 19,
2006.

 - 19 - 

 

In such event, the terms and provisions of the Stipulation, with the exception of ¶¶2.7, 2.8,
7.3-7.5 hereof, shall have no further force or effect with respect to the Settling Parties and
shall not be used in this Action or in any other proceeding for any purpose, and any judgment or
order entered by the Court in accordance with the terms of the Stipulation shall be treated as
vacated, nunc pro tunc. No order of the Court or modification or reversal on appeal of any order
of the Court concerning the Plan of Allocation or the amount of any attorneys’ fees, costs,
expenses and interest awarded by the Court to Lead Counsel shall constitute grounds for
cancellation or termination of the Stipulation.

     7.5 If the Effective Date does not occur, or if the Stipulation is terminated pursuant to its
terms, neither the Lead Plaintiff nor Lead Counsel shall have any obligation to repay any amounts
actually and properly disbursed from the Class Notice and Administration Fund. In addition, any
expenses already incurred and properly chargeable to the Class Notice and Administration Fund
pursuant to ¶2.6 hereof at the time of such termination or cancellation, but which have not been
paid, shall be paid by the Escrow Agent in accordance with the terms of the Stipulation prior to
the balance being refunded in accordance with ¶¶2.8 and 7.3 hereof.

     7.6 If prior to the Settlement Hearing, the aggregate number of shares of Quovadx common stock
purchased or acquired by Persons who would otherwise be Members of the Class, but who request
exclusion from the Class, exceeds the sum specified in a separate “Supplemental Agreement” between
the Settling Parties, Quovadx shall have, in its sole and absolute discretion, the option to
terminate this Stipulation in accordance with the procedures set forth in the Supplemental
Agreement. The Supplemental Agreement will be filed with the Court under seal.

     7.7 If a case is commenced in respect to any Defendant under Title 11 of the United States
Code (Bankruptcy), or a trustee, receiver or conservator is appointed under any similar law,

 - 20 - 

 

and in the event of the entry of a final order of a court of competent jurisdiction
determining the transfer of the Settlement Fund, or any portion thereof, by or on behalf of such
Defendant to be a preference, voidable transfer, fraudulent transfer or similar transaction, then,
as to such Defendant, the releases given and Judgment entered in favor of such Defendant pursuant
to this Stipulation shall be null and void.

     7.8 Each Defendant warrants and represents that he, she or it is not “insolvent” within the
meaning of 11 U.S.C. §101(32) as of the time this Stipulation is executed and as of the time any
payments are transferred or made as required by this Stipulation.

     8. Miscellaneous Provisions

     8.1 The Settling Parties (a) acknowledge that it is their intent to consummate this agreement;
and (b) agree to cooperate to the extent reasonably necessary to effectuate and implement all terms
and conditions of the Stipulation and to exercise their reasonable best efforts to accomplish the
foregoing terms and conditions of the Stipulation.

     8.2 The Settling Parties intend this settlement to be a final and complete resolution of all
disputes between them with respect to the Action. The settlement compromises claims which are
contested and shall not be deemed an admission by any Settling Party as to the merits of any claim
or defense. The Final Judgment will contain a statement that during the course of the Action, the
parties and their respective counsel at all times complied with the requirements of Federal Rule of
Civil Procedure 11. The Defendants agree that the Action was filed in good faith and in accordance
with Federal Rule of Civil Procedure 11, and that the amount paid to the Settlement Fund and the
other terms of the settlement were negotiated in good faith by the Settling Parties and reflect a
settlement that was reached voluntarily after consultation with competent legal counsel. The

 - 21 - 

 

Defendants may issue a press release announcing the settlement, but may not contradict this
language. The Settling Parties reserve their right to rebut, in a manner that such party
determines to be appropriate, any contention made in any public forum that the Action was brought
or defended in bad faith or without a reasonable basis.

     8.3 Neither the Stipulation nor the settlement contained therein, nor any act performed or
document executed pursuant to or in furtherance of the Stipulation or the settlement: (a) is or may
be deemed to be or may be used as an admission of, or evidence of, the validity of any Released
Claim, or of any wrongdoing or liability of the Defendants or their Related Parties; or (b) is or
may be deemed to be or may be used as an admission of, or evidence of, any fault or omission of any
of the Defendants or their Related Parties in any civil, criminal or administrative proceeding in
any court, administrative agency or other tribunal. Defendants and/or their Related Parties may
file the Stipulation and/or the Judgment in any action that may be brought against them in order to
support a defense or counterclaim based on principles of res judicata, collateral estoppel,
release, good faith settlement, judgment bar or reduction or any other theory of claim preclusion
or issue preclusion or similar defense or counterclaim.

