DVI, Inc. Securities Litigation 03-CV-05336-Lead Plaintiffs' Motion For Entry Of Order Approving

Case 2:03-cv-05336-LDD Document 400 Filed 11/02/2006 Page 1 of 11

IN THE UNITED STATES DISTRICT COURTFOR THE EASTERN DISTRICT OF PENNSYLVANIA

In Re DVI, Inc. Securities LitigationCase No. 2:03-CV-5336

Hon. Legrome D. Davis

LEAD PLAINTIFFS' MOTION FOR ENTRY OF ORDER APPROVINGPARTIAL SETTLEMENTS, PLAN OF ALLOCATION, CERTIFICATION OF A

SETTLEMENT CLASS, AND ATTORNEYS' FEES AND EXPENSES

Lead Plaintiffs respectfully move this Court pursuant to Fed. R. Civ. Pro. 23 (e)

for an order, in the form attached hereto as Exhibit 1, approving the three separate

Settlement Agreements that Lead Plaintiffs have entered into with Defendants OnCure

Medical Corp., f/k/a OnCure Technologies Corp., Dolphin Medical Inc. and PresGar

Imaging L.C. (the "Partial Settlements ).

For the reasons set forth in Lead Plaintiffs' accompanying Memorandum of Law

in Support of Motion for Entry of Order Approving Partial Settlements , Lead Plaintiffs

respectfully request that this Court (a) approve the Partial Settlements; (b) approve the

parties' plan of allocation; (c) approve and certify a settlement class; and (d) award

Plaintiffs' Counsel's requested attorneys' fees and expense reimbursement.

Dated: November 2, 2006

Respectfully submitted,

KRISLOV & ASSOCIATES, LTD.

By: /s/ Michael R. Kamuth

Clinton A. Krislov, Esq.Michael R. Karnuth, Esq.20 North Wacker Drive


Chicago , Illinois 60606Phone : 312-606-0500Fax: 312-606-0207Plaintiffs ' Lead Counsel

Steven A. Schwartz, Esq.Attorney I .D. No. 50579Kathy Meermans Esq.Attorney I .D. No. 37846Chimicles & Tikellis LLP361 W. Lancaster AvenueOne Haverford CentreHaverford, PA 19041Phone : 610-642-8500Fax: 610- 649-3633Plaintiffs' Liaison Counsel


EXHIBIT 1



Case No. 2:03-CV-5336-LDDIn Re DVI, Inc. Securities Litigation

Judge Legrome D. Davis

ORDER OF FINAL JUDGMENT AND DISMISSAL

On November 9, 2006, a hearing having been held before this Court to determine:

(1) whether the terms and conditions of the Stipulations and Agreements of Settlement

dated October 10, 2005, December 13, 2005 and April 19, 2006 (the "Stipulations ), as

amended on July 19, 2006, including the releases provided for in the Stipulations, are

fair, reasonable and adequate for the settlement of all claims asserted by the Class against

Defendants OnCure Medical Corp., f/k/a OnCure Technologies Corp. ("OnCure ),

Dolphin Medical, Inc. ("Dolphin ) and PresGar Imaging LC ("PresGar ), respectively, in

the Complaint now pending in this Court under the above caption, and should be

approved; (2) whether judgment should be entered dismissing the Complaint with

prejudice as to OnCure, Dolphin and PresGar; and (3) whether and in what amount to

award Plaintiffs' Lead Counsel fees and reimbursement of expenses.

The Court having previously granted certification of a Settlement Class on August

18, 2006 as to Plaintiffs' claims against the Settling Defendants, and having considered

all matters submitted to it at the hearing and otherwise; and it appearing that a notice of

the hearing substantially in the form approved by the Court was mailed to all persons or

entities reasonably identifiable who purchased the DVI, Inc. securities at issue in this

Action from August 10, 1999 and August 13, 2003 (dates inclusive) (the "Class Period"),


and who were damaged thereby, except those persons or entities excluded from the

definition of the Class or who previously excluded themselves from the Class, and that a

summary notice of the hearing substantially in the form approved by the Court was

published on one occasion in: the national edition of The Wall Street Journal; USA

Today; a Sunday edition of the Chicago Tribune and the Philadelphia Inquirer, as well as

electronically on Primezone, and the Court having considered and determined the fairness

and reasonableness of the award of attorneys' fees and expenses requested; and all

capitalized terms used herein having the meanings as set forth and defined in the

Stipulations.

NOW, THEREFORE, IT IS HEREBY ORDERED THAT:

The Court has jurisdiction over the subject matter of the Action, the

Plaintiffs , the Class Members, and the Settling Defendants (specifically OnCure, Dolphin

and PresGar).

2. The Court determines for purposes of finally approving the Stipulations

only that the action as against Settling Defendants OnCure, Dolphin and PresGar may

proceed for settlement purposes as a class action under Federal Rules of Civil Procedure

23(a) and (b)(3) in that: (a) the number of Class Members is so numerous that joinder of

all members thereof is impracticable; (b) there are questions of law and fact common to

the Class; (c) the claims of the Lead Plaintiffs and Class Representatives are typical of

the claims of the Class they seek to represent; (d) the Class Representatives have and will

fairly and adequately represent the interests of the Class; (e) the questions of law and fact

common to the Class Members predominate over any questions affecting only individual

2


members ofthe Class; and (f) a class action is superior to other available methods for the

fair and efficient adjudication of the controversy.

3. The Court therefore also determines for purposes of finally approving the

Stipulations only that the Class Representatives may represent a Settlement Class defined

as follows, which the Court hereby certifies for settlement purposes only:

All persons and entities who purchased or otherwise acquired thesecurities ofDVI (its common stock and 9 7/8% Senior Notes), betweenAugust 10, 1999 and August 13 , 2003 , both dates inclusive. Excludedfrom the Settlement Class are Defendants ; any entity in which a Defendanthas a controlling interest or is a part or subsidiary of, or is controlled by aDefendant; the officers, directors, legal representatives, heirs,predecessors , successors and assigns of any of the Defendants; plaintiffsnamed in the WM High Yield Fund, et al. v. O'Hanlon, et al. , No. 04-CV-3423 (E.D. Pa.); and those persons or entities who timely and validlyrequest exclusion from the Settlement Class pursuant to the Notice.

4. Notice of the pendency of this Action as a class action and of the proposed

Partial Settlements was given to all Class Members who could be identified with

reasonable effort. The form and method of notifying the Class of the pendency of the

action as a class action and the terms and conditions of the proposed Partial Settlement

met the requirements of Rule 23 of the Federal Rules of Civil Procedure, Section

21D(a)(7) ofthe Securities Exchange Act of 1934, 15 U.S.C. 4(a)(7), as amended

by the Private Securities Litigation Reform Act of 1995 (the "PSLRA"), due process, and

any other applicable law; constituted the best notice practicable under the circumstances;

and constituted due and sufficient notice to all persons and entities entitled thereto.

5. The Partial Settlements and the Plan ofAllocation are approved as fair,

reasonable and adequate, and the parties are directed to and shall consummate and abide

by the Partial Settlements in accordance with the terms and provisions of the Stipulations.

6. The Complaint, which the Court finds was filed on a good faith basis in


accordance with the PSLRA and Rule 11 of the Federal Rules of Civil Procedure based

upon all publicly available information, is hereby dismissed with prejudice and without

costs, except as provided in the Stipulations, as against Settling Defendants OnCure,

Dolphin and PresGar only.

7. Class Members who have not previously excluded themselves from the

Class and the successors and assigns of any of them are hereby permanently barred and

enjoined from instituting, commencing or prosecuting all claims, rights, demands, suits,

matters, issues or causes of action, whether known or unknown, asserted or unasserted,

whether under state or federal law, including the federal securities laws, and whether

directly, indirectly, derivatively, representatively or in any other capacity, arising out of

losses sustained by the Class with respect to any transaction in or related to the DVI, Inc.

securities (the "Settled Claims") (but excluding any claims to enforce the terms ofthe

Partial Settlement) against Settling Defendants OnCure, Dolphin and PresGar, trusts for

which OnCure, Dolphin and PresGar are the settlor or which is for the benefit of them or

their families ; OnCure's, Dolphin's and PresGar's personal or legal representatives, heirs,

executors, administrators, and any other Person acting on their behalf; and all of

OnCure's, Dolphin's and PresGar's past and present agents, employees, attorneys,

insurers, co-insurers, reinsurers, accountants, advisors, successors, shareholders,

directors, affiliates, parents, subsidiaries, and assigns; provided, however, that nothing

herein shall bar or enjoin any members ofthe Class from instituting or pursuing any

claims against Defendants Michael A. O'Hanlon, Steven R. Garfinkel, John P. Boyle,

Terry Cady, Gerald Cohn, Nathan Shapiro, William S. Goldberg, Harry T.J. Roberts,

John E. McHugh, Deloitte & Touche, LLP, Merrill Lynch & Co., Inc., Radnet

4


Management, Inc., Richard E. Miller, Anthony J. Turek, or Canadian Imperial Bank of

Commerce Trust Company (Bahamas) Limited, as trustee of trusts for the benefit of the

grandchildren of A.N. Pritzker, Thomas Pritzker, the Pritzker Organization LLC, and

certain unnamed Pritzker family members, Clifford Chance LLP and Clifford Chance

(US) LLP. The Settled Claims are hereby compromised, settled, released, discharged and

dismissed as against Settling Defendants OnCure, Dolphin and PresGar and any Released

Party (as defined in the Stipulations) with prejudice by virtue of the proceedings herein

and this Order and Final Judgment.

To the maximum extent permitted by law, the Court hereby bars (1) all

claims against Settling Defendants OnCure, Dolphin and PresGar, and Released Parties,

for indemnity or contribution or any other claim against Settling Defendants OnCure,

Dolphin and PresGar arising out of the Action or otherwise where the injury to the

claimant is the claimant's actual or threatened liability to the Class arising out of or

related to any transactions with respect to the DVI securities, and (2) all claims by

Settling Defendants OnCure, Dolphin and PresGar against any person for indemnity or

contribution arising out of the Action or otherwise where the injury to the claimant is the

claimant's actual or threatened liability to the Class arising out of or related to any

transactions with respect to the securities.

9. Any nonsettling party shall be entitled to a reduction in any final verdict

or judgment in an amount calculated as provided for in 15 U.S.C. In

addition, any nonsettling party who claims to be covered under any insurance policy

issued by an Insurer, if any, shall also be entitled to a credit against any final judgment

equal to the amount of coverage actually available, if any, that a court determines would


have been available to such nonsettling party under such insurance policy but for the

operation of the bar order in the Order of Final Judgment and Dismissal.

10. Neither this Order and Final Judgment, the Stipulations, nor any of their

terms and provisions, nor any ofthe negotiations or proceedings connected therewith, nor

any ofthe documents or statements referred to therein shall be:

a. offered or received against the Settling Defendants OnCure,

Dolphin and PresGar as evidence of or construed as or deemed to be evidence of any

presumption, concession, or admission by Settling Defendants OnCure, Dolphin and

PresGar with respect to the truth of any fact alleged by the Plaintiffs or the validity of any

claim that had been or could have been asserted in the Action or in any litigation, or the

deficiency of any defense that has been or could have been asserted in the Action or in

any litigation, or ofany liability, negligence, fault, or wrongdoing of OnCure, Dolphin

and PresGar;

b. construed as or received in evidence as an admission, concession

or presumption against Lead Plaintiffs or the Class, or any of them that any of their

claims are without merit or are subject to any infirmities, or that damages recoverable

under the Complaint would not have exceeded the Settlement Amounts; or

c. construed against Settling Defendants OnCure, Dolphin and

PresGar, or Lead Plaintiffs or the Class as an admission or concession that the

consideration to be given hereunder represents the amount which could be or would have

been recovered after trial.

11. On the Effective Date of these Partial Settlements (as defined in the

Stipulations), all Class Members and anyone claiming through or on behalf of any of

6


them, will be forever barred and enjoined from commencing, instituting, prosecuting or

continuing to prosecute any action or other proceeding in any court of law or equity,

arbitration tribunal, or administrative forum, asserting the Released Claims against any of

the Released Parties, except that these releases shall not bar any suit or action to enforce

the terms of the Stipulations or this Order of Final Judgment and Dismissal.

12. The Court finds that all parties to the Stipulations and their counsel have

complied with each requirement of Rule 11 of the Federal Rules of Civil Procedure as to

all proceedings herein.

13. Plaintiffs' Lead Counsel are hereby awarded $ in attorneys'

fees, which shall be paid from the Class Settlement Fund and which the Court finds to be

fair and reasonable, and $ in reimbursement of expenses , both ofwhich

shall be paid to Plaintiffs' Lead Counsel from the Class Settlement Fund with interest

from the date such Class Settlement Fund was funded to the date ofpayment at the same

net rate that the Class Settlement Fund earns.

14. Exclusive jurisdiction is hereby retained over the parties and the Class

Members for all matters relating to this Action, including the administration,

interpretation, effectuation or enforcement of the Stipulation and this Order and Final

Judgment, and including any application for fees and expenses incurred in connection

with administering and distributing the settlement proceeds to the members of the Class.

15. Without further order of the Court, the parties may agree to reasonable

extensions of time to carry out any provisions of the Stipulation.

7

Case 2 : 03-cv-05336-LDD Document 400 Filed 11/02/2006 Page 11 of 11

16. There is no just reason for delay in the entry of this Order and Final

Judgment and immediate entry by the Clerk of Court is expressly directed pursuant to

Rule 54(b) of the Federal Rules of Civil Procedure.

ENTER:

Judge, United States District Courtfor the Eastern District of Pennsylvania

Dated: November -, 2006

8

Case 2:03-cv-05336-LDD Document 400-2 Filed 11/02/2006 Page 1 of 70




PLAINTIFFS' MEMORANDUM OF LAW IN SUPPORT OF MOTION FORFINAL APPROVAL OF PARTIAL SETTLEMENTS AND IN SUPPORT OF

CERTIFICATION OF SETTLEMENT CLASS, PLAN OF ALLOCATION ANDAWARD OF ATTORNEYS FEES AND COSTS

Clinton A. KrislovMichael R. KarnuthKRISLOV & ASSOCIATES, LTD.20 N. Wacker Dr., Suite 1350Chicago , Illinois 60606Tel. (312) 606-0500Fax. (312) 606-0207Plaintiffs' Lead Counsel

Steven A. SchwartzM. Kathy MeermansCHIMICLES & TIKELLIS, LLPOne Haverford CentreHaveford, PA 19041Tel. (610) 645-4720Fax. (610) 649-3633Plaintiffs' Liaison Counsel


TABLE OF CONTENTS

TABLE OF AUTHORITIES ................................................................................................v

I. INTRODUCTION ....................................................................................................1

II. HISTORY OF THE LITIGATION ..........................................................................3

A. Early History , .................................................................................................3

B. The DVI Bankruptcy Examiner ' s Report And Lead Plaintiffs'Fifth Amended Complaint ............................................................................. 3

C. Settlement Negotiations ...............................................................................6

ARGUMENT ........................................................................................................................ 7

1. THE PROPOSED CLASS SATISFIES THE REQUIREMENTS FORCERTIFICATION OF A SETTLEMENT CLASS .................................................7

A. Class Certification is Favored In Securities Fraud Cases ..........................7

B. The Settlement Class Meets The Requirements For Certification ...........8

1. Courts Liberally Construe Rule 23 In This Circuit .........................9

2. The Elements of Rule 23(a) Are Satisfied .......................................9

a. Numerosity is Clearly Present ................................................... 9b. There are Questions of Law and Fact Common to

All Class Members................................................................... 11c. Plaintiffs' Claims are Typical of the Claims of All

Class Members ........................................................................ 12d. Plaintiffs and Class Counsel Have and Will

Continue to Adequately Represent the Interestsof the Class .............................................................................. 14

is Class Counsel Has and Will Continueto Ably Represent the Class ......................................... 14

ii. The Class Representative's InterestsAre Not Antagonistic to those of theClass ........................................................................... 15

3. The Requirements Of Rule 23(b)(3) Are Also Met In theSettlement Context ...........................................................................16

i


a. The Ouestions of Law and Fact that are Commonto the Class Predominate Over Any Individual Issues ................17

b. Class Treatment of this Matter is the Best Methodto Achieve Judicial Efficiency and Ensure that AllPlaintiffs Have the Opportunity to Assert theirClaims .................................................................................... 18

III. THE PROPOSED PARTIAL SETTLEMENTS WARRANT FINALAPPROVAL ..............................................................................................................20

A. The Due Process Requirements Have Been Satisfied ...............................20

B. The Standards For Judicial Approval Of Class Action Settlements ...........21

1. Complexity, Expense, and Likely Duration of theLitigation Weigh in Favor of Approval.............................................24

2. Reaction of the Class to the Partial Settlements .............................26

3. The Stage of the Proceedings and the Amount ofDiscovery Completed Weigh in Favor of Approval.........................27

4. The Risks of Establishing Liability Weigh inFavor of Approval ............................................................................. 28

5. The Risk of Proving Damages and Causation Weighin Favor of Approval .........................................................................30

6. The Risks of Maintaining the Class Action ThroughTrial Weigh in Favor of Approval.....................................................31

7. The Ability of Defendants to Withstand a GreaterJudgment ...........................................................................................31

8. The Settlements are Reasonable in Light of the BestPossible Recovery and all Attendant Risks ofLitigation. ........................................................................................... 32

9. The Settlements are the Product of Arm's LengthNegotiations Among Experienced Counsel .....................................34

C. The Plan Of Allocation Is Fair And Reasonable .........................................36

IV. PLAINTIFFS' COUNSEL'S REQUEST FOR ATTORNEYS' FEESAND EXPENSE REIMBURSEMENT SHOULD BE APPROVED .....................36

ll


A. Legal Standard Governing The Award Of Attorneys ' Fees .......................37

B. The Court Should Calculate The Attorneys' Fees AwardUsing The Percentage-Of-Recovery Approach...........................................38

C. The Requested 30% Fee Is Fair And Reasonable Under TheThird Circuit' s Gunter Factors ..................................................................... 39

1. The Size and Nature of the Common Fund Created,and the Number of Persons Benefited by the Settlement ...............40

2. The Absence of Any Objections to the Settlement orthe Requested Attorneys ' Fee Award..............................................41

3. The Skill and Efficiency of Plaintiffs ' Counsel ................................42

4. The Complexity and Duration of the Litigation...............................44

5. The Risk of Non-Payment ................................................................45

a. The Fully Contingent Nature of Plaintiffs'Representation ......................................................................... 45

b. The Risk of Collecting a Judgment thatMight Ultimately be Obtained was Significantin this Case ..............................................................................46is Litigation Risks.............................................................46ii Collectability ................................................................47

6. The Time Devoted to this Case by Plaintiffs' Counsel

was Significant ...................................................................................47

7. Awards in Similar Cases ...................................................................48

D. The Requested Fee Is Reasonable Under the LodestarCross-Check .................................................................................................. 50

1. Hours Reasonably Expended by Counsel .......................................51

2. Calculating the "Base" Lodestar .....................................................52

3. The Lodestar Multiplier ...................................................................53

4. Performing the Lodestar Cross-Check ............................................53

E. Public Policy Considerations Support The Requested Fee .........................55

A


F. Plaintiffs ' Counsel Should Be Reimbursed For Their ReasonablyIncurred Litigation Expenses .......................................................................56

IV. CONCLUSION .........................................................................................................57

iv


TABLE OF AUTHORITIES

/'1 A [1T![l

Aamco Automatic Transmissions, Inc. v. Tayloe , 82 F.R.D. 405 (E.D. Pa. 1979) .......... 50

Anixter v. Home-Stake Prod. Co. , 77 F.3d 1215 (10th Cir. 1996) ................................... 46

ATI Tech. , 2003 WL 1962400 .......................................................................................... 50

Basic Inc . v. Levinson 485 U.S. 224 ( 1988 ) .................................................................... 55

Bateman Eichler, Hill Richars , Inc. v . Berner, 472 U. S. 299 , 310 (1985)............ 38, 55, 56

Behrens v. Wometco Enters ., Inc. , 118 F.R.D. 534, 547-48 (S.D. Fla. 1988),affd without op ., 899 F.2d 21 (11th Cir . 1990) ...................................................... 40, 43

Blackie v. Barrack, 524 F.2d 81 (9th Cir. 1975) ............................................................... 16

Blackman v. O'Brien Envtl. Energy, Inc. , 1999 WL 397389 (E.D. Pa. May 12, 1999)... 50

Blum v. Stetson 465 U. S. 886 .................................................................................... 38, 52

Boeing Co. v. Van Gemeq 444 U.S. 472 (1980) ....................................................... 37, 38

Bradburn v. 3M, No . Civ. A. 02-7676, 2004 WL 1842987(E.D. Pa. Aug. 18 , 2004) ............................................................................... 9, 10, 12, 16

Brown v. Esmor Correctional Services , Inc. , No. 98-1282 , 2005 WL 1917869(D.N.J. Aug. 10, 2005) .................................................................................................. 49

Brown v. Pro Football, Inc. , 839 F. Supp . 905 (D.D.C. 1993) ......................................... 57

Bryan v. Pittsburgh Plate Glass Co. , 494 F.2d 799 (3d Cir. 1974) ................................... 23

Bullock v. Adm'r of Estate of Kircher, 84 F.R.D. 1 (D. N.J. 1979) ................................. 24

Cent. R.R. & Banking Co. v. Pettus , 113 U. S. 116 (1885 ) ............................................... 37

City of Detroit v. Grinnell Corp. , 495 F.2d 448 (2d Cir. 1974) .................................. 22, 33

Cohen v. Tuttle , Civ. Action Nos. 85-2396, 85-2621, 85-3022, 1987 WL 7224(E.D. Pa. 1987) ............................................................................................................. 34

Cullen v. Whitman Med. Corp. , 188 F.R.D. 226 (E.D. Pa. 1999) .................................... 11

v


Cullen v. Whitman Med. Corp. , 197 F.R.D. 136 (E.D. Pa. 2000) .................................... 50

Daniel B . v. O'BannoA 633 F . Supp . 919 (E.D. Pa. 1986) ......................................... 22, 35

Denney v. Jenkens & Gilchrist, 230 F.R.D. 317 (S.D.N.Y. 2005) ................................... 34

DeSantis v. Snap-on Tools, 2006 WL 3068584 (D.N.J. 2006) ........................................ 27

Eichenholtz v. Brennan 52 F.3d 478 (3d Cir. 1995) .................................................. 21, 22

Eisen v. Carlisle & Jacquelin, 417 U. S. 156 (1974) ..................................................... 9, 20

Eisenberg v. Gagnor 766 F.2d 770 (3d Cir. 1985 ) ........................................................ 7, 8

Eisenstadt v. Centel Corp. , 113 F.3d 738 (7th Cir. 1997) ................................................. 46

Eltman v. Grandma Lee's Inc. , 1986 WL 53400 (E.D.N.Y. May 28, 1986) .............. 23,55

Ernst & Ernst v. Hochfelder, 425 U. S. 185 (1976) ........................................................... 29

Farris v. JC Penney Co., Inc. , 176 F.3d 706 (3d Cir. 1999) ............................................. 21

Feder v. Harrinttoor̂ 58 F.R.D. 171 (S.D.N.Y. 1972) ....................................................... 23

Fickinger v. C.I. Planning Corp. , 646 F. Supp. 622 (E.D. Pa. 1986) ................................ 33

Fisher Bros. v. Cambridge-Lee Indus., Inc. , 630 F. Supp. 482 (E.D. Pa. 1985) ........ 23, 35

Fisher Bros., Inc. v. Mueller Brass Co. , 630 F. Supp. 493 (E.D. Pa. 1985) ..................... 26

Girsh v. Jenson 521 F.2d 153 (3d Cir. 1975) ........................................................21, 22, 27

Gunter v. Ridgewood Energy Corp. , 223 F.3d 190 (3d Cir. 2000) .................................. 39

Hanlon v. Chrysler Corp. , 15 F.3d 1011 (9th Cir. 1998) .................................................. 13

Hoxworth v. Blinder Robinson & Co. , 980 F.2d 912 (3d Cir. 1992) ............................... 13

Huddleston , 459 U. S. 375 ................................................................................................. 55

In re Aetna Inc. Sec . Litig. , 2001 WL 20928 (E.D. Pa. Jan. 4, 2001) ........................ passim

In re AT&T Corp. Sec. Litig. , 455 F.3d 160 (3d Cir. 2006) ........................... 38, 42, 50, 51

In re Baldwin-United Corp. , 607 F. Supp. 1312 (S.D.N.Y. 1985) ................................... 23

vi


In re Cell Pathways , 2002 WL 31528573 ....................................................... 22, 36, 42, 50

In re Cendant Corp. Sec. Litig_ , 404 F.3d 173 (3d Cir. 2005) .......................................... 39

In re Cendant Sec. Litig. , 264 F.3d 201 (3d Cir. 2001) ........................................ 27, 28, 35

In re Chambers Dev. Sec. Litig. , 912 F. Supp. 822 (W.D. Pa. 1995) ......................... 25, 29

In re Cigna Sec. Litig_ , 2006 WL 2433779 (E.D. Pa. Aug. 18 , 2006) .............. passim

In re Computron Software, Inc. Sec. Litig. , 6 F. Supp. 2d 313 (D. N.J. 1998) .......... passim

In re Corel Corp. Sec. Litig_ , 206 F.R.D. 533 (E.D. Pa. 2002) ....................... 12, 13, 18, 19

In re Corel Corp. Sec. Litig. , 293 F.Supp.2d 484 (E.D. Pa. 2003) ................................... 49

In re Crazy Eddie Sec. Litig. , 824 F. Supp. 320 (E.D.N.Y. 1993) ................................... 34

In re Elec. Carbon Prods . Antitrust Litig. , --- F. Supp. 2d ----, 2006 WL 2505881(D.N.J. Aug. 30, 2006) ............................................................................................ 37, 54

In re Fine Paper Antitrust Litig. , 751 F.2d 562 (3d Cir. 1984) ................................... 52, 53

In re Greenwich Pharm. Sec. Litig. , No. 92-3071, 1995 WL 251293(E.D. Pa. Apr. 25, 1995) ............................................................................................... 50

In re Ikon Office Solutions , Inc. Sec . Litig. , 194 F.R.D. 166 (E.D. Pa. 2000) ........... passim

In re LifeUSA Holding, Inc . , 242 F.3d 136 (3d Cir . 2001 ) .............................................. 17

In re Linerboard Antitrust Litig. , 2004 WL 1221350 (E.D. Pa. June 2, 2004)........... 49, 51

In re Loewen Group, Inc. Sec. Litig_, 233 F.R.D. 154 (E.D. Pa. 2005) ................ 15, 17, 18

In re Michael Miliken & Assoc. Sec. Litig. , 150 F.R.D. 57 (S.D.N.Y. 1993) .................. 34

In re Nat'l Student Mktg. Litig. , 68 F.R.D. 151 (D.D.C. 1974) ........................................ 23

In re Ortlnpedic Bone Screw Prod. Liability LitiagtioA 246 F.3d 315 (3d Cir. 2001).... 20

In re Plastic Cutlery Antitrust Litigation, 1998 WL 125703(E.D. Pa. March 20, 1998) ........................................................................................... 19

In re Prudential his. Co. ofAmerica Sales Practice Litig. Agent Actions ,148 F.3d 283 (3d Cir. 1998) .................................................................................... passim

vii


In re Prudential Sec. Inc. Ltd. P'ships Litig. , MDL No. 1005, 1995 WL 798907(S.D.N.Y. 1995) ............................................................................................................ 34

In re Prudential-Bache Energy Income Partnerships Sec. Litig. , No. 888,1994 WL 202394 (E.D. La. May 18, 1994) .................................................................. 45

In re Ravisent Technologies, Inc. Sec. Litig. , No. 00-1014, 2005 WL 906361(E.D. Pa. April 18, 2005) .............................................................................................. 49

In re Remeron Direct Purchaser Antitrust Litig. , No. 03-0085, 2005 WL 3008808(D.N.J. Nov. 9, 2005) .............................................................................................. 41, 49

In re Remeron End-Payor Antitrust Litig. , No. 02-2007, 2005 WL 2230314(D.N.J. Sept . 13, 2005) ................................................................................................. 57

In re Rent-Way Sec. Litig. , 218 F.R.D. 101 (W.D. Pa. 2003) .................................... 17, 18

In re Residential Doors Antitrust Litig. , No. 96-2125, 1998 WL 151804(E.D. Pa. Apr. 2, 1998) ................................................................................................. 34

In re Rite Aid Corp. Sec. Litig. , 146 F. Supp. 2d 706 (E.D. Pa. 2001) ................ 38, 49, 57

In re Rite Aid Corp. Sec. Litig. , 362 F. Supp. 2d 587 (E.D. Pa. 2005) ............................ 39

In re Rite Aid Corp. Sec. Litig. , 396 F.3d 294 (3d Cir. 2005) ........................ 39, 42, 51, 52

In re Saxon Sec. Litig. , No. 82 Civ. 3101 (MJL), 1985 WL 48177(S.D.N.Y. Oct. 31, 1985 ) .............................................................................................. 23

In re School Asbestos Litig. , 789 F.2d 996 (3d Cir. 1986) ............................................... 17

In re SmithKline Beckman Corp. Sec. Litig. , 751 F. Supp. 525(E.D. Pa. 1990) .................................................................................................. 22, 26, 42

In re ValueVision Int'l Sec. Litig. , 957 F. Supp. 699 (E.D. Pa. 1997) .............................. 50

In re Vicuron Pharmaceuticals, Inc. Sec. Litig. , 233 F.R.D. 421(E.D. Pa. 2006) .................................................................................................. 10, 11, 18

In re Warfarin Sodium Antitrust Litig. , 391 F.3d 516 (3d Cir. 2004) .............................. 35

In re Warner Communications Sec. Litig. , 618 F. Supp. 735(S.D.N.Y. 1985 ) affd, 798 F.2d 35 (2d Cir. 1986) ..................................... 23, 43, 53, 55

In re Warner Communications Sec. Litig. , 798 F.2d 35 (2d Cir. 1986) ........................... 23

vin


Johnston v. HBO Film Management, Inc. , 265 F.3d 178 (3d Cir. 2001) ........................... 8

Kanter v. Casey, 43 F.3d 48 (3d Cir. 1994) ...................................................................... 12

Karasik v. Pac E. Corp. , 180 A. 604 (Del. Ch. 1935) ....................................................... 33

Kathleen S. v. Dep't ofPublic Welfare of the Commonwealth of Pa. ,No. 97-6610, 1998 WL 83973 (E.D. Pa. Feb. 25, 1998) .............................................. 10

Katz v. E.L.I. Computer Sys. Inc . , 70 Civ. 2462, 1971 WL 251(S.D.N.Y. Apr. 5, 1971) ................................................................................................ 23

Ketchum v. Sunoco, Inc . , 217 F.R.D. 354 (E.D. Pa. 2003) .............................................. 13

Kirkorian v. Borelli, 695 F. Supp. 446 (N.D. Cal. 1988) ................................................. 23

La Fata v. Raytheon Co. , 207 F.R.D. 35 (E.D. Pa. 2002) ................................................. 12

Lazy Oil, Co. v. Witco Corp. , 95 F. Supp. 2d 290 (W.D. Pa. 1997) .......................... 21, 35

Lenahan v. Sears, Roebuck and Co. , No. 02-0045, 2006 WL 2085282(D.N.J. July 24, 2006) ................................................................................................... 49

Lyon v. Caterpillar , Inc. , 194 F.R.D. 206 (E.D. Pa. 2000) ................................................. 9

M. Berenson Co. v. Faneuil Hall Marketplace, Inc. , 671 F. Supp. 819(D. Mass. 1987) ............................................................................................................. 23

Meijer, Inc. v. 3M, No. 04-5871, 2006 WL 2382718 (E.D. Pa. Aug. 14,2006) ........ 41, 56

Mills v. Elec. Auto-Lite Co. , 396 U.S. 375 (1970) ........................................................... 37

Milstein v. Huck, 600 F. Supp . 254 (E.D.N.Y. 1984) ...................................................... 24

Missouri v. Jenkins , 491 U.S. 274 (1989) ................................................................... 52, 57

Moskowitz v. Lopp , 128 F.R.D. 624 (E.D. Pa. 1989) ...................................................... 12

National Organization on Disability v. T one , No. Civ. A. 01-1923,2001 WL 1258089 (E.D. Pa. Oct. 22, 2001) ................................................................... 9

New York State Ass'n for Retarded Children, Inc. v. Carey, 711 F.2d 1136(2d Cir. 1983 ) ................................................................................................................ 53

Newman v. Stein, 464 F.2d 689 (2d Cir. 1972) .......................................................... 23, 33

ix


Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc. , 259 F.3d 154 (3d Cir. 2001) ... 12

Nichols v. SmithKline Beecham Corp. , No. 00-6222, 2005 WL 950616(E.D. Pa. April 22, 2005) .............................................................................................. 49

Parker v. Anderson, 667 F.2d 1204 (5th Cir. 1982), cert. denied,459 U. S. 828 (1982) ...................................................................................................... 33

Perry v. FleetBoston Financial Corp. , 229 F.R.D. 105 (E.D. Pa. 2005) ........................... 39

Protective Comm. for Indep. Stockholders ofTMT Trailer Ferry, Inc. v. Anderson,390 U. S. 414 (1968) ...................................................................................................... 24

Ratner v. Bennett, No. 92-4701, 1996 WL 243645 (E.D. Pa. May 8, 1996) .................... 50

Robbins v. Koger Plps., Inc. , 116 F.3d 1441 (11th Cir. 1997) ....................................... 45

Schutte v. Maleski, No. Civ. A. 93-0961, 1993 WL 218898 (E.D. Pa. June 18, 1993) ..... 9

Seidman v. American Mobile Sys. , 965 F. Supp . 612 (E.D. Pa. 1997) ...................... 27, 53

Seidman v. American Mobile Systems, Inc. , 157 F.R.D. 354 (E.D. Pa. 1994) ................ 12

Semerenko v. Cendant Corp. , 223 F.3d 165 (3d Cir. 2000) ................................. 30, 40, 50

Shlensky v. Dorsey, 574 F.2d 131 (3d Cir. 1978) ............................................................ 22

Sommers v. Abraham Lincoln Fed. Say. & Loan Ass'n. , 79 F.R.D. 571(E.D. Pa. 1978) .............................................................................................................. 23

Sprague v. Ticonic Nat'l Bank , 307 U.S. 161 ................................................................... 38

Stewart v. Abrahan 275 F.3d 220 (3d Cir. 2001), cert. denied, 536 U.S. 958 (2002) .... 10

Stoetzner v. United States Steel Corp. , 897 F.2d 115 (3d Cir. 1990) ............................... 26

Stoner v. CBA Info. Servs. , 352 F. Supp. 2d 549 (E.D. Pa. 2005) ............................. 39, 49

United States v. 412.93 Acres of Land , 455 F.2d 1242 (3d Cir. 1972) ............................ 30

Voisin v. Bartell Media Corp. , No. 76 Civ. 3954 (MJL), 1982 WL 1359(S.D.N.Y. 1982) ............................................................................................................ 34

Walsh v. Great Atl. & Pac. Tea Co. , 726 F.2d 956 (3d Cir. 1983) ............................. 21, 22

x


Williams v. First Nat'l Bank, 216 U. S. 582 (1910) ........................................................... 21

Yang v. Odors 392 F.3d 97 (3d Cir . 2004) ........................................................................ 7

Zeffro v. First Pa. Banking and Trust Co. , 96 F.R.D. 567 (E.D. Pa. 1983 ) ...................... 13

Zinman v. Avemco Corp. , No. 75-1254, 1978 WL 5686 (E.D. Pa. Jan. 18, 1978) .......... 50

Statutes

15 U.S.C. §78u-4(e)(3) ..................................................................................................... 36

Rules

Fed. R. Civ. Pro. 23(b)(3) ................................................................................................. 17

Fed. R. Civ. Pro. 23(e) ...................................................................................................... 22

XI


1. INTRODUCTION

Lead Plaintiffs respectfully submit this memorandum of law in support of their

application for final approval of (1) certification of a class for settlement purposes; (2) the

proposed partial settlements of this securities fraud class action (the "Action ) between

Lead Plaintiffs and defendants OnCure Medical Corp., f/k/a OnCure Technologies Corp.

("OnCure ), Dolphin Medical , Inc. ('Dolphin ) and PresGar Imaging L.C. ("PresGar )

(collectively, the "Settling Defendants ), (3) the Plan of Allocation for distributing the

proceeds of the Partial Settlements, and (4) attorneys fees and costs.

The proposed partial settlements - amounting to $2,885,000 in cash - represent an

exceptional recovery for the Class from the Settling Defendants. Specifically, the three

Stipulations and Agreements of Settlement with the Settling Defendants provide for cash

payments of (i) $1,175,000 from OnCure, (ii) $960,000 from Dolphin, and (iii) $750,000

from PresGar. Since executing the aforementioned settlements, each settlement amount

has been fully funded into an interest-bearing escrow account. These settlements are

described as "Partial Settlements because although they completely resolve Lead

Plaintiffs' claims against the Settling Defendants they do not affect their claims against

the remaining, non-settling, parties in this case. Lead Plaintiffs, Kenneth Grossman, the

Cedar Street Fund and the Cedar Street Offshore Fund, and Lead Counsel believe that the

Partial Settlements are an excellent result for the Class.

The Settling Defendants were "Special Relationship Entities ("SREs ) ofDVI

which made no public statements about DVI that were actionable under the federal

securities laws. Thus, Lead Plaintiffs were only able to negotiate these settlements by

pleading claims and defeating the SREs' motions to dismiss based on a "scheme liability

Case 2 : 03-cv-05336-LDD Document 400-2 Filed 11/02/2006 Page 14 of 70

theory. Moreover, each of the Settling Defendants had limited resources and insurance

from which to pay any settlement or judgment. Significantly, the other plaintiff getups in

the related DVI litigation--Fleet National Bank, the DVI Liquidating Trustee, and the

WM High Yield Fund-have also settled their claims against these Settling Defendants.

However, Lead Class Plaintiffs, in negotiating the settlement terms, guaranteed that the

Class would receive a greater settlement than the other plaintiff groups by negotiating a

'most favored nations provision in the Settlement Agreements . Thus, these Settlements

compare favorably to settlements negotiated by sophisticated plaintiffs who also settled

their claims against the SREs. For practical purposes, these Settlements represent the

maximum settlements achievable given the SREs' financial condition.

Not surprisingly, the Settlements have been favorably received by the Class.

Indeed, that no objections or unanticipated' opt-outs to the partial settlements have been

received from any class members, in a case where over 8,600 notices were mailed to

institutional and individual investors, is strong evidence of the outstanding result

obtained These partial settlements are the result of substantial briefing and research, oral

argument on numerous motions to dismiss, decisions on those motions, briefing and

decisions on Defendants' motions for reconsideration and petitions for interlocutory

appeal, analysis ofhundreds ofthousands of documents (many from productions that

were disorganized or otherwise difficult to review), several months ofrigorous

negotiations and, with respect to the settlements with Dolphin and PresGar, involvement

of an outside mediator.

1 Since July 19, 2004, when Plaintiffs in the WM High Yield Fund et al. v. O'Hanlon, et al. , filed theirindividual action, it was expected that they would opt-out of participating in this Class Action. Indeed, thePartial Settlement Agreements expressly exclude the WM High Yield plaintiffs from participating in these

Settlements and, as explained herein, they have expressly opted-out of these Partial Settlements.

2


On August 18, 2006, this Court granted preliminary approval ofthe Partial

Settlements, approved the form of and method for giving Notice of the pendency of this

Action and the Partial Settlements to the Settlement Class ("Notice ); preliminarily

approved a class for settlement purposes; directed that the Notice be given to Settlement

Class Members as approved by the Court; and scheduled a hearing (the "Final Fairness

Hearing ) at which the Court will consider: (i) the settling parties' request for final

approval of the Partial Settlements and entry of the proposed Final Order and Judgment;

(ii) certifying the Settlement Class; (iii) the Plan of Allocation of the Settlement Fund;

and (iv) plaintiffs' counsel's application for an award of attorneys' fees and

reimbursement of expenses. As requested herein, Plaintiffs respectfully request that the

Court grant final approval, certify the Settlement Class, approve the Plan of Allocation

and plaintiffs' counsels' application for an award of attorneys' fees and reimbursement of

expenses.

