in the united states district court for the district...

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Civil Action No. 03-cv-1521-PSF-PAC LEONARD STEPHENS, EDWARD ) BUHLMAN, JIM NOFFSINGER, ) GARY MCDONALD, and BRUCE ) TALLMADGE, Individually, Derivatively ) for WebAccess International, Inc., and On ) Behalf of All Others Similarly Situated, ) )

Plaintiffs, ) )

v. ) ) WEBACCESS INTERNATIONAL, INC. ) a Delaware, corporation authorized to ) transact business in the State of Colorado, ) its officers and directors individually, ) BLAIR WHITAKER, ) J. ROGER MOODY, ) L. SHAWN BRESKOW, ) JAMES W. STUCKERT, ARCHIBALD ) J. MCGILL, WILEY E. PRENTICE, JR., ) STEVEN A. SPESARD, STEVEN A. ) LYGA, CAROL L. LEVEQUE, DANIEL ) W. BOYD, JAMES ROGERS, STEVEN ) E. ANDERSON, and J.J.B. HILLIARD, ) W.L. LYONS, INC. and all others who ) may be additionally named as defendants ) individually, jointly and severally, ) )

Defendants. )

MOTION TO APPROVE SETTLEMENT OF DERIVATIVE CLAIMS AGAINST CERTAIN DEFENDANTS, APPROVE FORM AND

METHOD OF NOTICE TO SHAREHOLDERS, AND SET HEARING ON FAIRNESS OF SETTLEMENT

Plaintiffs, along with defendants WebAccess International, Inc. (“WebAccess”), Blair

Whitaker, J. Roger Moody, L. Shawn Breskow, James W. Stuckert, Archibald J. McGill, Wiley

E. Prentice, Jr., Steven A. Spesard, Steven A. Lyga, Carol L. Leveque, and Daniel W. Boyd

Case 1:03-cv-01521-PSF-PAC Document 165 Filed 12/23/2005 of 16

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(collectively the "Settling Defendants") (collectively with Plaintiffs, the “Settling Parties”),

pursuant to Rule 23.1 of the Federal Rules of Civil Procedure, request that the Court: (1) grant

preliminary approval of the dismissal of the derivative claims against the Settling Defendants, (2)

approve the form of notice to be mailed to WebAccess’ shareholders in compliance with FED. R.

CIV. P. 23.1, and (3) set a fairness hearing, if any shareholder shall object to the proposed

settlement, or otherwise in the Court's discretion, within 60 days after dissemination of notice to

the shareholders of WebAccess.

I. PROCEDURAL BACKGROUND

1. On or about April 7, 2003, Defendant WebAccess International, Inc. (hereinafter

"WebAccess") filed an action against Defendant Prentice captioned WebAccess International,

Inc. v. Prentice, 03 CV 2508 (Colo. Dist. Ct.) (hereinafter the "State Court Action") alleging that

Defendant Prentice obtained WebAccess's corporate funds for expenses for which there was

inadequate evidence to corroborate the legitimate business nature of the expense. A forensic

audit commissioned by WebAccess had determined that the amount of these expenses was

approximately $160,000. See Exhibit D at 3.

2. Plaintiffs originally filed this action in the District Court of the City and County

of Denver on July 11, 2003 as a purported class action and shareholder derivative suit. The

Defendants included WebAccess; former WebAccess CEO Wiley E. Prentice (“Prentice”), nine

other current or former WebAccess officers, directors, and employees (the “WebAccess

Individual Defendants”); and J.J.B. Hilliard, W.L. Lyons, Inc. (“Hilliard Lyons”) and two

Hilliard Lyons employees (James Rogers and Steven Anderson) who were not officers, directors,

or employees of WebAccess (collectively with Hilliard Lyons, the “Hilliard Lyons Defendants”).

Prior to the completion of formal service on the named defendants, on August 8, 2003,


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Defendants L. Shawn Breskow, James W. Stuckert, and James Rogers filed a Notice of Removal

to the Federal Court. Following removal, Plaintiffs amended their complaint several times,

culminating with their Third Amended Complaint filed on or about January 12, 2004 (the

“Complaint”), which is the operative pleading in this case.

3. The Complaint asserted statutory and common-law claims (hereinafter the "Direct

Claims") against all Defendants, seeking redress for alleged misrepresentations and omissions

upon which Plaintiffs allegedly relied in their purchases of WebAccess securities, as well as

derivative claims (hereinafter the "Derivative Claims") on behalf of WebAccess against the

WebAccess Individual Defendants and the Hilliard Lyons Defendants, seeking damages for

Defendants' alleged violations of the Colorado Organized Crime Control Act ("COCCA") and

breaches of fiduciary duty.