     8.4 All agreements made and orders entered during the course of the Action relating to the
confidentiality of information shall survive this Stipulation.

     8.5 All of the Exhibits to the Stipulation are material and integral parts hereof and are
fully incorporated herein by this reference.

     8.6 The Stipulation may be amended or modified only by a written instrument signed by or on
behalf of all Settling Parties or their respective successors-in-interest.

 - 22 - 

 

     8.7 The Stipulation and the Exhibits attached hereto constitute the entire agreement among the
parties hereto and no representations, warranties or inducements have been made to any party
concerning the Stipulation or its Exhibits other than the representations, warranties and covenants
contained and memorialized in such documents. Except as otherwise provided herein, each party
shall bear its own costs.

     8.8 Lead Counsel, on behalf of the Class, are expressly authorized by the Lead Plaintiff to
take all appropriate action required or permitted to be taken by the Class pursuant to the
Stipulation to effectuate its terms and also are expressly authorized to enter into any
modifications or amendments to the Stipulation on behalf of the Class which they deem appropriate.

     8.9 Each counsel or other Person executing the Stipulation or any of its Exhibits on behalf of
any party hereto hereby warrants that such Person has the full authority to do so.

     8.10 The Stipulation may be executed in one or more counterparts. All executed counterparts
and each of them shall be deemed to be one and the same instrument. A complete set of original
executed counterparts shall be filed with the Court.

     8.11 The Stipulation shall be binding upon, and inure to the benefit of, the successors and
assigns of the parties hereto.

     8.12 The Court shall retain jurisdiction with respect to implementation and enforcement of the
terms of the Stipulation, and all parties hereto submit to the jurisdiction of the Court for
purposes of implementing and enforcing the settlement embodied in the Stipulation.

     8.13 The Stipulation and the Exhibits hereto shall be considered to have been negotiated,
executed and delivered, and to be wholly performed, in the State of Colorado, and the rights and
obligations of the parties to the Stipulation shall be construed and enforced in accordance with,
and

 - 23 - 

 

governed by, the internal, substantive laws of the State of Colorado without giving effect to
that State’s choice-of-law principles.

     IN WITNESS WHEREOF, the parties hereto have caused the Stipulation to be executed, by their
duly authorized attorneys dated as of November 20, 2006.

	 	 	 	 	 
	 

	 	LERACH COUGHLIN STOIA GELLER	 	 
	 

	 	  RUDMAN & ROBBINS LLP	 	 
	 

	 	JOY ANN BULL	 	 
	 

	 	655 West Broadway, Suite 1900	 	 
	 

	 	San Diego, CA 92101-3301	 	 
	 

	 	Telephone: 619/231-1058	 	 
	 

	 	619/231-7423 (fax)	 	 
	 

	 	Email: joyb@lerachlaw.com	 	 
	 
	 	 	 	 
	 

	 	LERACH COUGHLIN STOIA GELLER	 	 
	 

	 	  RUDMAN & ROBBINS LLP	 	 
	 

	 	JEFFREY W. LAWRENCE	 	 
	 

	 	DENNIS J. HERMAN	 	 
	 

	 	EX KANO S. SAMS II	 	 
	 
	 	 	 	 
	 

	 	/s/ Jeffrey W. Lawrence
 

JEFFREY W. LAWRENCE
	 	 
	 
	 	 	 	 
	 

	 	100 Pine Street, Suite 2600	 	 
	 

	 	San Francisco, CA 94111	 	 
	 

	 	Telephone: 415/288-4545	 	 
	 

	 	415/288-4534 (fax)	 	 
	 

	 	Email: jeffreyl@lerachlaw.com	 	 
	 

	 	Email: dherman@lerachlaw.com	 	 
	 

	 	Email: exkanos@lerachlaw.com	 	 
	 
	 	 	 	 
	 

	 	Lead Counsel for Plaintiffs	 	 

 - 24 - 

 

	 	 	 	 	 
	 

	 	WHEELER TRIGG KENNEDY LLP	 	 
	 

	 	MICHAEL T. WILLIAMS	 	 
	 
	 	 	 	 
	 

	 	/s/ Michael T. Williams
 

MICHAEL T. WILLIAMS
	 	 
	 
	 	 	 	 
	 

	 	1801 California Street, Suite 3600	 	 
	 

	 	Denver, Colorado 80202	 	 
	 

	 	Telephone: 303/244-1800	 	 
	 

	 	303/244-1879 (fax)	 	 
	 

	 	Email: williams@wtklaw.com	 	 
	 
	 	 	 	 
	 

	 	WILSON SONSINI GOODRICH	 	 
	 

	 	  & ROSATI, P.C.	 	 
	 