II. HISTORY OF THE LITIGATION

A. Early History

Between August 2003 and September 2003, numerous putative class actions were

filed in the United States District Court for the Eastern District of Pennsylvania (the

"Court ), asserting federal securities law claims . These actions arose from DVI, Inc.'s

("DVI or "Company ) announcement on August 13, 2003, that it was filing for Chapter

11 bankruptcy protection. On November 25, 2003, the Cedar Street Group was appointed

Lead Plaintiffs and the actions were consolidated.

B. The DVI Bankruptcy Examiner's Report And Lead Plaintiffs' FifthAmended Complaint


On October 14, 2003, the bankruptcy court overseeing DVI's bankruptcy

proceedings appointed R. Todd Neilson to investigate allegations of financial

improprieties at DVI (the "Examiner ). The Examiner retained legal counsel and an

accounting firm to assist him in his investigation. The Examiner's investigation

consisted ofreviewing thousands of Company documents, interviewing certain former

Company officers and directors, and coordinating efforts with the Company's crisis

management team and with certain government agencies. After an almost four month

investigation, the Examiner, on April 7, 2004, issued a 188-page report, along with

numerous exhibits and appendices, describing numerous instances offinancial

irregularities at the Company, including material overstatements ofrevenues,

understatements of loan loss reserves, and concealment of substantial liquidity problems.

The report, however, indicated that the Examiner's findings just scratched the surface of

the potential claims and possible parties involved in DVI's demise.

On September 20, 2004, in accordance with an Order of this Court, Lead

Plaintiffs filed their Third Amended Consolidated Complaint (the 'Third Amended

Complaint ). Lead Plaintiffs' Third Amended Complaint is a putative class action

lawsuit filed on behalf ofpurchasers of DVI's common stock and 9 7/8% Senior Notes

from August 10, 1999 through August 13, 2003, both dates inclusive (the Class

Period ). The allegations in the Third Amended Complaint include references to several

findings made by the Examiner.

Specifically, Lead Plaintiffs alleged that during the Class Period Defendants2

engaged in numerous schemes to artificially inflate DVI's securities prices by materially

2 Defendants, as set forth in the Third Amended Complaint, include the Settling Defendants, OnCure,

Dolphin and PresGar, as well as the non-Settling Defendants which consist of Michael A. O'Hanlon,

4


misstating DVI's operating results and financial condition. These schemes consisted of

concealing severe cash shortages through double-pledging collateral or pledging

ineligible collateral on DVI's lines of credit and Securitization transactions, intentionally

refusing to write-down impaired loans, and overstating revenues on delinquent loans.

Based on these and other allegations, the Third Amended Complaint charges

Defendants with securities fraud under Sections 10(b) and 20(a) of the Securities

Exchange Act of 1934 (the "Exchange Act ). Claims against the Settling Defendants,

however, were raised solely under Section 10(b) of the Exchange Act and Rule IOb-5(a)

and (c) promulgated thereunder by the Securities and Exchange Commission.

On or about November 1, 2004, Defendants, including the Settling Defendants,

filed sixteen separate Motions to Dismiss the Third Amended Complaint (the "Motions ).

On or about January 25, 2005, Lead Plaintiffs filed their omnibus opposition papers. A

hearing on the Motions was held on March 4, 2005. On May 31, 2005, the Court issued

its ruling on Defendants' Motions.

The Court's May 31, 2005 decision granted in part and denied in part Defendants'

Motions. Specifically, with respect to the Settling Defendants, the Court granted in part

OnCure's motion, barring any Rule IOb-5(a) and (c) claims against OnCure with respect

to claims based upon any causes of action arising from the Corpus Christi transaction or

to which the same limitations period is applicable, and which arose prior to July 30, 1999.

On February 13, 2006, the Court denied Defendants', including the Settling

Defendants', motions for reconsideration or, alternatively, for interlocutory appeal.

Steven R. Garfinkel, Richard E. Miller, John P. Boyle, Anthony J. Turek, Terry Cady, Gerald Cohn,Nathan Shapiro, John E. McHugh, William S. Goldberg, Harry T.J. Roberts, Deloitte & Touche LLP,

Merrill Lynch & Co., Inc. and Radnet Management, Inc.


Plaintiffs, on September 30, 2005, amended the Complaint to add Section 20(a)

claims against Thomas Pritzker, the Pritzker Organization LLC and certain unnamed

Pritzker family members (collectively, the "Pritzker Defendants ) as liable controlling

parties. Thereafter, on April 7, 2006, Plaintiffs further amended ("Fifth Amended

Complaint ) to add Section 10(b) and Rule lOb-5 (a) and (c) claims against DVI's former

legal counsel Clifford Chance LLP and Clifford Chance (US) LLP (collectively,

"Clifford Chance ). On August 11, 2006, the Court denied the Pritzker Defendants' and

Clifford Chance's separate motions to dismiss Lead Plaintiffs ' Fourth and Fifth Amended

Complaints, respectively.

While Lead Plaintiffs continue to believe that their claims against the Settling

Defendants are meritorious, Lead Plaintiffs also believe that the Partial Settlements offer

substantial benefits for the Class and, thus, should be approved.

C. Settlement Negotiations

Settlement negotiations between Lead Plaintiffs' counsel and counsel for OnCure

started months prior to the March 4, 2005 hearing on Defendants' Motions to Dismiss.

These rigorous settlement negotiations consisted ofnumerous conversations between

Lead Plaintiffs' counsel and counsel for OnCure, which took into account, inter alia, the

analysis of culpability, causation, damages, the ability of OnCure to pay a larger

judgment, and an analysis of various defenses raised by OnCure. On October 10, 2005,

after reviewing numerous documents produced by OnCure, including OnCure's financial

statements and insurance policies possibly covering claims in this case, Lead Plaintiffs'

counsel executed the OnCure Settlement Stipulation.

6


Settlement negotiations with Dolphin's counsel and PresGar's counsel occurred

after this Court's May 31, 2005 ruling and were similarly rigorous, additionally involving

the assistance of Eric D. Green, a well-respected mediator who has vast experience in

mediating securities fraud lawsuits. After several mediation sessions and conference

calls with Mr. Green involved, as well as numerous sessions involving only the parties,

Lead Plaintiffs' counsel executed the Dolphin Settlement Stipulation on December 13,

2005, and the PresGar Settlement Stipulation on April 19, 2006.

Moreover, Lead Counsel have completed confirmatory discovery of each Settling

Defendant, including reviews of thousands ofpages of documents and have completed

interviews of OnCure's and Dolphin's counsel and/or executives, and will have

completed an interview ofPresGar's representatives before the Final Fairness hearing.

ARGUMENT

For the reasons set forth below, the Court should grant (I) Certification of the

proposed Settlement Class; (II) final approval ofthe proposed Partial Settlements as fair,

reasonable and adequate; (III) final approval of the plan of allocation; and (IV) approve

Lead Counsel's request for attorneys' fees and reimbursement of expenses.

1. THE PROPOSED CLASS SATISFIES THE REQUIREMENTS FORCERTIFICATION OF A SETTLEMENT CLASS

A. Class Certification Is Favored In Securities Fraud Cases

"Class actions are a particularly appropriate and desirable means to resolve claims

based on the securities laws, since the effectiveness of the securities laws may depend in

large measure on the application of the class action device . Yang v. Odom, 392 F.3d 97,

109 (3d Cir. 2004); Eisenberg v. Qqgnor 766 F.2d 770, 785 (3d Cir. 1985). "[T]he

7


interests ofjustice require that in a doubtful case ... any error, if there is to be one,

should be committed in favor of allowing a class action. Eisenberg, 766 F.2d at 785

("a class action [in a federal securities action] may well be the appropriate means for

expeditious litigation of the issues, because a large number of individuals may have been

injured, although no one person may have been damaged to a degree which would have

induced him to institute litigation solely on his own behalf. ).

B. The Settlement Class Meets The Requirements For Certification

In order for a lawsuit to be maintained as a class action under Rule 23, the named

plaintiff must meet the four prerequisites ofRule 23(a) - numerosity ofparties,

commonality of factual and legal issues, typicality of claims and defenses of class

representatives, and adequacy ofrepresentation - as well as the requirements of one of

the subsections of Rule 23(b). See, Johnston v. HBO Film Management, Inc. , 265 F.3d

178, 183-84 (3d Cir. 2001). Here, Plaintiffs seek certification under Rule 23(b)(3), which

requires that common issues predominate over individual ones and that a class action be

superior to other available methods of adjudication. Plaintiffs request certification of the

following class for settlement:

all Persons and entities who purchased or otherwise acquired the securitiesofDVI, Inc. (including its common stock and 9 7/8% Senior Notes)between August 10, 1999 and August 13 , 2003 , both dates inclusive.Excluded from the class are Defendants; any entity in which a Defendanthas a controlling interest or is a part or subsidiary of, or is controlled by aDefendant; the officers, directors, legal representatives, heirs,predecessors , successors and assigns of any of the Defendants ; plaintiffsnamed in WM High Yield Fund, et al. v. O'Hanlon, et al. , No. 04-CV-3423 (E.D. Pa.); and those Persons who timely and validly requestexclusion from the Class pursuant to the Notice.

This proposed settlement class meets all of the requirements for certification

pursuant to Rules 23(a) and (b)(3).

8


1. Courts Liberally Construe Rule 23 In This Circuit

In the Third Circuit, Rule 23 is given a liberal, rather than a restrictive,

construction. See, Stewart, 183 F.R.D. at 194. The question for the court "is not whether

the plaintiff or plaintiffs have stated a cause of action or will prevail on the merits, but

rather whether the requirements of Rule 23 are met. Eisen v. Carlisle & Jacquelin, 417

U.S. 156, 178 (1974); see also,Pga, 202 F.R.D. at 439 (court must refrain from

conducting preliminary inquiry into merits of suit in determining class motion); Bradburn

v. 3M, No. Civ. A. 02-7676, 2004 WL 1842987 , *2 (E.D. Pa. Aug. 18, 2004) (Padova,

J.); Schutte v. Maleski, No. Civ. A. 93-0961, 1993 WL 218898, at *3 (E.D. Pa. June 18,

1993) (court does not consider merits of case on class certification). In ruling on class

certification, the Court must treat the substantive allegations of the complaint as true.

Lyon v. Caterpillar, Inc. , 194 F.R.D. 206, 209 (E.D. Pa. 2000); Schulte, 1993 WL

218898, at *3. When doubt exists concerning certification of the class, the court should

err in favor of allowing the case to proceed as a class action. See, Dgffy, 202 FR D. at

439; National Organization on Disability v. Tartaglione , No. Civ. A. 01-1923, 2001 WL

1258089, *1 (E.D. Pa. Oct. 22, 2001) (Padova, J.).

2. The Elements of Rule 23(a) Are Satisfied

a. Numerosity is Clearly Present

Rule 23(a)(1) requires that the class be of sufficient size that joinder of all

members is "impracticable . Fed. R Civ. P. 23(a)(1). "No minimum number of

plaintiffs is required to maintain a suit as a class action, but generally if the named

plaintiff demonstrates that the potential number ofplaintiffs exceeds 40, the first prong of

Rule 23(a) has been met. Stewart v. Abraham, 275 F.3d 220, 226-27 (3d Cir. 2001),

9


cert. denied, 536 U.S. 958 (2002) (holding class of 67 people was sufficiently numerous);

Bradburn, 2004 WL 1842987, at *3 ("Generally if the named plaintiff demonstrates that

the potential number ofplaintiffs exceeds 40, the [numerosity] prong ofRule 23(a) has

been met. ) (citations omitted). In determining whether joinder is impracticable, courts

may employ common sense assumptions, such as geographic dispersions of Class

Members. See, In re Chlorine and Caustic Soda Antitrust Lit. , 116 F.R.D. at 625;

Stewart, 183 F.R.D. at 194. In this context, "impracticable does not mean "impossible ,

but only the difficulty or inconvenience ofjoining all members of the class. Stewart, 183

F.R.D. at 194, fnl; Kathleen S. v. Dep't ofPublic Welfare of the Commonwealth of Pa.

No. 97-6610, 1998 WL 83973, at *1 (E.D. Pa. Feb. 25, 1998).

The members of the Class contemplated here number at least in the thousands,

making joinder impracticable . Over 15 million shares ofDVI stock were issued and

outstanding at the end of the Class Period, and were actively traded on the New York

Stock Exchange ("NYSE ) during the Class Period. Additionally, $155 million ofpar

value DVI Senior Notes were issued and outstanding, and traded on the NYSE and Over-

The-Counter during the Class Period. The Class Members comprise individuals and

entities residing in numerous states across the country. Thus, the proposed Class easily

satisfies the numerosity requirement. See, In re Vicuron Pharmaceuticals, Inc. Sec.

Litig. , 233 F.R.D. 421, 425 (E.D. Pa. 2006) (certifying class where "exact size of the

proposed class [was] not known but where 40 million shares were outstanding and the

shares traded on the NASDAQ); In re Cigna Corp. Sec. Litig . , 2006 WL 2433779, at *2

(E.D. Pa. Aug. 18, 2006) ("courts have recognized a presumption that the numerosity

10


requirement is satisfied when a class action involves a nationally traded security )

(citation omitted).

b. There Are Questions ofLaw and Fact Common to AllClass Members

Rule 23(a)(2) requires a showing ofthe existence of "questions of law or fact

common to the class . Fed. R. Civ. P. 23(a)(2). "Because a single common issue may

satisfy this requirement, ìt is easily met.' In re Cigna Corp. Sec. Litig. , 2006 WL

2433779, at *3 (citing, Cullen v. Whitman Med. Corp. , 188 F.R.D. 226, 230 (E.D. Pa.

1999)). Common factual questions here include, among others, whether DVI's financial

statements were materially misstated during the Class Period, whether Defendants made

material misrepresentations or omitted material information regarding DVI's financial

statements during the Class Period, and whether the market price ofDVI's common stock

and Senior Notes were artificially inflated because ofDefendants' alleged misconduct

during the Class Period. Common legal questions include, among others, whether

Defendants' alleged acts violated the federal securities laws, whether Defendants had a

duty to disclose certain information, whether Defendants acted knowingly and recklessly

in making materially Use and misleading statements during the Class Period, and the

appropriate measure of damages.

Such issues have been found to satisfy the commonality requirement ofRule

23(a) in other securities fraud class actions . See, In re Cigna Corp. Sec. Litig. , 2006 WL

2433779, at *3; In re Vicuron Pharm. Sec. Litig. , 233 F.R.D. at 426 (finding

commonality satisfied where "members of the proposed class must demonstrate that the

press releases and other actions taken by Vicuron artificially inflated the trading price of

the company's stock and "must prove that Vicuron's course of conduct violated the

11


federal securities laws ); In re Corel Corp. Sec. Litig. , 206 F.R.D. 533, 540-41 (E.D. Pa.

2002); Moskowitz v. Lo17p , 128 F.R.D. 624, 629 (E.D. Pa. 1989) ("Plaintiffs' allegations

that [a company] and its management omitted material information from its public

disclosures thereby inflating the price of... stock is the paradigmatic common question

of law or fact in a securities fraud action. ).

To this end, Plaintiffs need only make a threshold showing that common proof

will be presented at trial with respect to the essential elements of their claims. See,

Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc. , 259 F.3d 154, 183 (3d Cir. 2001)

O'We have set a low threshold for satisfying both [the commonality and typicality]

requirements. ); La Fata v. Raytheon Co. , 207 F.R.D. 35, 42 (E.D. Pa. 2002) ("The

threshold for satisfying the commonality as well as the typicality prerequisites ofRule

23(a) is not high. ); Bradburn, 2004 WL 1842987 at *3 ("The commonality requirement

will be satisfied if the named plaintiffs share at least one question of fact or law with the

grievances of the prospective class. ) (citation omitted). Plaintiffs' numerous class

allegations (see, Fifth Amended Cmplt. &65) more than satisfy the common questions

requirement of Rule 23(a)(2). See, Baby Neal for and by Kanter v. Casey, 43 F.3d 48, 56

(3d Cir. 1994) (requiring only a single issue of law or fact common to class members).

c. Plaintiffs' Claims Are Typical of the Claims of All ClassMembers

To satisfy the typicality requirement under Rule 23(a)(3), the "claims or defenses

of the representative parties [must be] typical of the claims or defenses of the class.

Seidman v. American Mobile Systems, Inc . , 157 F.R.D. 354 , 360 (E.D. Pa. 1994)

(quoting, Fed. R. Civ. P. 23(a)(3)). Rule 23(a)(3)'s typicality requirement is satisfied

when "there is a common nucleus of facts and potential legal remedies among all class

12


members... Manual for Complex Litigation, Fourth C-21.132 at 251, citing, Hanlon v.

Chrysler Corp. , 15 F.3d 1011, 1022 (9th Cir. 1998). The class representative and class

members need not have identical factual and legal claims. Rather, the typicality

requirement is satisfied if the class representatives show that their interests are aligned

with class members' interests and their claims arise from the same events and are

premised on the same legal theories as class members ' claims . See, Ketchum v. Sunoco,

Inc., 217 F.R.D. 354, 357 (E.D. Pa. 2003); Dom, 202 F.R.D. at 442; In re Corel Corp.,

Inc. Sec. Litig. , 206 F.R.D. at 541-42. "Factual differences will not render a claim

atypical if the claim arises from the same event or practice or course of conduct that gives

rise to the claims of the [absent] class members, and if it is based on the same legal

theory. Hoxworth v. Blinder Robinson & Co. , 980 F.2d 912, 923 (3d Cir. 1992); hire

Corel Corp., Inc. Sec . Litig. , 206 F.R.D. at 541.

Just as the differences in the factual nature of claims do not affect typicality,

neither do differences in the amount of damages. See, Zeffro v. First Pa. Banking and

Trust Co. , 96 F.R.D. 567, 570 (E.D. Pa. 1983) (where the representative plaintiff and

other class members share an interest in prevailing on similar legal claims, differences in

the amount of damages claimed or availability of certain defenses against a class

representative may not render claims atypical).

Plaintiffs' claims are typical of the claims of the Class. Plaintiffs allege that

DVI's financial statements were materially Use and misleading because DVI, among

other things, materially overstated its recognized revenue, understated its loan loss

reserves and double-pledged collateral on its lines of credit and securitizations (Fifth

Amended Cmpt. &161). All class members were injured in the same manner by each of

13


the material Use statements and omissions, and by the schemes to defraud engaged by

Defendants that kept DVI's securities prices artificially inflated. Therefore, typicality is

"easily satisfied. In re Ikon Office Solutions, Inc. Sec. Litig. , 194 F.R.D. 166, 176 (E.D.

Pa. 2000) (finding typicality "easily met where there was "no difference between legal

theories advanced by plaintiffs and those of the other class members ); In re Cigna Corp.

Sec. Litig. , 2006 WL 2433779, at *3.

d. Plaintiffs and Class Counsel Have and Will Continue ToAdequately Represent the Interests of the Class

The final requirement ofRule 23(a) requires that "the representative parties will

fairly and adequately protect the interests of the class. Fed. R. Civ. P. 23(a)(4). In the

Third Circuit, this prerequisite involves a two-pronged inquiry: (1) whether "the

representatives and their attorneys will competently, responsibly and vigorously

prosecute the suit, and (2) `whether plaintiffs ' interests are antagonistic to those of the

class. Bogosian, 561 F.2d at 499.

Class Counsel Has and Will Continue to Ably Representthe Class

As to the first prong, the named Plaintiffs are represented by counsel with

extensive experience in prosecuting complex class actions, including those in the area of

securities litigation. On November 25, 2003, this Court appointed the lawfirms of

Krislov & Associates, Ltd as lead counsel and Chimicles & Tikellis, LLP, as liaison

counsel to Lead Plaintiffs and the proposed Class. The biographies of Lead Counsel,

Liaison Counsel and Bankruptcy Counsel3 for the proposed Class, attached hereto as

3 Because numerous issues raised in DVI's bankruptcy proceedings affected the rights of Lead Plaintiffsand the Class in this action, Lead Counsel retained bankruptcy counsel, the lawfirm of Morgenstern, Jacobs

& Blue LLC to address certain matters raised in DVI's bankruptcy. For example, at certain times

14


Exhibits A, B and C, show the experience and success these firms have had in

competently representing lead plaintiffs in similar actions.

Lead Counsel have actively prosecuted this litigation (e.g., filing five amended

complaints, opposing motions to dismiss, reconsideration and interlocutory appeal,

requesting and reviewing hundreds of thousands ofpages of documents from parties and

non-parties, and preparing for depositions) and intend to continue to vigorously prosecute

the remaining claims against the non-Settling Defendants . Further, Lead Counsel

negotiated the proposed Partial Settlements from a position of knowledge and strength,

and as advocates for the entirety of the Class. It is respectfully submitted that the

adequacy of counsel requirement is satisfied for certification. See, In re Cigna Corp. Sec.

Litig. , 2006 WL 2433779, at *4 th2 (adequacy of representation satisfied where counsel

was experienced in securities and complex litigation); In re Loewen Group, Inc. Sec.

Litig. , 233 F.R.D. 154, 166 (E.D. Pa. 2005) (finding counsel adequate where "[t]hey have

vigorously pursued this action, preparing memoranda and conducting appropriate

discovery. ).

ii The Class Representative's Interests Are Not Antagonisticto those of the Class

In addition to appointing lead and liaison counsel, this Court's November 25,

2003 Order also appointed Kenneth Grossman, Cedar Street Fund and Cedar Street

Offshore Fund as Lead Plaintiffs in this action. Lead Plaintiffs now seek appointment to

be the class representatives in this case.

Lead Plaintiffs and each member ofthe proposed Class have similar interests in

establishing liability against the Settling and non- Settling Defendants. By pursuing this

settlements were entered into in the DVI bankruptcy case , which attempted to release claims raised in this

case against certain parties. On these, and other matters, bankruptcy counsel provided assistance.

15


litigation, each representative Plaintiff necessarily advances the common interests of all

other Class members. No conflict of interest exists as all Class Members desire to

recover as damages all losses incurred because ofthe alleged frauds engaged in by

defendants, which artificially inflated DVI's securities prices during the Class Period.

For a conflict to preclude class certification, the disagreement between Plaintiffs

and other Class members must be "apparent, imminent, and on an issue at the very heart

ofthe suit; a speculative or hypothetical conflict will not bar class certification.

Bradburn, 2004 WL 1842987 at *4 (citing, Blackie v. Barrack, 524 F.2d 81, 909 (9th Cir.

1975)). There is nothing to suggest that the representative Plaintiffs have significant

interests antagonistic to those of the absent Class members in the vigorous pursuit of the

Class claims against defendants. Here, Plaintiffs seek to represent DVI investors, each of

who were similarly impacted by defendants' alleged wrongdoing in a like manner and

each ofwhich has the same interest as Plaintiffs in establishing defendants ' liability and

obtaining damages. That each class member likely has different damages does not defeat

class certification and any damage issues can be addressed at the time the Settlement

Fund is allocated and the claims are administered. In re Cigna Corp. Sec. Litig. , 2006

WL 2433779, at *5 ("the mere fact that individual members ofthe class may be entitled

to different amounts of money damages does not mean that individual questions

predominate ).

Thus, as shown above, all four elements of Rule 23(a) are satisfied.

3. The Requirements Of Rule 23(b)(3) Are Also Met In TheSettlement Context

Having satisfied the four requirements of Rule 23(a), the proposed class action

must also meet the requirements of at least one of the subsections of Rule 23(b). Under

16


Rule 23(b)(3), a class may be certified only where "questions of law or fact common to

the members of the class predominate over any questions affecting only individual

members, and ... a class action is superior to other available methods for the fair and

efficient adjudication of the controversy. Fed. R. Civ. Pro. 23(b)(3).

a. The Questions of Law and Fact that are Common to theClass Predominate Over Any Individual Issues

The predominance inquiry requires the Court to determine whether common

questions of law or fact predominate over any questions affecting only individual class

members. See, In re LifeUSA Holding, Inc. , 242 F.3d 136, 143 (3d Cir. 2001). The

question is "whether the class is sufficiently cohesive to warrant adjudication by

representation . Id. at 144.

Courts within this Circuit regularly find that common issues predominate in

securities fraud claims . E.g., In re Loewen Group Inc. Sec. Litig. , 233 F.R.D. at 167

("Predominance is a test readily met in certain cases alleging ... securities fraud)4, In re

Cigna, 2006 WL 2433779, at *5; In re Ikon, 194 F.R.D. at 177-78; and In re Rent-Way

Sec. Litig. , 218 F.R.D. 101, 116 (W.D. Pa. 2003).

Here, as stated above, common issues of liability predominate over any individual

issues . If an individual Plaintiff proves that defendants committed violations of the

federal securities laws, that proof would be the same for any other person seeking to

establish that fact. The only issue remaining would be the amount of damages suffered,

and it is well- settled that differences in the amount of damages to be awarded to each

class member do not preclude class certification. See, In re Warfarin Sodium, 212 F.R.D.

4 Rule 23(b)(3) requires only that common issues predominate; they need not be dispositive of the entirelitigation. See, In re School Asbestos Litie. , 789 F.2d 996, 1010 (3d Cir. 1986) ("[t]here may be cases inwhich class resolution of one issue or a small group of them will so advance the litigation that they may

fairly be said to predominate ); Stewart , 183 F.R.D. at 197.

17


at 249 (necessity for individual damage calculations does not defeat predominance or

class certification); In re Vicuron, 233 F.R.D. at 428 ("the determination of damages

owed to each class member will involve a comparatively simple mathematical calculation

once the class-wide questions regarding liability are solved. ); In re Cigna , 2006 WL

2433779, at *5 ("the mere fact that individual members of the class may be entitled to

different amounts of money damages does not mean that individual questions

predominate ). Thus, where all Class members' claims are premised upon their injury

resulting from defendants' conduct in artificially inflating the prices of DVI's securities,

there can be little doubt that predominance is sufficiently demonstrated and that

certification is appropriate.

b. Class Treatment of this Matter is the Best Method toAchieve Judicial Efficiency and Ensure That All PlaintiffsHave the Opportunity to Assert Their Claims

In Amchem, the Supreme Court stated that the requirement of superiority in Rule

23(b)(3), like that ofpredominance, ensures that resolution by class action will "achieve

economies oftime, effort, and expense, and promote ... uniformity of decision as to

persons similarly situated, without sacrificing procedural fairness or bringing about other

undesirable results . 521 U. S. at 615 . As noted above, courts regularly certify securities

fraud class actions, recognizing that securities fraud cases are particularly amenable to

common treatment and that the private enforcement purpose of the securities laws is well

served by class actions . In re Vicuron, 233 F.R.D. at 429; In re Ikon Office Solutions

Inc. Sec. Litig. , 194 F.R.D. at 177; In re Loewen Group Inc. Sec . Litig. , 233 F.R.D. at

168; In re Cigna Corp . Sec. Litig. , 2006 WL 2433779, at *6; In re Rent-Way Sec. Litig. ,

218 F.R.D. at 121; In re Corel Corp. Sec. Litig. , 206 F.R.D. at 544.

18


This case satisfies the "superiority requirement. Settling this case as a class

action will achieve economies for both the litigants and the Court, avoiding thousands of

individual adjudications that would dismally clog the system. Moreover, if certification

was denied, "[i]ndividual actions would be needlessly duplicative, expensive, and time-

consuming, especially in light of the predominance of common questions. In re Plastic

Cutlery Antitrust Litigation, 1998 WL 125703 , at *9 (E.D. Pa. March 20, 1998); In re

Corel Corp. , 206 F.R.D. at 544 (finding superiority met and indicating that absent a class

potentially thousands of lawsuits could be filed and/or individual actions would be

forgone because of cost); In re Cigna, 2006 WL 2433779, at *5; Cardizen 200 F.R.D. at

326 (finding that class action will achieve economies for litigants and judiciary);

Lorazepan 202 F.R.D. at 30-31 (finding that without class action, individual lawsuits

would unnecessarily waste judicial resources and that class certification provides

opportunity for efficient resolution). Requiring individual class members to file their

own lawsuits would cause unnecessary duplicative litigation, with parties, witnesses and

courts required to litigate time and again the same issues, possibly in different forums. In

addition, class treatment limits the possibility of inconsistent pilings regarding liability or

the appropriate measure of damages.

Moreover, absent the class procedure, many class members may be effectively

foreclosed from pursuing their claims . While many ofthe Class members are large

institutional investors, many of the Class members are individuals that do not have the

financial wherewithal to take on defendants and their attorneys in individual actions.

Finally, settlement on a class basis is also superior to individual litigation and

adjudication because settlement provides class members with prompt compensation for

19


their injuries. By contrast, compensation resulting from litigation is highly uncertain and

may not be received before lengthy trial and appellate proceedings are complete.

Therefore, class treatment of this matter is the best method to achieve judicial efficiency

and ensure that Plaintiffs and the Class have the opportunity to efficiently settle and/or

assert their claims.

III. THE PROPOSED PARTIAL SETTLEMENTS WARRANT FINALAPPROVAL

A. The Due Process Requirements Have Been Satisfied

In accordance with the Preliminary Approval Order, there was an extensive notice

program, including the mailing of over 8,600 notice and claim forms to putative Class

Members, posting of notice and claim forms on the Claims Administrator's website, and

publication of the notice in the national edition of The Wall Street Journal, USA Today,

the Sunday edition of the Chicago Tribune and Philadelphia Inquirer, and electronically

on Primezone, all on or before September 7, 2006. See, Affidavit of Paul Mulholland at

2-3 ("Mulholland Affidavit ), attached as Ex. D. This program clearly meets the due

process requirements of Rule 23 of the Federal Rules of Civil Procedure, which calls for

"the best notice practicable under the circumstances, including individual notice to all

members who can be identified through reasonable effort. Eisen v. Carlisle & Jacquelin,

417 U.S. 156, 173 (1974); see also, In re Orthopedic Bone Screw Prod. Liability

Litigation, 246 F.3d 315, 328 (3d Cir. 2001). In this regard, the Class has been (i)

provided with notice of the proposed Partial Settlements as well as rights, method and

dates by which Class Members could object or opt out ofthe Partial Settlements, and (ii)

advised of the date of the final fairness hearing at which they will be provided an

opportunity to be heard. Due process requirements, therefore, have been satisfied.

20


B. The Standards For Judicial Approval Of Class Action Settlements

The approval of a proposed class action settlement is a matter within the sound

discretion of the court. In re General Motors Corp. Pick-Up Truck Fuel Tank Prod. Liab.

Litig , 55 F.3d 768, 782-83 (3d Cir. 1995), cert. denied, GMC v. Freuds , 516 U.S. 824

(1995) ("General Motors ); Eichenholtz v. Brennan, 52 F.3d 478, 482 (3d Cir. 1995);

Walsh v. Great Atl. & Pac. Tea Co. , 726 F.2d 956, 965 (3d Cir. 1983); Girsh v.Jepson,

521 F.2d 153, 156 (3d Cir. 1975).

In determining whether to approve a settlement, the Court should be cognizant of

the strong judicial policy favoring resolution of litigation short of trial. See, Williams v.

First Nat'l Bank, 216 U. S. 582 , 595 (1910); Farris v. JC Penney Co., Inc . , 176 F.3d 706,

711 (3d Cir. 1999) ("A strong public policy exists in favor of settlements ); Eichenholt^

52 F.3d at 478; Lazy Oil, Co. v. Witco Corp. , 95 F. Supp. 2d 290, 329 (W.D. Pa. 1997)

("The settlement of disputed claims, especially of complex class action litigation, is

favored by courts as a matter of public policy. ). Indeed, the Third Circuit has stated

that:

The law favors settlement, particularly in class actions and other complexcases where substantial judicial resources can be conserved by avoidingformal litigation ... The parties may also gain significantly from avoidingthe costs and risks of a lengthy and complex trial.... These economicgains multiply when settlement also avoids the costs of litigating classstatus - often a complex litigation within itself. Furthermore, a settlementmay represent the best method of distributing damage awards to injuredplaintiffs, especially where litigation would delay and consume theavailable resources and where piecemeal settlement could result, in theRule 23(b)(1)(B) limited fund context, in a sub-optimal distribution of thedamage awards.

General Motors, 55 F.3d at 784 (citations omitted); accord, Eichenholt^ 52 F.3d

at 486 ("[i]n general, the settlement of complex litigation before trial is favored by

21


the federal courts ); Bell Atl. Corp. , 2 F.3d at 1314 fn16 ("our rules of civil

procedure and evidence encourage settlement ).

The district court should approve a class action settlement if it is "fair, reasonable,

and adequate and in the best interest of the class. General Motors, 55 F.3d at 805;

Eichenholt^ 52 F.3d at 482; Walsh, 726 F.2d at 965; In re Cell Pathways , Inc., Sec . Litig.

II, at *3 (E.D. Pa. Sept. 23, 2002) ("In re Cell Pathways ). In deciding whether to

approve a proposed class action settlement under Fed. R. Civ. Pro. 23(e) as "fair,

adequate and reasonable, the Third Circuit has endorsed examination of the following

factors by the district courts:

(1) the complexity, expense and likely duration of the litigation ...; (2) thereaction of the class to the settlement ...; (3) the stage of the proceedingsand the amount of discovery completed. . .; (4) the risks of establishingliability ...; (5) the risk of establishing damages ...; (6) the risks ofmaintaining the class action through trial ...; (7) the ability of thedefendants to withstand a greater judgment ...; (8) the range ofreasonableness of the settlement fund in light of the best possible recovery...; (9) the range ofreasonableness of the settlement fund to a possiblerecovery in light of all the attendant risks of litigation ...

GirsI 521 F.2d at 157 (citing, City of Detroit v. Grinnell Corp. , 495 F.2d 448, 463 (2d

Cir. 1974); accord, In re Aetna Inc. Sec . Litig. , 2001 WL 20928 at *6 (E.D. Pa. Jan. 4,

2001) ("Aetna ); In re Ikon Office Solutions , Inc. Sec. Litig. , 194 F.R.D. 166, 178-79

(E.D. Pa. 2000) ('Ikon III ); General Motors, 55 F.3d at 785; Shlensky v. Dorsey, 574

F.2d 131, 147 (3d Cir. 1978); In re Cell Pathways , 2002 WL 31528573, at *8; In re

SmithKline Beckman Corp . Sec. Litig . , 751 F. Supp. 525, 528 (E.D. Pa. 1990).

Moreover, in appraising the fairness of a proposed settlement, the opinion of

experienced counsel is entitled to considerable weight. Daniel B. v. O'Bannor 633 F.

Supp. 919, 926 (E. D. Pa. 1986); accord, Kirkorian v. Borelli, 695 F. Supp. 446, 451

22


(N.D. Cal. 1988); In re Nat'l Student Mktg. Litig. , 68 F.R.D. 151, 155 (D.D.C. 1974);

Feder v. Harrington, 58 F.R.D. 171, 176 (S.D.N.Y. 1972). Although the court must

independently evaluate a proposed settlement, the court should avoid substituting its

judgment for that of counsel who negotiated the settlement. See, e.g., Bryan v. Pittsburgh

Plate Glass Co. , 494 F.2d 799, 804 (3d Cir. 1974); Fisher Bros. v. Cambridge-Lee Indus.,

Inc., 630 F. Supp. 482, 488 (E.D. Pa. 1985); Sommers v. Abraham Lincoln Fed. Sav. &

Loan Ass'n. , 79 F.R.D. 571, 576 (E.D. Pa. 1978). Furthermore, the court need not, and

should not, engage in a trial on the merits. See, In re Warner Communications Sec.

Litig , 798 F.2d 35, 37 (2d Cir. 1986) ('Warner Communications ). The very purpose of

a settlement is to avoid the trial of disputed issues and to avoid wasteful litigation.

Newman v. Stein, 464 F.2d 689 (2d Cir. 1972).

The proposed Partial Settlements enjoy a presumption that they are fair and

reasonable because they are the product of arms-length negotiations conducted by

capable counsel who are well experienced in class action litigation. M. Berenson Co. v.

Faneuil Hall Marketplace, Inc. , 671 F. Supp. 819, 822 (D. Mass. 1987); Katz v. E.L.I.

Computer Sys. Inc . , 70 Civ. 2462, 1971 WL 251, at *4 (S .D.N.Y. Apr. 5, 1971 ) (holding

that there is a "strong initial presumption that the compromise is fair and reasonable );

see also, Eltman v. Grandma Lee ' s Inc . , 1986 WL 53400 (E.D.N.Y. May 28 , 1986); In re

Baldwin-United Corp. , 607 F. Supp. 1312, 1320 (S.D.N.Y. 1985); In re Saxon Sec. Litig. ,

No. 82 Civ. 3101 (MJL), 1985 WL 48177 (S.D.N.Y. Oct. 31, 1985); In re Warner

Communications Sec. Litig. , 618 F . Supp. 735, 741 (S.D.N.Y. 1985) aff'd, 798 F.2d 35

(2d Cir. 1986).

23


As set forth below, analysis of the Partial Settlements in light of the factors set

forth in Girsh demonstrates that they are fair, reasonable and adequate.

1. Complexity, Expense, and Likely Duration of the LitigationWeigh in Favor of Approval

Courts have consistently held that the expense and uncertainty of the litigation are

factors supporting a settlement . Milstein v. Huck, 600 F . Supp . 254, 267 (E.D.N.Y.

1984); see also, Aetna, 2001 WL 20928, at *6 ("Of equal importance is the likely

complexity ofproof in the case. ); Ikon III , 194 F.R.D. at 179 (noting the "complicated

nature of large class actions alleging securities fraud where "there are literally thousands

of shareholders, and any trial on these claims would rely heavily on the development of a

paper trail through numerous public and private documents ); Protective Comm. for

Indep. Stockholders ofTMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414,424 (1968)

(court must consider, among other things, "the complexity, expense, and likely duration

of such litigation ); Bullock v. Adm'r of Estate ofKircher, 84 F.R.D. 1, 10 (D. N.J.

1979).

This has been, and will likely continue to be, a complex, expensive and lengthy

litigation. It has already been zealously litigated for just over three years. During that

time, Plaintiffs' counsel have expended considerable time preparing five amended

complaints, addressing lead plaintiff and lead counsel appointment, successfully

responding to twenty separate motions to dismiss, numerous motions for reconsideration

and motions for interlocutory appeal filed by defendants , conducting extensive factual

investigation, reviewing and analyzing hundreds ofthousands ofpages of documents,

dissecting DVI's financials and the results of internal and external investigations, and

preparing for numerous upcoming depositions. Plaintiffs know that the trial of this action

24


against the Settling Defendants would have been a lengthy, expensive affair, and because

of the amounts and issues involved, appeals would be virtually assured no matter what

the verdict. "It is safe to say, in a case of this complexity, the end of that road might be

miles and years away. In re Chambers Dev. Sec. Litig. , 912 F. Supp. 822, 837 (W.D.

Pa. 1995). Taking into account the likelihood of appeal, absent the Partial Settlements,

this litigation likely would have continued for years against the Settling Defendants,

despite the best efforts of the parties and the Court to speed the process.

In approving the settlement of a securities fraud case against Ikon, Judge

Katz noted the complexity of securities fraud cases and that in these types of

actions:

[a]n equally significant issue is the likely complexity ofproof. Many ofthe allegations relate to defendants ' accounting decisions, and extensiveexpert testimony would certainly be required on the nature of theaccounting practices, the significance of various decisions in relation toGAAP, and the effect that those practices ultimately had on stock pricesand the plaintiffs ' finances . The difficulty ofpresenting these issues eitherin the context of a motion for summary judgment or at trial thus weighs infavor of settlement, particularly when considered in conjunction with thecorresponding financial outlays by both sides.

Ikon III , 194 F.R.D. at 179.