4. On February 11, 2004, all of the Defendants except Mr. Prentice, who had not

been served, filed motions to dismiss the action. The Court, inter alia, denied from the Bench

Defendants' motion to dismiss Plaintiffs' claims alleging violations of COCCA and breaches of

fiduciary duty, which causes of action were the bases of Plaintiffs' Derivative Claims.

5. On October 19, 2005, the Court denied Plaintiffs’ motion for class certification.

Shortly thereafter, on November 17, 2005, the Court granted motions to compel arbitration and

to stay proceedings filed by Defendants J.J.B. Hilliard, W. Lyons, Inc., Steven Anderson, James

Rogers, L. Shawn Breskow, and James W. Stuckert.1 Accordingly, the case against the Hilliard

Lyons Defendants is no longer proceeding in this Court.

1 Defendants Stuckert and Breskow are directors of WebAccess as well as employees as Hilliard Lyons. While the claims against these Defendants were compelled to arbitration along with the Hilliard Lyons Defendants, the Proposed Settlement includes the claims against Stuckert and Breskow. It does not include the claims against Hilliard Lyons, Anderson, and Rogers, which Plaintiffs are free to pursue in arbitration.


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II. TERMS OF SETTLEMENT AND REASONS FOR APPROVAL

6. A Settlement Conference was convened before Magistrate Judge Patricia Coan on

December 5, 2005. During the Settlement Conference, Plaintiffs and the Settling Defendants

agreed to resolve the Direct Claims and Derivative Claims against the Settling Defendants, as

well as the claims asserted by WebAccess against Prentice in the State Court Action, subject to

Court approval, on the following terms (hereinafter described as “the Proposed Settlement”):

Defendant Prentice has agreed to pay WebAccess the sum of $50,000.00 in full satisfaction of

WebAccess's claim against him in the State Court Action and in full satisfaction of the

Derivative Claims against the Settling Defendants, contingent upon this Court's approval of the

Proposed Settlement. The Derivative Claims are to be dismissed with prejudice as to the Settling

Defendants.2 The Proposed Settlement does not cover the claims against the Hilliard Lyons

Defendants, and Plaintiffs (both directly and derivatively on behalf of WebAccess) are free to

pursue their claims against the Hilliard Lyons Defendants in arbitration. A copy of the Proposed

Settlement is attached as Exhibit A to this Motion.3

7. The Court should grant preliminary approval of the Proposed Settlement (with

Final Approval to be entered at the conclusion of the Fairness Hearing described below). Under

FED. R. CIV. P. 23.1, a derivative action “shall not be dismissed or compromised without the

approval of the court, and notice of the proposed dismissal or compromise shall be given to

shareholders or members in such manner as the court directs.” FED. R. CIV. P. 23.1. “The

2 In addition to the settlement of the Derivative Claims, the Settling Defendants have also reached an agreement to settle the Direct Claims against the Settling Defendants. The settlement of the Direct Claims is conditioned on the Court’s approval of the Proposed Settlement of the Derivative Claims. However, unlike the settlement of the Derivative Claims, court approval is not required to settle the Direct Claims, since the case was not certified as a class action. Compare FED. R. CIV. P. 23.1 (requiring court approval for settlement of derivative claims) with FED. R. CIV. P. 23(e) (court approval for direct claims only required when class is certified). 3 Pursuant to a confidentiality agreement between the Settling Parties, the amount of the Settlement Payment for the Direct Claims has been redacted from Exhibit A. As set forth in Footnote 2 supra, court approval is not required to settle the Direct Claims.


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authority to approve a settlement of a class or derivative action is committed to the sound

discretion of the trial court.” Jones v. Nuclear Pharm., Inc., 741 F.2d 322, 324 (10th Cir. 1984);

In re King Resources Co. Sec. Litig., 420 F. Supp. 610, 624 (D. Colo. 1976). “Settlements of

shareholder derivative actions are particularly favored because such litigation is ‘notoriously

difficult and unpredictable.’” Maher v. Zapata Corp., 714 F.2d 436, 455 (5th Cir. 1983). “The

courts, therefore, do not lightly reject such settlements.” Id. “Before approving the settlement of

a shareholders’ derivative action, however, the district court must determine that there has been

no fraud or collusion in arriving at the settlement agreement, and that it is fair, reasonable, and

adequate.” Id. In considering whether a settlement is fair, reasonable, and adequate, the trial

court should consider:

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

Jones, 741 F.2d at 324.4 “In making these determinations, the district court enjoys wide

discretion, and in exercising its discretion, the court should not decide the merits of the action or

4 In determining that the settlement of derivative claims are fair and reasonable, the Court should consider:

the extent of the benefit to be derived from the proposed settlement by the corporation, the real party in interest. The adequacy of the recovery must be considered in light of the best possible recovery, of the risks of establishing liability and proving damages in the event the case is not settled, and of the costs of prolonging the litigation. . . . Additionally, . . . district courts [should] apply the following factors when making a fairness determination: (1) the complexity, expense and likely duration of the litigation; (2) the reaction of the shareholders to the settlement; (3) the stage of the proceedings and the amount of discovery completed; (4) the risks of establishing liability; (5) the risks of establishing damages; (6) the risks of maintaining the derivative action through the trial; (7) the ability of the defendants to withstand a greater judgment;


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attempt to substitute its own judgment for that of the parties.” Maher, 714 F.2d at 455. As set

forth below, the Proposed Settlement easily satisfies these requirements.5

A. The Proposed Settlement Was Fairly And Honestly Negotiated

8. The Proposed Settlement was clearly not the product of fraud or collusion. The

Proposed Settlement was achieved under the auspices of the Court during a day-long mediation

conducted by U.S. Magistrate Judge Patricia Coan. The Settling Parties believe that Magistrate

Judge Coan was fair and impartial and conducted the mediation in a professional manner.

Before the mediation, both sides submitted settlement briefs and exhibits to Magistrate Judge

Coan supporting their positions. There was no hint of any fraudulent or collusive conduct before

or during the mediation.

9. Prior to the mediation, the Settling Parties aggressively litigated this case.

Plaintiffs took multiple depositions, contacted dozens of other witnesses, and reviewed

approximately 100 boxes of documents. Both sides retained expert witnesses and filed

numerous pretrial motions to support their claims. The Proposed Settlement was only reached

after the Settling Parties spent considerable resources taking discovery, pursuing their respective

positions in the litigation, and weighing the respective merits, costs, and weaknesses of their

litigation position. Again, there is no indication the Proposed Settlement was obtained through

fraud or collusion.

(8) the range of reasonableness of the settlement agreement in light of the best possible recovery; (9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation.

Unite Nat'l Retirement Fund v. Watts, 2005 WL 2877899 at *2 (D.N.J. Oct. 28, 2005). 5 The Settling Parties acknowledge that the underlying factual and legal issues in this case are disputed. The Settling Parties further stipulate and agree that in the event the Proposed Settlement is not consummated or approved, the contents of this Motion will not be construed as an admission by either party regarding the factual or legal merits of this case, nor will the contents of this Motion be submitted as evidence in support of (or opposition to) a motion for summary judgment, nor will the contents of this Motion be read or otherwise provided to the factfinder at trial, either in this case or in any other case relating to the affairs of WebAccess.


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B. There Are Serious Doubts About Liability And Damages

10. While the factual and legal issues in this case are hotly disputed, the Settling

Defendants maintain there is a serious risk Plaintiffs will be unable to recover or collect any

damages on the Derivative Claims, which will be costly to pursue. The Settling Defendants

believe there is a high risk that considerable legal resources could be expended in vain on

WebAccess’s behalf if this case were to continue, for numerous reasons. First, the Defendant

whom Plaintiffs allege is the “ringleader” of the alleged fraud, Wiley E. Prentice Jr., has

represented to WebAccess that he lacks sufficient financial resources to pay any amount greater

than the Derivative Settlement Payment and shall provide to WebAccess on or before December

31, 2005 a sworn affidavit attesting, under penalty of perjury, to the accuracy of his financial

representation to WebAccess. Plaintiffs may be deemed to lack standing to assert a derivative

claim against Prentice because WebAccess filed a direct action (the State Court Action) against

Prentice before Plaintiffs filed their derivative claims in this suit, thus nullifying the basis for a

shareholder derivative claim against Prentice.6 It is also unlikely that any claims against Prentice

will be covered by WebAccess’s director and officer insurance policy (the “D&O Policy”)

because: (1) Prentice is accused of misappropriation and intentional misconduct, which are

excluded from coverage; and (2) the D&O Policy excludes coverage for direct claims by

WebAccess against Prentice, meaning there is no coverage for the State Court Action. The

Parties also note that Prentice currently resides in the State of Texas, a state that provides

extensive protections for judgment debtors, thus making it unlikely Plaintiffs will be able to

collect on a derivative judgment against Prentice in excess of $50,000.