	 	BORIS FELDMAN	 	 
	 

	 	NINA F. LOCKER	 	 
	 

	 	650 Page Mill Road	 	 
	 

	 	Palo Alto, CA 94304-1050	 	 
	 

	 	Telephone: 650/493-9300	 	 
	 

	 	650/493-6811 (fax)	 	 
	 

	 	Email: nlocker@wsgr.com	 	 
	 
	 	 	 	 
	 

	 	Attorneys for Quovadx, Inc.	 	 
	 
	 	 	 	 
	 

	 	ROTHGERBER JOHNSON & LYONS LLP	 	 
	 

	 	FREDERICK J. BAUMANN	 	 
	 
	 	 	 	 
	 

	 	/s/ Frederick J. Baumann
 

FREDERICK J. BAUMANN
	 	 
	 
	 	 	 	 
	 

	 	One Tabor Center, Suite 3000	 	 
	 

	 	1200 Seventeenth Street	 	 
	 

	 	Denver, CO 80202-5855	 	 
	 

	 	Telephone: 303/623-9000	 	 
	 

	 	303/623-9222 (fax)	 	 
	 

	 	Email: fbaumann@rothgerber.com	 	 
	 
	 	 	 	 
	 

	 	Attorneys for Lorine R. Sweeney and	 	 
	 

	 	Gary T. Scherping	 	 

 - 25 - 

 

CERTIFICATE OF SERVICE

     I hereby certify that on November 21, 2006, I electronically filed the foregoing with the
Clerk of the Court using the CM/ECF system which will send notification of such filing to the
e-mail addresses denoted on the attached Electronic Mail Notice List, and I hereby certify that I
have mailed the foregoing document or paper via the United States Postal Service to the
non-CM/ECF participants indicated on the attached Manual Notice List.

	 	 	 	 	 
	 

	 	/s/ Joy Ann Bull
 

JOY ANN BULL
	 	 
	 
	 	 	 	 
	 

	 	LERACH COUGHLIN STOIA GELLER

          RUDMAN & ROBBINS LLP	 	 
	 

	 	655 West Broadway, Suite 1900

San Diego, CA 92101

Telephone: 619/231-1058

619/231-7423(fax)

E-mail:Joyb@lerachlaw.comKramerica August 21, 2006 Note

    

      THIS
        NOTE
        HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
        “ACT”), NOR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS AND HAS BEEN TAKEN
        FOR INVESTMENT PURPOSES ONLY. IT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
        OR
        HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO
        SUCH
        SECURITIES UNDER THE ACT AND QUALIFICATION UNDER APPLICABLE STATE LAW WITHOUT
        AN
        OPINION OF COUNSEL SATISFACTORY TO BORROWER THAT SUCH REGISTRATION AND
        QUALIFICATION ARE NOT REQUIRED.

       

      Kramerica

       

      NOTE

       

      $8,200                                                                                                                                                                                                                                                                                        
        August
        21, 2006

                                                                                                                                                                                                                                                                                                                      
        Dallas,
        TX

       

      FOR
        VALUE RECEIVED,
        IElement
        Corporation (“Maker”) promises to pay to the order of Kramerica (the “Lender”),
        at the offices located at 17194 Preston Road Ste 102, PMB 341 in Dallas,
        TX, the
        principal sum of Eight Thousand Two Hundred Dollars ($8,200), together with
        all
        accrued interest thereon, upon the terms and conditions specified
        below.

       

      1.  
        Interest.
        Interest
        shall accrue and be payable monthly on the balance outstanding under this
        Note
        at the rate of 10.0% per annum, compounded monthly, or at the maximum rate
        allowed by law, whichever is lower.

       

      2.  
Maturity.
        The full
        principle balance and interest will become due and payable six (6) months
        from
        the date funds are received.

       

      3.  
        Payment.
        Payment
        shall be made in lawful tender of the United States and shall be applied
        first
        to the payment of principal and then to all accrued and unpaid interest.
        Prepayment of the principal balance of this Note, together with all accrued
        and
        unpaid interest on the portion of principal so prepaid, may be made in whole
        or
        in part at any time without penalty.