Although Plaintiffs' counsel strongly believe that their case is meritorious against

all Defendants, they are sufficiently experienced and realistic to know that all of these

factors make the outcome of a trial and inevitable appeals uncertain and protracted. Even

if the Class could recover a larger judgment after trial, which is certainly not guaranteed,

the additional delay, through the trial, post-trial motions and the appellate process, could

deny the Class recovery for years. Given the time value of money, a future recovery,

even one in excess of the Settlement, may be less valuable to the Class than receiving the

25


benefits of the Partial Settlements now. These risks and delays must be taken into

account when appraising the fairness of the proposed settlement. In re Prudential his. Co.

of America Sales Practice Litig. Agent Actions , 148 F.3d 283 (3d Cir. 1998) (settlement

was favored where "the trial of this class action would be a long, arduous process

requiring great expenditures oftime and money on behalf ofboth the parties and the

court ).

The Partial Settlements provide a swift and certain benefit to the Class and avoids

years of delay and uncertainty. Thus, the likely prospect of continued protracted

litigation against the Settling Defendants militates strongly in favor of approving the

proposed Partial Settlements as in the best interest of the Class.

2. Reaction of the Class to the Partial Settlements

As directed by the Court, Plaintiffs have caused more than 8,600 Notices to be

mailed to members of the Class. Mulholland Affidavit at p.3 (Ex. D). The fact that there

have been no obiections to the Partial Settlements filed by members ofthe Class, which

included many sophisticated institutional investors, indicates a favorable reaction by the

members of the Class. See, Stoetzner v. United States Steel Corp. , 897 F.2d 115, 119 (3d

Cir. 1990) (observing that objections by "only 29 members ofthe class comprised of

281 "strongly favors settlement ); Ikon III, 194 F.R.D. at 179 (six objections to the

proposed settlement was found to be "extremely limited ); In re SmithKline Beckman

Corp . Sec. Litig. , 751 F. Supp . 525, 530 (E.D. Pa. 1990); Fisher Bros., Inc. v. Mueller

Brass Co. , 630 F. Supp. 493, 498 (E.D. Pa. 1985).

Additionally, there have been no unanticipated opt-outs to the Partial Settlements

by any member of the Class. The five opt-outs submitted by plaintiffs in theW

26


Yield case, as explained earlier, were anticipated and expressly accounted for in each

Partial Settlement. Mulholland Affidavit at p.3 (Ex. D). Only one other class member

submitted a request for exclusion, which was not perfected and which was later

withdrawn . Mulholland Affidavit at pp. 3-4 (Ex. D); see also , In re Cendant Sec. Litig. ,

264 F.3d 201, 235 (3d Cir. 2001) (affirming district court ' s finding that low number of

opt-outs supported approving settlement); DeSantis v. Snap- on Tools , 2006 WL

3068584, at *6 (D.N.J. 2006) ("the Third Circuit has repeatedly recognized that low

numbers of objectors and opt-outs is probative on the issue ofwhether a settlement is fair,

adequate, and reasonable. ).

The absence of any objections or opt-outs in this case strongly favors settlement

approval.

3. The Stage of the Proceedings and the Amount of DiscoveryCompleted Weigh in Favor of Approval

"[T]he stage of the proceedings and the amount of discovery completed is

another factor considered in determining the fairness, reasonableness and adequacy of a

settlement. GirsI 521 F.2d at 157. This prong ofthe analysis "captures the degree of

case development that class counsel have accomplished prior to settlement. Seidman v.

American Mobile Sys. , 965 F. Supp. 612 (E.D. Pa. 1997) (citing, General Motors, 55

F.3d at 813).

In this case, substantial work has been completed prior and subsequent to the

settlements. Plaintiffs' counsel conducted extensive investigation and analysis regarding

the law and facts relevant to the case. Plaintiffs filed five amended complaints and

survived numerous motions to dismiss, reconsideration and interlocutory appeal.

Plaintiffs gathered and studied relevant publicly available information and reviewed and

27


analyzed hundreds of thousands ofpages of non-public documents produced by the

Settling Defendants , DVI, DVI's former auditors , Deloitte & Touche LLP, its former

underwriter/lender/financial advisor, Merrill Lynch & Co., Inc., its primary outside

counsel, Cliffford Chance LLP, the Pritzker Defendants, and numerous third parties, and

have extensively prepared to conduct numerous depositions in the near future. In

addition, Plaintiffs' counsel consulted with several experts on matters of accounting,

auditing, damages and market efficiency to assist with the consideration and analysis of

the strengths and weaknesses of their claims. Furthermore, Plaintiffs' counsel conducted

extensive interviews of counsel for OnCure, counsel and the Chief Executive Officer for

Dolphin, and expect to complete an interview of PresGar representatives prior to the

November 9, 2006 final approval hearing. This case, therefore, is not a situation where

Plaintiffs' counsel conducted only a cursory investigation or otherwise failed to consider

the ramifications of settlement.

4. The Risks of Establishing Liability Weigh in Favor ofApproval

'This inquiry attempts to measure the expected value of litigating the action rather

than settling it at the current time . In re Cendant Corp. Sec. Litig. , 264 F. 3d 201, 238

(3d Cir. 2001). Plaintiffs ' counsel believe that Plaintiffs have a strong case as to liability

against the Settling Defendants, and intend to continue vigorously pursuing their claims

against the one remaining non- Settling "SRE Defendant , Radnet5, as well as the other

non settling Defendants. Nevertheless, Plaintiffs recognize that a finding of liability was

' As alleged in Plaintiffs' Fifth Amended Complaint, OnCure, Dolphin, PresGar and Radnet are referred toas Special Relationship Entities ("SREs ). As described in the Complaint, the SREs were closely

associated with DVI in many respects, including through ownership interests, close personal friendshipsand substantial lending and business relationships. Through these close associations, the SREs, asPlaintiffs allege, agreed to conceal, through a variety of means, problem loans recorded on DVI's financial

statements (Fifth Amended Complaint, &&509-519).

28


never assured against the Settling SRE Defendants , who continue to deny any liability.

The pleadings filed with the Court in this case indicate that the strengths of the claims

and defenses thereto have been the subject of substantial dispute between the parties.

The instant lawsuit involves, among other things, federal securities claims against

defendants under Section 10(b) of the Exchange Act and Rule IOb-5 promulgated

thereunder. To prove their Rule IOb-5 claim against the Settling Defendants, Plaintiffs

would have the burden of demonstrating that these Defendants were responsible for

engaging in a scheme to defraud DVI investors and that the Class suffered damages as a

result of Defendants' conduct.

Phintiffs would also have had the burden ofproving that the Defendants acted

with scienter - i.e., with actual knowledge of their scheme to defraud or a reckless

disregard of the truth. Ernst & Ernst v. Hochfelder, 425 U.S. 185 (1976). While

Plaintiffs' counsel believe that discovery has provided significant support for Plaintiffs'

allegations as to the Settling Defendants' knowledge and/or recklessness in regard to the

schemes to defraud DVI investors in light of the facts set forth above, Plaintiffs recognize

that proving scienter for any defendant is always difficult and uncertain and could go

either way before the jury. Moreover, had the Partial Settlements not occurred, the

Settling Defendants have indicated, by their previously filed motions for interlocutory

appeal, that they would likely pursue appellate review.

As Judge Lee has noted, "[a] very large bird in the hand in this litigation is surely

worth more than whatever birds are lurking in the bushes. In re Chambers Der. Sec.

Litig , 912 F. Supp. at 838. Although Plaintiffs believe that their claims have merit,

establishing liability at trial and prevailing on an inevitable appeal would by no means be

29


guaranteed. Accordingly, avoiding the risks of establishing liability is another factor that

supports approval of the proposed Partial Settlements.

5. The Risk of Proving Damages and Causation Weighs in Favorof Approval

As with liability, the Settling Defendants do not concede that Plaintiffs and the

Class were damaged by any conduct they engaged in. Plaintiffs, though they strongly

believe in their case on these points, could still face risks in proving damages against

these particular defendants. In an action brought under Section 10(b) and Rule IOb-5 (a)

and (c), plaintiff must prove that the fraudulent scheme caused plaintiffs harm.

Semerenko v. Cendant Corp. , 223 F.3d 165, 185 (3d Cir. 2000). These issues can be

complicated and require expert opinions.

Although Plaintiffs strongly believe that they would be able to provide convincing

expert testimony as to damages and causation, and receive a favorable judgment, they

also realize "it is certainly not inconceivable that, in the unavoidable `battle of the

experts,' a jury might disagree with the [Plaintiff Class] . In re Computron Software,

Inc. Sec. Litig. , 6 F. Supp. 2d 313, 320 (D. N.J. 1998); see also, United States v. 412.93

Acres of Land, 455 F.2d 1242, 1247 (3d Cir. 1972) ("The jury ... is under no obligation

to accept as completely true the testimony of any expert witness. It may adopt as much

of the testimony as appears sound, reject all of it, or adopt all of it. ). Given that the

parties would present opposing damage theories, it is impossible to predict how the jury

would react. This unpredictability is avoided by the proposed Partial Settlements, which

provides the Class with a meaningful percentage of the recovery that might realistically

be obtained through trial.

30


6. The Risks of Maintaining the Class Action Through TrialWeigh in Favor of Approval

Plaintiffs counsel believe that this case is appropriate for class certification.

However, class certification can be reviewed and modified at any time before trial and

there is always a risk that the action, or particular claims in the action, might not be

maintained as a class through trial. In re Prudential Ins. Co. of America Sales Practice

Litig. Agent Actions , 148 F.3d at 321 ("Under Rule 23, a district court may decertify or

modify a class at any time during the litigation if it proves to be unmanageable. ).

Although this Court has not yet addressed Plaintiffs' soon to be filed motion for

class certification, Plaintiffs strongly believe that this case is properly brought as a class

action with respect to all asserted claims. Nonetheless, the Partial Settlements avoid any

uncertainty with respect to this issue.

7. The Ability of Defendants to Withstand a Greater Judgment

This factor was ofprimary importance to Plaintiffs when considering whether to

accept the current Partial Settlements. As indicated herein, Plaintiffs' counsel believes

that had they proceeded to trial against the Settling Defendants, Plaintiffs had a very good

chance ofprevailing on liability. However, during negotiations and at the time Plaintiffs

entered into the Stipulations of Settlement, the Settling Defendants appeared unable to

have had the ability to withstand a significantly greater judgment. Thus, the potential for

a substantial recovery was tempered by the risk ofbeing unable to collect a significantly

greater judgment, even if successful, against the Settling Defendants. Based on a review

of the Settling Defendants ' financial statements, Plaintiffs believe their assets are

minimal and certainly not substantial enough to provide a source ofany significantly

31


greater recovery for the Class. Indeed, Dolphin has closed its doors and has liquidated,

and OnCure and PresGar were operating with accumulated shareholder deficits.

The Settling Defendants' precarious financial condition (brought on in part by the

massive failure ofDVI) was made more acute by not only the effect of this litigation, but

also the burden imposed by claims filed against them in the "related actions, including

the WM High Yield case and in the case of Fleet Bank et al . v. O'Hanlon et al. , (04-CV-

1277 (E.D. Pa.)).6 It was therefore beneficial for Plaintiffs to settle at the time and for the

amounts they did before the Settling Defendants were possibly forced into bankruptcy.

8. The Settlements are Reasonable in Light of the Best PossibleRecovery and All Attendant Risks of Litigation

"This inquiry measures the value of the settlement itself to determine whether the

decision to settle represents good value for a relatively weak case or a sell-out ofan

otherwise strong case . General Motors, 55 F.3d at 806. Plaintiffs contend that neither

stated scenario applies, but rather the settlement reflects a very good outcome considering

all the attendant risks in this case . In General Motors, the Third Circuit explained that:

[I]n cases primarily seeking monetary relief, the present value of thedamages plaintiffs would likely recover if successful, appropriatelydiscounted for the risk ofnot prevailing, should be compared with theamount of the proposed settlement ... The evaluating court must, ofcourse, guard against demanding too large a settlement based on its viewof the merits of the litigation; after all, settlement is a compromise, ayielding of the highest hopes in exchange for certainty and resolution.

55 F.3d at 806.

In this case, the value of the cash Settlements of $2.885 million, currently

escrowed and earning interest for the Class, is not subject to dispute. The range of

6 Notably, contained in each of the Stipulations of Settlement was a "most favored nations provisionwhich guaranteed Lead Plaintiffs and the Class a recovery no less than the recoveries obtained in the

related actions.

32


possible recovery must be juxtaposed against the likelihood of recovery. Moreover, the

determination of a "reasonable settlement is not susceptible to a mathematical equation

yielding a particularized sum. Rather, "in any case there is a range ofreasonableness

with respect to a settlement. Newman, 464 F.2d at 693; Fickinger v. C.I. Planning

Corp. , 646 F. Supp. 622, 630 (E.D. Pa. 1986).

In Parker v. Anderson, 667 F.2d 1204 (5th Cir. 1982), cert. denied, 459 U.S. 828

(1982), the Court stated:

The fact that a proposed settlement may only amount to a fraction of thepotential recovery does not, in and of itself, mean that the proposedsettlement is grossly inadequate and should be disapproved ... In factthere is no reason, at least in theory, why a satisfactory settlement couldnot amount to a hundredth or even a thousandth part ofa single percent ofthe potential recovery.

Id. at 1210 fh6 (quoting Grinnell, 495 F.2d at 455 fh2) (emphasis added). Indeed, courts

have approved settlements that have resulted in little or no recovery to class members at

all. For example, in Karasik v. Pac E. Corp. , 180 A. 604, 609 (Del. Ch. 1935), the court

stated:

[T]he amount claimed is one hundred million dollars and the amountreceived in settlement is a minimum of three hundred and eighty-fivethousand dollars. Now that is a wide disparity. But it is one thing toassert a claim and another thing to prove the claim to judgment ...Figures, however imposing, should not compel practical considerations toyield place to visions.

In this case, Lead Plaintiffs have not concluded their estimate of damages in this

case and therefore cannot now provide an exact measure ofthe percentage that the Partial

Settlements have in relation to total estimated damages attributable to the Settling

Defendants. But it is important to note that in addition to the substantial monetary

benefits the Partial Settlements, with respect to the OnCure and Dolphin Stipulations,

33


also include valuable cooperation provisions. See, e.g., Denney v. Jenkens & Gilchrist,

230 F.R.D. 317, 339 (S.D.N.Y. 2005)("Pursuant to the settlement , Jenkens has agreed to

provide (and has already provided) discovery on plaintiffs' claim. The value of this

agreement is hard to determine, but it is not negligible. ). Also notable, the Partial

Settlements do not affect Plaintiffs continued pursuit of their claims against the remaining

sixteen defendants in this case . Therefore, the $2.885 million result, as a partial

settlement, is in all likelihood well within the range of recoveries of settlements approved

by courts. See, In re Prudential Sec. Inc. Ltd. P'ships Litig. , MDL No. 1005, 1995 WL

798907 (S.D.N.Y. 1995) (approving settlement ofbetween 1 .6% and 5% of claimed

damages); In re Crazy Eddie Sec. Litig. , 824 F. Supp. 320 (E.D.N.Y. 1993) (settlement of

between 6% and 10% of damages); In re Michael Miliken & Assoc. Sec. Litig. , 150

F.R.D. 57 (S.D.N.Y. 1993) (7.5%).

9. The Settlements are the Product of Arm's Length NegotiationsAmong Experienced Counsel

Upon an analysis of the 'fairness factors, it is clear that the proposed Partial

Settlements were entered into in good faith, at arms-length and without any collusion.

Counsel from both sides zealously represented their respective clients' interests prior to

and during settlement negotiations. Absent some indicia of collusion, a settlement is

presumptively fair. See, e.g., Cohen v. Tuttle , Civ. Action Nos. 85-2396, 85-2621, 85-

3022, 1987 WL 7224, at *I (E.D. Pa. 1987) ("A compromise settlement is presumed,

initially, to be fair and reasonable and should be regarded not as an unlimited victory but

as a realistic compromise . ); see also, Voisin v. Bartell Media Corp. , No. 76 Civ. 3954

(MJL), 1982 WL 1359 (S.D.N.Y . 1982); In re Residential Doors Antitrust Litig. , No. 96-

2125, 1998 WL 151804, at *6 (E.D. Pa. Apr. 2, 1998) ("[a] presumption of correctness is

34


said to attach to a class action settlement reached in arms-length negotiations between

experienced, capable counsel after meaningful discovery (quoting, Manual for Complex

Litigation, Second E30.41 ( 1985)).

During negotiations with OnCure, Dolphin and PresGar, Lead Counsel zealously

advanced Lead Plaintiffs' position and was fully prepared to continue to litigate rather

than accept a settlement that was not in the best interests of Lead Plaintiffs and the

Settlement Class. Lead Plaintiffs, through their counsel, carefully considered and

evaluated, inter alia, the relevant legal authorities and evidence to support the claims

asserted against the Settling Defendants, the likelihood of prevailing on these claims, the

risk, expense and duration of continued litigation and the likely appeals and subsequent

proceedings necessary if Lead Plaintiffs did prevail against Settling Defendants at trial,

and the Settling Defendants ability to pay a larger amount after protracted litigation

and/or a trial. With respect to Dolphin and Presgar, the parties also engaged a well-

respected, independent mediator who has vast experience in mediating securities fraud

lawsuits, Eric D. Greene, to assist with the negotiations. See, In re Warfarin Sodium

Antitrust Litig. , 391 F.3d 516, 539-40 (3d Cir. 2004) (affirming settlement involving

"extensive, arms-length negotiations ); In re Cendant Corp. Lit. , 264 F.3d 201, 233 fnl8

(3d Cir. 2001). After considering the foregoing, Lead Plaintiffs and their counsel

concluded that the Partial Settlements are fair, reasonable and adequate and in the best

interest of the Settlement Class.?

7 Lead Counsel has over twenty years of experience in securities and other complex class action litigation,and have negotiated numerous other substantial class action settlements throughout the country, and basedupon this extensive experience, believe that the Partial Settlements are fair. "In considering a proposed

settlement, the courts are entitled to rely upon the judgment of experienced counsel. Lazy Oil Co, 95 F.Supp. 2d at 331("The opinion and recommendation of experienced counsel are entitled to considerableweight ); Daniel B. v. O'Bannon, 633 F. Supp. 919, 926 (E.D. Pa. 1986); Fisher Bros. v. Cambridge-Lee

Indus.. Inc. , 630 F. Supp. 482,488-89 (E.D. Pa. 1985).

35


C. The Plan Of Allocation Is Fair And Reasonable

Approval of a plan of allocation of a settlement fund in a class action is governed

by the same standards of review applicable to approval of the settlement as a whole: the

distribution plan must be fair, reasonable and adequate. Ikon III, 194 F.R.D. at 184;

Aetna, 2001 WL 20928, at * 12. In general, a plan of allocation that reimburses class

members based on the type and extent of their injuries is reasonable. Id. The present

Plan, similar to the one approved in the Rite Aid settlement, is reasonable. Claimants are

reimbursed for their recognized losses based on when they bought and sold their shares of

DVI securities. See, In re Cell Pathways , 2002 WL 31528573, at *7 ("To distinguish

between the award given to class members based on these factors [type of security

bought/sold and the timing of transactions] is reasonable. ). Recognized losses for those

who purchased and sold during the class period is simply the difference in price of the

purchase and sale. Whereas, recognized losses for those who purchased and held is the

difference between the purchase price and the average price for the 90-day period

subsequent to the end of the Class Period, pursuant to the PSLRA. 15 U.S.C. Q78u-

4(e)(3).

IV. PLAINTIFFS' COUNSEL'S REQUEST FOR ATTORNEYS' FEES ANDEXPENSE REIMBURSEMENT SHOULD BE APPROVED

Plaintiffs' Counsel's requested fee of 30% of the $2,885,000 settlement fund

(exclusive of interest), plus reimbursement ofreasonable out-of-pocket litigation

expenses of $90,000, is well within the range of approved fees and costs in similar cases,

and fully comports with the Third Circuit's criteria for approval. As a percentage of the

Settlement Fund, the requested fee is substantially less than Plaintiffs' Counsels' lodestar,

even without a multiplier. Moreover, despite a comprehensive notice program in which

36


over 8,600 notices were issued, many to sophisticated institutional investors, notifying

them of counsel's fee request, no objections were submitted. For all of these reasons, as

more fully discussed below, the Court should approve Plaintiffs' Counsel's modest fee

and expense reimbursement request.

A. Legal Standard Governing the Award of Attorneys' Fees

Ever since the United States Supreme Court's seminal decision in Cent. R.R. &

Banking Co. v. Pettus , 113 U. S. 116, 123-28 (1885), the common fund doctrine has been

firmly established and consistently applied in class actions . The Supreme Court "has

recognized consistently that a litigant or a lawyer who recovers a common fund for the

benefit ofpersons other than himself or his client is entitled to a reasonable attorney's fee

from the fund as a whole . Boeing Co. v. Van Gemert, 444 U.S. 472, 478 (1980). See

also Mills v. Elec. Auto-Lite Co. , 396 U.S. 375, 393-95 (1970) (discussing application of

the common fund doctrine even in cases involving non-monetary recoveries). Courts

have further recognized that not only do attorneys' fee awards from a common fund

provide just compensation, they also encourage skilled counsel to represent those seeking

redress for damages inflicted on entire classes ofpersons, and to discourage future

misconduct of a similar nature. See, e.g., In re Elec. Carbon Prods. Antitrust Litig. , --- F.

Supp. 2d ----, 2006 WL 2505881, *13 (D.N.J. Aug. 30, 2006) (noting that the common

fund doctrine "fosters class actions and encourages skilled counsel to represent class

action plaintiffs ) (citing Deposit Guaranty Nat'l Bank v. Roper, 445 U. S. 326, 338

(1980)). Indeed, the Supreme Court has emphasized that private securities fraud actions

"provide a `most effective weapon in the enforcement' of the securities laws and are à

37


necessary supplement to [SEC] action.' Bateman Eichler, Hill Richars, Inc. v. Berner,

472 U. S. 299 , 310 (1985) (quoting J.I. Case Co. v. Borak, 377 U.S. 426, 432 (1964)).

The Court ofAppeals for the Third Circuit and the District Courts within the

Third Circuit consistently apply these principles. See, e.g., In re Rite Aid Corp. Sec.

Litig , 146 F. Supp. 2d 706, 734 (E.D. Pa. 2001) ("It is , of course , firmly established that

à lawyer who recovers a common fund for the benefit ofpersons other than himself or

his client is entitled to a reasonable attorney's fee from the fund as a whole.') (citing

Boeing, 444 U.S. at 478); In re Ikon Office Solutions , Inc. Sec . Litig. , 194 F.R.D. 166,

192 (E.D. Pa. 2000) ("there is no doubt that attorneys may properly be given a portion of

the settlement fund in recognition of the benefit they have bestowed on class members );

In re Computron Software, Inc. Sec. Litig. , 6 F. Supp. 2d 313, 321 (D.N.J. 1998)

("Attorneys who represent a class and aid in the creation of a settlement fund are entitled

to compensation for legal services offered to the settlement fund under the common fund

doctrine ) (citing In re Gen. Motors Corp. Pick-up Truck Fuel Tank Prods. Liab. Litig. ,

55 F.3d 768, 820 n. 39 (3d Cir. 1995)).

B. The Court Should Calculate the Attorneys' Fee Award Using thePercentage-of-Recovery Approach

The Supreme Court and the Third Circuit have repeatedly held that the award of

attorneys' fees in common fund cases should be determined as a percentage of the fund.

See Blum v. Stetson, 465 U. S. 886, 900 n. 16 ("under the `common fund doctrine,' ... a

reasonable fee is based on a percentage of the fund bestowed on the class ); Boeing, 444

U.S. at 478-79; Sprague v. Ticonic Nat'l Bank , 307 U.S. 161, 164-66; In re AT&T Corp.

Sec. Litig. , 455 F.3d 160, 164 (3d Cir. 2006) ("In common fund cases such as this one,

the percentage-of-recovery method is generally favored [over a lodestar approach]

38


because ìt allows courts to award fees from the fund in a manner that rewards counsel

for success and penalizes it for failure ) (citing In re Rite Aid Corp. Sec. Litig. , 396 F.3d

294, 300 (3d Cir. 2005) (internal quotation marks omitted)); In re Cendant Corp. Sec.

Litig , 404 F.3d 173, 188 (3d Cir. 2005) (noting that the "percentage-of-recovery

approach dominates common fiend cases and finds support in the PSLRA). Similarly,

judges within the Eastern District of Pennsylvania have approved the percentage-of-

recovery method of awarding fees in other common fund cases like the instant one. See,

e.g., Perry v. FleetBoston Financial Corp. , 229 F.R.D. 105, 109 (E.D. Pa. 2005) (Schiller,

J.); In re Rite Aid Corp. Sec. Litig. , 362 F. Supp. 2d 587 (E.D. Pa. 2005) (Dalzell, J.);

Stoner v. CBA Info. Servs. , 352 F. Supp. 2d 549, 551 (E.D. Pa. 2005) (Katz, J.).

C. The Requested 30% Fee Is Fair and Reasonable Under The ThirdCircuit' s Gunter Factors

The Third Circuit gives district courts considerable discretion in setting

percentage-based fee awards in common fund cases . See, e.g., Gunter v. Ridgewood

Energy Corp. , 223 F.3d 190, 195 (3d Cir. 2000) ("We give [a] great deal of deference to a

district court's decision to set fees ); Pte, 229 F.R.D. at 119 (noting that a district court

has "a wide range of discretion when selecting which method [for calculating attorneys'

fees] to employ ). Nonetheless, the Third Circuit has also cautioned that, in exercising

its broad discretion in awarding fees, a district court should consider the following

nonexhaustive factors:

(1) the size of the fund created and the number ofpersons benefited,

(2) the presence or absence of substantial objections by members ofthe classto the settlement terms and/or the fees requested by counsel;

(3) the skill and efficiency of the attorneys involved,

39


(4) the complexity and duration of the litigation;

(5) the risk ofnonpayment;

(6) the amount of time devoted to the case by plaintiffs' counsel; and

(7) the awards in similar cases.

Gunter, 223 F.3d at 195 n.1 (citing Prudential , 148 F.3d at 336-40; Gen. Motors, 55 F.3d

at 819-22).

The Court of Appeals has also suggested that the percentage -of-recovery method should

be cross-checked against the lodestar method. Gunter, 223 F.3d at 195. Application of

these factors to the present case shows that a 30% fee award to Plaintiffs' counsel is fully

justified and appropriate.

1. The Size and Nature of the Common Fund Created, and theNumber of Persons Benefited By the Settlement

The result achieved is clearly a primary factor for consideration in determining

the amount of reasonable attorneys' fees. See Behrens v. Wometco Enters., Inc. , 118

F.R.D. 534, 547-48 (S.D. Fla. 1988), aff'd without op., 899 F.2d 21 (11th Cir. 1990)

("The quality ofwork performed in a case that settles before trial is best measured by the

benefit obtained ); Ikon, 194 F.R.D. at 194 ("The most significant factor in this case is

the quality of representation, as measured by `the quality of the result achieved, the

difficulties faced, the speed and efficiency of the recovery, the standing, experience, and

expertise of the counsel, the skill and professionalism with which counsel prosecuted the

case and the performance and quality of opposing counsel' ) (quoting Computron, 6 F.

Supp. 2d at 323).

Plaintiffs' counsel in this case have created a very substantial benefit for the

Proposed Settlement Class from just three of the nineteen named defendants, each of

40


whom had limited ability to pay significantly more. Far from being comprised of

coupons or illiquid securities of questionable marketability, here the entire $2,885,000

settlement consideration, including interest, is in cash.

Moreover, the number ofpersons benefited is undeniably large, including all

persons who purchased DVI securities (including DVI's Senior Notes as well as its

common stock) in the open market during the Class Period. At this early stage in the

claims filing process , which does not expire until January 3, 2007, several hundred claims

forms have already been submitted . See Mulholland Affidavit at p.3 (Ex. D). The

substantial benefit to the Class therefore supports the requested fee award.

2. The Absence of Any Objections to the Settlement or theRequested Attorneys' Fee Award

The over 8,600 Notices mailed to DVI investors of record - as well as nearly

2,000 banks, brokers, mutual funds, pension funds, money managers, and insurance

companies - advised the Class that Plaintiffs' counsel would apply for a fee award of

$865,500, plus up to $90,000 in expenses. The Notice also expressly advised Class

Members of their right to object to the fee application. No objections to the 30% fee or

$90,000 expense reimbursement have been submitted, an especially noteworthy fact here

because the Class includes large sophisticated institutional investors who collectively

purchased a substantial percentage ofDVI securities during the Class Period. See Meijer,

Inc. v. 3M, No. 04-5871, 2006 WL 2382718, *20 (E.D. Pa. Aug. 14, 2006) (Padova, J.)

("The absence of objections to the requested attorneys' fees in this case is particularly

notable given the sophisticated nature of the absent Class Members ); In re Remeron

Direct Purchaser Antitrust Litig. , No. 03-0085, 2005 WL 3008808 (D.N.J. Nov. 9, 2005)

("When a class is comprised of sophisticated business entities that can be expected to

41


oppose any request for attorney fees they find unreasonable, the lack of objections

indicates the appropriateness of the fee request ) (quotation marks and citations omitted).

Indeed, cases involving low numbers of objections (but nonetheless some objections, in

contrast to the complete absence of objections here), have been characterized by the

Third Circuit as "rare phenomen[a]. AT&T, 455 F.3d at 170 (eight objections out of

one million potential class members was "rare ); Rite Aid, 396 F.3d at 305 (two

objections out of 300,000 potential class members characterized as a "rare phenomena ).

The over 340 claim forms filed to-date show that Class Members are aware of the

settlement terms, including the attorneys' fees and reimbursement requests. The absence

of any objections therefore is significant evidence that the requested 30% fee is fair. See,

e.g., In re Cell Pathways, Inc., Sec. Litig. , 01-1189, 2002 WL 31528573, *9 (E.D. Pa.

Sept. 23, 2002) (McLaughlin, J.) ("Despite the large number of class members notified,

only one objection was received and it related only to the fee petition. This reaction

shows that the class views the settlement as a success , and ... indicates that the class does

not object to the thirty percent requested by the attorneys. This positive reaction supports

approval of the fee petition. ); In re Aetna Inc. Sec. Litig. , MDL 1219, 2001 WL 20928,

* 15 (E.D. Pa. Jan. 4, 2001) (Padova, J.) ("the Class members' view of the attorneys'

performance, inferred from the lack of objections to the fee petition, supports the fee

award ); In re SmithKline Beckman Corp. Sec. Litig. , 751 F. Supp. 525, 533 (E.D. Pa.

1990) (Broderick, J.).

3. The Skill and Efficiency of Plaintiffs' Counsel

Plaintiffs' counsel's efforts to efficiently resolve this litigation with respect to the

Settling Defendants are the best indicator of the experience and ability of the attorneys

42


involved. See, e.g., Behrens , 118 F.R.D. at 547-48 ("The quality of work performed in a

case that settles before trial is best measured by the benefit obtained ). By any measure,

counsel's efforts have resulted in a significant settlement from three of the nineteen

named defendants for the benefit of the Class. See Ikon, 194 F.R.D. at 194 (awarding

30% fee upon partial settlement and stating "the most significant factor in this case is the

quality of representation, as measured by `the quality of the result achieved, the

difficulties faced, the speed and efficiency of the recovery, the standing, experience and

expertise of the counsel, the skill and professionalism with which counsel prosecuted the

case and the performance and quality of opposing counsel' ) (quoting Computron, 6 F.

Supp. 2d at 323).

The experience of Plaintiffs' counsel in this action is set forth in the

accompanying biographies of Plaintiffs' counsel submitted herewith as Exhibits A, B,

and C. As those submissions show, Plaintiffs' counsel practice extensively in the highly

complex field of class actions, including securities litigation.

The quality and vigor of opposing counsel is also relevant in evaluating the

quality of the services rendered by plaintiffs' counsel. See, e.g., Ikon, 194 F.R.D. at 194;

In re Warner Communications Sec. Litig . , 618 F. Supp. 735, 749 (S.D.N.Y. 1985) ("The

quality of opposing counsel is also important in evaluating the quality ofplaintiffs'

counsel's work ). The Settling Defendants were represented by Dechert LLP, Pepper

Hamilton LLP, and Levan Friedman LLP, nationally prominent and highly regarded law

firms of undeniable experience and skill . The ability of Plaintiffs' counsel to obtain such

a favorable settlement for the Class in the face of such formidable legal opposition further

confirms the superior quality of Plaintiffs' counsel's representation.

43


4. The Complexity and Duration of the Litigation

Another factor used to evaluate fee awards is the complexity and duration of the

litigation. The Third Circuit has stated that this factor is intended to capture "the

probable costs, in both time and money, of continued litigation. Gen. Motors, 55 F.3d at

812. This action involves a massive accounting fraud, perpetrated by numerous actors,

and consisting of a host of different accounting manipulations infecting many aspects of

DVI's publicly reported financial statements . It is thus necessarily complex. See

Computron, 6 F. Supp. 2d at 317-18 ("Here, the trial, as ... all securities fraud trials, will

be long and complex ... Thus, the complexity, expense and duration ofthe litigation

weigh in favor of settlement. ) (citing Hoffman Elec., Inc. v. Emerson Elec., Co. , 800 F.

Supp. 1279, 1285 (W.D.Pa.1992)).

As for the duration of this litigation, Plaintiffs ' counsel has been actively

litigating this case for over three years (since September 2003), and have defeated

motions to dismiss, motions for reconsideration, and motions for interlocutory appeal

filed by the Settling Defendants. In the absence of the Partial Settlements, the litigation

with respect to these defendants would inevitably involve substantially more time and

delay - for continued discovery, pre-trial motions, trial, post-trial motions, and the

appellate process - likely necessitating thousands of additional attorney hours (and

potentially bankrupting the Settling Defendants in the process). Consequently, by

reaching the Partial Settlements, Plaintiffs' counsel have obtained "a substantial benefit

undiminished by further litigation expenses, without the delay, risk and uncertainty of

continued litigation. Computron, 6 F. Supp. 2d. at 318 (citation omitted).

44


In short, this highly complex case has been actively litigated over an extended

period, and there will in all likelihood be significant additional work and many additional

hours spent administering the settlement . The "Complexity and Duration factor,

therefore, also weighs in favor of the requested fee.

5. The Risk of Non-Payment

a. The Fully Contingent Nature of Plaintiffs' Representation

Plaintiffs' counsel undertook this action over three years ago on an entirely

contingent fee basis, assuming a substantial risk that the litigation would yield no

recovery and leave them uncompensated for their efforts. Courts across the country have

consistently recognized that the risk of receiving little or no recovery is a major factor in

considering an award of attorneys' fees. For example, as one court has noted:

Although today it might appear that risk was not great based on PrudentialSecurities' global settlement with the Securities and ExchangeCommission, such was not the case when the action was commenced andthroughout most of the litigation. Counsel's contingent fee risk is animportant factor in determining the fee award. Success is never guaranteedand counsel faced serious risks since both trial and judicial review areunpredictable. Counsel advanced all of the costs of litigation, a notinsubstantial amount, and bore the additional risk of unsuccessfulprosecution.

In re Prudential-Bache Energy Income Partnerships Sec. Litig. , No. 888, 1994 WL

202394, at *6 (E.D. La. May 18, 1994).

The real risk ofno recovery in complex cases of this type is heightened when

Plaintiffs' counsel press to achieve the very best result for their clients. Examples are

plenty of class actions in which plaintiffs' counsel expended thousands ofhours and yet

received no remuneration despite their diligence and expertise. See, e.g., Robbins v.

Koger Props., Inc. , 116 F.3d 1441 (11th Cir. 1997) (reversing jury verdict of $81 million

45


for plaintiffs against an accounting firm and entering judgment for defendant); Eisenstadt

v. Centel Corp. , 113 F.3d 738 (7th Cir. 1997) (affirming lower court's granting of

summaryjudgment for defendants); Anixter v. Home-Stake Prod. Co. , 77 F.3d 1215

(10th Cir. 1996) (overturning securities fraud class action jury verdict for plaintiffs based

on 1994 Supreme Court opinion in case filed in 1973 and tried in 1988).

Plaintiffs' counsel should be rewarded for assuming the real risk ofno recovery in

this case, and this factor thus weighs in favor of approval of the requested fee.

b. The Risk OfCollecting A Judgment That Might UltimatelyBe Obtained Was Significant In This Case

The Third Circuit has cautioned that percentage fee awards should be

substantially lower in those rare situations where, from the outset, neither the defendants'

liability nor the collectability of damages are at issue . See Cendant , 243 F.3d at 741

("Cendant's liability and consequent collectability had been conceded at the outset of the

PRIDES controversy, and that fact should have been given major consideration by the

District Court when setting Kirby's attorneys' fees ). Here, however, both the litigation

and collectability risks were significant.

Litigation Risks

It has never been certain that plaintiffs could establish liability against the Settling

Defendants in this case . Unlike Cendant, liability in this case has never been "conceded,

but has instead been vigorously disputed Although Plaintiffs' counsel are confident that

they would have established the Settling Defendants ' liability if the case proceeded to

trial, there would nonetheless be substantial opposition, creating the substantial costs,

uncertainty and risk that arises in virtually all contested litigation, especially in complex

securities fraud cases like this.

46


ii Collectability

The collectability risks in this case were also significant , and a consideration of

these risks makes the results achieved here all the more extraordinary. Given that

damages attributable to the Settling Defendants could have been assessed at a range close

to or lower than the settlement amounts, it is far from certain that the additional costs

incurred to proceed to trial and judgment would have garnered a higher award. In

addition, the assets of the Settling Defendants at this time were represented to be quite

small in the context of this case, resulting in the distinct possibility that continued,

protracted litigation against these parties could have resulted in them filing for

bankruptcy. Indeed, Dolphin ultimately shut down and liquidated, but Plaintiffs' Counsel

were still able to obtain $960,000 from it for the Class. Moreover, the Settling

Defendants also settled other related cases prior to or concurrently with the instant Partial

Settlements (Fleet National Bank v. O'Hanlon, et al. , No. 04-1277 (E.D. Pa.); and WM

High Yield Fund, et al. v. O'Hanlon, et al. , No. 04-3423 (E.D. Pa.)), which further

demonstrates that the Partial Settlements represented all that the Settling Defendants

could afford! The $2.885 million provided to the Class from these limited fund

defendants was a substantial benefit provided by Plaintiffs' counsel, and this factor thus

militates in favor of approval of the fee request.

6. The Time Devoted to this Case by Plaintiffs' Counsel wasSignificant

8 Notably, as raised earlier, Plaintiffs' counsel obtained a "most favored nation clause ineach of the Partial Settlements, representing a significant benefit to the Class byguaranteeing that its recovery against the Settling Defendants would not be any lowerthan what plaintiffs achieved in the other related actions.

47


Plaintiffs' counsel have expended over 17,600 hours and advanced over $385,000

in expenses on this case since its inception. See Kamuth Affidavit (Ex. A); Schwartz

Affidavit (Ex. B); and Morgenstern Affidavit (Ex. Q. Plaintiffs ' counsels' efforts reflect

an unselfish commitment to vigorously pursuing this case for the benefit of Plaintiffs and

the Class. Moreover, as noted above, Plaintiffs' counsel will likely incur many more

hours in connection with administration of these proposed Partial Settlements. The

foregoing unquestionably represents a very significant commitment of time, personnel,

and out-of-pocket expenses to this case and to these Settlements, and supports approval

of the requested fees and expenses.

7. Awards in Similar Cases

The requested fee of 30% of the settlement fund is well within the range of fees

typically awarded in actions of this nature. There is no rule governing the appropriate

percentage of the common fund to be awarded as attorney fees. According to the leading

treatise on class actions:

No general rule can be articulated on what is a reasonable percentage of acommon fund. Usually 50 percent of the fund is the upper limit of areasonable fee award from a common fund, in order to assure that fees donot consume a disproportionate part ofthe recovery obtained for the class,though somewhat larger percentages are not unprecedented.