6 The purpose of a shareholder derivative suit is to assert claims that the corporation is unwilling to bring. When, as here, the corporation has already brought suit, there is no need for a shareholder derivative action, and shareholders lack standing to sue.


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11. Second, The Settling Defendants contend that Plaintiffs’ ability to recover

damages from WebAccess's other directors is limited by the exculpatory clause in WebAccess’s

Certificate of Incorporation, which provides as follows:

Article IX. A director of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith and which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware (“DGCL”), or (iv) for any transaction from which the director derived any improper personal benefit. If the DGCL is amended to authorize corporation action further eliminating or limiting the personal liability of directors, then the liability of a director of the Company shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. Any repeal or modification of this provision shall not adversely affect any right or protection of a director of the Company existing at the time of such repeal or modification.

This clause mirrors 8 Del. Code Ann. § 102(b)(7), which expressly permits Delaware

corporations to limit the liability of directors for breaches of fiduciary duty other than those

breaches involving bad faith, disloyalty, or intentional misconduct or knowing violations of law.

Plaintiffs’ primary theory of liability against the other directors is that they were negligent in

failing to oversee Prentice’s alleged misconduct. The Settling Defendants contend it will be

difficult to prove that the other directors intentionally misappropriated WebAccess funds or

intended to defraud stockholders. Likewise, it will be difficult to prove that the directors

intentionally laundered money or otherwise committed intentional acts of racketeering in

violation of COCCA. Accordingly, there is a substantial risk that the exculpatory clause would

bar the claims against the other directors.

12. Third, the Settling Defendants contend that WebAccess was a high-risk startup

company in an industry (telecommunications and Internet services) that suffered through a

massive economic downturn beginning in about 2000, when WebAccess was attempting to

implement its business plan. Even without Prentice’s alleged misappropriation and fraud, the


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Settling Defendants contend that it is highly likely WebAccess would have failed anyway due to

external economic conditions. If the action were to proceed, Plaintiffs would face the prospect

of demonstrating that the Settling Defendants’ purported misconduct caused any damage to

WebAccess above and beyond the damage already inflicted on WebAccess by the telecom and

Internet market collapse.

13. Fourth, given the difficulties in establishing causation discussed in the previous

Paragraph and in proving damages to WebAccess due to the other directors' alleged breaches of

duty, Plaintiffs’ “best possible recovery,” if anything, is probably limited to the amount of funds

Prentice allegedly misappropriated or misused less any attorneys' fees and/or costs awarded to

Plaintiffs' counsel. As a precursor to the State Court Action, WebAccess hired a forensic audit

group to determine whether funds were misappropriated from WebAccess. See Exhibit D to this

Motion (Report of Crossroads Management Partners L.P.). The auditors determined that

Prentice charged approximately $160,000 in expenses on WebAccess’s corporate credit card that

lacked sufficient corroboration as business expenses. Id. at 3. Aside from this issue, the auditors

“were able to account for all but an immaterial amount of the cash sources and uses from the

records provided” and “did not encounter any material unexplained omissions of cash from our

examination of the [WebAccess] bank records and accounting detail during the analysis period.”

Id. at 2. It will be difficult to prove that Prentice caused WebAccess to suffer more than

approximately $160,000 in total damages, if anything at all.

14. Fifth, Prentice has asserted counterclaims against WebAccess in the State Court

Action for certain bonuses and salary that Prentice claims are owed to him. Prentice seeks

approximately $60,000.00 in damages from WebAccess on these claims. Assuming that

Prentice is liable to WebAccess for the full $160,000 (which likely represents Plaintiffs’ best


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possible recovery), any claim against Prentice would be offset by Prentice’s recovery on his

counterclaim. It is also possible that WebAccess may not be able to prove any of its claims

against Prentice.

15. In addition, the Proposed Settlement permits Plaintiffs to pursue the Derivative

Claims against J.J.B. Hilliard, W.L. Lyons (“Hilliard Lyons”), Steven Anderson, and James

Rogers (collectively, the “Hilliard Lyons Defendants”) in arbitration. Hilliard Lyons is a viable

business with substantial assets. Plaintiffs believe there is merit to the Derivative Claims against

Hilliard Lyons, and that the pursuit of these claims could benefit WebAccess.