       

      4.  
        Conversion.
        Lender
        shall have the right to convert the balance of this note to shares of Maker’s
        common stock at any time prior to maturity and at a rate equal to the lowest
        rate offered to any note holder within 6 (six) months after the date of this
        note.

       

      5.  
        Collateral. Lender
        shall have the right to file a UCC lien against Maker’s assets for the duration
        of the term.

       

      6.  
        Events
        of Acceleration.
        The
        entire unpaid principal balance of this Note, together with all accrued and
        unpaid interest, shall become immediately due and payable prior to the specified
        due date of this Note upon the occurrence of one or more of the following
        events: 

       

      A.  the
        expiration of the thirty (30)-day period following the date the Maker ceases
        for
        any reason to pay its monthly obligations to the Lender; or 

       

      B.  the
        insolvency of the Maker, the commission of any act of bankruptcy by the Maker,
        the execution by the Maker of a general assignment for the benefit of creditors,
        the filing by or against the Maker of any petition in bankruptcy or any petition
        for relief under the provisions of the Federal bankruptcy act or any other
        state
        or Federal law for the relief of debtors and the continuation of such petition
        without dismissal for a period of thirty (30) days or more, the appointment
        of a
        receiver or trustee to take possession of any property or assets of the Maker
        or
        the attachment of or execution against any property or assets of the Maker;
        or

       

      B.  an
        acquisition of the Company (whether by merger, sale of all or substantially
        all
        of the Company’s assets or sale of more than fifty percent (50%) of the
        Company’s outstanding voting securities) for consideration payable in cash or
        freely-tradable securities; provided,
        however, that if the Pooling of Interest Method, as described in Accounting
        Principles Board Opinion No. 16, is used to account for the acquisition for
        financial accounting purposes, then acceleration of this Note shall not occur
        until the end of the sixty (60)-day period immediately following the close
        of
        the applicable transfer restriction period required under Accounting Series
        Release Numbers 130 and 135.

       

      7.  
        Collection.
        If
        action
        is instituted to collect this Note, the Maker promises to pay all costs and
        expenses (including reasonable attorney fees) incurred in connection with
        such
        action.

       

      8.  
        Waiver.
        A waiver
        of any term of this Note or of any of the obligations secured thereby must
        be
        made in writing and signed by a duly-authorized officer of the Corporation
        and
        any such waiver shall be limited to its express terms.

       

      No
        delay
        by the Corporation in acting with respect to the terms of this Note shall
        constitute a waiver of any breach, default, or failure of a condition under
        this
        Note or the obligations secured thereby.

       

      9.  
        Construction.
        Each
        party acknowledges that it had the opportunity to have its legal counsel
        review
        this Note and, therefore, stipulates that the rule of construction that
        ambiguities are to be resolved against the drafting party shall not be applied
        in the interpretation of this Note to favor any party against the
        other.

       

      10.  
        Conflicting
        Agreements.
        In the
        event of any inconsistencies between the terms of this Note and the terms
        of any
        other document related to the loan evidenced by the Note, the terms of this
        Note
        shall prevail.

       

      11.  
        Governing
        Law.
        This
        Note shall be construed in accordance with the laws of the State of Texas
        without resort to that State’s conflict-of-laws rules.

       

      12.  
        Wire
        Transfer Instructions.

       

      Swift
        Code:                                
         BOFA
        AUS
        3N

       

      Bank
        ABA/Routing
        #:              
              
026
        00
        9593

       

      Account
        Number:                      
         0047
        8238
        4943

       

      Name
        on
        Bank Account:         
            
IElement

       

      Bank
        Name:                               
       Bank
        of
        America

       

      Bank
        Address:        
    901
        Main
        Street 16th
        Floor

                                                          
               Dallas,
        TX 75202

       

      Bank
        Contact:                           
Lauri
        Waisman

       

      Bank
        Telephone
        Number:                   (214)
        209-9523

       

      13.
        Signatures.

       

      
        Date: August
          21, 2006   

         

        /s/
          Ivan
          Zweig

        -----------------------

        Ivan
          Zweig,

        Director
          & Chief Executive Officer

        IElement
          Corporation

      

       

      
        
          /s/
            Ivan
            Zweig

          -----------------------

          Ivan
            Zweig,

          CEO
Kramerica

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