Newberg on Class Actions, Section 14.03 at 186, 188, 190 (2d ed. 1985).

The Third Circuit has observed that fee awards range from 19% to 45% of the

settlement fund. Gen. Motors, 55 F.3d at 822. See also Ikon, 194 F.R.D. at 194

("Percentages awarded have varied considerably, but most fees appear to fall in the range

of nineteen to forty-five percent ); Computron, 6 F. Supp. 2d at 322-23 ("There is no set

standard, however, on how to determine a reasonable percentage. Awards utilizing the

48


percentage-of-recovery method can reasonably range from nineteen percent to forty-five

percent of a settlement fund ... the percentage awarded, should, and generally does,

increase commensurate with increased quality of representation ).

Numerous courts within the Third Circuit, including the Eastern District of

Pennsylvania, have regularly awarded fees of 30% to 33-1/3% of the recovery or more,

even in cases involving much larger settlement funds than the instant case. Rite Aid, 146

F. Supp. 2d at 735 (review of 289 settlements demonstrates "average attorney's fee

percentage [of] 31.71% with a median value that "turns out to be one-third ); Lenahan

v. Sears, Roebuck and Co. , No. 02-0045, 2006 WL 2085282, *21 (D.N.J. July 24, 2006)

(awarding fee of 30% of $15 million fund and noting that "[a]ttorneys' fees of 30 percent

are common in this Circuit ); In re Linerboard Antitrust Litig. , 2004 WL 1221350, * 14

(E.D. Pa. June 2, 2004) (Dubois, J.) (awarding fee of 30% of $202 million settlement

fund and citing with approval "a recent Federal Judicial Center study that found that in

federal class actions generally median attorney fee awards were in the range of 27 to 30

percent). See, e.g., Remeron, 2005 WL 3008808 (33-1/3% of $75 million settlement

fiend); Brown v. Esmor Correctional Services, Inc. , No. 98-1282 , 2005 WL 1917869

(D.N.J. Aug. 10, 2005) (33-1/3% of $2. 5 million settlement fund); Nichols v. SmithKline

Beecham Corp. , No. 00-6222, 2005 WL 950616 (E.D. Pa. April 22, 2005) (Padova, J.)

(30% of $65 million settlement fund); In re Ravisent Technologies, Inc. Sec. Litig. , No.

00-1014, 2005 WL 906361 (E.D. Pa. April 18, 2005) (Surrick, J.) (33-1/3% of $7 million

settlement fund); Stoner, 352 F. Supp. 2d 549 (33%); In re Automotive Refinishing Paint

Antitrust Litig. , MDL No. 1426 (E.D. Pa. Oct 13, 2004) (32% of $66.75 million

settlement fund); In re Corel Corp. Sec. Litig. , 293 F.Supp.2d 484 (E.D. Pa. 2003)

49


(Brody, J.) (33-1/3% of $7 million settlement fiend); In re Flat Glass Antitrust Litig. ,

MDL No. 1200 (W.D. Pa. May 28, 2003) (33%); ATI Tech. , 2003 WL 1962400 (Dalzell,

J.) (30%); Cell Pathways , 2002 WL 31528573 (McLaughlin, J.) (30%); Ikon, 194 F.R.D.

166 (Katz, J.) (awarding fee of 30% of $111 million after only one and a half years of

litigation); Aetna, 2001 WL 20928 (Padova, J.) (30%); Cullen v. Whitman Med. Corp. ,

197 F.R.D. 136 (E.D. Pa. 2000) (Brody, J.) (33-1 /3%); In re Mobilemedia , No. 96-5723

(D.N.J. Feb. 24, 2000) (Lechner, J.) (33-1 /3%); Blackman v. O'Brien Envtl. Energy, Inc. ,

1999 WL 397389 (E.D. Pa. May 12, 1999) (O'Neill, J.) (35%); In re ValueVision Int'l

Sec. Litig. , 957 F. Supp. 699, 700 (E.D. Pa. 1997) (Pollack, J.) (34%); Ratner v. Bennett,

No. 92-4701, 1996 WL 243645 (E.D. Pa. May 8, 1996) (Broderick, J.) (35%); In re

Greenwich Pharm. Sec. Litig. , No. 92-3071, 1995 WL 251293 (E.D. Pa. Apr. 25, 1995)

(Newcomer, J.) (33-1/3%). See also Aamco Automatic Transmissions, Inc. v. Tayloe, 82

F.R.D. 405 (E.D. Pa. 1979) (Van Artsdalen, J.) (43.87%); Zinman v. Avemco Corp. , No.

75-1254, 1978 WL 5686 (E.D. Pa. Jan. 18, 1978) (Higginbotham, J.) (50%).

The fact that the requested fee clearly falls within the range of fees awarded in

other class cases in this Circuit further attests to its reasonableness.

D. The Requested Fee Is Reasonable Under The Lodestar Cross-Check

In addition to applying the percentage approach to determine attorneys' fees in

common fund cases like this one, courts in this Circuit also apply the lodestar method to

"cross-check whether the fee determined under the percentage approach is reasonable.

See AT&T, 455 F.3d at 164 ("we have recommended that district courts use the lodestar

method to cross-check the reasonableness of a percentage-of-recovery fee award ) (citing

Rite Aid, 396 F.3d at 305; Prudential, 148 F.3d at 333); Gunter, 223 F.3d at 195 n. 1 ("we

50


have also suggested that district courts cross-check the percentage award at which they

arrive against the `lodestar' award method ); Computron, 6 F. Supp. 2d at 322 ("In

assessing the requested fee in the instant matter, the percentage-of-recovery method was

primarily relied upon, but the lodestar method served as a useful cross-check ). It is

important to note that "[t]he lodestar cross-check, while useful, should not displace a

district court' s primary reliance on the percentage - of-recovery method. AT&T, 455

F.3d at 164 (citing Rite Aid, 396 F.3d at 307).

The lodestar method is a two-step process: the court first ascertains the "lodestar

figure by multiplying the number ofhours worked by the normal hourly rates of counsel,

then adjusts the lodestar, in its discretion, by applying a multiplier to take into account

the contingent nature and risks of the litigation, the results obtained and the quality of the

services rendered by counsel. See, e.g., Rite Aid, 396 F.3d at 305-06; Linerboard, 2004

WL 1221350 at *16 (citing Prudential, 148 F.3d at 340-41). The lodestar cross-check

analysis "need not entail `mathematical precision' or `bean-counting,' and is `not a full-

blown lodestar inquiry.' AT&T, 455 F.3d at 169 n. 6 (quoting Rite Aid, 396 F.3d at

306, 307 n. 16) (internal citations omitted).

1. Hours Reasonably Expended by Counsel

The lodestar cross-check begins with the number of hours expended in the

prosecution of the action. Plaintiffs' counsel here have spent, in the aggregate, more than

17,000 hours in the prosecution of this case. The aggregate hours include time spent:

responding to Defendants' twenty separate motions to dismiss, and numerous motions for

reconsideration and for interlocutory appeal; conducting pertinent factual and legal

research and amending the complaint when appropriate; researching and reviewing

51


pertinent accounting and auditing standards; requesting, reviewing and analyzing,

hundreds of thousands ofpages of documents produced by parties and non-parties;

engaging in numerous discovery and case management disputes; consulting with

plaintiffs' retained experts in the areas ofmarket efficiency, damages and accounting;

negotiating the terms of the Proposed Settlements; and drafting the Stipulations of

Settlement and related papers.

Counsel has conducted this litigation in a coordinated and well-organized fashion

to ensure efficiency and minimize unnecessary duplication ofwork. In addition, where

professionally and economically feasible, work was assigned to personnel with lower

billing rates in order to provide the best quality work at lower cost. The time records of

petitioners are available for review by the Court, although for the convenience of the

Court and in conformity with practice, Plaintiffs ' counsel submit them to the Court in

summarized form, along with accompanying affidavits (see, Exhibits A, B and Q. See

Rite Aid, 396 F.3d at 307 ("The district court may rely on summaries submitted by the

attorneys and need not review actual billing records ).

2. Calculating the "Base" Lodestar

To arrive at the lodestar, the hours expended are multiplied by each attorney's

respective hourly rate. The hourly rate to be applied in calculating the lodestar is that

which is normally charged in the community where the attorney practices. See, e.g.,

Blum, 465 U.S. at 895; In re Fine Paper Antitrust Litig. , 751 F.2d 562, 590-91 (3d Cir.

1984). Moreover, the United States Supreme Court and other courts have held that the

use of current rates is proper since such rates compensate for inflation and the loss ofuse

of funds. See Missouri v. Jenkins , 491 U.S. 274, 283-84 (1989); New York State Ass'n

52


for Retarded Children, Inc. v. Carey, 711 F.2d 1136, 1153 (2d Cir. 1983 ) (deeming the

use of current rates appropriate where services were provided within two to three years of

fee application).

In determining the reasonableness of an attorney's rates, courts take into account

the attorney's legal reputation, experience, and status (e.g., partner or associate). The

accompanying affidavits ofplaintiffs' counsel include a description of the background

and experience of the attorneys who worked on this case, providing support for the

hourly rates charged in this case.

3. The Lodestar Multiplier

"Calculation of the lodestar, however, is simply the beginning of the analysis.

Warner, 618 F. Supp. at 747. In the second step of the typical lodestar analysis (as

opposed to the cross-check), the court adjusts the lodestar to take into account, among

other things, the result achieved, the quality of representation, the complexity and

magnitude of the litigation, and public policy considerations . Fine Paper, 751 F.2d at

583; Prudential, 148 F.3d at 341 (citing 3 Newberg § 14.03 at 14-5); Seidman v. Am.

Mobile Sys. , 965 F. Supp. 612, 623 (E.D. Pa. 1997). The court then applies the

appropriate multiplier to the lodestar number to account for these additional factors.

4. Performing the Lodestar Cross-Check

In performing the lodestar cross-check, instead of applying a multiplier to the

lodestar, the court determines what multiplier would bring the lodestar to the amount

requested as a percentage of the common fund, and then determines whether the resulting

fee would be so unreasonable as to warrant a downward adjustment.

53


The mechanics of this calculation depend on the actual value of the Settlement

Fund, which in this case is $2,885,000 excluding interest. Counsel's requested

percentage of 30% of the fund results in a fee award of $865,500. The cumulative hours

expended by all Plaintiffs' counsel since inception of this case are 17,687.71 hours. The

cumulative lodestar for the services performed by the plaintiffs' firms in this action since

inception is $5,268,254 (see, Exs. A, B and Q.

Typically the lodestar cross-check is performed to insure that the percentage-

based fee does not translate to an unreasonably high multiplier. Here, 'multiplier is a

misnomer, as the lodestar method actually yields a substantially higher total than the

requested percentage fee. Given that the requested fee is substantially below the

Plaintiffs' counsels' lodestar, the requested fee is shown to be eminently reasonable.

Indeed, the recent words of this Court's sister court are equally - if not more - applicable

here:

The lodestar multiplier is approximately 0.97. There is no disparity herebetween the fees requested and the lodestar cross-check figure. By thisimportant measure, the requested fees are extremely reasonable andcongruent with the work performed. A multiplier of 0.97 is modest incomparison with the multiples from 1 to 4 frequently awarded in commonfund cases , see Prudential, 148 F.3d at 341, depending on circumstancespresented.

Accordingly, the lodestar cross-check provides significant confirmation inthis case of the reasonableness of the fees sought under the percentage-of-recovery method.

Elec. Carbon, 2006 WL 2505881 at* 19.

Consequently, by any objective or comparative standard, the requested fee

is reasonable and warranted by the result obtained in this case.9

9 Plaintiffs' Counsels' lodestar represents all time spent prosecuting class members' claims against all

defendants, not just time spent prosecuting claims against the Settling SRE Defendants. Should Plaintiffs'

54


E. Public Policy Considerations Support the Requested Fee

The federal securities laws are remedial in nature and designed to encourage

private lawsuits to effectuate their purpose of protecting investors. See Basic Inc. v.

Levinson, 485 U.S. 224 ( 1988); Bateman Eichler, 472 U. S. 299 ; Huddleston, 459 U.S.

375. Indeed, the ultimate effectiveness of these remedies may largely depend on the

efficacy of the class action device. As one court has noted:

Private lawsuits serve to further the objective of the federal securities lawswhich is to protect investors and consumers against fraudulent and otherdeceptive practices. As a practical matter, those lawsuits can bemaintained only if competent counsel can be obtained to prosecute them.Competent counsel can be obtained if reasonable and adequatecompensation for the services were awarded if a successful result isachieved. "To make certain that the public is represented by talented andexperienced trial counsel, the remuneration should be both fair andrewarding. The concept of a private attorney acting as a `private attorneygeneral' is vital to the continued enforcement and effectiveness of theSecurities Acts.

Eltman v. Grandma Lee's, Inc. , No. 82-1912,1986 WL 53400, *9 (E.D.N.Y. May 28,

1986) (citations omitted). See also Warner, 618 F. Supp. at 750-51 ("Fair awards in

cases such as this encourage and support other prosecutions, and thereby forward the

cause of securities law enforcement and compliance. ). Retired District Judge Abraham

Sofaer, of the Southern District ofNew York, has also succinctly stated the reasons for

providing a substantial financial incentive for capable counsel in securities class actions:

It unquestionably is true that without able lawyers handling these mattersnot only do some ofthem go unprosecuted, but the big difference in myexperience is in the amount obtained, and you don't get the highestrecovery when you are paying at the low end ofthe scale of fee recoveryin contingent actions. It seems to me that I as the protector of the classcan fairly say, and honestly say, that I believe it is in the class's best

Counsel subnit future fee petitions in connection with other settlements or judgments, Plaintiffs' Counselwill provide the Court, as is custom, with their full lodestar from inception of this litigation, along withitemization of any fees awarded by the Court from these Partial Settlements, so that the Court canmeaningfully evaluate such future fee requests and perform any necessary lodestar cross-checks.

55


interests - of this class and of future classes yet unknown - to pay this kindof money for these kinds ofbenefits.

Conte, supra, § 1.04, at 6-7 (citation omitted). This view has also been endorsed by

Former Chief Justice William H. Rehnquist:

Full civil justice reform will not likely be accomplished until we rethinkthe manner in which litigation is paid for in this country, and until betterincentives exist to reward lawyers for early resolution of controversies andefficient handling of cases, instead ofproviding a disincentive, as thepresent hourly rate often does.

Remarks of the Chief Justice for the Distinguished Citizen Award, February 5, 1994, at

10.

The Supreme Court has also emphasized that private actions provide "à most

effective weapon in the enforcement' of the securities laws and are à necessary

supplement to [SEC] action.' Bateman Eichler, 472 U. S. at 310 (quoting J.I. Case Co.

v. Borak, 377 U. S. 426, 432 (1964)). These authorities have expressed the clear public

policy of encouraging private attorneys to take the risks required to represent those who

would not otherwise be protected from securities fraud. Accordingly, an award of the

fees requested herein is fully consistent with important public policy considerations.

F. Plaintiffs' Counsel Should Be Reimbursed for Their ReasonablyIncurred Litigation Expenses

Plaintiffs' counsel also request reimbursement for the reasonable and necessary

expenses advanced in the prosecution of this litigation. The expenses requested at this

time total $90,000, an amount substantially less than the expenses incurred to-date, as

summarized in the accompanying affidavits , attached as Exhibits A, B and C. "Attorneys

who create a common fund for the benefit of a class are entitled to reimbursement of

reasonable litigation expenses from the fund Meijer, 2006 WL 2382718 at *18

56


(quoting Aetna , 2001 WL 20928 at * 13). Each of the expense categories for which

reimbursement is sought is appropriate for payment from a class settlement fund. Brown

v. Pro Football, Inc. , 839 F. Supp. 905, 916 (D.D.C. 1993) (citing Missouri, 491 U.S. at

284, for the proposition that "Plaintiffs' out-of-pocket costs for telephone, telecopier, air

and local couriers, postage, photocopying, Westlaw research, secretarial overtime, and

counsels' travel expenses are routinely billed to fee-paying clients, and thus are all

compensable as part of a reasonable attorney's fee ); In re Remeron End-Payor Antitrust

Litig , No. 02-2007, 2005 WL 2230314, *32 (D.N.J. Sept . 13, 2005) (approving

reimbursement of expenses including "costs expended for purposes ofprosecuting this

litigation, including substantial fees for experts; substantial costs associated with creating

and maintaining an electronic document database; travel and lodging expenses; copying

costs; and the costs of deposition transcripts ). Moreover, the Notice informed class

members that plaintiffs' counsel would seek reimbursement of expenses up to $90,000,

and no objection to the expense application have been filed For all the foregoing

reasons, the requested expenses should be awarded. Cf. Rite Aid, 146 F. Supp . 2d at 736

(`plaintiffs seek reimbursement of expenses ... which they have detailed in their

submissions to us. These out-of-pocket expenses ... are compensable ... They are also

unobjected to and, in our judgment, reasonable ) (citation omitted).

IV. CONCLUSION

For all the reasons set forth herein, including (a) the substantial immediate

recovery of $2,885,000 in cash for the Class; (b) the risks attendant with any litigation,

that Plaintiffs would recover little or nothing or be unable to collect any judgment if they

continued to trial; (c) the skill and efficiency of Plaintiffs' counsel; (d) the absence of any

57


objection from Class members; and (e) the significant amount oftime already spent on

the case (and the additional time that counsel will spend administering this Settlement);

and (f) in comparison to awards in comparable cases ; Plaintiffs counsel respectfully

requests that the Court grant (i) final approval of certification of a settlement class, (ii)

final approval of the Partial Settlements as fair, reasonable and adequate, (iii) final

approval of the Plain ofAllocation and (iv) final approval of Lead Counsel's request for

an award of attorneys fees of 30% ofthe Settlement Fund, together with reimbursement

of their reasonable expenses in the amount of $90,000, with accrued interest as earned in

the Settlement Fund.

Dated: November 2, 2006 Respectfully submitted,

/s/ Michael R KamuthCounsel for Lead Plaintiffs

Clinton A. Krislov, Esq.Michael R. Karnuth, Esq.KRISLOV & ASSOCIATES, LTD.20 North Wacker DriveChicago , Illinois 60606Phone : 312-606-0500Fax: 312-606-0207

Plaintiffs' Lead Counsel

CHIMICLES & TIKELLIS LLPSteven A. Schwartz, Esq.Attorney I.D. No. 50579Kathy Meermans Esq.Attorney I.D. No. 37846361 W. Lancaster Avenue1 Haverford CenterHaverford, PA 19041Phone:610-642-8500

Plaintiffs ' Liaison Counsel

58


CERTIFICATE OF SERVICE

I, Michael R. Kamuth, on oath state that Lead Plaintiffs ' Motion for Entry of Order

Approving Partial Settlements, Plan of Allocation, Certification ofA Settlement Class,

and Attorneys ' Fees and Expenses and Memorandum of Law in Support of Motion for

Final Approval of Partial Settlements and in Support of Certification of Settlement

Class, Plan of Allocation and Award of Attorneys ' Fees and Costs was filed electronically

on Thursday, November 02, 2006, and is available for downloading and viewing from the U.S.

District Court for the Eastern District ofPennsylvania's Electronic Court Filing service, and that

the documents have been served electronically upon the parties on the attached service list who

consented to electronic service and via U.S. Mail, postage prepaid, to those listed on the

service list who have not consented to electronic service.

/s/ Michael R. Karnuth


SERVICE LIST

Richard L. Scheff, Esq. Maura E. Fay, Esq.

Jeffrey S. Feldman, Esq. DILWORTH PAXSON LLP

MONTGOMERY MCCRACKEN 3200 Mellon Bank Center

WALKER & RHOADS LLP 1735 Market Street

123 S. Broad Street Philadelphia , PA 19103

Philadelphia , PA 19109 Tel: 215-575-7000

Tel: 215-772-1500 Fax: 215-575-7200

Fax: 215-772-7620 mfay(aDdilworthlaw.com

rscheff(&,,mmwr.com Counselfor Steven R. Garfinkel

jfeldman(abmmwr.com

Counselfor Michael A. O'Hanlon

Robert E. Kelly, Esq. William P. Quinn, Jr., Esq.

Kelly D. Eckel, Esq. Thomas V. Ayala, Esq.

Patrick Loftus, Esq. Karen Pieslak Pohlmann, Esq.

Matthew M. Ryan, Esq. David W. Marston, Jr., Esq.

Matthew A. Taylor, Esq. Marc J. Sonnenfeld, Esq.

DUANE MORRIS LLP MORGAN, LEWIS & BOCKIUS LLP

30 South 17th Street 1701 Market Street

Philadelphia, PA 19103 Philadelphia, PA 19103-2921

Tel: 215-979-1000 Tel: 215-963-5000

Fax: 215-979-1020 Fax: 215-963-5001

rkelly6D,duanemorris.com [email protected]

kdeckel(,duanemorris.com tayala(,morgaanlewis.com

loflus(,duanemorris.com kpoh1mann(,morganlewis.com

mmryan(,duanemorris.com dmarston(&,,morganlewis.com

mataylor(cduanemorris.com msonnenfeld(amorgaanlewis.com

Counselfor John P. Boyle Counselfor William S. Goldberg, John E.

McHugh, and Nathan Shapiro

Patricia M. Hamill, Esq. Gregory P. Miller, Esq.

Vincent T. Cieslik, Esq. Michael A. Morse, Esq.

CONRAD, O'BRIEN, GELLMAN & Stephen G. Stroup, Esq.

ROHN, P.C. MILLER, ALFANO & RASPANTI, P.C.

1515 Market Street, 16th Floor 1818 Market Street, Suite 3402

Philadelphia, PA 19102-1916 Philadelphia, PA 19103

Tel: 215-864-9600 Tel: 215-972-6400

Fax: 215-864-9620 Fax: 215-981-0082

2


phamill(&,,cogr.com grniller(a nar-law.com

vcieslik(a cogr.com mmorseArnar-law.com

Counselfor Richard E. Miller sstroup(mar-law.com

Counselfor Harry T.J. Roberts

William J. Taylor, Esq.

Kevin F. Berry, Esq.

COZEN O'CONNOR, P.C.

The Atrium

Paul W. Kaufman, Esq.

Matthew Hamermesh, Esq.

Daniel Segal, Esq.

HANGLEY ARONCHICK SEGAL &

1900 Market Street

Philadelphia , PA 19103

Tel: 215-665-2000

Fax: 215-665-2013

wtaylor(cr),cozen.com

kbeny( cozen.com

Counselfor Anthony J. Turek

William J. Leonard, Esq.

PUDLIN, P.C.

One Logan Square, 27th Floor


Tel: 215- 568-6200

Fax: 215-568-0300

mhamermesh(,hangley.com

pkaufinan(,hangley. com

dsegal(,hangley.com

Counselfor Terry Cady

Julian W. Friedman, Esq.

Thomas A. Leonard, Esq. Mary Margulis-Ohnuma

OBERMAYER REBMANN MAXWELL & STILLMAN, FRIEDMAN & SHECHTMAN,

HIPPEL LLP P.C.

One Penn Center, 19th Fl.

1617 JFK Boulevard

Philadelphia, PA 19103-1895

Fax: 215-665-3165

William.Leonar"obermaver.com

Thomas.Leonard(,obermaver.com

Counselfor Gerald Cohn

425 Park Avenue

New York, NY 10022

Tel: 212-223-0200

Fax: 212-223-1942

jfriedman(,stillmanfriedman. com

mohnumaAstillmanfriedman.com

Lead Counselfor Gerald Cohn

David L. Comerford, Esq.

Edward F. Mannino, Esq.

Jeffery A. Dailey, Esq.

AKIN GUMP STRAUSS HAUER & FELD

LLP

One Commerce Square

2005 Market Street, Suite 2200

Robert L. Hickok, Esq.

Christopher J. Huber, Esq.

PEPPER HAMILTON LLP

3000 Two Logan Square

18th & Arch Streets

Philadelphia, Pennsylvania 19103-2799

Tel: 215-981-4000

3


Philadelphia, PA 19103

Tel: 215-965-1200

Fax: 215-965-1210

dcomerford(,akingump. com

emannino(&,,akingump.com

jdailey(,akingump. com

Counselfor Deloitte & Touche, LLP

Richard A. Levan, Esq.

LEVAN FRIEDMAN LLP

Two Penn Center Plaza, Ste. 1422

1500 John F. Kennedy Blvd.


Tel.: 215-568-9840

Fax: 215-568-9843

rlevan6b,levanfriedman.com

Counselfor Dolphin Medical, Inc.

Fax: 215-981-4750

hickokr(&,,pepperlaw.com

hubercAmoperlaw.com

Counselfor PresGar Imaging, LLC

Bruce Cohen, Esq.

Sapna Kanoor, Esq.

Scott R. Lord, Esq.

Rob Martin, Esq.

COHEN & LORD, P.C.

1801 Century Park East, Ste. 2600

Los Angeles, CA 90067-2328

Tel: 310-691-2200

Fax: 310-691-2201

rmartin(&,,cohen lord.com

bcohen(&,,cohen lord.com

Counselfor Radnet Management, Inc.

William J. O'Brien, Esq.

DELANEY & O'BRIEN

325 Chestnut Street, Ste, 1212


Tel: 215-829-4210

Fax: 215-829-4219

wjo6b,dolaw.com

Counselfor Radnet Management, Inc

David S. Hofiher, Esq.

DECHERT LLP

30 Rockefeller Plaza

New York, NY 10112

Tel: 212-649-8781

Fax: 212-698-3599

Alessandro Martuscelli, Esq.

DECHERT LLP

1717 Arch Street

4000 Bell Atlantic Twoer


Tel: 215-994-4000

Fax: 215-994-2222

4


david.hoflherAdechert. com alessandro .martuscelli(a dechert.com

Lead Counselfor OnCure Medical Corp. Local Counselfor OnCure Medical Corp.

Jeffrey W. Sarles, Esq.

Robert J. Kriss, Esq.

Nicole Byrd, Esq.

MAYER BROWN ROWE & MAW LLP

71 South Wacker Drive

Laurence S. Shtasel, Esq.

BLANK ROME LLP

One Logan Square


Tel: 215-569-5691

Chicago, IL 60606

Tel: 312-782-0600

Fax: 312-701-7711

j sarles(&,,mayerbrownrowe.com

Counselfor Canadian Imperial Bank of

Commerce Trust Company ofthe

Bahamas

Rachel B. Kane

William J. Schwartz

Emma Terrell

Celia Goldwag Barenholtz

COOLEY GODWARD KRONISH LLP

1114 Avenue of the Americas

New York, NY 10036

rkane(akronishlieb.com

wschwartz(,kronishlieb.com

eterrellAkronishlieb.com

cbarenholtz(iaronishlieb.com

Tel: 212-479-6000

Fax: 212-479-6275

Fax: 215-832-5691

shtasel(&,,blankrome. com

Counselfor Canadian Imperial Bank of

Commerce Trust Company ofthe Bahamas

John G. Harkins

Marianne Consentino

HARKINS CUNNINGHAM LLP

2800 One Commerce Square

2005 Market Street

Philadelphia, PA 19103-7042

Tel.: 215-851-6700

Fax: 215-851-6710

jharkins(aD,harkinscunnin .corn

mconsentino(cr^,harkinscunningham. com

Counselfor Clifford Chance LLP, Clifford

Chance US LLP

Counselfor Clifford Chance LLP,

Clifford Chance US LLP

Steven D. Johnson

GIBBONS, DEL DEO, DOLAN,

GRIFFINGER & VECCHIONE PC

1700 Two Logan Square

18th & Arch Streets


Tel: 215-665-0400

Mark C. Hansen

Antonia M. Apps

David E. Ross

KELLOGG, HUBER, HANSEN, TODD,

EVANS & FIGEL PLLC

1615 M Street, NW, Suite 400

Washington, DC 20036-3209

5


Fax: 215-636-0366

sjohnson(,gibbonslaw.com

Counselfor Thomas J. Pritzker and The

Pritzker Organization LLC

C. Clark Hodgson, Jr., Esq.

Michael D. O'Mara, Esq.

STRADLEY, RONON, STEVENS &

YOUNG, LLP

2600 One Commerce Square


Tel: 215- 564-8000

Fax: 215-564-8120

chodsgon(cD,stradley.com

mo'[email protected]

Local Counselfor Merrill Lynch & Co.,

Inc.

Tel: 202-326-7900

Fax: 202-326-7999

mhansen(crbkhhte. com

aapps(&,,khhte.com

dross(&,,khhte.com

Counselfor Thomas J. Pritzker and The

Pritzker Organization LLC

Gregory Ballard, Esq.

Liz Butler, Esq.

Benjamin Gardner, Esq.

Gregory A. Markel, Esq.

William S. Norton, Esq.

Gabriel M. Weaver, Esq.

Amy Miller, Esq.

Gazeena Soni, Esq.

CADWALADER, WICKERSHAM & TAFT LLP

One World Financial Center

New York, New York 10281

Tel: 212-504-6000

Fax: 212-504-6666

gregory.ballard(,cwt. com

liz.butlerA,,cwt.com

greg.markel(,cwt.com

benjamin. (ibcwt.com

william.nortonAcwt.com

gabriel.weaver(cb,cwt.com

6


amy.millei cwt.comgazeena. [email protected]

Lead Counselfor Merrill Lynch & Co., Inc

11/2/2006


EXHIBIT A





AFFIDAVIT OF MICHAEL R. KARNUTH IN SUPPORT OFPETITION FOR ATTORNEY'S FEES AND

REIMBURSEMENT OF EXPENSES

1. I am an associate of the law firm of Krislov & Associates Ltd. I submit

this affidavit in support of this firm's application for an award of attorneys' fees in

connection with services rendered in the above-titled case, as well as the reimbursement

of expenses incurred by the firm in connection with this litigation.

2. Lead Plaintiffs , Kenneth Grossman, Cedar Street Fund , and Cedar Street

Offshore Fund, selected Krislov & Associates, Ltd. as their Lead Counsel, and this Court

appointed this firm as Lead Counsel for Lead Plaintiffs and the proposed class. Krislov

& Associates Ltd. as well as Chimicles & Tikellis LLP, whom this Court appointed

Liaison Counsel, have vigorously prosecuted this action, including, but not limited to: the

investigation, research, and preparation of complaints; the motions related to those

complaints; fact discovery including document review and analysis and motion practice

in connection with discovery; expert discovery; work and negotiations related to the

settlements currently pending before this Court; and the overall litigation strategy on

behalf of the proposed class.

3. Attached hereto as Exhibit 1 is a detailed summary articulating the amount

of time, by category, spent by each attorney, paralegal, and/or other staff member who

was involved in the above-titled litigation, and the lodestar calculation based upon the


billing rates for such attorneys, paralegals, and staff members. For attorneys, paralegals,

and staff members who are no longer employed by Krislov & Associates, the lodestar

calculation is based upon the billing rates for such attorneys and paralegals in his or her

final year of employment by the firm. The schedule was prepared from contemporaneous,

daily records regularly prepared and maintained by the firm. Time expended in preparing

this application for fees and reimbursement of expenses has not been included in this

request.

4. The hourly rates for the attorneys, paralegals, and staff members in this

firm that are included in Exhibit 1 are the same as the regular current rates charged for

their services in non-contingent matters and/or which have been accepted and approved

in other class action cases.

5. The total number of hours expended on the above-titled litigation through

September 30, 2006 is 12,928.51 hours. The total lodestar calculation for Krislov &

Associates is $3,330,181.50.

6. K islov & Associates lodestar figures are based upon the firm's billing

rates, which do not include charges for expense items. Expense items are billed

separately and such charges are not duplicated in the hourly billing rates.

7. Exhibit 2 details Krislov & Associates unreimbursed expenses, which total

$361,890.88.

8. The expenses incurred in this action are reflected on the books and records

of Krislov & Associates. These books and records are prepared from expense vouchers,

check records, and other source materials and are an accurate recordation of the expenses

incurred.


9. With respect to the standing of counsel in this case, attached hereto as

Exhibit 3 is a brief biography of Krislov & Associates and its attorneys, including those

who were involved with this litigation.

I declare under penalty of perjury that the foregoing is true and correct.

Executed this 2nd day of November, 2006.

/s/ Michael R. KarnuthMichael R. Karnuth


EXHIBIT 1


DVI SECURITIES LITIGATIONLodestar Report

Firm : Krislov & Associates, Ltd.Period : Inception through September 30, 2006

Name & Status Total Hours Current Hourly Rate Total Lodestar

Clinton A. Krislov p 1,138.90 $550.00 $626,395.00

Michael R. Karnuth A 3,563.90 $350.00 $1,247,365.00

M. Reas Bowman A 806.60 $250.00 $201,650.00

W. Joel Vander Vliet A 553.50 $250.00 $138,375.00

Elizabeth Dixon A 106.90 $250.00 $26,725.00

Jason Stiehl FA 5.20 $275.00 $1,430.00

Brian Stalets CA 446.15 $250.00 $111,537.50

Timothy J. Weber LA 2,293.50 $150.00 $344,025.00

Michalene McElligott LA 246.20 $150.00 $36,930.00

Charles Wysong LA 570.70 $150.00 $85,605.00

Mathew D. Dudek LC 576.80 $150.00 $86,520.00

Robert P. DeWitte LC 304.40 $150.00 $45,660.00

Amy Keller LC 141.80 $150.00 $21,270.00

Dean F. Pettinga LC 326.16 $150.00 $48,924.00

Jeffrey M. Salas LC 276.30 $150.00 $41,445.00

Carey J. Crimmons FCA 62.50 $250.00 $15,625.00

Michele A. Dukes FCA 257 $250.00 $64,250.00

Jessica McGill FLC 1.30 $150.00 $195.00

Katherine Eisenmann FLC 237.60 $150.00 $35,640.00

M. Reas Bowman FLC 459.40 $150.00 $68,910.00

Krista Young FLC 51.20 $150.00 $7,680.00

W. Joel Vander Vliet FLC 346.30 $150.00 $51,945.00

Catherine Cifonelli FPL 130.90 $150.00 $19,635.00

Clint Costa FLC 16.30 $150.00 $2,445.00

TOTALS: 12,928.51 n/a $3 ,330,181.50

P = Partner; A = Associate; FA = Former Associate CA = Contract Attorney; LA = LegalAssistant; LC = Law Clerk; PL = Paralegal; FPL = Former Paralegal; FLC = Former LawClerk; FCA = Former Contract Attorney


EXHIBIT 2


DVI SECURITIES LITIGATIONEXPENSE REPORT

Firm: Krislov & AssociatesPeriod: Inception through September 30, 2006

Description Amount

Photocopies :In-house : 25,785.32Outside: 53,264.17

$79,049.49

Scanned Documents $1,206.45

Postage $963.23

Telephone-long distance $395.16

Fax $24,774.00

Messenger $3,655.97

Office Supplies $8,502.24

Online Research $45,791.09

Experts $75,000.00

Consultants $62,930.00

Press Release $910.00

TRAVEL:Airfare: $14,130.46Meals: $2,504.16Hotels: $6,247.27Parking : $297.50Taxi: $5,168.80Rental Car: $1,102.50Other : $110.73

$29,561.42

Litigation Support $15,835.70

Filing Fees $230.00

Summons Service $1 ,739.00

Mediation Fee $10,177.13

Witness Fees $1,170.00

TOTALS: $361,890.88F:\CASES\DVI\Reports\Expenses Inception to 9-30-06.wpd


EXHIBIT 3

Case 2:03-cv-05336-LDD Document 400-4

KuISLOV & A.SSOGTATES, LTD.

Filed 11/02/2006 Page 10 of 25

CIVIC OPERA BUILDING , SUITE 1350

20 NORTH WACKER DRIVE

CHICAGO, ILLINOIS 60606

FAX (312) 606-0207

TELEPHONE (312) 606-0500


Civic Opera Building, Suite 135020 North Wacker DriveChicago, Illinois 60606Telephone: 312-606-0500Facsimile: 312-606-0207

email: clint e,krislovlaw.comwebsite: www.krislovlaw.com

For over 20 years, Krislov & Associates, Ltd. has specialized in litigating complex class

and derivative litigation involving nationwide consumer, securities, Qui Tam/whistleblower,

governmental wrongdoing and corruption, and pension matters.

Krislov & Associates has been lead counsel for plaintiffs or objectors in numerous major

federal and state cases throughout the country, and has earned nationwide stature as independent,

honest and aggressive attorneys pursuing the interests of investors, taxpayers, working families

and the public.

1. Securities/Shareholder Rights . Krislov & Associates has been involved in

complex corporate shareholder and takeover litigations, especially in cases involving truly

complex valuation issues . These cases include:

(a) In re Nationsbank/BankAmerica Securities Litigation , MDL 1264 (E.D.Mo.,Nangle, DJ) (Executive Committee member in $100 Billion bank "merger ofequals" shaken by post-merger disclosures of hedge fund losses) (participated inachievement of $490 million settlement), 263 F.3d 795 (8`h Cir. 2001);


K$ISLOV & ASSOCIATES, LTD.

(b) In Re Prudential-Bache Energy Income Partnerships Securities Litigation , MDLNo. 888 (E.D. La.), (lead Objectors' counsel, forced the disclosure of Prudential'sinternal "Locke Purnell" audit showing truly corrupt actions in selectingpartnerships to "pump" through the Pru sales force, blocked an early-stage lowcash rollup settlement, forced an auction and found the high-bid purchaser whoultimately paid $508 million for the auctioned partnerships, and ultimately alsohelped produce an improved settlement of $120 million additional cash fromPrudential Securities);

(c) Massad v. Prudential Insurance Co. (global Civil RICO case against PrudentialSecurities initiated from knowledge gathered in Prudential partnership litigationcase; became the global civil RICO case referred to as In Re Prudential Securities,Inc. Limited Partnerships Litigation , MDL No. 1005 (S.D.N.Y.), which producedmore than $110 million cash for all of Prudential's limited partnership unit-holders nationwide, see also 163 F.R.D. 200 (S.D.N.Y. 1995) (preliminaryapproval) and 912 F. Supp 97 (S.D.N.Y Jan. 24, 1996) (award of fees followingfinal approval));

(d) In re DVI, Inc. Securities Litigation, 2:03-cv-5336 (E.D. Pa.) (sole lead counsel forCommon Stock and 9-7/8% Senior Note purchasers) (successfully defendedagainst numerous motions to dismiss , 2005 WL 1307959 (E.D. Pa., May 31,2005),as well as motions for reconsideration and summaryjudgment, and enteredinto settlement agreements with three of nineteen named defendants, case iscurrently proceeding with discovery);

(e) In re Safety-Kleen Rollins Shareholder Litigation, (D. So. Carolina, Judge JosephF. Anderson, Jr.) (co-lead counsel) (survived motions to dismiss and summaryjudgment, obtained class certification and, in 2005, entered into settlementstotaling $3.15 million in action asserting § 14(a) proxy claims on behalf of formerRollins shareholders; settlement represented a substantial recovery of classmember estimated losses);

(f) In re First Chicago Shareholder Securities Litigation , (N.D. Ill.) (ExecutiveCommittee member in action asserting § 11, 12(a) and 14(a) claims brought onbehalf of First Chicago Shareholders in connection with Bank One Merger; actionsettled in 2005 for $120 million);

(g) Mercury Finance Company Securities Litigation , (cooked book finances ofsubprime auto lender, Krislov firm helped organize diverse groups of competingclaims and counsel in federal and state court, bankruptcy court and outsidearbitration, ultimately designated lead counsel for state court claimants in bothstate and federal courts, bankruptcy and arbitration matters, instrumental inachieving multi-court settlements and arbitration of claims resulting in multi-

2


K$ISLOV & ASSOCIATES, LTD.

million dollar recovery to the Class);

(h) Malone v. Brincat , 722 A.2d 5 (Del . Sup. 1998), establishing actionable director

duties of full disclosure to shareholders;

(i) Gavin v. AT&T Corp ., 464 F.3d 634 (7th Cir. 2006), Corporation charged

shareholders for delivery of stock certificates in connection with a merger when

shareholders could have obtained certificates for free. (Seventh Circuit reversed

dismissal of case pursuant to Securities Litigation Uniform Standards Act, and

remanded to Northern District of Illinois to proceed on the merits of Plaintiffs state

law claims).

2. Government Mismanagement, Fraud and Corruption . The Krislov firm is

perhaps best known in Illinois for its "private attorney general" practice, in derivative actions

brought against state and local governments to correct the massively under-funded state and local

pension systems . Cases include, Ryan v. City of Chicago , 148 Ill . App. 3d 638 (1st Dist. 1986)

and 274 Ill. App. 3d 483 (1st Dist . 1995), in which we recovered over $32 million cash, $80

million total benefits , and fundamentally improved the handling of City pension tax levies, ending

the City's illegal use of pension tax levies for its own benefit . In People ex rel. Sklodowski v.

State , 284 Ill. App. 3d 809 (1st Dist. 1996), see also, 162 I11.2d 117 (1994) and 182 Ill. 2d 220

(1997), we blocked the State's conversion of $51 million from the State Pensions Fund to State

general budget use, and initially established the courts' power to compel State Officials to comply

with statutory minimum contribution obligations for Illinois' five funded retirement systems to

correct a shortfall now totaling $3.4 billion. In litigation spanning over 16 years, we have fought

for annuitants' contractual rights to promised lifetime healthcare coverage. In City of Chicago v.

Korshak, 206 Ill . App. 3d 968 (1st Dist . 1990) and Retired Chicago Police Ass'n v. City of

Chicago , 7 F.3d 584 (7th Cir. 1992), parallel state and federal cases, the Krislov firm forced the

3



City of Chicago to continue a fixed-rate subsidized plan of retiree health care insurance for 21,000

annuitants and their families, and, despite setbacks during various periods, successfully had these

claims restored by the Illinois appellate court . City v. Korshak, Ill. App. unpublished order, (1St

Dist. 2000), obtained injunctive relief, and ultimately obtained a settlement which ensures

annuitant healthcare coverage through 2013 and beyond for Chicago Police, Firemen, Municipal

Employees and Laborers.

The Krislov firm has also recovered funds for the government, due to governmental fraud,

abuse and mismanagement . See, County of Cook ex rel . Rifkin v. Bear Steams , 215 I11.2d 466

(2005); Scachitti v. UBS Financial Services , 215 Ill.2d 484 (2005) and City of Chicago ex rel.

Scachitti v. Prudential Securities , 332 Ill. App.3d 353 (Ill App. 2002) PLA den. (establishing

constitutionality of whistleblower actions against underwriters "yield burning", i.e. overcharging

municipalities on refinancing government debt litigation, established ability of whistleblowers to

employ "nullum tempus" doctrine eliminating ordinary limitations periods on claims for

government entities); see also, Ryan v. Cosentino, 776 F. Supp. 386 (N.D. Ill. 1991), 793 F. Supp.

822 (N.D. Ill. 1992), and 1995 WL 516603 (N.D. Ill. August 24, 1995) ($ 14 million judgment

obtained for corrupt loans to public officials in exchange for deposits of State monies without

interest); and McKay v. Kusper, 252 Ill. App. 3d 450 (1993).

3. Private Pension . ERISA matters . We also have particular expertise in litigating

issues of protecting pension benefits over corporate manipulation and in ERISA-related matters.

In Montgomery v. Aetna Plywood , 231 F.3d 399 (7' Cir. 2000), we doubled the Profit

Sharing accounts of the 100 participants whose ESOP [Employee Stock Ownership] had been

redeemed out of the 95% ownership of their employer for less than half of fair value, won a

4



judgment after a 3-week bench trial, and successfully completed a recovery of $7 million cash

plus restored 20% ownership of company.

We were also brought in to settle remaining ESOP fiduciary claims arising from the

SEARS buyout in which management was accused of selling a large percent to a newly-created

ESOP to thwart the outside takeover threat.

Clair v. Harris Trust & Savings Bank, 190 F.3d 495 (7th Cir. 1999), established payout

requirements from qualified plans.

In Brannan v. Health Care Service Corp. , 00 C 6884 (N.D. Ill. Mag. Judge Geraldine Soat

Brown), the Firm served as co-lead counsel in case which, in 2004, obtained a $6.95 million

settlement, plus prospective relief valued at millions more, for class of insureds who were

damaged by Blue Cross's alleged practice of seeking reimbursement liens for amounts greater

than what they actually paid health care providers and for failing to reduce their liens pursuant to

Illinois' common fund doctrine.

4. Civil RICO. The Krislov firm has also established significant precedent in the

consumer protection field, especially in Civil RICO matters . In Commercial Cleaning Services

LLC v. Colin Service , 271 F.3d 374 (2nd Cir. 2001) we established that competitor companies

may use Civil RICO against competitors whose hiring of undocumented aliens enabled them to

underbid the competition.

5. Consumer Protection and Antitrust Matters . We are or have been lead counsel

for nationwide consumer litigation and have established significant law in the consumer

protection field, including:

(a) South Austin Coalition Community Council v. SBC Comm. Inc ., 274 F.3d 1168

5



(7th Cir. 2001) (antitrust challenge to SBC-Ameritech merger);

(b) Beckwith Place L.P. v. General Electric Co. , Cook Co. Circuit Court, No. 99 CH18240 (certified nationwide class against General Electric arising fromdishwashers containing a defective switch causing fires; case settled);

(c) Zapka v. Coca-Cola Co. , 2001 U.S.Dist. LEXIS 20155 (N.D.Ill. 2001) (deceptivemarketing of diet Coke, without disclosing that fountain version containssaccharin ; settled action);

(d) Zazove v. Pelikan. Inc. , 326 Ill. App. 3d 798, 761 N.E.2d 256 (1s` Dist. 2001)(establishing Illinois jurisdiction over foreign producer of consumer products forconsumer claims under stream of commerce concept);

(e) Brody v. Finch Univ./Chicago Medical School, 298 Ill.App. 146, 698 NE2d 257(2d Dist. 1998) (right of students to enter into medical school under graduateprogram);

(f) In re Starlink Corn products , MDL 1403 ($9 million settlement for consumers)(lead counsel for consumer claims arising from the dispersion of the geneticallyengineered StarlinkTM corn strain into human food products); and

(g) DeGradi v. KB Holdings=Inc. , 02 CH 15838, Cir. Ct. of Cook County, Illinois,Chancery Division (obtained $3 million settlement from toy store company whoallegedly improperly manipulated product prices to the public); and

(h) Cruz v. Blue Cross/Blue Shield of Illinois , 00 CH 14182 (Cir. Ct. Cook County,Ill.); Blue Cross/Blue Shield of Illinois v. Cruz , 2003 WL 22715815 (N.D. Ill. Nov.17, 2003); and 396 F.3d 793 (7th Cir. 2005)(parallel state and federal litigationover Blue Cross's claimed reimbursement right against third-party recoveries and;obtained summary judgment for Plaintiff and a certified class in the state litigation;prevailed at district court level in the federal action, and successfully vacated theSeventh Circuit's dismissal before the United States Supreme Court, 126 S. Ct.2964 (June 26, 2006); See Also , Empire Healthchoice Assur. v. McVeigh, 126 S.Ct. 2121 (2006), in which Krislov firm acted as amicus in support of McVeigh, theprevailing party, and cited Id. at 2135, in the United States Supreme Court'sdecision regarding the scope of federal jurisdiction and preemption under theFederal Employee Health Benefits Act and federal common law.

We have also paved the way for Illinois consumer actions against banks and utilities, as

lead or co-lead counsel in the following cases:

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KRISLov & ASSOCIATES, LTD.

(a) Allenson v. Hoyne, 272 Ill. App. 3d 938 (1st Dist . 1995) (civil RICO cause upheld

in state court over misamortizing of home mortgage payments);

(b) Cohan v. Citicorp , 266 Ill. App. 3d 626 (1st Dist. 1993)(charges on ADR shares of

foreign securities);

(c) In re Commonwealth Edison 1990 Chicago Power Outages, Cook Co. Cir. Ct.,

Nos. 90-7547 and 90-7637 (the firm recovered $4 million for some 63,000 low-

income customers for damages from extended power outages); and

(d) In re Illinois Bell , Cook Co. Cir. Ct., Nos. 91-930, 91-1354 and 91-12529 (firm

recovered $3.5 million over disputed late charges and surcharges).

6. Actions as Independent Objector Counsel . We are also independent, and

uniquely have not hesitated to intervene and fight to block or improve corporate transactions and

litigation settlements, which need to be blocked or improved. Representative cases include: In

Re Scattered Corp. , N.D. Ill., No. 93 C 4069 (Co-lead Plaintiffs ' counsel in a case challenging

massive short-selling of LTV common shares); Lyphomed Shareholder Liti agtion, Cook Co. Cir.

Ct., No. 89 CH 7585, (Lead counsel in shareholder litigation over Fujisawa takeover); Starr v.

Graham Energy, (Counsel for Objectors in New Jersey and for Plaintiffs in Delaware derivative

litigation); Hooker v. JMB/Arvida, N.D. Ill., No. 92-C-7148 (Co-lead objectors' counsel against

settlement of investor class' loss of entire $234 million investment for $6 million); In re Domestic

Air Transp. Antitrust Litig. , MDL No. 861, 148 F.R.D. 297 (N.D. Ga.) (Krislov firm was one of

the Objectors' counsel and was instrumental in identifying problem areas of the widely criticized

settlement and eliminating the prohibition on use of the settlement coupons through travel agents);

and Michael Milken and Associates Securities Litig. , MDL No. 924 (S.D.N.Y.) (Krislov was a

member of the nationwide Allocation Committee of the plaintiffs' counsel). We forced the

disqualification of lead counsel in the MDL proceedings over the conspiracy to fix floor prices for

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KBISLOV & ASSOGL&TES, LTD.

compact disc music . In re Compact Disc Minimum Advertised Price Antitrust Lit. , 2001 WL

243494, (D.Me. 3/12/2001)(Hornby, Ch.D.J.) (cased settled for $115 million).

7. Mass Tort Litigation . As counsel for Longshore Objectors, Krislov uncovered

potentially fatal defects in the original asbestos mega-settlements in the federal courts in

Philadelphia and in Tyler, Texas and devised the use of a defendant third-party employer class to

prevent individual potential forfeiture of Longshore Act benefits for longshoremen and harbor

workers nationwide, without which the settlement could not have been approved. Ahearn v.

Fiberboard, No. 6:93-cv-526, 1995 U.S. Dist. Lexis 11522, 11532, 11062 (E.D. Tex. July 27,

1995), affirmed In re Asbestos Liti gation, 90 F. 3d 963 (5th Cir. 1996), reversed on other grounds.

8. Partnership Rollup Litigation . Krislov & Associates has a nationwide reputation

for contesting unfair "rollup" transactions in which limited partnerships are consolidated into new

listed corporate entities in which existing management obtains an unfair proportion of the

surviving entity. Krislov has been lead or co-lead counsel in cases in Delaware, Preim v.

Franchise Finance Corp . of America, De. Ch. C.A. No. 13192 (reduction of management share in

$900 million rollup); in Louisiana, In re Prudential-Bache Energy Income Partnerships Securities

Liti agtion, MDL No. 888 (forced $500 million auction plus improved $120 million settlement);

and in California, Blumberg v. Glenborough Realty Corgi , No. 391223 (Cal. Super. Ct. San Mateo

Co.) ($100 million real estate rollup).

9. Major Tax Litigation . Prior to focusing on class actions, Mr. Krislov was a tax

litigator involved in the litigation of major tax disputes, civil and criminal, with the federal

government. See, e.g., Caterpillar Tractor Co. v. United States , 589 F.2d 1030 (7th Cir. 1978)

(interplay of Domestic International Sales Corporation and Western Hemisphere Trade Company

8



export provisions); Estate of Jenner Commissioner, T.C. Memo 1977-54 (U.S. Tax Ct. 1977),

rev'd on different grounds 577 F.2d 1100 (7th Cir. 1978) (pre-IPO valuation of largest block of

shares of closed-end investment company and permitting deduction of underwriting commission

for Estate Tax and Estate Income Tax).

10. Constitutional Litigation . Matter of Grand Jury Subpoena Duces Tecum, 725

F.2d 1110 (7th Cir. 1984) (establishing invalidity of subpoenas issued by U.S. Attorneys without

Grand Jury authorization). Shaper v. Tracy, 97 Ohio App. 3d 760 (1994), cert. denied, 116 S. Ct.

274 (1995) and 76 Ohio St. 3d 241, 667 N.E. 2d 368 (1996). Dormant Commerce Clause

challenge to discriminatory state income taxation of only foreign-state municipal income.

11. Environmental Class Actions . Enzenbacher v. Browning Ferris Ind. Of Ill ., 332

111. App. 3d 1079 (2°d Dist. 2002) settled case involving trespass and nuisance issues related to

landfill on behalf of neighbors of the landfill.

12. Veterans Employment Rights . Veterans Legal Defense Fund v. Schwartz , 330

F.3d 937 (7"' Cir. 2003). Veterans' right to statutory preferential hiring for state job openings.

13. Voting Rights; Election Law . In the widely cited Krislov v. Rednour , 97 F.

Supp. 2d 862 (N.D. Ill. 2000), affirmed 226 F.3d 851 (7th Cir. 2001), cert. den. sub nom

McGuffage v Krislov , 531 US 1147 (2001), Mr. Krislov successfully attacked Illinois' ballot

petition procedures that had previously prevented non-organization candidates from getting on the

ballot. On v. Edgar, 179 Ill. 2d 589 (1998), State constitution challenge to statute eliminating

straight ticket ballot.

In another voting rights victory, the Krislov firm obtained class certification of a bi-lateral

class of all absentee voters whose ballots were rejected without receiving notice until after the

9


KRISLOV $e ASSOCIATES, LTD.

canvas of votes (so their votes were not counted) and against a defendant class of all 111 Illinois

election authorities, ensuring that absentee ballot voters have uniform rights statewide. Zessar v.

Helander. et al . , 2006 WL 573889 (N.D. Ill. Mar. 7, 2006) (certifying double classes); Zessar v.

Helander, et al. , 2006 WL 642646 (N.D. Ill. Mar. 13, 2006) (granting Summary Judgment to

Plaintiffs and the class).

14. Representation of Defendants . Krislov & Associates has also represented

defendants in very limited instances. Primax v. Sevilla, 324 F. 3d 844 (7`h Cir. 2003)

(successfully defended against plaintiff's action brought against named plaintiff, which was

essentially an action brought in federal court to collaterally attack the progress of a state court

class action); see also, LaSalle v. Medco , 54 F.2d 443 (7th Cir. 1995); Lorence/Gallagher v.

Cannonball, Inc. , Cook Co. Cir. Ct., Nos. 89 CH 11016 and 89 CH 11347 and Cruz v. Blue

Cross/Blue Shield of Illinois , 396 F.3d 793 (7th Cir. 2005), vacated by, 126 S. Ct. 2964 (2006).

15. Favorable Mention by Courts . The standing of the Krislov firm in successfully

conducting complex and class action litigation has been favorably noted by the courts. For

example, in Ryan v. City of Chicago , Cook Co. Cir. Ct., No. 83-CH-390, former Chief Chancery

Judge Curry characterized our battle for the integrity of pension fund moneys against the forces of

the City and its pension funds, who had engaged in the "Mugging of the Good Samaritan" stating:

The petitioner's [Krislov] efforts for and on behalf of the Firemen'sFund have now spanned nine years. His energy, persistence andlegal scholarship have (1) righted a serious wrong, (2) securedrestitution for past misconduct, (3) created a climate which willassure fidelity in transmitting future pension fund tax receipts, (4)delivered a handsome recovery, (5) enhanced that recovery byferreting out auditing mistakes, (6) secured an award of compoundinterest, and (7) engaged in collateral litigation so as to protect thebenefits gained for the Firemen's fund.

10


KRISZOV & ASSOCIATES, LTD.

Slip Op., December 14, 1992, at 7.

In approving the Firm's settlement with Blue Cross, Magistrate Judge Geraldine Soat

Brown stated:

I will note for the record that this Court presided over literally ascore of settlement conferences in this case, at least nine of whichwere in person, and I think I counted - I stopped counting at eleventelephone settlement conferences in this case. Both sides wererepresented by able and experienced counsel who have representedparties in class actions of this nature and have made an informedevaluation of the benefits of settlement in light of the risks oflitigation and possible recovery.

I think counsel has certainly earned the fees that are going to beawarded them in this case by the able way they have taken this caseon, the fact that in these very difficult and complex issues they were able toassemble law, argument, discovery to support and bring the defendant to thetable, and obtain a settlement of this case that benefits the class in this way. Thoseattorneys' fees are reasonable and well deserved.

September 30, 2004 Transcript of Final Hearing on Settlement before Magistrate Judge Geraldine

Soat Brown.

Major Pending Cases of Note :

Courtney v. Halloran (7"' Cir. 2006). As attorney for under-insured depositors in failed Superior

Bank, we are challenging the FDIC's agreement with the Pritzker family, under which Bank

shareholders receive preferential payments from third party recoveries while depositors remain

unpaid.

Metro v. Amway Asia Pacific (Mich. App. 2006). Challenge by public shareholders forced out of

11


KRISLOV 8c ASSOCIATES, LTD.

Pacific Rim trading company by Amway controlling families' unfairly priced buyout of shares on

eve of China' s admission to World Trade Organization.

Cruz v. Blue Cross/Blue Shield of Illinois , (Ill. Cir. Ct. 2006) Proceeding in state court after

United States Supreme Court decision vacated ruling by Seventh Circuit in Blue Cross's favor, on

behalf of federal employees insured under a Blue Cross plan against whom Blue Cross seeks

reimbursement for more than they are entitled.

12



Filed 11/02/2006 Page 22 of 25

KRISLOV & ASSOCIATES. LTD.

ATTORNEY BIOGRAPHIES

CLINTON A. KRISLOV

Clint Krislov, a graduate of Northwestern University (B.A. 1971), Phi Beta Kappa, and

Cornell Law School (1974), is the founder and senior attorney of Krislov & Associates, Ltd. Mr.

Krislov is admitted to practice in Illinois and Michigan state courts, the United States Supreme

Court, numerous Circuit Courts of Appeals, and the trial bar of the federal court for the Northern

District of Illinois. Mr. Krislov is an Adjunct Professor of Law at Chicago-Kent College of Law,

teaching courses in Consumer Protection Law (2001 -present) and federal income tax (1976-7),

and the author of several articles, including: The Illinois Consumer Fraud Act: Hey! What

Happened to all the Strict Constructionists ?, Judicial Add-Ons are Ruining a Perfectly Good

Statute , 11 Loyola Consumer Law Review 224 (1999); "Scrutiny ofthe Bounty: Incentive Awards

ofPlaintiffs in Class Actions ," 78 Illinois Bar Journal 286, June 1990; "Tax Considerations in

Buying, Selling and Dissolving the Professional Practice," in Professional Practices , HCLE, 1986;

"Civil and Criminal Tax Litigation ," in 1981 Federal Tax Skills Course, IICLE, 1981 ; "Evaluating

Publicly Syndicated Investments ," in Basic Tax Shelters, IICLE, 1984.

Mr. Krislov has also served three terms as Chair, following two terms as vice-Chair, of the

Chicago Bar Association Class Litigation Committee, and initiated programs of bench-bar

communications which continue. Mr. Krislov also serves as a member of the Board of Editors of

13


KRISLOV & ASSOGI&TES, LTD.

Class Action Reports (1992-present), the Board of Trustees of the Chicago Chapter of the Federal

Bar Association (1995-96), and the Chicago Region ABA-IRS Nonfiler Initiative (joint Program

to reach out nationwide to persons who had not filed income tax returns offering amnesty-type

opportunity to get on the system without fear of prosecution).

As a former candidate for the United States Senate and Illinois Attorney General, Mr.

Krislov has also led the fight to open the electoral system fairly for all participants. He is the 2001

recipient of Independent Voters of Illinois-Independent Precinct Organization ' s "Legal Eagle"

award for his work in election reform and defense against corporate overreaching.

KENNETH T. GOLDSTEIN

Ken Goldstein is a graduate of the University of Wisconsin, Madison (B.A. 1990) and The

John Marshall Law School (J.D. 1996). He was a member ofThe John Marshall Moot Court Council,

Spring 1995. He was admitted to practice in Illinois state and federal courts in 1997. Mr. Goldstein

has been active in electoral and legislative politics in Illinois. He joined the firm of Krislov &

Associates in January 1998. His practice is concentrated in consumer class actions and antitrust

actions.

MICHAEL R. KARNUTH

Mike Karnuth was born in Chicago, Illinois on September 8, 1965; admitted to Illinois

state bar on May 6, 1999, and U.S. District Court, Northern District of Illinois 1999. Mr. Karnuth

is also admitted to the Court of Appeals for the Seventh Circuit and to the bar of the United States

14



Supreme Court. Education: Loyola University of Chicago (B.A., 1988); Certified Public

Accountant (1991); Chicago-Kent College of Law (1999 J.D., with honors). Recipient: CALI

Award, Advanced Research - Securities. During law school, Mr. Karnuth interned for Judge

Blanche Manning of the federal district court for the Northern District of Illinois. Member:

Chicago, Illinois State and American Bar Associations , Illinois CPA Society and American

Institute of Certified Public Accountants. Practice Areas: class action and complex litigation.

ELIZABETH NEUGENT DIXON

Elizabeth is a graduate of Marquette University in Milwaukee, Wisconsin (B.A. 2000) and

Drake University Law School (J.D. 2003). During law school , Elizabeth was a member of the

moot court board, worked as a summer intern for Judge Ronald Bartkowicz in the Circuit Court of

Cook County, and was a prosecutor intern in Polk County, Iowa. She was admitted to practice in

Illinois State Court on November 6, 2003.

W. JOEL VANDER VLIET

Joel graduated with honors from Hope College in Holland, Michigan in 2000 with a

Bachelor of Arts in Chemistry and Philosophy. He graduated from the University of Michigan

Law School in 2004. While in law school, Joel spent his summers working both as an intern for a

county prosecutor where he tried bench trials and negotiated plea agreements , and also as a

research clerk for a federal magistrate judge. He also served as an editor of the student

newspaper, Res Gestae, and was a representative in the Student Senate. Joel was admitted to

15


KBISLOV & ASSOCIATES, LTD.

Filed 11/02/2006 Page 25 of 25

practice in Illinois state court in 2005 and has been an attorney at Krislov & Associates, Ltd. since

February 2005.

M. REAS BOWMAN

Reas graduated from DePauw University at Greencastle , Indiana in 2002 with a Bachelor

of Arts in Economics . At DePauw, he was a Management Fellows Honor Scholar and received

the Communication Department scholarship grant all four years he attended. Reas then went on

to Chicago-Kent College of Law, earning his Juris Doctorate in 2005 , with a Litigation and

Dispute Resolution certificate. While in law school, Reas became a certified mediator with the

Center for Conflict Resolution and mediated cases in the Illinois Circuit Court. He has been with

Krislov and Associates since 2003, and was admitted to the Illinois Bar in 2005.

16


EXHIBIT B

Case 2 :03-cv-05336-LDD Document 400-5 Filed 11/02/2006 Page 2 of 33


IN RE: DVI, INC. SECURITIES LITIGATION CIVIL ACTIONNO. 2:03-cv-05336-LDD

DECLARATION OF STEVEN A. SCHWARTZ INSUPPORT OF PETITION FOR ATTORNEYS' FEES AND

REIMBURSEMENT OF EXPENSES

I am a member of the law firm of Chimicles & Tikellis LLP. I submit this affidavit

in support of my firm's application for an award of attorneys ' fees in connection with services

rendered in this case , as well as the reimbursement of expenses incurred by my firm in connection

with this litigation.

2. Lead Plaintiffs selected and, pursuant to the PSLRA, this Court appointed my firm

as Liason Counsel for Lead Plaintiffs and the proposed class in this class action. My firm has

worked closely with Lead Counsel in all aspects of the prosecution of this litigation, including, but

not limited, to the investigation, research and preparation of the various complaints; motion practice

related to those complaints; all aspects of fact discovery including document review and analysis and

related motion practice; expert discovery; work and negotiations related to the settlements currently

pending before the Court; and the overall litigation strategy on behalf of the proposed class.

3. The schedule attached hereto as Exhibit 1 is a detailed summary indicating the

amount of time, by category , spent by each attorney and paralegal of my firm who was involved in

this litigation, and the lodestar calculation based on my firm's current billing rates. For attorneys

and paralegals who are no longer employed by my firm, the lodestar calculation is based upon the

billing rates for such attorneys and paralegals in his or her final year of employment by my firm.

The schedule was prepared from contemporaneous , daily time records regularly prepared and


maintained by my firm. Time expended in preparing this application for fees and reimbursement of

expenses has not been included in this request.

4. The hourly rates for the attorneys and paralegals in my firm included in Exhibit 1 are

the same as the regular current rates charged for their services in non-contingent matters and/or

which have been accepted and approved in other securities or shareholder litigation.

The total number of hours expended on this litigation by my firm through October

15, 2006 is 4,713 hours . The total lodestar for my firm is $1,915 ,790.00.

6. My firm's lodestar figures are based upon the firm's billing rates, which rates do not

include charges for expense items. Expense items are billed separately and such charges are not

duplicated in my firm's billing rates.

7. As detailed in Exhibit 2, my firm has incurred a total of $23,839. 92 in unreimbursed

expenses in connection with the prosecution of this litigation.

8. The expenses incurred in this action are reflected on the books and records of my

firm. These books and records are prepared from expense vouchers, check records and other

source materials and are an accurate recordation of the expenses incurred.

9. With respect to the standing of counsel in this case, attached hereto as Exhibit 3 is a

brief biography of my firm and attorneys in my firm who were principally involved in this litigation.

I declare under penalty of perjury that the foregoing is true and correct.

Executed this 24th day of October, 2006.

/s/Steven A. Schwartz

STEVEN A. SCHWARTZ


EXHIBIT 1


IN RE DVI SECURITIES LITIGATIONCHIMICLES & TIKELLIS LLPTIME REPORTINCEPTION THROUGH OCTOBER 15, 2006

NAME*TOTALHOURS

HOURLYRATE LODESTAR

Chimicles, Nicholas E. P 40.00 $675.00 $27,000.00Tikellis, Pamela S. P 0.25 $600.00 $150.00Malone, James R. Jr. P 11.50 $550.00 $6,325.00Gottsch, Michael D. P 0.25 $500.00 $125.00Schwartz, Steven A. P 1,382.00 $500.00 $691,000.00Donaldson, Kimberly M. P 35.50 $425.00 $15,087.50Geyelin, Anthony A. OC 0.75 $410.00 $307.50Hegedus, Candice L.H. OC 304.50 $395.00 $120,277.50Meermans, M. Katherine A 1,876.00 $395.00 $741,020.00Sauder, Joseph G. A 223.00 $350.00 $78,050.00Scott, Daniel B. A 484.00 $325.00 $157,300.00Mariani, Ramona M. FA 73.50 $300.00 $22,050.00Landau-Smith, Philip IT 17.25 $300.00 $5,175.00Burkey, Fatema A 22.00 $280.00 $6,160.00Davis, Robert A 0.50 $280.00 $140.00Kimmel, Kimberly Litman A 5.50 $280.00 $1,540.00Mathews, Timothy N. A 0.75 $280.00 $210.00Naylor, Zachary A 4.75 $280.00 $1,330.00Long, Brian FA 26.25 $285.00 $7,481.25Wozny, Michael J. FLC 22.00 $190.00 $4,180.00Aldinger, Catherine A. LA 135.25 $175.00 $23,668.75Torpey, Mary Fran FA 0.50 $165.00 $82.50Kasman, Donna A. FLA 5.75 $165.00 $948.75Emmett, Catherine LA 0.25 $155.00 $38.75Dickinson, Joshua FLC 1.00 $150.00 $150.00Rosso, Matthew D. FLC 39.25 $150.00 $5,887.50Kramer, Brent FLC 0.75 $140.00 $105.00

TOTALS : 4,713 .00 $1,915,790.00

*P=Partner , OC=Of Counsel , A=Associate , FA=Former Associate,FLC=Law Clerk, LA=Legal Assistant, FLA=Former Legal AssistantIT=IT Manager

11/2/2006


EXHIBIT 2


IN RE : DVI SECURITIES LITIGATIONCHIMICLES & TIKELLIS LLPEXPENSE REPORTINCEPTION THROUGH OCTOBER 15, 2006

EXPENSECATEGORY

AMOUNT

Travel, Food & Lodging $7,637.65Photocopy-Firm 6,732.23Computer Research 6,286.79Express Mail 1,279.53Postage 682.24Photocopy-Outside 592.89Filing Fees 242.00Subpoena Service 230.00Telephone/Telecopy 121.59Clerical Overtime 35.00

TOTALS: $23,839.92

11/2/2006


EXHIBIT 3


CHIMICLES & TIKELLIS LLP has law offices in Haverford,PA and Wilmington, DE. and concentrates in the area of complex litigation,with an emphasis on securities, antitrust, consumer, ERISA and environmentallitigation. As a group, the Partners in Chimicles & Tikellis have significantsubstantive experience in the prosecution of class action and derivativelitigation in state and federal trial and appellate courts across the country,including the United States Supreme Court and the highest courts of more than20 states. The Firm is comprised of seven Partners, four Of Counsel andeleven Associates. The Firm also works closely with a number of experts andconsultants in the financial, forensic accounting and investigative fields. TheFirm's e-mail is [email protected] and its website isWWW.CHIMICLES.COM

NICHOLAS E. CHIMICLES is senior partner and Chairman ofthe Firm's Executive Committee. Mr. Chimicles is a 1970 graduate of theUniversity of Pennsylvania, where he received a Bachelor of Arts Degree withHonors. Mr. Chimicles graduated in 1973 from the University of VirginiaSchool of Law, where he was a member of the Editorial Board of theUniversity of Virginia Law Review and was the author of several publishedcomments. While attending law school, he co-authored a course and studyguide entitled "Student's Course Outline on Securities Regulation," publishedby the University of Virginia School of Law. Upon graduation from lawschool, Mr. Chimicles joined a major Philadelphia law firm where he practicedfor eight years and specialized in litigation including complex commercial,antitrust and securities fraud cases and served as principal or assistant trialcounsel in United States v. Pfizer, Inc. , (Antibiotics Antitrust Litigation), CivilAction No. 78-1155 (E.D. Pa.); Penn Galvanizing Co. v. Lukens Steel Co. ,Civil Action No. 71-1777 (E.D. Pa.); Wolgin v. State Mutual Investors , 265Pa. Super. 525, 402 A.2d 669 (1979); Beta Consultants & Administrators v.Centennial Life Ins. Co. , unreported opinion by Judge Newcomer (E.D. Pa.1980); and R. & M. Musselman, Inc., et al. v. Line Lexington Lumber &Millwork, Inc. , C.A. 727458-02-1 (Bucks Co. 1981).

As a name partner in his own firm since 1981, Mr. Chimicles hasactively prosecuted major complex litigation, antitrust, securities fraud andbreach of fiduciary duty suits. Most recently, Mr. Chimicles was lead trial

September 2006BIO 092006


counsel for a Class of investors in a six-week jury trial of a securitiesfraud/breach of fiduciary duty case that resulted in a $185 million verdict. Inre Real Estate Associates Limited Partnerships Litigation , No. CV 98-7035DDP, was tried in the federal district court in Los Angeles before theHonorable Dean D. Pregerson. On November 15, 2002, the 10 member jury,after hearing testimony from more than 25 witnesses and viewing in excess of500 exhibits, returned an unanimous verdict in favor of the Class (comprisinginvestors in the eight REAL Partnerships) and against the REALs' managinggeneral partner, National Partnership Investments Company ("NAPICO") andthe four individual officers and directors ofNAPICO. The jury awarded morethan $25 million in damages against all five defendants on Count I, theSection 14(a), 1934 Act, proxy fraud claim and more than $67 million indamages against NAPICO on Count II for breach of fiduciary duty. OnNovember 19, 2002, the jury returned a verdict of $92.5 million in punitivedamages against NAPICO. This total verdict of $185 million was among the"Top 10" Verdicts of 2002, as reported by the National Law Journal(verdictsearch.com), and stands as the largest jury verdict in favor of plaintiffsin a case brought under the federal securities laws since their amendment in1995. Mr. Chimicles was assisted at trial by Partner Kimberly Donaldson.Other Firm professional staff members who provided invaluable assistance tothe result in this landmark decision were Kathleen P. Chimicles, the Firm'sfinancial specialist, who worked with and assisted plaintiffs' expert witnessesand consultants; and associates Candice L.H. Hegedus and M. KatherineMeermans. Following post-trial motions, the Court upheld in all respects thejury's verdict on liability as to both Count I and Count II, upheld in full thejury's award of $92.5 million in compensatory damages, upheld the Class'sentitlement to punitive damages (but reduced those damages to $2.6 millionbased on the application of California law to NAPICO's financial condition),and awarded an additional $25 million in prejudgment interest. Based on theCourt's decisions on the post-trial motions, the judgment entered in favor ofthe Class on April 28, 2003 totaled over $120 million, approximately$90 million on Count II and $30 million on Count I. The Real EstateAssociates judgment was settled by an agreement approved by the Court inNovember 2003, providing for the payment of a total of $83 million, of which$48 million was paid immediately and the balance of $35 million will be paidin 5 equal annual installments of $7 million per year between 2004 and 2008.

In other federal securities fraud cases, Mr. Chimicles served as aLead Counsel in the Hercules Securities Litigation , Civil Action No. 90-442(RRM) (D. Del.) ($18 million recovery); Scott Paper Securities Litigation ,

September 2006 2BIO 092006


Civil Action No. 90-6192 (E.D. Pa.) ($8 million recovery); Sunrise Savings &Loan Securities Litiagtion, MDL No. 655 (E.D. Pa.) ($15 million recovery);Storage Technology Corp. Securities Litigation, Master File No. 84-F-1981(D. Colo.) ($18 million recovery); In re: Fiddler's Woods BondholdersLitigation , Civil Action No. 83-2340 (E.D. Pa.), a bondholders' class actionarising out of a default on a $33 million industrial development bond issue(recovery of more than $7 million for the class); and Charter SecuritiesLitigation , Civil Action No. 84-448 Civ-J-12 (M.D. Fla.) (recovery of $7.75million). He served as a Lead Counsel for the shareholder class in theContinental Illinois Securities Litigation, Civil Action No. 82 C 4712 (N.D.Ill.), one aspect of which involved a twenty-week jury trial conducted by Mr.Chimicles that concluded in July, 1987 (the class ultimately recovered nearly$40 million).

By virtue of the Fiddler's Woods litigation (in which Mr.Chimicles also represented the court-appointed Receiver), his representation ofthe Bondholders' Protection Committee for the Baptist Estates Life CareFacility (Doylestown, PA), a $15 million tax-exempt bond issue whichdefaulted, and his representation of bondholders in other litigation in Atlanta,Orlando and New Jersey arising from defaulted bond issues aggregating over$135 million, Mr. Chimicles established a national reputation for representingthe interests of bondholders in default situations.

In another specialized area of securities litigation, involving therecovery of losses incurred by purchasers and holders of units in public limitedpartnerships, Mr. Chimicles has been a principal counsel in several majorlitigations that have resulted in precedent-breaking recoveries for classmembers, in addition to the Real Estate Associates Limited PartnershipLitiagtion, discussed above, Mr. Chimicles was a member of the ExecutiveCommittee in the Prudential Limited Partnerships Litigation , MDL 1005(S.D.N.Y.), where the class recovered $130 million in settlement fromPrudential and other defendants in a settlement approved by Judge MiltonPollack in November 1995. Mr. Chimicles was lead counsel in thePaineWebber Limited Partnerships Litigation , 94 Civ. 8547 (S.D.N.Y.) inwhich a $200 million settlement was approved in mid-1997. Distributions toclass members in the PaineWebber case were made in 1998 and supplementaldistributions under the settlement were made in 2003. Final distributions toclass members are expected in the future. As co-lead counsel in severallitigations involving ML-Lee Acquisition Fund, L.P., ML-Lee AcquisitionFund II, L.P. and ML-Lee Acquisition Fund (Retirement Accounts) II, L.P.



(C.A. No. 92-60, 93-494, 94-422 and 95-724) that were prosecuted in theFederal District Court in Delaware, Mr. Chimicles (together with partnerPamela Tikellis and financial specialist Kathleen Chimicles) negotiatedsettlements that resulted in more than $30 million in cash and other benefits tobe paid or made available to investors in the various funds. Those settlementswere approved by the district court in July 1998. In litigation involving PLMEquipment Growth and Income Funds IV-VII, Mr. Chimicles (together withfinancial specialist Kathleen Chimicles) was instrumental in negotiating asettlement reached in 2001 that provides both monetary ($6.6 million) andequitable (extension of the partnerships' lives) relief for the limited partners.In February 2002, the Superior Court of Marin County, California, approvedthe settlement of a case in which Mr. Chimicles was co-lead counsel,involving five public partnerships sponsored by Phoenix Leasing Incorporatedand its affiliates. (In Re Phoenix Leasing Incorporated Limited PartnershipLitiagtion, Superior Court of the State of California, County of Marin, CaseNo. 173739). The settlement resulted in the payment of more than $21 millionin cash (part of which is to be collected from assets of the 'defunct insurer,Reliance Insurance Company) in settlement of breach of fiduciary duty claims.

Mr. Chimicles has represented limited partners who successfullyhave sought and secured the liquidation of their partnerships' assets or thereorganization of the partnership. For example, in In re the Mendik RealEstate Limited Partnership , N.Y. Supreme Ct. No. 97-600185, Mr. Chimicles,as co-lead counsel, negotiated a settlement which provided for the prompt saleof more than $100 million of the partnership's real estate assets. Thesettlement was approved in late 1998 and the limited partners have receivedtheir liquidation proceeds. As co-lead counsel, Mr. Chimicles, together withpartner Pamela Tikellis, negotiated the settlement, approved by the DelawareChancery Court in 2000, of a suit filed against the general partners of AetnaReal Estate Associates, L.P., providing for the orderly liquidation of the morethan $200 million in that partnership's real estate holdings, the reduction ofgeneral partner fees and the payment of a special cash distribution to thelimited partners. (Aetna Real Estate Associates, L.P., Area GP Co orationand Aetna/Area Corporation , Delaware Chancery Court, New Castle County,Civil Action Nos. 15386-NC and 15393-NC).

Mr. Chimicles has also represented stockholders in numeroussuits brought in courts across the country arising from proposed mergers,acquisitions and hostile takeovers. For example, in Garlands, Inc. ProfitSharing Plan et al. v. The Pillsbury Company, State of Minnesota, County of



Hennepin, Fourth Judicial District, Court File No. 88-17834, Mr. Chimicleswas a Lead Counsel in a suit brought to compel Pillsbury's board of directorsto negotiate in good faith with Grand Metropolitan and persuaded the court toenjoin a proposed spin-off of Burger King, a device sought to be used byPillsbury's board to ward off Grand Metropolitan's takeover. In numerousother cases, Mr. Chimicles has represented shareholders in obtaining enhancedconsideration for their stock in the context of a takeover or going privatetransaction. Randee L. Shantzer, et al. v. Charter Medical Corp., et al. , Courtof Chancery, State of Delaware, New Castle County, Consolidated CivilAction No. 9530; In Re Interstate Bakeries Corporation ShareholdersLitigation, Court of Chancery, State of Delaware, New Castle County, Con-solidate Civil Action No. 9263.

In the antitrust field, Mr. Chimicles has acted as a Lead and Co-Lead Counsel in numerous class suits . He was Co-Lead Counsel in the TravelAgency Commission Antitrust Litigation , (D. Minn.) in which the Firmrepresented the American Society of Travel Agents, an Alexandria, Virginia-based association that represents more than 9,000 travel agencies nationwideand worldwide in a suit against seven airlines for Section 1 (Sherman Act)violations involving commission cuts. The case was settled in late 1996 formore than $80 million. Mr. Chimicles was also Co-Lead Counsel in theInsurance Antitrust Litigation , Case No. C-88-1688 (N.D. Calif.) whichcharged commercial general liability insurers , domestic and London-basedreinsurers and an insurance service organization with violations of theSherman and Clayton Acts. The case was settled after an earlier dismissal wasreversed by the Ninth Circuit, a decision affirmed by the U.S. Supreme Court.In re Insurance Antitrust Litigation, 93 8 F.2d 919 (9th Cir. 1991); affd subnom. Hartford Fire Insurance Co. v. California , _ U.S. -, 113 S.Ct. 2891(1993).

Mr. Chimicles was also lead counsel in Crawford's Auto-Centerv. Automatic Data Processing, Inc. , C.A. No. 97-CV-2085 (E.D. Pa.), anantitrust class action that was settled for more than $5 million in cash and othervaluable consideration. The settlement, which was approved by the court inMarch 1999, provides among other items of relief that an auto partsinterchange license agreement (that was negotiated as part of the settlement)

would be made available to class members.

As an appellate advocate, Mr. Chimicles has handled cases whichhave protected the rights of victims of securities fraud in bankruptcy



proceedings. In cases that he successfully argued before the Courts of Appealsfor the Tenth and Eleventh Circuits, due process and notice principles wereextended to protect securities purchasers filing claims in bankruptcy cases, Inre Standard Metals Corp. , 817 F.2d 625 (10th Cir.), rev'd in part on rehearing,839 F.2d 1383 (1987), and it was established that class proofs of claim areallowable in bankruptcy proceedings, In re the Charter Company, 876 F.2d866 (11th Cir. 1989).

Mr. Chimicles has also actively prosecuted suits involving publicutilities constructing nuclear plants. He was Lead Counsel in the PhiladelphiaElectric Company Securities Litigation, Master File No. 85-1878 (E.D. Pa.)and a Lead Counsel in the Consumers Power Company Derivative Litiagtion,Master File No. 84-CV-3788 AA (E.D. Mich.). Mr. Chimicles was co-leadcounsel in the stockholder derivative suit arising from mismanagement claimsagainst former officers of Philadelphia Electric Company involved in theclosing of the Peach Bottom Nuclear Plant, a suit which Mr. Chimicles wasauthorized to bring by a PECO board of directors resolution. In re PhiladelphiaElectric Company Derivative Litigation, Case No. 7090, Court of CommonPleas, Philadelphia County, PA. That case resulted in a recovery of$35 million for the utility company in November 1990.

Mr. Chimicles was also a Co-Lead Counsel in a majorenvironmental litigation, Ashland Oil Spill Litiagtion , Master File M-14670(W.D. Pa.), involving the claims of residents and businesses for damagearising from the largest inland waterway oil spill in history that occurred onJanuary 2, 1988 in Pittsburgh. In 1990, the case was settled upon creation of aclaims fund of over $30 million for the class. This and similar environmentalsuits in which the Firm is involved were the subject of a program, "Toxic TortsMay Not Be Hazardous To Your Health: A Lawyer's Guide to HealthSurvival in Mass Tort Litigation," in which Mr. Chimicles was a principalspeaker at this program which was held at the American Bar Association's1989 Convention in Honolulu.

Mr. Chimicles has acted as Special Counsel for the City ofPhiladelphia and the Philadelphia Housing Authority in an action seeking tohold lead pigment manufacturers liable for federally mandated abatement oflead paint in properties owned, managed or operated by the plaintiffs. Ci ofPhiladelphia, et al. v. Lead Industries Ass'n, et al. , Civil Action No. 90-7064(E.D. Pa.) and No. 92-1420 (3rd Cir.).



Mr. Chimicles is admitted to practice in the Supreme Court of theUnited States, numerous federal district and appellate courts, as well as theSupreme Court of Pennsylvania. He is a member of the American BarAssociation (Sections of Litigation; Antitrust; and Corporation, Banking andBusiness Law), the Pennsylvania Bar Association, the Philadelphia BarAssociation (Federal Courts Committee and various subcommittees). Mr.Chimicles has lectured frequently on securities law at the Rutgers UniversityLaw School - Camden, the Wharton School Graduate Division of theUniversity of Pennsylvania, New York University, the University of Virginia,and for Prentice Hall Law and Business Publications. Mr. Chimicles hasaddressed numerous law and accounting conferences, including ALI-ABA,Practising Law Institute, the Pennsylvania Bond Counsel Association and thePennsylvania Institute of Public Accountants, and has also frequently appearedas a speaker in numerous state and national bar association sponsored seminarson topics involving federal securities laws, RICO, class actions, hostilecorporate takeovers, and professional ethics. Mr. Chimicles also is acontributor to and member of the advisory boards of various professionalpublications involving the securities law field. Mr. Chimicles is the author ofnumerous articles including an article co-authored with the Firm's FinancialSpecialist, Kathleen P. Chimicles nee Balon, published in the New York LawJournal , August 26, 1993, entitled "A Realistic Assessment Of The Need ForSecurities Class Action Litigation Reform;" and The Securities Case: ThePlaintiff's Perspective, published in the Practical Litigator, Vol. 6, No. 6 (Nov.1995).

Mr. Chimicles is the past President of the National Association ofSecurities and Commercial Law Attorneys (1999-2001) based in Washington,D.C., the Chairman of the Public Affairs Committee of the American HellenicInstitute, also based in Washington, D.C., and is a member of the board ofdirectors of the Opera Company of Philadelphia and Pennsylvanians forModern Courts. He received the prestigious Ellis Island Medal of Honor inMay 2004, in recognition of his professional achievements and history ofcharitable contributions to educational, cultural and religious organizations.

PAMELA S. TIKELLIS is a name partner and a member of theFirm's Executive Committee. Ms. Tikellis was born in Lawrence, Kansasand is a 1974 graduate of Manhattanville College, where she received aBachelor of Arts and a 1976 graduate of the Graduate Faculty of the NewSchool for Social Research, where she received a Master's in Psychology.Ms. Tikellis graduated in 1982 from Widener University School of Law,



where she was the Managing Editor of the Delaware Journal of CorporateLaw. Upon graduating from law school, Ms. Tikellis served as a law clerkin the nationally recognized Court of Chancery in Wilmington, Delaware.Before joining the Firm, Ms. Tikellis engaged in significant shareholderlitigation practice. In 1987, she opened the Delaware office of the Firm,where she is a resident and has continued to specialize in litigation,including complex transactional cases, both derivative and class, limitedpartnership litigation, antitrust and securities fraud litigation. She is AVrated by Martindale Hubbell.

Ms. Tikellis has prosecuted class and derivative suits ofnational importance for over 20 years. Notably, Ms. Tikellis has representedstockholders in numerous suits, primarily in the Court of Chancery inWilmington, Delaware arising out of mergers and acquisitions and hostiletakeovers. Ms. Tikellis served as Liaison Counsel in the litigation arisingout of the Paramount/Viacom merger. She and her co-counsel representedParamount stockholders in the successful challenge to the merger and wereinstrumental in eliciting the highest possible value to the stockholders.(Court of Chancery Civil Action No. 13117; Delaware Supreme Court No.427, 1993). Similarly, Ms. Tikellis served as Lead Counsel in HomeShopping Network Shareholders and Securities Litigation , (Civil Action No.93-406; Court of Chancery Consolidated Civil Action No. 12868; DelawareDistrict Court Civil Action No. 93-336 (MMS) obtaining over $15 million insettlement funds for the class of Home Shopping stockholders. Morerecently, as Lead Counsel, she actively prosecuted litigation on behalf ofCyprus Amax stockholders arising out of a proposed merger with Asarcoand helped achieve a merger for Cyprus Amax with Phelps Dodge forgreater consideration than was offered by Asarco. (In re Cyprus AmaxShareholders Litigation , Court of Chancery, C.A. No. 17383-NC). Ms.Tikellis also acted as one of Lead Counsel representing a class ofstockholders of First Interstate Bancorp prior to the acquisition of FirstInterstate by Wells Fargo & Co. The litigation resulted in Wells Fargo'sacquisition of First Interstate for a substantially greater consideration thanoffered by the First Bank Systems in a battle for the company. (FirstInterstate Bancorp Shareholders Litigation , Consolidated Civil Action No.14623).

Ms. Tikellis has actively prosecuted derivative litigation onbehalf of companies and their stockholders. Sanders v. Wang, No. 16640(Delaware Court of Chancery), was a derivative suit brought on behalf of



Computer Associates International, Inc. The suit alleged that the boardexceeded its authority under the KESOP by awarding 9.5 million excessshares to the participants. Ms. Tikellis was instrumental in achieving thereturn from the defendants of over $50 million in stock issued in violation ofthe Company's plan. This represented a recovery of substantially all of therelief sought by Plaintiffs. Reported decisions include 1998 Del. Ch. LEXIS207 (Del. Ch. Nov 19, 1998); 1999 Del. Ch. LEXIS 203 (Del. Ch. Nov. 8,1999); 2001 Del. Ch. LEXIS 82 (Del. Ch. May 24, 2001); 2001 Del. LEXIS387 (Del. Aug. 22, 2001); 2001 Del. Ch. LEXIS 121 (Del. Ch. Sept. 18,2001).

In the limited partnership arena, Ms. Tikellis along with partnerMr. Chimicles has actively and successfully prosecuted several casesincluding ML Lee Acquisition Fund L.P. and ML-Lee Acquisition Fund IIL.P. and ML-Lee Acquisition Fund (Retirement Accounts), (C.A. Nos. 92-60, 93-494, 94-422, and 95-724). The litigation resulted in a negotiatedsettlement exceeding $30 million in cash and other benefits made availableto investors in these funds. In another limited partnership matter, Ms.Tikellis along with Mr. Chimicles was successful in representing limitedpartners of Aetna Real Estate Associates L.P. This settlement provided forthe orderly liquidation of more than $200 million in the partnership's realestate holdings and reduction of general partners' fees and the payment of aspecial cash distribution to the limited partners (Aetna Real EstateAssociates, L.P. , Delaware Court of Chancery, C. A. Nos. 15386-NC and15393-NC).

On the Appellate level, Ms. Tikellis has successfully handledcases before the Delaware Supreme Court resulting in victories for theshareholders and investors. Within the year of 2002 and 2003, Ms. Tikellisargued successfully three appeals in the Delaware Supreme Court. Sheargued en banc to the Delaware Supreme Court in Saito v. McKessonCorporation , Civil Action No. 18553. This books and records case was triedby Ms. Tikellis. While the Court permitted production of certain documents,the Court imposed severe restrictions. The limitations imposed by the Courtof Chancery were appealed successfully by Plaintiff. Importantly, thedocuments ultimately received in the books and records Saito case haveresulted in the filing of an amended derivative complaint in the underlyingcase against McKesson and its directors and discovery is ongoing in thatderivative suit. Saito v. McCall pending in the Court of Chancery, CivilAction No. 17132. The derivative suit was recently settled and the



settlement won approval by the Court of Chancery. The settlements providefor a $30 million payment to the Company by the insurance carriers for thedirectors and the implementation of important corporate governancereforms.

Most recently, in a case argued by Ms. Tikellis, the DelawareSupreme Court overruled the Court of Chancery's determination thataccorded the presumption of the business judgment rule to a board's mergerrecommendation even though 5 of the 7 directors were interested in thetransaction. The Supreme Court held that the mere existence of apurportedly disinterested special committee (consisting of the other twoboard members) did not shield the remaining 5 members from liability.Krasner v. Moffett, 826 A.2d 277 (Del. June 18, 2003). Importantly, theCourt held that a full record needed to be developed to determine whetherthe entire fairness standard of review or the business judgment standard ofreview would apply in the case. The decision has broken new ground in thefield of corporate litigation in Delaware. A settlement providing for a $17.5million fund for the class was approved by the Court of Chancery on April20, 2006.

Ms. Tikellis is admitted to practice before all Courts in the Stateof Delaware and the United States Court of Appeals for the Third Circuit.She is a member of the Delaware Bar Association and the American BarAssociation (Litigation and Business Sections). Ms. Tikellis has served as amember of the Board of Bar Examiners of the Supreme Court of the State ofDelaware since 1994. She also served as the Chair of the Delaware BarAssociation Ethics Committee from 1989 to 1992, and is a director of theHistorical Society of the Court of Chancery for the State of Delaware. Inaddition, Ms. Tikellis is President of the Delaware chapter of theInternational Network of Boutique Law Firms.

Ms. Tikellis has addressed numerous conferences includingALI-ABA, The Practising Law Institute, the American Bar Association, theDelaware Bar Association, and the Pennsylvania Bar Institution lecturing oncorporate governance, merger and acquisitions, hostile takeovers, defensemechanisms and professional ethics. She has participated as a commentatoron corporate governance as part of the Institute for Law and EconomicPolicy's program on Corporate Accountability and recently addressedinstitutional investors at the OPAL Conference regarding the various toolsavailable in Delaware to protect shareholder rights. Ms. Tikellis is a

September 2006 10BI0 092006


member of the faculty of the 7th Annual Colorado Business Law Institute tobe held in Vail, Colorado August 10-12, 2006. She will participate on apanel featuring the Honorable Phillip S. Figa of the United States DistrictCourt for the District of Colorado and the Honorable Leland P. Anderson ofthe Colorado State District Court addressing the topic of fiduciary duties.

JAMES R. MALONE, JR. is a partner in the law firm ofChimicles & Tikellis. Mr. Malone is admitted to practice before the SupremeCourt of Pennsylvania, the Supreme Court of the United States, the UnitedStates Courts of Appeal for the First, Third, Fifth, Sixth, Seventh, Ninth andD.C. Circuits and the United States District Courts for the Eastern District ofPennsylvania, the Northern District of California, and the Eastern District ofMichigan. Mr. Malone is a 1984 cum laude graduate of the VillanovaUniversity School of Law where he was a staff member on the Villanova LawReview and was elected to the Order of the Coif. Upon graduation from lawschool, Mr. Malone was associated with a major Philadelphia law firm wherehe concentrated in bankruptcy and commercial litigation.

Mr. Malone has substantial experience in the securities field.With his former partner, Oliver Burt, he served as co-lead counsel in Hoexterv. Simmons, Civ. No. 89-1069-PHX-RCB (D. Ariz.) in which a $10.8 millionsettlement was achieved. In Serabian v. AmoskeagBank, 24 F.3d 357 (1stCir. 1994), Mr. Malone successfully argued for the reversal of a district courtorder dismissing a securities complaint in a case involving deceptive financialreporting by a New Hampshire bank holding company. Mr. Malone served asco-lead counsel in Winsor v. Holegrson , No. 89-2507 (PBS) (D. Mass.), a caseinvolving the accounting practices of a failed savings bank, in which a $12.5million settlement was reached. Mr. Malone has been active in casesinvolving public offerings of limited partnerships; he served as lead counsel inIn re Jiffy Lube Insured Income Partners Securities Litigation . Civil ActionNo. 10828 (Del. Ch.). The settlement resulted in limited partnership investorsreceiving the full amount of their initial investment. He has also been active intransactional cases, such as limited partnership roll-ups, and in shareholderderivative actions. Currently, he is active in DeBenedictis v. Merrill Lynch &Co., Inc. , No. 04-404 (JLL)(D.N.J.), a class action challenging the sufficiencyof Merrill Lynch's prospectus disclosures for Class B shares in its proprietarymutual funds.

In the area of consumer litigation , Mr. Malone was a member ofthe Executive Committee in In re Advanta Credit Card Terms Litigation, MDL



Docket No . 1233, a consumer case brought on behalf of credit card holders.The case resulted in a settlement of $ 7.25 million dollars that also providedfor substantial reductions in rates for credit card holders. Along with hispartner, Michael Gottsch, Mr. Malone was active in Flannick v. First UnionHome Equity Bank, N.A. , No. 98-6080 , an action brought under the NationalBank Act against a home equity lender, which resulted in a substantialrecovery.

In the field of ERISA litigation, Mr. Malone served as co-leadcounsel in In re Unisys Savings Plan Litigation , 74 F.3d 420 (3d Cir. 1996), inwhich he successfully argued for the reversal of a district court order grantingsummary judgment in an ERISA class action arising out of the failure of theExecutive Life Insurance Company. The case was the first appellate decisionaddressing Section 404(c) of ERISA and the liability of fiduciaries in certainindividual account plans. Mr. Malone served as counsel in Corcoran v. BellAtlantic Corporation , 97-cv-510 (E.D. Pa.) an ERISA class action challengingthe conversion of a defined benefit pension plan into a cash balance plan. Thecase involved issues relating to the calculation of accrued benefits underERISA's vesting standards and the elimination of early retirement benefits.He is currently active in In re Lucent Death Benefits Litigation, No. 2:03-5017(WGB)(D.N.J.), which challenges Lucent's elimination of spousal deathbenefits for retirees that were funded as part of a defined benefit pension plan,and in Charles v. Pepco Holdings, Inc. , No. 05-702-SLR (D. Del.), a classaction challenging the conversion of a traditional pension plan to a cashbalance plan.

Mr. Malone has been involved in a variety of different antitrustactions in both state and federal court. He was active in indirect purchaseractions arising out of price-fixing in the market for sorbates pending inTennessee and Wisconsin; the resolution of these cases resulted in substantialrecoveries by indirect purchasers. Mr. Malone was also active in In reMicrosoft Antitrust Litig. , MDL No. 1332, and in In re Buspirone AntitrustLiti ation, MDL No. 1413, where he served in a variety of roles. Mr. Maloneis currently active in In re Plavix Indirect Purchaser Antitrust Litigation , No.06-226 (S.D. Ohio), and in In re Intel Corp. Microprocessor Litigation, MDLNo. 1717 (D. Del.).

Mr. Malone served as co-lead counsel in Gersenson v.Pennsylvania Life & Health Insurance Guaranty Association, April Term1994, No. 3468, an insurance insolvency class action brought under the



Pennsylvania Life & Health Insurance Guaranty Association Act. In June1998, the Philadelphia Court of Common Pleas granted summary judgment infavor of the plaintiff class in the amount of $16.5 million dollars. Mr. Malonesuccessfully argued the resulting appeal and successfully opposed thedefendant's petition for allocatur before the Supreme Court of Pennsylvania.

Mr. Malone is a member of The Philadelphia Bar Association,and is active on its cy pres committee, which works to assure that unclaimedclass settlement funds are put to appropriate charitable uses.

MICHAEL D. GOTTSCH is a partner in the Firm's Haverfordoffice. Mr. Gottsch is admitted to practice before the Supreme Courts ofPennsylvania and New Jersey, the United States District Court for theEastern District of Pennsylvania, the United States District Court for theDistrict of New Jersey and the United States Courts of Appeals for the Thirdand Ninth Circuits. He is a graduate of Temple University School of Law(J.D. 1983) and Marquette University (B.S. 1977). From 1986 to 1987 heserved as a Law Clerk to the Honorable Joseph H. Rodriguez, Judge of theUnited States District Court for the District ofNew Jersey.

Mr. Gottsch has concentrated his practice in the fields ofAntitrust and Consumer Protection law. As a partner in the firm, recentcases in which he has served in the role of lead or co-lead counsel are:McParland v. Keystone Health Plan Central, Civil Action No. 98-SU-00770-01 (Common Pleas Court York County) (case successfully resolved onbehalf of a class of approximately 15,000 senior citizens who enrolled inKeystone's "Senior Blue" program); Flannick v. First Union Home EquityBank, N.A., Civil Action No. 98-CV-6080 (E.D. Pa.) (case successfullyresolved on behalf of a class of approximately 32,000 home equityborrowers from First Union Home Equity Bank); and GFS of Madison, Inc.v. Rhone-Poulenc, S.A., Case No. 00-CV-1143 (Cir. Ct. Dane County, Wis.)("Methionine antitrust litigation") (action pending). Mr. Gottsch has assistedin the firm's pro bono efforts in the area of immigration asylum appeals. Heis the treasurer of the Committee to Support the Antitrust Laws ("COSAL"),a Washington, D.C. based organization committed to supporting diligentenforcement of the federal and state antitrust laws. He was named aPennsylvania SuperLawyer for 2006.

ROBERT J. KRINER, JR. is a Partner in the Firm's Wilmington,Delaware office. He is admitted to practice before the Supreme Court of



Delaware and the United States District Court for the District of Delaware.

Mr. Kriner is a 1983 graduate of the University of Delaware with a degree in

chemistry, and a 1988 graduate of the Delaware Law School of Widener

University, where he was managing editor of The Delaware Journal of

Corporate Law. From 1988 to 1989, Mr. Kriner served as law clerk to the

Honorable James L. Latchum, Senior Judge of the United States District Court

for the District of Delaware. Following his clerkship and until joining the

Firm, Mr. Kriner was an associate with a major Wilmington, Delaware law

firm, practicing in the areas of corporate and general litigation.

Mr. Kriner's practice focuses primarily on business litigation onbehalf of investors. Mr. Kriner has prosecuted actions, including class andderivative actions, on behalf of stockholders, limited partners and otherinvestors with claims relating to mergers and acquisitions, hostile acquisitionproposals, the enforcement of fiduciary duties, the election of directors, andthe enforcement of statutory rights of investors such as the right to inspectbooks and records. Mr. Kriner prosecuted the Home Shopping Network,McKesson and Moffett matters along with Ms. Tikellis. In addition, Mr.Kriner represented holders of Series B stock of Litton Industries in Myersand Koehler v. Litton Industries, Inc., et al ., C.A. No. 18947-NC inconnection with the short form merger cash out of the Series B stock in2001. The short form merger price was $35 per share. Mr. Krinernegotiated a settlement of the claims which provided an additional $1.84 pershare to the Series B holders.

Mr. Kriner also was on the trial team in Gelfman, et al. v.Weeden Investors, L.P ., et al ., C.A. No. 18519-NC, which was tried in theDelaware Court of Chancery and resulted in a judgment in favor of thelimited partners represented by Mr. Kriner . In Weeden, the limited partnersrepresented by Mr. Kriner asserted that dilution and a cash out of theirinterests at a book value of $4.20 per Unit was unfair and in violation of thePartnership Agreement and the General Partner ' s fiduciary duties. Aftertrial , the Court agreed , concluding the value of the interests was $20.92 perUnit, 4.98 times that paid on the cash out plan , and awarded damages to thelimited partners.

Mr. Kriner represented the public limited partners in I.G.Holdings, Inc., et al. v. Hallwood Realty LLC, et al. , C.A. No. 20283-NC, inan action challenging the defensive response of the General Partner ofHallwood Partners LP to a premium tender offer by an affiliate of Carl Icahn



in 2003. Mr. Kriner led the litigation on behalf of the public limited partnersthrough expedited injunction proceedings and an expedited trial which led tothe General Partner's agreement to auction and sell the Partnership. The saleof the Partnership resulted in a per unit price of $136.70 to the limitedpartners, as compared to the trading range for the Units of $60 - $80 prior tothe litigation.

Recently, Mr. Kriner was one of the co-lead counsel in actionsbrought on behalf of the public stockholders of Chiron Corporationchallenging the buyout of Chiron by its 42% parent, Novartis AG. Novartisinitially proposed a buyout at $40 per share and thereafter entered into amerger agreement to acquire Chiron for $45 per share. Mr. Kriner and hisco-counsel moved preliminarily to enjoin the merger pending a properprocess to maximize value and full disclosure to the stockholders. Aftercompletion of briefing on the injunction motion, an agreement in principlewas reached for a settlement of this litigation which includes, among otherthings, an increase in the merger price to $48 per share, or an aggregateincrease of over $330 million for the public stockholders.

Mr. Kriner is an associate member of the Board of BarExaminers of the Supreme Court of the State of Delaware.

STEVEN A. SCHWARTZ, a Partner in the Haverford office, isadmitted to practice before the United States Supreme Court, the SupremeCourt of Pennsylvania, the United States District Courts for the Eastern andWestern Districts of Pennsylvania and the Eastern District of Michigan, andthe United States Court of Appeals for the Third Circuit. He is a graduate ofthe Duke University School of Law (J.D. 1987) where he served as a senioreditor of Law & Contemporary Problems . He is a 1984 cum laude graduate ofthe University of Pennsylvania, where he received a B.A. in political science.Mr. Schwartz previously practiced at Schnader, Harrison, Segal & Lewis,LLP, a major Philadelphia firm, concentrating in complex civil litigation.

Mr. Schwartz has actively prosecuted complex class actions in awide variety of contexts. Most recently, he served as Co-Lead Counsel for acertified national class of employees of Siemens Medical Solutions whose1998 Incentive Compensation was retroactively reduced by 30% bySiemens. The Philadelphia Court of Common Pleas granted Plaintiffs'motion for summary judgment as to liability, and a few days before trial was



scheduled to begin, Siemens agreed to pay class members a net recovery ofthe full amount that their incentive compensation was reduced(approximately $10.1 million), and pay all counsel fees and expenses inaddition to the class members' recovery.

Similarly, in connection with the withdrawal by Bayer of itsanti-cholesterol drug Baycol, Mr. Schwartz represents various Health andWelfare Funds (including the Pennsylvania Employees Benefit Trust Fund,the Philadelphia Firefighters Union, and the American Federation of State,County and Municipal Workers District Council 47) and a certified nationalclass of "third party payors" seeking damages for the sums paid to purchaseBaycol for their members/insureds and to pay for the costs of switching theirmembers/insureds from Baycol to an another cholesterol-lowering drug. ThePhiladelphia Court of Common Pleas granted plaintiffs' motion for summaryjudgment as to liability; this is the first and only judgment that has beenentered against Bayer anywhere in the United States in connection with thewithdrawal of Baycol. The Court subsequently certified a national class, andthe parties recently reached a settlement in which Bayer agreed to pay classmembers a net recovery that approximates the maximum damages (includingprejudgment interest) suffered by class members.

In the securities litigation field, as lead or co-lead counsel, Mr.Schwartz has obtained significant recoveries for defrauded investors. In InRe Coin Fund Litigation , (Superior Court of the State of California for theCounty of Los Angeles), Mr. Schwartz served as plaintiffs' co-lead counseland successfully obtained a settlement in excess of $35 million on behalf oflimited partners, which represented a 100% net recovery of their initialinvestments. Mr. Schwartz also served as Plaintiffs Co-Lead Counsel in In reVeritas Software Corp. Derivative Litigation (Superior Court of the State ofCalifornia for the County of Santa Clara). In early 2005, the Court approveda settlement in which Veritas agreed to extensive corporate governancechanges, including requiring that 75% of the members of Veritas' Board ofDirectors would be independent directors, and that all reporting 16b officersand directors of the Company would be prohibited from engaging in anysales of Veritas' stock except pursuant to a newly-enacted 10b5-1 TradingPlan. Mr. Schwartz currently serves as Plaintiffs' Co-Lead Counsel in thePennexx Securities Litigation , (E.D. Pa.) and Liaison Counsel in In Re DVISecurities Litigation , (E.D. Pa.).



In the consumer protection field, Mr. Schwartz served asplaintiffs' co-lead counsel in Wolens, et al. v. American Airlines, Inc. In thatclass action, plaintiffs alleged that American Airlines breached its contractswith members of its AAdvantage frequent flyer program when itretroactively increased the number of frequent flyer miles needed to claimcertain frequent flyer miles travel awards. In a landmark decision, the UnitedStates Supreme Court held that plaintiffs' claims were not preempted by theFederal Aviation Act. 513 U.S. 219 (1995). The parties ultimately reached asettlement in which American agreed to provide class members with mileagecertificates that represent, for practical purposes, the full extent of classmembers' alleged damages, which the Court valued at between $ 95.6million to $ 141.6 million. Mr. Schwartz also represented a national class ofowners of wood clad doors and windows manufactured by Marvin Windowsthat prematurely rotted due to a defective wood preservative. (Minn. 4thJudicial Dist.). Even though the windows were between 12 and 16 years old,the parties reached a national settlement providing class members with theopportunity to obtain replacement windows with minimum net discounts ofbetween 45 % and 58 %.

In the environmental field, Mr. Schwartz played a significantrole as part of a large team of plaintiffs' counsel who prosecuted the claimsof fisherman, property owners, and Native Americans who were injured as aresult of the Exxon Valdez oil spill. The trial of that case resulted in a juryverdict in excess of $5.3 billion. Appellate proceedings in the 9th CircuitCourt of Appeals are still ongoing.

Mr. Schwartz has also developed an expertise in representing

the interests of providers of medical services whose bills have been deniedfor payment by insurers. Mr. Schwartz represented a certified class ofPennsylvania physicians and chiropractors who were not paid by NationwideMutual Insurance Company for physical therapy/physical medicine servicesprovided to its insureds. Nationwide agreed to pay class membersapproximately 130% of their bills. Mr. Schwartz is currently representingcertified classes of medical providers seeking interest for overdue bills fortreatment provided to insureds of SEPTA and Progressive InsuranceCompany.

In the product liability field, Mr. Schwartz served as a memberof the Plaintiffs' Steering Committee for medical monitoring claims in In rePennsylvania Diet Drugs Litigation, (Phila. C.C.P.). To settle that case,



American Home Products agreed to pay for an extensive medical monitoring

program for all Pennsylvania residents who ingested fenfluramine and

dexfenfloramine, the "fen" of the "fen phen" diet drug combination.

KIMBERLY M. DONALDSON, a Partner in the Haverfordoffice, is admitted to practice before the Supreme Courts of Pennsylvaniaand New Jersey, the United States Court of Appeals for the Third Circuit,and the United States District Courts for the Eastern District of Pennsylvaniaand District of New Jersey. Ms. Donaldson is a 1999 cum laude graduate ofVillanova University School of Law and is a 1996 graduate of BostonUniversity, where she received a B.A. in Political Science and interned withthe Massachusetts Office of the Attorney General, Public Protection Bureau,Consumer Protection Division. Ms. Donaldson's practice includes therepresentation of investors (shareholders and limited partners) andconsumers in major complex litigation, antitrust, securities fraud and breachof fiduciary duty suits. Ms. Donaldson was the principal trial assistant to Mr.Chimicles during the trial of the Real Estate Associates Limited PartnershipLitiagtion, which resulted in a jury verdict totaling $185 million inNovember 2002, following a six week trial. (For more details see Mr.Chimicles' biography at page 1-2).

MORRIS M. SHUSTER, Of Counsel, is admitted to practicebefore the United States Supreme Court, United States Court of Appeals forthe Third Circuit, the United States District Court for the Eastern District ofPennsylvania, the Supreme Court of Pennsylvania, and all other PennsylvaniaAppellate and trial courts.

Mr. Shuster is a graduate of the Wharton School, University ofPennsylvania (B.S. in Economics, 1951), and of the University ofPennsylvania Law School (J.D., 1954).

Prior to joining the Firm, Mr. Shuster was an active civil litigatoras an associate and partner in a major Philadelphia litigation firm, as a named-partner in his own firm, and as special litigation counsel to a largePhiladelphia, full-service firm. Over the last 20 years, he has concentrated hispractice in consumer class actions against banks and insurance companies. Hehas been successful in obtaining multi-million dollar recoveries in these cases.



Mr. Shuster is currently a faculty member at the University ofPennsylvania Law School where he teaches Trial Advocacy. In 1981, he wasa full-time faculty member at the University of Pennsylvania Law School andtaught a course in The Lawyering Process. He also has been a guest lectureron various legal subjects at the University of Pennsylvania Law School,Medical School, and Dental School, and at Drexel University. He is a memberof the Advisory Committee for the Public Service Program at the University ofPennsylvania Law School where he developed the mentor/student pro bonoproject.

Mr. Shuster is a past president of The Philadelphia Trial Lawyers'Association. He was appointed by the Third Circuit Court of Appeals asChairperson of the Bankruptcy Judge Search Committee. He was appointedby the District Court for the Eastern District of Pennsylvania as Chairperson ofa Panel to consider reappointment of a U.S. Magistrate.

In the Philadelphia Bar Association, Mr. Shuster has served as amember of the Board of Governors, Chairperson of the Judicial Commission,Committee on Judicial Selection and Reform, Committee on CivilLegislation/Legislative Liaison, and Committee on Civil Judicial Procedure(state courts). He is listed in Who's Who in American Law.

DENISE DAVIS SCHWARTZMAN, Of Counsel, is admitted topractice in Pennsylvania, Florida, Texas and the District of Columbia. She isadmitted to practice before all the State Courts in these jurisdictions and isadmitted to the United States Courts of Appeals for the Third, Fifth, Eleventhand District of Columbia Circuits as well as United States District Courtswithin each Circuit. Ms. Schwartzman is a graduate of The Law School ofthe University of Pennsylvania (L.L.B. 1969) and Temple University (A.B.1966). She holds a Master of Laws in Taxation from the Villanova UniversityLaw School. Ms. Schwartzman has practiced extensively at the trial andappellate levels before Federal and State Courts and before variousadministrative agencies.

Ms. Schwartzman was appellate counsel on the brief in In reCharter Company, 876 F.2d 866 (11th Cir. 1989), a case which establishedthat class proofs of claim are allowable in bankruptcy proceedings, served onthe trial team in Ashland Oil Spill Litigation , Master file M-14670 (W.D. Pa),In re Sunrise Securities Litiagtion, MDL No. 685 (E.D.Pa.) and representedour firm on the Litigation Committee in Prudential Securities Incorporated



Limited Partnership Litigation , MDL 1005 (S.D.N.Y.). Ms. Schwartzmanrepresented the firm on the plaintiffs' Co-Lead Counsel Committee in Spitzerv. Abdelhak, No. 98-CV-6475 (E.D.Pa.), a civil RICO action which recovereddamages on behalf of the physicians and research scientists of the nowdefunct Allegheny Health Education and Research Foundation (AHERF), amajor health care provider in the Delaware Valley and is a senior member ofthe trial team for the Firm in In re Mutual Funds Investment Litiagtion , MDL1586, a complex coordinated derivative action alleging violations of theInvestment Company Act and the Investment Advisers Act by the investmentadvisers to eighteen mutual fund families. Prior to relocating in Philadelphia,she was associated with a major law firm in San Antonio, Texas.

ANTHONY ALLEN GEYELIN, Of Counsel , is admitted topractice before the United States District Court for the Eastern District ofPennsylvania and the Supreme Court of Pennsylvania.

Mr. Geyelin is a graduate of the University of Virginia (B.A. inEnglish, 1968) and the Villanova University School of Law (J.D. 1974 cumlaude), where he was a member of the Moot Court Board, an AssociateEditor of the Villanova Law Review, and a recipient of the Obert CorporateLaw Award. After graduation from law school Mr. Geyelin was anassociate in the business department of a major Philadelphia law firm beforeaccepting an appointment as Chief Counsel to the Pennsylvania InsuranceDepartment in Harrisburg, an office he held from 1981 through 1983. Mr.Geyelin served as Pennsylvania's Acting Insurance Commissioner in 1983and 1984. In 1985 Mr. Geyelin accepted the position as chief inside counselfor Academy Insurance Group, Inc. in Valley Forge, Pennsylvania andAtlanta, Georgia, serving as General Counsel and Secretary of the publiclytraded holding company and its operating subsidiaries. In 1994 Mr. Geyelinwas appointed Secretary and General Counsel of Penn-America InsuranceCompany in Hatboro, Pennsylvania, and in 1995 assumed the same officeswith Penn-America Group, Inc., the publicly traded parent company. From1997 until joining the firm Mr. Geyelin was in private practice,concentrating on general business, insurance regulatory and litigationsupport matters.

CANDICE L.H. HEGEDUS, Of Counsel, is admitted to practicebefore the Supreme Court of Pennsylvania, the United States District Court forthe Eastern District of Pennsylvania, and the United States Court of Appealsfor the Third Circuit. She is a graduate of Villanova University School of Law



(J.D. 1979) and Muhlenberg College cum laude (B.A. 1974). Prior to joiningthe Firm, she practiced with major Philadelphia litigation firms. The focus ofher practice is complex litigation, including securities fraud and limitedpartnership cases behalf of shareholders and antitrust matters. Ms. Hegeduswas a member of the team who litigated In Re Real Estate Associates LimitedPartnership Litiate, No. CV-98-7035 (Federal District Court, Los Angeles),a case brought for violation of federal securities laws. Following a six-weektrial in November 2002, the jury returned a $ 185 million plaintiffs ' verdict, thefirst verdict awarding substantial monetary damages since the passage of thePrivate Securities Litigation Act of 1995.

TIMOTHY P. BRIGGS, an associate in the Haverford office, isadmitted to practice before the Supreme Court of Pennsylvania. He is agraduate of the Temple University Beasley School of Law (J.D. 2005) andreceived his undergraduate degree in Political Science from West ChesterUniversity (B.A., 1992). Prior to joining the firm, Mr. Briggs enjoyed along and distinguished career in the political arena. Mr. Briggs had servedin senior positions with U.S. Congressmen Joseph Hoeffel (PA) and BillPascrell (NJ) as well as Pennsylvania State Senator Connie Williams.

DANIEL J. BROWN, an associate in the Wilmington Office, isadmitted to practice before the Supreme Court of Delaware and the U.S.District Court for the District of Delaware. Mr. Brown received his J.D.,magna cum laude, in 2005 from Widener University School of Law, wherehe served as an Articles Editor for the Delaware Journal of Corporate Law.While in law school, Mr. Brown was a recipient of the prestigious WolcottFellowship, in which he served as a law clerk for the Honorable Myron T.Steele, Chief Justice, of the Delaware Supreme Court. Mr. Brown receivedhis B.A. in psychology from Villanova University in 2001.

FATEMA E.F. BURKEY, an associate in the Haverford office,is admitted to practice before the Supreme Courts of Pennsylvania and NewJersey. She graduated from Washington University School of Law (J.D.2003) and received her undergraduate degree in French and English fromGeorgetown University (B.S. 1998 cum laude). While in law school, Ms.Burkey served as Associate Editor of the Washington University LawQuarterly and authored, Prosecutor v. Aleksovski: A Critical Analysis oftheICTY Appeals Chamber's Abandonment of Witness Protection Measures, 82Wash. U. L.Q. 297-318 (2004).



ROBERT R. DAVIS, a former associate in the Wilmingtonoffice, is admitted to practice before the Supreme Court of Delaware and theSupreme Court of Pennsylvania. He is a 2003 graduate of William andMary, where he received his J.D. and Master's in Public Policy. Mr. Davisreceived his undergraduate degree from Appalachian State University in1999. Prior to joining the firm, Mr. Davis served as a law clerk for theHonorable Joseph J. Farnan, Jr. of the United States District Court for theDistrict of Delaware.

BENJAMIN F. JOHNS, an associate in the Haverford office,is admitted to practice before the United States Court of Appeals for theThird Circuit, the District Court for the Eastern District of Pennsylvania, theDistrict Court for the District of New Jersey, as well as the Supreme Courtsof Pennsylvania and New Jersey. He is a graduate of the Penn StateDickinson School of Law (J.D. 2005), the Penn State Harrisburg School ofBusiness Administration (M.B.A. 2004, Beta Gamma Sigma), andWashington and Lee University (B.S. 2002, cum laude). While attendinglaw school, Mr. Johns was a member of the Woolsack Honor Society andIrving R. Kaufman Securities Moot Court Team. He is a member of thePhiladelphia Bar Association and the Association of Trial Lawyers ofAmerica.

KIMBERLYM. LITMAN, an associate in the Haverford office,is admitted to practice before the Supreme Courts of Pennsylvania and NewJersey. She is a graduate of the Temple University Beasley School of Law(J.D. 2003) and received her undergraduate degree in Psychology from theUniversity of Maryland at College Park (B.A. 2000). While in law school,she served as Executive Editor of the Temple Political & Civil Rights LawReview and as a law clerk to Senior District Judge Kenneth L. Ryskamp ofthe United States District Court for the Southern District of Florida. Ms.Litman's pro bono activities include serving as a volunteer attorney with thePhiladelphia Volunteers for the Indigent Program, a non-profit organizationthat provides legal services to low-income clients who reside in Philadelphiaor have legal problems in Philadelphia.

TIMOTHY N. MATHEWS, an associate in the Haverfordoffice, is a graduate of Rutgers School of Law-Camden (J.D. magna cumlaude 2003) and Rutgers University-Camden (B.A. summa cum laude 2000).While attending law school, Mr. Mathews was a Teaching Assistant for theLegal Research and Writing Program and received the 1L Legal Writing



Award. He was also Lead Marketing Editor of the Rutgers Journal of Law& Religion and one of the top 10 oralists in the 2003 Judge John R. BrownAdmiralty Moot Court competition. Mr. Mathews' practice includes therepresentation of investors in complex antitrust, securities, and shareholderderivative litigation. He is an active member of the Firm's litigation team in Inre Mutual Funds Investment Litigation (MDL 04-1586), a multidistrictlitigation alleging claims related to late trading and market timing of mutualfunds in eighteen mutual fund families and involving hundreds of parties. Mr.Mathews is admitted to practice before the Supreme Courts of Pennsylvaniaand New Jersey, and the United States District Court for the Eastern Districtof Pennsylvania.

MARY KATHERINE MEERMANS, an associate in theHaverford office, graduated cum laude from the Law School of University ofPennsylvania in 1982. She served as a law clerk to the Honorable Paul M.Chalfin, Philadelphia Court of Common Pleas, from September 1982 toJanuary 1984, and to the Honorable Phyllis W. Beck from January 1984 toOctober 1984. She is a member of the Pennsylvania Bar.

A. ZACHARY NAYLOR, an associate in the Wilmingtonoffice, is a graduate of the Widener University School of Law (J.D., 2003magna cum laude), the University of Delaware (B.A. in Economics andPolitical Science, 2000) and Salesianum School. While at Widener, heserved as Wolcott Law Clerk to the Honorable Joseph T. Walsh of theSupreme Court of Delaware. He was also a Managing Editor of theDelaware Journal of Corporate Law, meriting the Russell R. LevinMemorial Award for outstanding service and dedication to that publication.Mr. Naylor is admitted to practice before the Supreme Court of the State ofDelaware, the United States Court of Appeals for the Third Circuit and UnitedStates District Court for the District of Delaware.

JOSEPH G. SAUDER, an associate in the Haverford office, isadmitted to practice before the Supreme Courts of Pennsylvania and NewJersey, the United States District Courts for the Eastern District ofPennsylvania, the Middle District of Pennsylvania and the District of NewJersey. Mr. Sauder received his B.S., magna cum laude in Finance fromTemple University in 1995 and his J.D. from Temple University School ofLaw in 1998, where he was a member of Temple Law Review. Prior tojoining the firm, Mr. Sauder was an associate with a major Philadelphia firm

where he concentrated on complex civil litigation. From 1998 to 2003, Mr.



Sauder was a prosecutor in the Philadelphia District Attorney's Office wherehe served as lead counsel in hundreds of criminal trials including overtwenty jury trials involving major felonies. His pro bono activitiesinclude serving as a volunteer attorney with the Support Center forChild Advocates, a nonprofit organization that provides legal and socialservices to abused and neglected children.

DANIEL B. SCOTT, an associate in the Haverford office, isadmitted to practice before the Supreme Courts of Pennsylvania and NewJersey, the United States Court of Appeals for the Third Circuit and theUnited States District Courts for the District of New Jersey, Eastern Districtof Pennsylvania and Eastern District of Michigan. He is a graduate ofEmory University School of Law (J.D. 2001, Atlanta Law Fellow) andPennsylvania State University (B.S. Economics 1991, with Distinction,University Scholar). Upon graduation from law school, Mr. Scott wasinducted into the Order of Barristers and Order of Emory Advocates, inrecognition of his work as a participant and coach on the Emory Law SchoolPhilip C. Jessup International Law Moot Court team (1999-200 1).

His practice includes the representation of companies, investors

and consumers in complex antitrust, securities and consumer protectionlitigation. In In re Pennsylvania Baycol Third Party Pgyor Litigation (Phila.

Ct. Common Pleas), a class action for which Chimicles & Tikellis served asco-lead counsel, Mr. Scott was instrumental in helping obtain partialsummary judgment on liability; this was the first judgment to be entered

against Bayer in the United States in connection with the withdrawal of

Baycol. Mr. Scott also materially assisted in briefing a motion for classcertification in that case, resulting in the certification of one of the few

national class actions involving third party payors to be certified in a statecourt. Shortly before trial, the firm reached a settlement with Bayer inwhich Bayer agreed to pay class members a net recovery that approximatestheir maximum damages. In Wong v. T-Mobile USA, Inc. (E.D. Mich.2006), a class action for which Chimicles & Tikellis serves as co-leadcounsel, Mr. Scott was instrumental in briefing opposition to T-Mobile's

motion to compel arbitration. In July 2006, the Court issued an opiniondenying T-Mobile's motion, having concluding that the class action waivercontained therein was unenforceable. Mr. Scott's pro bono commitmentsinclude an effort to obtain asylum for a Colombian bacteriologist who waskidnapped, assaulted and threatened with death by the FARC rebels ofColombia. In this case, Mr. Scott argued and won remand from the Court of



Appeals for the Third Circuit on a denial of asylum by the Department of

Homeland Security . Rojas-Contreras v. Att'y Gen'l , No. 04-4762, 2006 WL2052233 (3d Cir. July 24, 2006).

In September 2006, American Lawyer Media, publisher of TheLegal Intelligencer and the Pennsylvania Law Weekly, named Mr. Scott as

one of forty "Lawyers on the Fast Track" - Pennsylvania attorneys under the

age of 40 who show outstanding promise in the legal profession and make a

significant commitment to their community. Selection for this award is doneby an independent ALM committee comprised of members of the bar.

KATHLEEN P. CHIMICLES, ASA, the Firm's Financial

Specialist between 1992 and 2005, and currently a consultant to the Firm, is a

graduate of Drexel University (B.S. Finance 1983) and Villanova University

(Master of Taxation 1992). Ms. Chimicles is a Senior Member of the

American Society of Appraisers. Before leaving the Firm to pursue other

business interests, Ms. Chimicles played a significant role in some of the

Firm's landmark cases, including Real Estate Associates Limited Partnerships

Litigation , PaineWebber Limited Partnerships Litigation and Prudential

Limited Partnerships Litiaction . In each of these cases, Ms. Chimicles

coordinated the efforts of plaintiffs' experts' witnesses including assisting in

the preparation of expert reports in connection with depositions and trial. Prior

to joining the Firm, Ms. Chimicles was a Vice President of the investment

bank, Howard, Lawson & Co., where she had responsibility for a broad range

of corporate finance assignments. Ms. Chimicles nee Balon has co-authored

several articles, including "Giving the Company Away (While Keeping the

Benefits)," Lawyer's Digest, March 1987, "Leveraged ESOPs - Buyers of

Companies," Lawyer's Digest, May 1988, and together with Mr. Chimicles, "A

Realistic Assessment Of The Need For Securities Class Action Litigation

Reform," the New York Law Journal , August 26, 1993. Ms. Chimicles has

also served as a panelist at various seminars and conventions regarding

financing and valuation issues.



EXHIBIT C





AFFIDAVIT OF PETER D. MORGENSTERN FOR APPLICATION FORPAYMENT OF ATTORNEYS' FEES

1. I am a member of the law firm of Morgenstern Jacobs & Blue, LLC

("MJB"), and I respectfully submit this affidavit in support of MJB's application for the

payment of attorney fees in connection with services rendered in the above-referenced

securities class action litigation.

2. As set forth in the detailed billing report that accompanies this affidavit

(Exhibit 1), during the period from September 2004 through January 10, 2005, MJB,

through its predecessor firm Bragar Wexler Eagel & Morgenstern, P.C., analyzed

specialized bankruptcy issues that had the potential to affect this litigation, including, for

example, review of DVI, Inc.'s disclosure statement, proposed plan of liquidation and

plan supplements. MJB also prepared and filed an objection to confirmation of DVI,

Inc.'s liquidation plan, which resulted in successfully protecting the rights of the

securities class action plaintiffs in this case.

3. The above-described work was performed by Debra Kramer, who

formerly served in the position of Special Counsel. The work was performed under my

supervision . I am submitting herewith information about our firm, together with my

professional biography. (Exhibit 2)

4. MJB' s fees and expenses in this matter total $22,401.59. A detailed

breakdown of these fees and expenses is submitted herewith.

I declare under penalty of perjury that the above information is true and correct to

the best of my personal knowledge.


Date: November 2, 2006

/s/ Peter D. Morgenstern

Peter D . Morgenstern, Esq.Morgenstern, Jacobs & Blue LLC.885 Third AvenueNew York, NY 10022


EXHIBIT 1


DVI SECURITIES LITIGATION

Firm: Morgenstern Jacobs & Blue, LLC

Period : Inception through September 30, 2006

Lodestar Report

Name and Status Total Hours Current Hourly Rate Total Lodestar

Debra Kramer 39.20 $540.31 $21,180.00

Celia L. Zeilberger 2.80 $165.00 $462.00

Yvonne Woon 3.5 $150.00 $525.00

Kandra Payne .70 $165.00 $115.50

Total 46.20 $22 ,282.50

Expenses

Description Amount

Copy Expenses $59.00

Facsimiles 6.85

WestLaw 24.06

Pacer 25.18

Transportation 4.00

Total $119.09


EXHIBIT 2


MORGENSTERN JACOBS & BLUE, LLCATTORNEYS AT LAW

885 THIRD AVENUE

NEW YORK, NEW YORK 10022

TELEPHONE : (212) 750-6776

FACSIMILE: (212) 750-3128

Morgenstern Jacobs & Blue, LLC ("MJB") handles a broad array of significant civil

litigation, class actions and bankruptcy matters throughout the United States, Europe and

Asia from its primary offices in New York. MJB's attorneys come from diverseprofessional backgrounds , including elite large and small firms , and a broad range of

government service . While MJB has extensive trial experience in state and federal courts,

MJB's attorneys know how to employ their outstanding trial skills to achieve extremely

favorable pretrial resolutions for MJB ' s clients.

MJB's strategic approach to cases and its attorneys' considerable experience allow MJB

to handle cases that are larger and more complex than many of MJB's small-firm peers.

MJB currently represents the court-appointed Official Committee of Equity SecurityHolders in the Chapter 11 case of Adelphia Communications Corporation, and the

Creditors' Committee in the Chapter 11 case of Calpine Corporation.

Peter D. Morgenstern, Partner

Peter Morgenstern is a founding member of the firm. He concentrates his practice in the

areas of bankruptcy, creditors' rights and commercial litigation. He was formerly a

partner and head of the business reorganization department of the Florida office of Weil,

Gotshal & Manges. Prior to that he was associated with the firm of Fried Frank HarrisShriver & Jacobson. He is admitted in New York State, New Jersey and Florida. Peter is

a member of the American Bar Association, and the American Bankruptcy Institute.

He is a 1982 graduate of the National Law Center, George Washington University, where

he was a member of the Law Review. He completed his undergraduate work atNorthwestern University in 1979 and also studied at the University of Sussex, England.

His publications include: New Clout for Victims in Criminal Proceedings , New York

Law Journal (July 20, 2005); and Litigation Issues for Hedge Funds, The Wall StreetTranscript (June 2005).


EXHIBIT D



In Re DVI, Inc. Securities LitigationCase No. 2:03-CV-5336-LDD

AFFIDAVIT OF PAUL MULHOLLAND, CPA, CVACONCERNING MAILING OF NOTICE OF PENDENCY OF CLASS ACTION,

HEARING ON PROPOSED PARTIAL SETTLEMENTS, PLAN OF ALLOCATIONAND ATTORNEYS ' FEES AND EXPENSES

I, Paul Mulholland, being duly sworn, depose and say:

I submit this affidavit in order to provide the Court and the parties to the above-

captioned litigation with information regarding the mailing of the Notice of Pendency of Class

Action, Hearing on Proposed Partial Settlements, Plan of Allocation and Attorneys' Fees and

Expenses ("Notice") and the Proof of Claim and Release form ("Claim Form") (collectively,

"Notice Claim Form") and the publications of the Summary Notice ("Publication Notice"). I am

over 21 years of age and am not a party to this action. I have personal knowledge of the facts set

forth herein and, if called as a witness, could and would testify competently thereto.

2. I am the President of Strategic Claims Services ("SCS"), a nationally recognized

claims administration firm. I am a Certified Public Accountant and a Certified Valuation

Analyst. I have over fifteen (15) years of experience specializing in claims administration for

class action settlements and I have administered over ninety (90) cases. SCS was established in

April 1999 and has administered over sixty (60) class actions settlements since its inception.

SCS was retained by Counsel for the Class to provide administrative services as part of the

settlement administration process in the above-captioned litigation. Our services include

supervising the printing of the Notice Claim Form; providing Notice Claim Forms to the Class;

notifying brokerage firms or other nominee accounts of the appropriate manner to provide

individual notice to class members, both individually and on a published basis; distributing,


accepting and processing Claim Forms filed by class members; reviewing submitted Claim

Forms for accuracy and completeness and to ensure that they are supported by sufficient

documentary evidence; providing notice of deficient or rejected claims, when appropriate;

calculating recognized losses of the class, on both an individual and classwide basis; and all

other services necessary to administer this securities litigation class action settlement

("Settlement")

So as to provide actual notice to those persons and entities who purchased or

otherwise acquired the securities of DVI, Inc. ("DVI") between August 10, 1999 and August 13,

2003, both dates inclusive ("Class Period"), we mailed, by first class mail, the Notice Claim

Form approved by the Court to all individuals and organizations identified on the records of

DVI's transfer agent. These records reflect persons and entities that purchased or otherwise

acquired securities of DVI for their own account or for the account(s) of others during the Class

Period . In addition , we mailed Notice Claim Forms to all brokerage companies , banks and trust

companies contained on our master mailing list. This master list consists of the 840 largest

banks and brokerage companies ("Nominee Account Holders"), as well as 1 ,042 mutual funds,

insurance companies, pension funds, and money managers ("Institutional Groups") which may

have traded DVI's securities in their clients' or their accounts. The mailing of Notice Claim

Forms were mailed on or before September 1, 2006 as required by the Preliminary Approval

Order Pursuant to Rule 23 of the Federal Rules of Civil Procedure , dated August 18, 2006 (the

"Court' s August 18 , 2006 Order"). Moreover, the Notice Claim Form was made available to the

public at SCS's website at www.strategicclaims.net.

4. The Nominee Account Holders were asked to either distribute Notice Claim

Forms to beneficial holders directly (the cost for which they were reimbursed), or provide SCS

with lists of the names and addresses of actual or beneficial holders so that SCS could mail

2


Notice Claim Forms directly to them. A copy of a letter sent to these organizations is attached as

Exhibit A.

5. As required by the Court' s August 18 , 2006 Order , the Publication Notice was

published in the national edition of The Wall Street Journal, USA Today, a Sunday edition of the

Chicago Tribune and the Philadelphia Inquirer, and electronically on the PrimeZone on or

before September 7, 2006, as shown in the affidavits of publications attached as Exhibit B.

6. The notice procedures described in paragraphs two (2) through five (5) above are

consistent with the procedures I have used in each of the class action securities litigation cases in

which I have been involved with over the past fifteen years.

7. To date, 8,602 Notice Claim Forms have been mailed. Attached as Exhibit C is a

copy of the Notice Claim Form as mailed. SCS mailed 227 Notice Claim Forms to individuals

and organizations from the shareholders' list provided by the Company. As noted above, 1,882

Notice Claim Forms were sent to Nominee Account Holders and Institutional Groups . Also, to

date, an additional 6,493 Notice Claim Forms were requested by the Nominee Account Holders

and Institutional Groups and other individuals. Lastly, to date, SCS has received 344 Proof of

Claim forms filed by potential class members.

8. To date, there are five (5) requests for exclusion . SCS initially received six (6)

requests for exclusion from members of the Class. Five of these initial requests for exclusions

were from the five (5) WM Funds (plaintiffs named in a related action titled WM High Yield

Fund et al. v. O'Hanlon et al., No. 04-CV-3423 - Eastern District of PA.). Attached as Exhibit

D are the requests for exclusion for the five WM Funds. SCS also received an initial request for

exclusion from Mr. Scott J. Childress ("Childress") that was later withdrawn. Childress's initial

request for exclusion was not sufficient since he did not provide the amount of DVI securities

purchased or sold, or the date (s) of such trades . After follow up discussions with Childress by

SCS and Class Counsel, Mr. Childress indicated he purchased approximately 12,000 shares


during the Class Period and he also decided to withdraw his request for exclusion. Attached as

Exhibit E is Mr. Childress's letter and a letter from Class Counsel memorializing Childress's

decision to withdraw his request for exclusion.

9. SCS has received no objection to the fairness of the Settlement, Plan of

Allocation, Certification of a Settlement Class or plaintiffs request for application for attorneys'

fees and reimbursement of litigation expenses.

Sworn to and Subscribed before meThisday of October 2006In the County of Delaware,Com gnwealth of Pennsylvania

Notary

CATHYModkBMy COMO

Paul Mulholland, CPA, CVA

4

Case 2:03-cv-05336-LDD Document 400-7 Filed 11/02/2006 Page 6 of 34EXHIBIT A

STRATEGIC CLAIMS SERVICES2710 CONCORD ROAD, SUITE 5

ASTON, PA 19014PHONE: (610) 364-2693 FAX: (610) 364-2698

EMAIL: [email protected]

September 1, 2006

NOTICE TO BROKERS, CUSTODIAL BANKS, FUND MANAGERS, INSURANCECOMPANIES, PENSION FUNDS, MUTUAL FUNDS AND OTHER NOMINEES

Re: DVI, Inc. Securities LitigationCase No. 2:03-CV-5336-LDDCusip No. 233343102

EXCLUSION DEADLINE - OCTOBER 12, 2006OBJECTION DEADLINE - OCTOBER 12, 2006

SETTLEMENT FAIRNESS HEARING DATE - NOVEMBER 9, 2006CLAIMS FILING DEADLINE - JANUARY 3, 2007

TO EXPEDITE THIS PROCESS, PLEASE SUBMIT REQUESTED INFORMATIONELECTRONICALLY.

Enclosed is a copy of the "Notice of Pendency of Class Action, Hearing on Proposed Partial Settlements, Plan

of Allocation and Attorney's Fees and Expenses" in the above-referenced matter. This was sent to all entities

whose names have been made available to us, or which we believe may know of potential claimants.

Your clients may be due to receive a portion of the net settlement fund set aside in this matter.

We request that you assist us in identifying any individuals or accounts who purchased or otherwise acquired

DVI common stock and DVI 9 7/8% Senior Notes during the period of August 10, 1999 through and including

August 13, 2003 (both dates inclusive), excluding (a) Defendants; (b) plaintiffs named in a related action titled

WM High Yield Fund, et al. v. O'Hanlon et al.; and (c) those who timely and validly request exclusion from

the Class pursuant to this Notice.

Please comply in one of the following ways:

1. If you have no beneficial owners, please so advise us in writing; or

2. Supply us with the names and addresses of your beneficial owners and we will do the mailing

(Please provide us this information electronically. If you are not able to do this, labels will be

accepted but it is important that a hardcopy also be submitted of the names of your clients); or

3. Advise us of how many beneficial owners you have and we will supply you with ample forms to

do the mailing.

You are on record as having been notified of this legal matter. Any reasonable research and mailing expenses

may be billed directly to our office, payable subject to the approval of the Class Representative. You should

note on your invoice that expenses incurred were for compliance with the Order of the Court. Please call us

directly at the above number should you have any questions.

Thank you for your prompt response.

Sincerely,

Claims AdministratorDVI, Inc. Securities LitigationFOR: PLAINTIFFS' COUNSEL


• STATE OF TEXAS )ss:

CITY AND COUNTY OF DALLAS)

Filed 11 /02/2006 Page 7gVMIT BWft;

I, 01= Hellums Jr.. being duly sworn, depose and say that I am the Advertising Cleric

ofthe Publisher ofTHE _ ALL STREET JOURNAL , a daily national newspaper

published and ofgeneral circulation in the City and County ofNew York, Now You,

City ofNaperville, DuPage County, Illinois, and in the city and County of Dallas, Texas

and that the attached Notice has been regularly published in THE WALL STREET

JOURNAL for national distribution forcinsertion(s) on the following date(s): 9/5/06

at the request ofadvertiser: DVL Inc and that the foregoing statements are true and

correct to the best ofmy knowledge fi formatjon, and bcicf

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7950 Jones Branch Drive • McLean, Virginia 22108fir1-800-872-3433

VERIFICATION OF PUBLICATION

COMMONWEALTH OF VIRGINIACOUNTY OF FAIRFAX

Being duly sworn Kristen Cunningham says that she is the principal clerk ofUSATODAY, and is duly authorized byUSA TODAY to make this affidavit, and isfully acquainted with the facts stated herein: on Tuesday. September. 5.2206 thefollowing advertisement- In Re DVL Inc. Securities Litigation was published inUSATODAY DOMESTIC.

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Case 2:03-cv-05336-LDD Document 400-7 Filed 11/02/2006 Pac 'I14^ter 8

= CERTIFICATE OF PUBLICATION

Chicago Tribune Company hereby certifies that it is the

publisher of the Chicago Tribune; that the Chicago Tribune

Is an English language newspaper of general circulation,

published daily in the City of Chicago, County of Cook

and State of Illinois; that the Chicago Tribune has been

so published continuously for more than one year prior to

the date of first publication mentioned below and is further

a newspaper as defined in Ill. Rev. Stat. ch. 100, SS 5 & 10;

that the undersigned is the duly authorized agent of the

Chicago Tribune Company to execute this certificate on its

behalf; and that a notice of which the annexed is a true

copy was printed and published in said newspaper

time(s) and on the following dates:

the first publication being on the earliest of said dates and

the last publication being on the latest of said dates.

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CHICAGO TRIBUNE COMPANY

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Proof of Publication in The Philadelphia InquirerUnder Act. No 160, P.L. 877, July 9,1976

STATEOF PENNSYLVANIACOUNTYOFPHILADELPHIA

Anna Dickerson being duly sworn, deposes and saysthat The Philadelphia Inquirer is a daily newspaper published

at Broad and Callowhill Streets, Philadelphia County,

Pennsylvania. which was established in the year 1829, sincewhich date said daily newspaper has been regularly publishedand distributed in said County, and that a copy of the printednotice of publication is attached hereto exactly as the samewas printed and published in the regular editions and issues ofsaid daily newspaper on the following dates:

September 3, 2006

Affiant further deposes and says that he is an employeeof the publisher of said newspaper and has been authorizedto verify the foregoing statement and that he is not interestedin the subject matter of the aforesaid notice of publication, andthat all allegations in the foregoing statement as to time, placeand character of publication are true.

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Case 2:03-cv-05336-LDD Document 400-7 Filed 11/02/2006 Page 1W,&•, eowl

PRIME O E Cross Time Report

Cross September 7, 2006 at 07:00 AM (Eastern)Time:

Headline : Notice of Pendency and Proposed Partial Settlements of Class Action on

Behalf of Those Who Purchased or Otherwise Acquired the Securities of

DVI, Inc. Announced by Krislov & Associates, Ltd.

This email message serves as a formal confirmation that your release was transmitted onPrimeZone's distribution network as requested, including any fax or email broadcasts.

If you have any questions, comments or concerns, please reply to this message, contact

your account manager, or call our Customer Service Center at 800-307-6627, or 310-642-

6930, and enter option #1

Copyright © 2006 PrimeZone Media Network, Inc.

Case 2:03-cv-05336-LDD Document 400-7 Filed 11/02/2006 Page 16 of HiBIT C


X

In Re DVI, Inc. Securities Litigation: Case No. 2:03-CV-5336-LDD

X

NOTICE OF PENDENCY OF CLASS ACTION, HEARING ON PROPOSED PARTIAL

SETTLEMENTS, PLAN OF ALLOCATION AND ATTORNEYS' FEES AND EXPENSES ("NOTICE")

TO: All persons and entities who purchased or otherwise acquired the securities of DVI, Inc. ("DVI") between

August 10, 1999 and August 13, 2003 , both dates inclusive (the "Class Period").

If you purchased or otherwise acquired any DVI securities (common stock and 914% Senior Notes) during

the Class Period and you lost money on the securities, you may be entitled to share in a settlement.

To claim benefits that maybe due to you. you must submit a Proof of Claim and Release form attached to

this Notice postmarked on or before January 3. 2007.

PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY YOUR RIGHTS WILL BE AFFECTED BY PROCEEDINGS

IN THIS ACTION. IF YOU ARE A CLASS MEMBER, YOU ULTIMATELY MAY BE ENTITLED TO RECEIVE BENEFITS PUR-

SUANT TO THE PROPOSED PARTIAL SETTLEMENTS DESCRIBED HEREIN.

CLAIMS DEADLINE: CLAIMANTS MUST SUBMIT PROOFS OF CLAIM, ON THE FORM ACCOMPANYING THIS NOTICE,

POSTMARKED ON OR BEFORE JANUARY 3, 2007.

The purpose of this Notice is to inform you of this Action, and the proposed Partial Settlements that will affect

all Class Members' rights. This Notice describes rights you may have under the proposed Partial Settlements and

what steps you may take in relation to this Action. This Notice is not an expression of any opinion by the Court

as to the merits of any claims or any defenses asserted by any party in this Action, or the fairness or adequacy

of the proposed Partial Settlements.

You are receiving this Notice because you may have purchased a security issued by DVI, Inc. during the Class

Period.

The above captioned lawsuit is a class action lawsuit (the Àction°) in which the Court has certified a Settlement

Class (the "Settlement Class"), described more fully below

The proposed Partial Settlements create a fund in the amount of $2,885,000 in cash (the "Partial Settlements

Amount") and will include interest that accrues on the fund prior to distribution.

By Order of the Court, this Notice is being sent to you in the belief that you may be a member of the Class,

to inform you as follows:

THE COURT HAS CERTIFIED THE SETTLEMENT CLASS ON BEHALF OF THE CLASS DEFINED IN SECTION m

BELOW.

PARTIAL SETTLEMENTS OF THE ACTION HAVE BEEN REACHED, SUBJECT TO COURT APPROVAL. THESE

PARTIAL SETTLEMENTS ARE WITH ONLY CERTAIN DEFENDANTS, AND THE ACTION IS CONTINUING

AGAINST OTHER DEFENDANTS. THE TERMS OF THE PARTIAL SETTLEMENTS ARE DESCRIBED IN SECTION

IV BELOW.

IF YOU MEET THE CLASS DEFINITION, YOU ARE A MEMBER OF THE CLASS AND YOU WILL BE BOUND BY

THE PARTIAL SETTLEMENTS AND THE RELEASES THAT ARE GIVEN PURSUANT THERETO, UNLESS YOU ACT

TO EXCLUDE YOURSELF PURSUANT TO THE INSTRUCTIONS IN SECTION VII BELOW. IF YOU WISH TO RE-

MAIN A MEMBER OF THE CLASS AND TO BE BOUND BY THE PARTIAL SETTLEMENTS AND RELEASES, YOU

DO NOT NEED TO TAKE ANY ACTION IN RESPONSE TO THIS NOTICE OTHER THAN WHAT IS OUTLINED IN

SECTION VIII BELOW TO ESTABLISH THE DOLLAR AMOUNT OF YOUR CLAIM.

NO DETERMINATION HAS BEEN MADE ON THE MERITS OF THE CASE. ANY FINAL JUDGMENT WILL BIND ALL

MEMBERS OF THE CLASS EXCEPT THOSE MEMBERS WHO ACT TO EXCLUDE THEMSELVES PURSUANT TO

THE DEADLINES SET HEREIN.

YOU MAY OBTAIN MORE DETAILED INFORMATION ABOUT THE ACTION BY ACCESSING THE COURT FILE

Case 2:03-cv-05336-LDD Document 400-7 Filed 11/02/2006 Page 0";4x C,

Plaintiffs' Lead Counsel have not received any payment for their services in prosecuting the Action on behalf of

Plaintiffs and the members of the Class, nor have they been reimbursed for their out-of-pocket expenditures. If

the Partial Settlements are approved by the Court, Plaintiffs' Lead Counsel will apply to the Court for attorneys'

fees not to exceed 30% of the Settlement Amount, or up to $865,500, and reimbursement of out-of-pocket ex-

penses not to exceed $90,000, both of which shall be paid to Plaintiffs' Lead Counsel from the Class Settlement

Fund with interest from the date such Class Settlement Fund was funded to the date of payment at the same net

rate that the Class Settlement Fund earns. The average cost per share and per note will vary depending on the

number of shares and notes for which claims are filed.

_11. A DESCRIP'TION OF THE LAWSUIT AND STATUS OF THE PROCEEDINGS

The Third Amended Consolidated Class Action Complaint (the "Complaint"), filed on September 20, 2004, alleges

that during the Class Period the Defendants prepared and disseminated to the investing public materially false

and misleading information about DVI's financial condition and results of operations, and/or engaged in decep-

tive schemes to conceal DVI's dire financial position, in order to artificially inflate the prices of DVI's publicly-

traded securities.

The culmination of this alleged misconduct resulted in DVI publicly disclosing its intention, on August 13, 2003,

to petition for Chapter 11 Bankruptcy protection based on the "discovery of apparent improprieties in its prior

dealings with lenders involving misrepresentations as to the amount and nature of collateral pledged to lenders."

On August 25, 2003, DVI filed for bankruptcy protection and, thereafter, liquidated. In the bankruptcy proceed-

ings, a Bankruptcy Court-appointed Examiner conducted an investigation of DVI's demise and, on or about April

8, 2004, issued a 188-page report, which described numerous misstatements related to DVI's revenue recognition

and loan loss reserves, among other items.

In this case, the Complaint, which derives in part from the Examiner's findings and conclusions, alleges that De-

fendants' misconduct violated federal securities laws and damaged investors who purchased or otherwise ac-

quired the artificially inflated securities during the Class Period.

This Action is pending against:

(1) individuals and entities who allegedly intentionally or recklessly made materially false and misleading state-

ments to the investing public regarding DVI, including DVI's Officers and Directors (Michael A. O'Hanlon

("O'Hanlon"), Steven R. Garfinkel ("Garfinkel"), John P. Boyle ("Boyle"), Gerald Cohn ("Cohn"), Nathan

Shapiro ("Shapiro"), William S. Goldberg ("Goldberg"), Harry T.J. Roberts ("Roberts"), John E. McHugh

("McHugh")), its Auditor, Deloitte & Touche, LLP, and one of its Underwriter's/Lender's, Merrill Lynch & Co.,

Inc.; these claims were brought under Section 10(b) of the Securities & Exchange Act of 1934, 15 U.S.C.

'78j(b), and Rule 10b-5(b), 17 C.F.R. '240.10b-5(b), promulgated by the Securities and Exchange Commission;

(2) certain "special relationship" entities - Dolphin Medical, Inc. ("Dolphin"), OnCure Medical Corp., f/k/a On-

Cure Technologies Corp. ("OnCure"), PresGar Imaging, LC ("PresGar"), and Radnet Management, Inc. ("Rad-

net"), who Plaintiffs allege were closely associated with DVI and participated in DVI's scheme of avoiding

substantial specific loss recognition on delinquent loan and lease receivables; these claims were brought

under Section 10(b) and Rule 10b-5(a) and (c);

(3) individuals and entities who engaged in a scheme or device to conceal DVI's financial irregularities from the

investing public, specifically Richard E. Miller, Anthony J. Turek, Terry Cady, and all individuals and entities

in paragraph (1) ; these claims were brought under Section 10(b) and Rule l Ob-5 (a) and (c) ; and

(4) individuals and entities who allegedly knew or were recklessly indifferent to the fact that DVI's financial

statements were materially false and had control over DVI, specifically including O'Hanlon, Garfinkel, Boyle,

Cohn, Shapiro, Goldberg, Roberts, McHugh, Miller, Turek, Cady (collectively, "the Individual Officer and Di-

rector Defendants"); these claims were brought under Section 20(a) of the Securities & Exchange Act of

1934, 15 U.S.C. '78t(a).

On or about November 1, 2004, each of the aforementioned named Defendants, as well as Canadian Imperial Bank

of Commerce Trust Company (Bahamas) Limited ("CIBC"), the trustee of certain trusts for the benefit of certain

Pritzker family members and against whom Plaintiffs filed a Section 20 (a) claim, filed motions to dismiss the Com-

plaint (the "Motions"). On May 31, 2005, the Court granted in part and denied In part Defendants' Motions to Dis-

miss. Specifically, the Court denied all motions to dismiss except as to CIBC, claims under Rule lOb-5(b) asserted

against Defendants Turek, Cady and Miller, and the claims under Rule l Ob-5 (a) and (c) against OnCure for pur-

chasers who bought prior to July 30, 1999. It further held that OnCure, Dolphin and PresGar were "not alleged to

have made any misstatements or omissions and [are] too far removed from the statements at issue to be held li-

able therefore." The Court, on February 16, 2006, denied Defendants' motions for reconsideration and for certi-

Case 2:03-cv-05336-LDD Document 400-7 Filed 11/02/2006 Page 18 1;k 4fr

fication for interlocutory appeal of the Court's May 31, 2005 decision. Motions to dismiss are not decisions on

the merits and merely determine whether the complaint alleges facts sufficient to state a claim. OnCure, Dolphin

and PresGar deny that they engaged in any wrongdoing, deny that they violated Section 10(b) and Rule 10b-5

promulgated thereunder by the SEC, and deny that the Complaint sets forth a valid claim against them.

Plaintiffs, on September 30, 2005, amended the Complaint to add Section 20(a) claims against Thomas Pritzker,

the Pritzker Organization LLC and certain unnamed Pritzker family members (collectively, the "Pritzker Defen-

dants") as controlling parties. In addition, Plaintiffs, on April 7, 2006, added Section 10(b) and Rule lOb-5(a) and

(c) claims against DVI's former lead legal counsel, Clifford Chance LLP and Clifford Chance (US) LLP.

The Court's denial, in part, of Defendants' motions to dismiss Plaintiffs' Complaint only addressed the sufficiency

of Plaintiffs' pleadings and did not determine the merits of Plaintiffs' claims. The Settling Defendants, Oncure,

Dolphin and PresGar, deny that they engaged in any wrongdoing or violated any federal securities laws.

The Settling Defendants, in order to resolve this litigation with respect to each of them, have agreed to settle-

ment terms with Plaintiffs. Any final judgment made by the Court will be binding on all Class Members as to these

three defendants excepting only those class members who exclude themselves as provided herein.

l1il= 1 11110 no 111MIX01111111111V

The Court has certified the Settlement Class as consisting of all persons or entities, other than defendants in the

Litigation, who purchased or otherwise acquired the DVI securities (its common stock and 97/896 Senior Notes)

between August 10, 1999 and August 13, 2003, both dates inclusive (the "Class Period"). Excluded from this Set-

tlement Class are Defendants, plaintiffs named in a related action titled WM I- 'gh Yield Fund. et al. v. O'Hanlon et

-1., No. 04-CV-3423 (E.D. Pa.), and those who timely and validly request exclusion from the Class pursuant to this

Notice.

Lead Plaintiff/Class Representative . The Court appointed Kenneth Grossman, the Cedar Street Fund and the

Cedar Street Offshore Fund (collectively, 'Cedar Street Group") as lead plaintiffs in the Action pursuant to the

Private Securities Litigation Reform Act of 1995, 15 U.S.C. '78u-4 & 772-1 ("PSLRA"). The Court has also certified,

for settlement purposes, the Cedar Street Group as Class representatives.

Lead Counsel/Class Counsel The Court has appointed the law firm of Krislov & Associates, Ltd., 20 N. Wacker

Drive, Chicago, IL 60606, (312) 606-0500 to serve as Lead Counsel for the Class. The Court has also certified, for

purposes of the settlement class, Krislov & Associates, Ltd. as class counsel.

A. Reasons The Parties Settled

On October 10, 2005, December 13, 2005 and April 19, 2006, the Lead Plaintiffs, by their counsel, signed Stipula-

tions of Settlement (the "Stipulations') with Defendants OnCure, Dolphin and PresGar, respectively. The Stipula-

tions provide for settlement of this Action as against these three defendants only (the "Partial Settlements"), and

do not constitute settlements of any claims by Lead Plaintiffs or the Class against any other Defendants named

or who may be named in the Action in the future.

OnCure, Dolphin and PresGar are three of the four "special relationship" entities that are alleged to have partic-

ipated in the scheme to improperly conceal unrecoverable loan and lease losses at DVI. Specifically, OnCure, Dol-

phin and PresGar were alleged to have been involved with transactions that DVI engaged in to cover-up uncol-

lectible loans and leases by a variety of devices.

OnCure, Dolphin and PresGar deny all allegations of wrongdoing, fault, liability or damage to the Lead Plaintiffs

or the Class, deny that they engaged in any wrongdoing, deny that they committed any violation of law, deny that

they acted improperly in any way and believe that they acted properly at all times. OnCure, Dolphin and Pres-

Gar recognize, however, the uncertainty and risk inherent in any litigation, especially complex securities litiga-

tion, and the difficulties and substantial expense and length of time necessary to defend this action through trial

and any appeal. To eliminate the burden and expense of further litigation and the risk of a judgment at trial, On-

Cure, Dolphin and PresGar wish to settle the litigation against them on the terms and conditions stated in the

Stipulations, and to put the claims alleged in this Action to rest finally and forever.

Based on the investigations of Lead Counsel and the comprehensive investigation by the Bankruptcy Court ap-

pointed Examiner, the Lead Plaintiffs have concluded that the terms and conditions of these Partial Settlements

are fair reasonable and adequate to the Class's interests, and have agreed to settle the claims raised in the Ac-

tion as against OnCure. Dolphin and PresGar pursuant to the terms and provisions of the Stipulations. The Lead

Plaintiffs made this decision after considering (a) the substantial benefits that the Class will receive from the Par-

3

Case 2:03-cv-05336-LDD Document 400-7 Filed 11/02/2006 Page 19 of"As

tial Settlements, (b) the attendant risks of litigation, (c) the ability of the Settling Defendants to pay a materially

greater amount, and (d) the desirability of permitting the Partial Settlements to be consummated as provided by

the terms of the Stipulations. From the perspective of the Lead Plaintiffs, the principal reason for the Partial Set-

tlements is the substantial monetary benefits to be provided to the Class now. These benefits must be compared

to the risk that recovery might not be achieved after a contested trial and likely appeal - possibly years into the

future. Assuming the Lead Plaintiffs won at trial, they anticipated that the Settling Defendants would have ap-

pealed the verdict and that would have created further uncertainty and delay. From the perspective of OnCure,

Dolphin and PresGar the principal reasons for the Settlements are to settle and terminate all existing or poten-

tial claims against them, and to eliminate the risk of a judgment against them, without in any way acknowledg-

ing any fault or liability, in order to eliminate the burden and expense of further litigation and possible appeals.

B. Releases Exchanged By The Parties

Pursuant to the Stipulations, if the Partial Settlements are approved by the Court, all Class Members will be

deemed to have released the following claims against OnCure, Dolphin and PresGar and certain related parties

(as more fully defined in the Stipulations):

all claims, rights, demands, suits, matters, issues or causes of action, whether known or unknown, asserted

or unasserted, whether under state or federal law, including the federal securities laws, and whether directly,

indirectly, derivatively, representatively or in any other capacity, arising out of any losses sustained by Class

Members with respect to any transaction in or related to the DVI securities at issue here (but excluding any

claims to enforce the terms of the Partial Settlements).

Furthermore, upon the Effective Date of the Settlements, Lead Plaintiffs, all members of the settlement class, and

all other persons and entities whose claims are being released, shall be deemed to have, and shall have, ex-

pressly waived and relinquished, any and all provisions, rights and benefits conferred by any law of any state or

territory of the United States, or principals of common law, which is similar, comparable or equivalent to § 1542

of the California Civil Code, which provides:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS, WHICH THE CREDITOR DOES NOT KNOW OR SUS-

PECT 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.

This means that, upon Court approval, all Settlement Class Members will be permanently barred from asserting

any known or unknown claims related to this Action against the Settling Defendants. In addition, if the Court ap-

proves the Partial Settlements, the Settling Defendants will be precluded from suing the Lead Plaintiffs, Class

Members, or Lead Counsel in connection with the Action.

C. The Settlement Benefits

Under the terms of the Stipulations , the three settling defendants have deposited or will deposit an aggregate

$2,885 ,000 (the "Gross Partial Settlement Amount'") into escrow on behalf of the Class . OnCure will deposit One

Million One Hundred Seventy Five Thousand Dollars ($ 1,175 ,000), Dolphin will deposit Nine Hundred Sixty Thou-

sand Dollars ($960,000) and PresGar will deposit Seven Hundred Fifty Thousand ($750,000). The Partial Settle-

ments Fund will be distributed to eligible Settlement Class Members who send in valid Proof of Claim forms with

the requested documentation , after payment of Court-approved legal fees , attorney and Lead Plaintiff expenses

and the costs of claims administration , including the costs of printing and mailing this Notice and the cost of pub-

lishing newspaper notice (the "Net Settlement Fund'),

D. Plan of Allocation

Your share of the Net Settlement Fund will depend upon: (a) the number of valid Proof of Claim forms that Set-tlement Class Members have submitted (the fewer the number of Settlement Class members who choose to par-

ticipate in the Partial Settlement, the larger the recovery for each participant); (b) the number of shares of DVI

common stock and/or DVI 97/8% Senior Notes you purchased during the Class Period; and (c) when you bought

and sold them.

In order to recover damages, you must have suffered an actual monetary loss on the shares of DVI common stock

and/or the units of DVI 97/s% Senior Notes that you purchased during the Class Period. For shares or units thatyou purchased and sold during the Settlement Class Period, the purchase price must have been greater than the

sales price.

Recognized Loss Formula. The Net Settlement Fund shall be distributed to Authorized Claimants, which are

those Class Members who file timely and valid claims. The Claims Administrator shall determine each Autho-

oe

Case 2:03-cv-05336-LDD Document 400-7 Filed 11/02/2006 Page 20 o 4. C.

rized Claimant's pro rata share of the Net Settlement Fund based upon a formula which takes into account-which

security he, she, or it purchased (DVI common stock or DVI 97/s% Senior Notes), the amount of each security pur-

chased, among other things (the "Recognized Loss Formula"). The Recognized Loss Formula, which provides

each Claimant with his, her, or its "Recognized Loss", is not intended to be an estimate of the amount which a

Settlement Class Member would recover after trial: nor is it an estimate of the amount that will be paid to Au-

thorized Claimants pursuant to the Partial Settlements. The Recognized Loss Formula is the basis upon which

the Net Settlement Fund will be allocated to the Authorized Claimants.

The Recognized Loss Formula per DVI common share will be calculated as follows:

(a) if Authorized Claimant purchased and sold DVI common stock at a loss during the period August 10, 1999

through the close of trading on August 13, 2003, an Authorized Claimant's "Recognized Loss" shall be the

difference between the amount paid by the Authorized Claimant for his, her or its DVI common stock, ex-

cluding commissions, less the amount received before commissions from the sale of such stock;

(b) if Authorized Claimant purchased DVI common stock during the period August 10, 1999 through the close

of trading on August 13, 2003, and held those shares through the close of trading on August 13, 2003, an Au-

thorized Claimant's "Recognized Loss" shall be the difference between the amount paid by the AuthorizedClaimant for his, her or its DVI common stock, excluding commissions, and $0.12 per share, the 90-day av-erage closing price of DVI's common stock after the Class Period.

The Recognized Loss Formula per DVI 97/g% Senior Notes will be calculated as follows:

(a) if Authorized Claimant purchased and sold DVI 97/8% Senior Notes at a loss during the period August 10, 1999through the close of trading on August 13, 2003, an Authorized Claimant's "Recognized Loss" shall be the

difference between the amount paid by the Authorized Claimant for his, her or its DVI 91/8% Senior Notes,

excluding commissions, less the amount received before commission from the sale of such notes;

(b) if Authorized Claimant purchased DVI 97/8% Senior Notes during the period August 10, 1999 through the

close of trading on August 13, 2003, and held those notes through the close of trading on August 13, 2003,

an Authorized Claimant's "Recognized Loss" shall be the difference between the amount paid by the Au-thorized Claimant for his, her or its DVI 97/s% Senior Notes, excluding commissions, and $20.82 per note, the90-day average closing price of DVI's 97/8% Senior Notes after the Class Period.

Class members who did not suffer a Recognized Loss, as calculated above, will not be entitled to participate inthe Net Settlement Fund. In the event a class member has more than one purchase or sale of DVI common stock

or DVI 91/s% Senior Notes, all purchases and sales of DVI securities shall be matched on a First In First Out

("FIFO") basis, including securities held as of the beginning of the Class Period. Any transactions resulting in again shall be excluded. The covering purchase of a short sale is not an eligible purchase.

The Court has reserved jurisdiction to allow, disallow, or adjust the claim of any class member on equitablegrounds.

If you fall within the Class definition and you wish to remain in the Class, you must file your Proof of Claim at-tached hereto by January 3, 2007.

If you remain in the Class, then: (a) your interests in the Action will be represented by Lead Counsel for the Class,as identified in Section III above; (b) you will not have to pay any of Lead Counsel's attorneys' fees or expenses,except to the extent the Court may direct that such fees and expenses be paid out of any settlements or recov-eries obtained for the Class (including the Partial Settlements); (c) you may be entitled to share in the benefitsof any settlements or recoveries obtained in the Action, and you will be bound by any such settlements (includ-ing the Partial Settlements) and by any favorable or unfavorable judgments entered in the Action; (d) you willhave the right to appear and be heard regarding Court approval of the Partial Settlements and any future settle-ments, and any applications for payment of attorneys' fees and expenses; and (e) you will have the right to re-ceive notice of and object to any settlements (including the Partial Settlements).

If you elect to remain in the Class, you have the right to object to the Partial Settlements in the manner set forthbelow. If your objection is rejected, you will be bound by the Partial Settlements and the releases describedherein, just as if you had not objected.

If you do not wish to have your interests represented by Lead Counsel for the purpose of appearing, objectingto, and/or otherwise being heard regarding the Partial Settlements and/or any future settlements or applicationsfor payment of attorneys' fees and expenses, you may enter a separate appearance through counsel of yourchoice, or personally, at your own expense.

Case 2:03-cv-05336-LDD Document 400-7 Filed 11/02/2006 Page 21 of 4VAlt.

In order for you to benefit from any future recoveries against other Defendants in the Action, should there beany, you should retain copies of all records pertaining to your ownership of, as well as all purchases and salesof, DVI common stock and DVI 97/8% Senior Notes during August 10, 1999 through August 13, 2003.

Under the law, you have the right to exclude yourself from the Class certified by the Court . You may exclude your-self from the Class if you wish to pursue a separate lawsuit against the Defendants , or for any reason at all. If youexclude yourself from the Class, you will not be entitled to participate in any recovery by such Class in the Ac-tion , and you will not be bound by the Partial Settlements or any settlement in the Action , or by any favorableor unfavorable judgment in the Action.

If you do not wish to remain a member of the Class, then you must timely request in writing to be excluded fromthe Class. Your request for exclusion must legibly set forth your name and address, and must include a statementthat you wish to be excluded from the Class in the DVI, Inc. Securities Litigation. Your request for exclusion mustbe sent by United States mail, postmarked no later than October 12, 2006 to the Claims Administrator.

DVI, Inc. Securities Litigationc/o Strategic Claims Services

ExclusionsClaims Administrator

2710 Concord Road, Suite 5Aston, PA 19014

www.strategkclaims.net(610) 364-2693

If you request exclusion from the Class on behalf of any person, entity, or individual other than yourself (suchas, for example, a trust, a minor, or a pension fund), you also must state the basis of your legal authority to makea request for exclusion on behalf of that person, entity, or other individual.

In order to ensure proper processing of your request for exclusion, please include with the request the Social Se-curity Number or Taxpayer Identification Number of the person, entity, or individual requesting exclusion fromthe Class, as well as a list stating the DVI, Inc. securities purchased and/or sold during the Class Period, and thedate or dates of each such purchase and sale.

In order to be eligible to receive any distribution from the Partial Settlements, you must complete and sign theaccompanying Proof of Claim and Release form and send it by first class mail postmarked on or before January3, 2007 , addressed as follows:

DVI Inc. Securities Litigationc/o Strategic Claims Services

Claims Administrator2710 Concord Road, Suite 5

Aston, PA 19014wwwstrategicclaims.net

(610) 364-2693

If you do not submit a proper Proof of Claim form, you will not be entitled to any share of the Partial SettlementFunds.

Each Claimant shall be deemed to have submitted to the jurisdiction of the United States District Court for theEastern District of Pennsylvania with respect to his, her or its Proof of Claim. The Court has reserved jurisdic-tion to allow, disallow, or adjust any claim on equitable grounds.

Nominees who purchased or acquired DVI common stock or DVI 97/8% Senior Notes for the benefit of anotherperson or entity during the Class Period are requested to send the Notice and the Proof of Claim to all such ben-eficial owners of those securities within ten (10) days after receipt thereof, or send a list of the names and ad-dresses of such beneficial owners to the Claims Administrator within ten (10) days of receipt thereof in whichevent the Claims Administrator shall promptly mail the Notice and Proof of Claim to such beneficial owners.

6

Case 2:03-cv-05336-LDD Document 400-7 Filed 11/02/2006 Page 22 of $4. C

Vill. STAI I'MENT OF ATTORNEYS' FEES AND COSTS SOUGHT

Lead Counsel has expended considerable time and effort in the prosecution of this litigation on a contingent fee

basis, and has advanced substantial expenses for the litigation, in the expectation that if they were successful in

obtaining a recovery for the Class they would be paid from such recovery. Plaintiffs' Lead Counsel intends to ap-

ply to the Court for an award of attorneys' fees in the amount of $865,500, which represents 30% of the Gross Par-

tial Settlement Amount, and for reimbursement of expenses incurred in connection with the prosecution of this

Action against the Settling Defendants of not more than $90,000, both of which shall be paid to Plaintiffs' Lead

Counsel from the Class Settlement Fund with interest from the date such Class Settlement Fund was funded to

the date of payment at the same net rate that the Class Settlement Fund earns. The Settling Defendants and their

counsel do not oppose these requests. Lead Counsel, without further notice to the Class, may subsequently ap-

ply to the Court for expenses incurred in connection with administering and distributing the proceeds of the Par-

tial Settlements to the Class Members.

IX. NOTICF. OF PARTIAL SETTLEMENTS HEARING

A hearing on the proposed Partial Settlements (the 'Partial Settlements Hearing") will be held on November 9,

2006 at 10:00 a.m. before the Honorable Legrome D. Davis in the U.S. District Court for the Eastern District ofPennsylvania, 601 Market Street, Room #6614, Philadelphia, Pennsylvania, 19106. The purpose of the Partial Set-tlements Hearing will be to determine: (1) whether the Partial Settlements should be finally approved as fair, just

and reasonable; (2) whether the Action should be dismissed with prejudice as against the Settling Defendants;

and (3) to consider the proposed Plan of Allocation for the proceeds of the Partial Settlements and the applica-

tion of Lead Counsel for attorneys' fees and reimbursement of expenses.

Any member of the Class who has not requested exclusion may appear at the Partial Settlements Hearing to show

cause why the proposed Partial Settlements should not be approved, why the Action should not be dismissed

with prejudice as against the Settling Defendants, or why Lead Counsel should not be awarded attorneys' fees

and reimbursement of expenses; provided, however, that no such person shall be heard, unless his, her or its ob-

jection or opposition is made in writing and filed, together with copies of any and all supporting papers andbriefs, with the Court no later than October 12, 2006, with copies sent to:

Attorneys for Lead Plaintiffs:

Clinton A. KrislovMichael R. KarnuthKrislov & Associates, Ltd.Civic Opera Building20 N. Wacker Dr., Suite 1350Chicago, IL 60606

Attorneys for the Settling Defendants:

David HoffnerScott M. ZimmermanOlivier StrauchDechert, LLP30 Rockefeller PlazaNew York, NY 10112Attorney for OnCure Medical Corp.

Richard LevanLevan Friedman, LLPTwo Penn Center PlazaSuite 14221500 John F. Kennedy Blvd.Philadelphia, PA 19102Attorney for Dolphin Medical, Inc.

Robert L. HickokChristopher J. HuberPepper Hamilton, LLP3000 Two Logan SquareEighteenth and Arch StreetsPhiladelphia, PA 19103Attorney for PresGar Imaging LC

The Claims Administrator:

Strategic Claims ServicesConcord Plaza2710 Concord RoadSuite 5Aston, PA 19014

Once an objection to the proposed Partial Settlements is made, it cannot be withdrawn without the Court's ap-

proval. Unless otherwise ordered by the Court, any member of the Class who does not make his/her/its objec-

tion or opposition in the manner provided above shall be deemed to have waived all objections and opposition

to the fairness, reasonableness and adequacy of the proposed Partial Settlements.

Case 2:03-cv-05336-LDD Document 400-7 Filed 11/02/2006 Page 23$*• d

X, MtJF1'11'1,EMi'd1,1_NGS AND CHANGE OF ADDRESS

If you receive multiple copies of this Notice, it may be because you had multiple brokerage accounts, holdings

or transactions in DVI, Inc. securities.

If this Notice was sent to a wrong address, or if your address changes in the future, please send prompt written

notification of your correct address to the Claims Administrator at the address stated at the end of this Notice.

FOR MORE INFORMATION

This Notice contains only a summary of the Action and the terms of the proposed Partial Settlements. Anyone

interested in more detail regarding the Action is invited to: (1) visit the Office of the Clerk of the United States

District Court for the Eastern District of Pennsylvania at 601 Market Street, Philadelphia, PA, during regular busi-

ness hours, to inspect the Stipulations, the pleadings, and the other papers maintained there in Case No. 2:03-

CV-05336-LDD: and/or (2) contact the Claims Administrator at the following address:

DVI Inc. Securities Litigation

c/o Strategic Claims ServicesClaims Administrator

2710 Concord Road, Suite 5Aston, PA 19014

www.strateg_icclaims.net(610) 364-2693

ALL INQUIRIES CONCERNING THIS PARTIAL SETTLEMENTS NOTICE OR THE PROOF OF CLAIM FORM BY CLASS

MEMBERS SHOULD BE MADE TO THE CLAIMS ADMINISTRATOR IN WRITING AT THE ADDRESS INDICATED IM-

MEDIATELY ABOVE.

DO NOT TELEPHONE THE COURT REGARDING THIS NOTICE

Dated: August 18, 2006

BY ORDER OF THE COURTUNITED STATES DISTRICT COURT FORTHE EASTERN DISTRICT OF PENNSYLVANIA

8

Case 2:03-cv-05336-LDD Document 400-7 Filed 11/02/2006 Page 26X•41 7".

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

X

In Re DVI, Inc. Securities Litigation : Case No. 2:03-CV-5336-LDD

X

Must be Postmarked No Later Than January 3, 2007

In re DVI, Inc. Securities Litigation

c/o Strategic Claims Services


Aston, PA 19014(610) 364-2693

wwwstrategicclaims.net

PROOF OF CLAIM AND RELEASE

1. GENERAL INSTRUCTIONS

To recover as a member of the Settlement Class based on your claims in the action titled In re DVI, Inc. Securi-

ties Litigation, 2:03-CV-05336-LDD (the "Action"), you must complete and, on page 5 hereof, sign this Proof of Claim

and Release, and submit the requested documentation. If you fail to file or properly complete the Proof of Claim and

Release, or fail to provide the required documentation, your claim may be rejected and you may be precluded from

obtaining any recovery from the Net Partial Settlement Fund created in connection with the proposed Partial Settle-

ments of the Action.

Submission of this Proof of Claim and Release, however, does not assure that you will share in the proceeds of

the Partial Settlements. The Claims Administrator will review your Proof of Claim and supporting documentation to

determine if you are entitled to a distribution.

You Must Mail Your Completed And Signed Proof Of Claim And Release, With Appropriate Documentation,

Postmarked On Or Before January 3, 2007, Addressed As Follows:

In Re DVI, Inc. Securities Litigationc/o Strategic Claims Services


Aston, PA 19014www.strateuicclaims.net

(610) 364-2693

If you are NOT a Member of the Settlement Class, as defined in the Notice of Pendency (Notice"), DO NOT sub-

mit a Proof of Claim and Release form.

If you are a Member of the Settlement Class and you do not timely request exclusion, you will be bound by the terms

of any judgment entered in the Action, WHETHER OR NOT YOU SUBMIT A PROOF OF CLAIM AND RELEASE FORM.

H. DEF N1'IlONS

1. "Defendants" means Michael A. O'Hanlon ("O'Hanlon"), Steven R. Garfinkel ("Garfinkel"), John P. Boyle

("Boyle"), Gerald Cohn ("Cohn"), Nathan Shapiro `Shapiro"), William S. Goldberg ("Goldberg"), Harry T.J. Roberts

("Roberts"), John E. McHugh ("McHugh"), Richard E. Miller ("Miller"), Anthony J. Turek ('Turek"), Terry Cady

("Cady"), Deloitte & Touche, LLP C'Deloitte"), Merrill Lynch & Co., Inc. ("Merrill Lynch'), Dolphin Medical, Inc. ("Dol-

phin'), OnCure Medical Corp., f/k/a OnCure Technologies Corp. ("OnCure"), PresGar Imaging, LC CPresGar"), Rad-

net Management, Inc. ("Radnet'"'), Thomas Pritzker, the Pritzker Organization LLC and certain unnamed Pritzker fam-

ily members (collectively„ the "Pritzker Defendants"), and Clifford Chance LLP and Clifford Chance US LLP

(collectively "Clifford Chance").

2. "Released Persons" means the three settling defendants , OnCure, Dolphin and PresGar and Related Parties

as defined in the Settlement Stipulations.

3. All other capitalized terms used in this Proof of Claim and Release are defined in the Notice.

Case 2:03-cv-05336-LDD Document 400-7 Filed 11/02/2006 Page Jfg039,, em

III. CLAIMANT IDENTIFICATION (How To Identify Yourself)

1. If you purchased DVI common stock and DVI 9%% Senior Notes during the period of August 10, 1999 through

August 13, 2003, inclusive, and the stock certificate(s) and/or note(s) are in your name, you are the beneficial owner

as well as the record owner of the stock and note. If, however, the stock certificate(s) and note(s) are registered in

the name of a third party, such as a nominee or brokerage firm, you are only the beneficial owner of the shares and/or

notes, and the nominee or brokerage firm is the record holder.

2. This Claim Must Be Filed By The Actual Beneficial Purchaser, Or Legal Representative Of Such Beneficial

Purchaser of the DVI common stock and/or DVI 97/s% Senior Notes, Upon Which These Claims Are Based.

3. All joint purchasers of DVI common stock and 9%% Senior Notes must sign this Proof of Claim and Release.

Executors, administrators, guardians, conservators and trustees must complete and sign this Proof of Claim and Re-

lease on behalf of Persons represented by them. A copy of proof of their authority must accompany this Proof of

Claim and Release. Their titles or capacities must be stated. Failure to provide the foregoing information could de-

lay verification of your Claim or result in rejection of the Claim.

IV. CLAIM FORM

1. Use Part VIII entitled "Schedule of Transactions" in DVI common stock and 9%% Senior Notes, to supply all re-

quired information regarding your ownership of and transaction(s) in these DVI Securities. If you need more space

or additional schedules, attach separate sheets. In the attachment, you should give all of the required information in

substantially the same form. Sign and print or type your name on each additional sheet.

2. On the schedules, provide all the requested information with respect to all of your purchases and all of your

sales of DVI common stock and DVI 9%% Senior Notes which took place beginning August 10, 1999 through August

13, 2003, inclusive. Failure to report all such transactions may result in the rejection of your claim.

3. List each transaction separately and in chronological order, by trade date, beginning with the earliest date.

You must accurately provide the type of security purchased or sold, the month, day and year of each transaction you

list, along with the quantity and selling price.

4. Any loans of DVI Securities to Persons engaged in a "short sale" are not considered a sale.

5. You must attach photocopies of documentation of all your transactions in DVI Securities. This includes bro-

ker confirmation slips, broker statements, relevant portions of federal or state tax returns, or other documentation.

Failure to provide this documentation will delay verification of your claim and could result in rejection of your claim.

Do not send original documents.

6. The Claims Administrator may request additional information as required to calculate your claim. In some

cases, where the Claims Administrator cannot perform the calculation accurately or at a reasonable cost to the Class,

the Claims Administrator may require the production of additional information. In certain exceptional cases, calcu-

lating a claim may require the hiring of an accounting expert at the claimant's expense.

Notice Regarding Electronic Files: Certain claimants with a large number of transactions, such as institutional

holders, may ask (or be asked) to submit claim information in an electronic format. The Claims Administrator will

decide when electronic filing of information will be authorized. In these cases, all claimants must still submit a man-

ually signed paper Proof of Claim and Release form. The Proof of Claim and Release form must list all the data and

transactions, whether or not they are also submitted electronically. Only electronic files authorized by the Claims

Administrator will be considered properly submitted. The Claims Administrator will issue a written acknowledgment

of receipt and acceptance of electronically submitted data to the claimant.

V. CLASS MEMBER SUBMISSION TO THE JURISDICTION OF THE COURT

Each Class Member who signs and submits a Proof of Claim and Release agrees to the following:

I (we) submit this Proof of Claim and Release under the terms of the Stipulations of Settlement described in the

Notice. I (we) also submit to the jurisdiction of the United States District Court for the Eastern District of Pennsyl-

vania. The Court has jurisdiction over my (our) claim and the enforcement of the release granted. I (we) acknowl-

edge that I am (we are) bound by the terms of any judgment in the Action. I (we) agree to furnish additional infor-

mation to the Claims Administrator to support this claim if necessary. I (we) have not submitted any other claim

covering the same acquisitions or sales of DVI common stock and/or DVI 9%% Senior Notes. I (we) know of no other

Person having done so on my (our) behalf.

VI. RELEASE

1. If you remain a Class Member, you release all claims against the Released Parties for the Settled Claims. This

means you give up all rights to sue concerning the Settled Claims. Specifically, all Class Members and their repre-

sentatives will be forever barred from any legal prosecution of the Settled Claims against any of the Released Parties.

Case 2:03-cv-05336-LDD Document 400-7 Filed 11/02/2006 Page 2EJCA

2. "Released Parties" means Defendant OnCure, Dolphin and PresGar, and their past or present directors, offi-

cers, employees, partners, principals, agents, underwriters, issuers, insurers, co-insurers, reinsurers, controlling

shareholders, attorneys, accountants, auditors, banks or investment bankers, advisors, personal or legal represen-

tatives, predecessors, successors, parents, subsidiaries, divisions, joint venturers, assigns, spouses, heirs, associ-

ates, related or affiliated entities, any entity in which any of them has or had a controlling interest, any members of

their immediate families, any trust of which any of them is the settlor or which is for the benefit of any of them and/or

member(s) of their families, and any past or present officer or director of each of the foregoing entities.

3. "Settled Claims" means any and all claims rights or causes of action or liabilities whatsoever, whether based

on federal, state, local, statutory or common law or any other law, rule or regulation, including both known claims

and Unknown Claims, that have been or could reasonably have been asserted in any forum by the Class Members,

or any of them, whether directly, indirectly, representatively or in any other capacity against any of the Released Par-

ties and which arise out of, or relate in any manner to, the DVI Inc. securities, including the facts, occurrences, acts,

disclosures, statements, omissions or failures to act which were alleged or could have been alleged in the Litigation.

4. Furthermore, upon the Effective Date of the Settlements, all persons and entities whose claims are being re-

leased shall be deemed to have, and shall have, expressly waived and relinquished, any and all provisions, rights and

benefits conferred by any law of any state or territory of the United States, or principals of common law, which is

similar, comparable or equivalent to § 1542 of the California Civil Code, 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. This means that, upon Court approval, all Settlement Class Members

will be permanently barred from asserting any known or unknown claims related to this Action against the Settling

Defendants. In addition, if the Court approves the Partial Settlements, the Settling Defendants will be precluded from

suing Plaintiffs, Class Members, or Lead Counsel in connection with the Action.

5. This release shall only be in force when the Court approves the Partial Settlements and it becomes effective

on the Effective Date (as defined in the Stipulations of Settlement).

6. 1 (We) guarantee that I (we) have not assigned or transferred (or purported to assign or transfer), voluntar-

ily or involuntarily, any Released Claim or any other part or portion thereof.

I (We) guarantee that I (we) have included complete information about all of my (our) purchases and sales of

DVI Securities, which occurred between August 10, 1999 and August 13, 2003, inclusive.

VD. CLAIMANT IDENTIFICATION

Phone No.: r-m-

-1 1 -MArea Code Telephone No. (Day) Area Code Telephone No. (Evening)

Fax No.:Area Code Email Address:

Social Security Number: OR Taxpayer tdeatification Number:m(for individuals) (for estates , trusts, corporations, etc.)

The Internal Revenue Service requires a taxpayer identification number to be provided for this claim.

Check One: q Individual q Joint Owners (if any, identify here): q IRA q Estate q Corporation

q Other (Specify)


VIII. SCHEDULE OF TRANSACTIONS IN DVI COMMON STOCK AND 97/s% SENIOR NOTES

A. BEGINNING HOLDINGS:

1. At the close of trading on August 9, 1999 (I/we) owned shares of DVI common stock (write noneor zero CO"), if no shares were owned on that date) (Must be documented);

2. At the close of trading on August 9, 1999 (1/we) owned units of DVI 9%% Senior Notes (writenone or zero ("0"), if no units were owned on that date) (one unit equals a $1,000 par value Note) (Must be documented).

B. PURCHASES: Below please list all purchases of DVI common stock and DVI 97/s% Senior Notes Purchasedon or after August 10 , 1999 to August 13, 2003 inclusive . (Must be documented).

I (we) made the following purchases of DVI common stock and DVI 9%% Senior Notes between (and including)

August 10, 1999 and August 13, 2003:

DVI SecurityPurchased (IdentifyCommon Stock or9%% Senior Notes)

0

Purchase (Trade) Date(List Chronologically)(Month/Day/Year)

m-m-m

m-m-mm-m-mm-m-m

Number of Shares ofDVI Stock or 936%

Senior NotesPurchased

Purchase PricePer Share or Per Note

$ .m

$Illill_.1$111 11 .m$ .m

Total Purchase Price(Excluding Commissions,

Taxes , and Fees)

$ .m

$(I1TT I I 'M$fII 1 1 1 1.m$ .m

C. SALES: Below, please list all sales of DVI common stock and DVI 97/e% Senior Notes Sold on or after August10, 1999 to August 13, 2003 inclusive . (Must be documented).

I (we) made the following sales of DVI common stock and DVI 9%% Senior Notes between (and including) August10, 1999 and August 13, 2003:

DVI SecuritySold (identify

common stock or934% Senior Notes)

1

Sale (Trade) Date(List Chronologically)(Month/Day/Year)

m-m-m

m-m-m

m-m-mm-m-m

Number of Shares ofDVI Stock or 935%

Senior Notes Sales PriceSold Per Share or Per Note

$ .m

111111 s1 11 1 M.mI JA s .m

s I Ill-I.m

Total Proceeds(Before Commissions,

Taxes, and Fees)

$ .m

$ .=

$ .m$ =

Please attach pages for additional transactions as necessary Please sign and print or type your name on each addi-tional sheet.

D. ENDING HOLDINGS:

1. At the close of trading on August 13, 2003, (I/we) owned shares of DVI common stock (writenone or zero ("0"), if no shares were owned on that date) (Must be documented).

2. At the close of trading on August 13, 2003, (I/we) owned notes ($1,000 face value) of DVI 9%%Senior Notes (write none or zero ("0"), if no notes were owned on that date) (Must be documented).

For each transaction and holding listed above, you must attach a legible copy of a broker's confirmation,monthly statement, correspondence, relevant portions of a tax return or other documentation confirming the abovelisted transaction(s) in DVI Securities. Do not submit originals of such documents.

I (we) certify that I am (we are) not subject to backup withholding under the provisions of Section 3406 (a)(1)(c)of the Internal Revenue Code because: (a) I am (we are) exempt from backup withholding; or (b) I (we) have not beennotified by the Internal Revenue Service ("IRS"). that I am (we are) subject to backup withholding as a result of a fail-ure to report all interest or dividends; or (c) the IRS has notified me (us) that I am (we are) no longer subject tobackup withholding.

NOTE: If you have been notified by the IRS that you are subject to backup withholding, please strike out the lan-guage that you are not subject to backup withholding in the immediately preceding paragraph.

4

Case 2:03-cv-05336-LDD Document 400-7 Filed 11/02/2006 Page 2îow41t e

I (we) certify under penalty of perjury under the laws of the United States of America that the information In-

cluded in this claim form (and any additional sheets) is true and correct, that this claim is being submitted by or on

behalf of a Class Member, and that this is the only claim being made with respect to these DVI Securities, executed

this day of 2006 in(City) (State/Country)

Signature of Claimant

(Type or Print Your Name Here)

Capacity of person(s) signing if other than in an individual

capacity, e.g., Beneficial Owner, Executor, or Administrator

Signature of Joint Claimant, if any

(Type or Print Your Name Here)

Capacity of person(s) signing if other than in an individual

capacity, e.g., Beneficial Owner, Executor, or Administrator

This Proof Of Claim Must Be Postmarked No Later Than January 3, 2007 And Be Mailed To:

In re: DVI Inc. Securities Litigationc/o Strategic Claims Services


Aston, PA 19014(610) 364-2693

Reminder Checklist:

1. Please complete and sign the release and certification.

2. Remember to attach supporting documentation.

3. Do not send originals of stock certificates or other documents.

4. Keep a copy of your claim form for your records, including any attachments or supporting documents.

5. If you desire an acknowledgement of receipt of your claim form, please send it Certified Mail, Return Re-

ceipt Requested.

6. If you move, please send us your new address.


In re: DVI Inc. Securities Litigationc/o Strategic Claims ServicesClaims Administrator2710 Concord Road, Suite 5Aston, PA 19014

FIRST CLASS MAIL

Filed 11/02/2006 Page*614ire.

PLEASE FORWARD-IMPORTANT LEGAL NOTICE

Case 2:03-cv-05336-LDD Document 400-7 Filed 11/02/2006 Pag ^3^r3ijj A

Joy 1N. &senhoifer(rarit $c E1SP.iilYl er 13A.

11 Agro Shama NirmulSara M. Grant Jeff A. Atmekla o Cad ne PatsinalusMegan D. Mclnyro Chase Manhattan Centre Naumon A Myed Brian M- RoslodhGeoffrey C. lorvis 1201 North Market Street Paler B. Andrews Ralph N. SianniS&W S. l sb°smon K'1FrdElgt , DE 19801 lames R. Bonko Lauren E. WagnerJohn C. Kdris Ted 302-622-7000 • FaX 302-622-7100 lacgve 9ryks• Marc D. Wsinb.rg"Michael I Barry o A Colder Kimberly L Wwrz.!^y J. $^b' 45 Rocketeer Center, 15th Floor

Anan

Mondo ChoudhuriDavid E. SeLlinger 630 Fifth Avenue P. Btodord det.euw

Charles T. Catondo•New York. NY 10111 Lydia For areas'

o '"wood in w a rwat A&WOod : MA 8, DC ay

G C*suph- "W

Tet 646-722-8500 • Fax 646-722.8501 G S. Levine gMOW fa

Drone T do www.gelaw.com Chddne M=Wr*OSh0 A"W in SC 0*

Jonathon D. Margolis'

Direct Dial. 302-622-7115 lames P. McEvoy, III connwI

Email: jnxuvilly®geiaw.com

October 11, 2006

VIA CERTIFIED MAIL. RETURN RECEIPT REQUESTEDAND FIRST CLASS MAIL

DVI, Inc. Securities Litigationc% Strategic Claims ServicesExclusionsClaims Administrator2710 Concord Road, Suite 5Aston. PA 19014.

Re: DVI Inc. Securities LitigationCiv. Act. No. 2:03-CV5336-LDD

Dear Claims Administrator:

This firm is litigation counsel to and represents WM High Yield Fund, WM IncomeFund, AT High Yield Fund, WM VT Income Fund and AT Income Fund (collectively the "WMFunds"). The WM Funds have a business address of 1201 Third Avenue, Suite 2220, Seattle,Washington 98101 .. The undersigned has been authorized by the WM Funds to request that theybe excluded from the class in the DVI Inc. Securities Litigation, Civ. Act. No 2:03-CV-5366-LDD, and this letter shall constitute a request for exclusion from the class by the WM Funds.

The following is a list oftransactions in DVI, Inc. securities by the WM Funds during theclass period:

Transaction TradeType Portfolio cusip Issue Date Par AmountB Anchor Trust High Yield Fund 233343AB8 9.875 FEB 01 34 2-Jui-01 500,000B Anchor Trust High_ Yield Fund 233343AD4 9.875 FEB 0134 23-Aug-01 750.000

• S Anchor Tnust High Yield Fund 233343ABB8 9.875 FEB 0134 17-Jul-03 175.000S Anchor Trust High Yield Fund 233343AB8 9.875 FEB 0134 17-Jul-03 175,000S Anchor Trust High Yield Fund 233343AD4 9.875 FEB 0134 6-Aug-03 150,000

Cas 65336sLDD Document 400-7 Filed 11/02/2006 Page31&I

Claims Administrator

DVI Inc. Securities Litigation

October 1.1, 2006

Page 2

B Anchor Trust Income Fund 233343AB8 9.875 FEB 01 34 17-Jul-01 750,000

S AnchorTrust Income Fund 233343AB8 9.875 FEB 01 34 17-Jul-03 25,000

S Anchor Trust Income Fund 233343AB8 9.875 FEB 0134 17-Jul-03 25,00030-May-

B VT Income Fund 233343AB8 9.875 FEB 01 34 01 1,000,000

B VT Income Fund 233343AD4 9.875 FEB 01 34 20-Jun-03 500,000

S VT Income Fund 233343AB8 9.875 FEB 01 34 17-Jul-03 50,000

S VT Income Fund 233343ABB 9.875 FEB 01 34 17-Jul-03 50,000

S VT Income Fund 233343AD4 9.875 FEB 01 34 6-Aug-03 100,000

B WM High Yield Fund 233343AB8 9.875 FEB 01 34 29-Nov-99 100,000

B WM High Yield Fund 233343AB8 9.875 FEB 01 34 12-Jan-00 500,000

B WM High Yield Fund 233343AB8 9.875 FEB 01 34 19-Jan-00 750,000

B WM High Yield Fund 233343AB8 9.875 FEB 0134 1-Feb-00 750,000

B WM High Yield Fund 233343AB8 9.875 FEB 01 34 22-Feb-00 500,000

B WM High Yield Fund 233343AB8 9.875 FEB 01 34 7-Apr-00 500.000

B WM High Yield Fund 233343AD4 9.875 FEB 01 34 6-Sep-00 2,000,000

B WM High Yield Fund 233343AD4 9.875 FEB 01 34 8-May-01 175,00023-May-

B WM High Yield Fund 233343AB8 9.875 FEB 01 34 01 1,000,00030-May-

B WM High Yield Fund 233343A88 9.875 FEB 01 34 01 1,500,000

B WM High Yield Fund 233343AB8 9.875 FEB 01 34 17-Jul-01 250,000

B WM High Yield Fund 233343AB8 9.875 FEB 01 34 1-Aug-01 500,000

B WM High Yield Fund 233343AD4 9.875 FEB 01 34 14-Feb-02 1,000,000

B WM High Yield Fund 233343AD4 9.875 FEB 0134 15-Feb-02 500,000

B WM High Yield Fund 233343AB8 9.875 FEB 0134 20-Jun-03 3,000,000

B WM High Yield Fund 233348AB8 9.875 FEB 01 3r{ 2-Jul-03 50,000

B WM High Yield Fund 233343AB8 9.875 FEB 0134 2-Jui-03 250,000

S WM High Yield Fund 233343AB8 9.875 FEB 0134 17-Jul-03 500.000

S WM High Yield Fund 233343AB8 9.875 FEB 0134 17-Jul-03 625,000

S WM High Yield Fund 233343AD4 9.875 FEB 01 34 6-Aug-03 825,000

B WM High Yield Fund 233343AB8 9.875 FEB 01 34 4-Sep-03 550,000

B WM High Yield Fund 233343A&4 9.875 FEB 0134 5-Apr-05 1,000,000

B WM High Yield Fund 233343AD4 9.875 FEB 0134 12-Apr-05 3.000,000B WM Income Fund 233343AB8 9.875 FEB 0134 16-Nov-99 500,000B WM Income Fund 233343AB8 9.875 FEB 01 34 19-Jan-00 250,000B WM Income Fund 233343ABB 9.875 FEB 01 34 6-Sep-00 750,000

30-May-B WM Income Fund 233343AB8 9.875 FEB 0134 .01 1.500,000

B WM Income Fund 233343AB8 9.875 FEB 01 34 17-Aug-01 1,500,000

B WM Income Fund 233343AB8 9.875 FEB 01 34 21-Sep-01 1,500,000

B WM Income Fund 233343ABB 9.875 FEB 01.34 10-Apr-02 1,000,000

B WM Income Fund 233343AB8 9.875 FEB 0134 20-Jun-03 2,000,000B WM Income Fund 233343AD4 9.875 FEB 01 34 20-Jun-03 500,000S WM income Fund 233343A98 9.875 FEB 01 34 17-Jul-03 250,000

S WM Income Fund 233343AB8 9.875 FEB 01 34 17-Jul-03 625,000S WM Income Fund 233343AD4 9.875 FEB 01 34 6-Aug-03 100,000

03-cv-05336-LDD Document 400-7 Filed 11/02/2006 Page i;•r

Claims Administrator

DVI Inc. Securities LitigationOctober 11, 2006Page 3

You should direct any inquiries regarding the exclusion of the WM Funds from the class

in the DVI Inc. Securities Litigation to the undersigned.

Very truly

P. McEvilly, III

Case 2:03-cv-05336-LDD Document 400-7 Filed 11/02/2006 Page 33 of 34ENMIT

604 S. Washington Sq., Apt. 2202Philadelphia, PA 19106-4152October 6, 2006

DVT, Inc. Securities LitigationC/o Strategic Claims ServicesExclusionsClaims Administrator2710 Concord Road, Suite 5Aston, PA 19014

Ddear Sir-

I wish to be excluded from the class pursuing claims against DVI, Inc., that is the subjectofa case in the U. S.district court for the eastern district ofPennsylvania (Case No. 2:03-CV-5336-LDD).

Yours truly,

Scott J. Childress


K$ISLOV & ASSOC7IATES, LTD.

Filed 11/02/2006 Page 34 E

CIVIC OPERA BUILDING, SUITE 1350

20 NORTH WACKER DRIVE

CHICAGO, ILLINOIS 60606

FAX (312) 606-0207

TELEPHONE (312) 606-0500

October 17, 2006

VIA FIRST CLASS MAIL

Mr. Scott J. Childress604 S. Washington Sq., Apt. 2202Philadelphia, PA 19106-4152

Re: In re DVI, Inc. Sec. Litig., 2:03-CV-05336 (E.D. Pa.)

Dear Mr. Childress:

This letter confirms the conversation we had today, during which we discussedthe letter you sent to the Claims Administrator in this case, Strategic Claims Services,regarding the Notice of Settlement with certain defendants in the above captioned case.

In your letter, postmarked October 7, 2006, you state that you "wish to beexcluded from the class pursuing claims against DVI, Inc." Your letter did not indicatethe amount of DVI securities purchased or sold, or the date(s) of such trades.

During our conversation, you indicated that you believe you purchasedapproximately 12,000 shares of DVI, Inc. common stock during the class period. Yqualso stated, however, that you wish to withdraw your exclusion.

If this letter does not accurately reflect the substance of our conversation, or ifyou have any questions, please feel free to contact me by phone, fax, mail or e-mail(mike(@krislovlaw. com) .

Sincerely,

Michael R. Karnuth

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