16. The Settling Parties also acknowledge that WebAccess is an insolvent company

with more than $1.5 million in outstanding obligations to creditors (including a claim by the

Internal Revenue Service for unpaid “941” or “trust fund” taxes in excess of $50,000.00, to

which the proposed settlement payment will be directed). Any recovery on the derivative claim

of less than the amount owing to creditors would go to creditors, not to shareholders, and could

not be used to further WebAccess’s business objectives or otherwise earn any return for

WebAccess or its shareholders. There is no prospect: (1) that WebAccess will open its doors

again or otherwise resume business operations, or (2) that shareholders will recover any proceeds

from a derivative recovery. Thus, any additional funds recovered on the Derivative Claims

would not assist WebAccess in resuming business operations and would very likely not provide

any benefit to shareholders.

C. The Value Of Immediate Recovery Outweighs The Mere Possibility Of Future Relief After Protracted And Expensive Litigation

17. Given Prentice’s offer to settle the State Court Action for the maximum amount

Prentice represents he can pay in light of his financial situation, the Derivative Claims against

the other Settling Defendants are no longer worth pursuing. Pursuing the Derivative Claims


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against the other directors will significantly increase the costs of litigation without providing

much marginal benefit. While a trial on the misappropriation claims against Prentice would be

fairly straightforward, it would be exponentially more costly, risky, and difficult to try a director

oversight case. Numerous witnesses would need to be called, including expert testimony from

both sides. At the end of the day, in the Settling Defendants’ view, there is a serious risk that the

exculpatory clause would bar such a claim. Accordingly, given Prentice’s willingness to settle

the State Court Action, there is little or no marginal benefit to be gained from pursuing the

claims against the other directors, while the marginal costs of pursuing such claims will be

extremely high.

18. In sum, even if plaintiffs' Derivative Claims were to survive summary judgment, a

trial on the remaining claims would be lengthy, costly, and time-consuming, and the legal

expenses would likely dwarf the amount of any recovery on those claims. According to the

Settling Defendants, there are serious doubts as to whether the Derivative Claims against the

other directors will survive the exculpatory provision in WebAccess’s Certificate of

Incorporation. Accordingly, the Settling Parties have determined that it is not in WebAccess’s

best interest to continue spending legal resources on its behalf in pursuit of the Derivative

Claims against Prentice and the WebAccess Individual Defendants. Moreover, Plaintiffs are still

free to pursue their derivative claims against the Hilliard Lyons Defendants in arbitration where,

Plaintiffs believe, given the less formal nature of the proceedings and the less exacting

evidentiary requirements, a substantial recovery on the Derivatiave Claims is more likely.

D. The Settling Parties Have Determined That The Proposed Settlement Is Fair And Reasonable

19. The Settling Parties arrived at the Proposed Settlement only after months of

intense litigation and a day-long mediation under the auspices of the Court, under the direct


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supervision of Magistrate Judge Coan. For the reasons discussed above, the Settling Parties have

determined that the Proposed Settlement is fair and reasonable to WebAccess, Plaintiffs, and the

Settling Defendants. As set forth above, now that Prentice has agreed to repay WebAccess for

the amount of allegedly misappropriated corporate funds to the maximum extent possible given

his financial situation, it is no longer in WebAccess’s best interest to pursue the Derivative

Claims against the Settling Defendants. A trial of those claims would likely be very expensive,

and there is a significant risk the Derivative Claims are precluded by the exculpatory provision

in WebAccess’s Certificate of Incorporation. Accordingly, the Settling Parties agree that the

Proposed Settlement is fair and reasonable.

III. PROPOSED NOTICE OF SETTLEMENT AND REQUEST FOR FAIRNESS HEARING

20. FED. R. CIV. P. 23.1 requires that “notice of the proposed dismissal or

compromise shall be given to shareholders or members in such manner as the court directs.”

FED. R. CIV. P. 23.1. The Settling Parties request that the Court approve the notice attached as

Exhibit B to this Motion (the “Proposed Notice”) for mailing to the shareholders of WebAccess

to the most current known address for WebAccess’s shareholders as reflected in WebAccess’s

files. As set forth therein, the Proposed Notice adequately informs the shareholders of

WebAccess regarding the Proposed Settlement and provides any objecting shareholders an

opportunity to be heard. In addition to the mailing of the Proposed Notice to WebAccess’s

shareholders, the Settling Parties have agreed to publish a summary of the settlement terms on

BusinessWire. The Settling Parties believe that the combination of direct mailing and notice by

publication will provide sufficient notice to the shareholders of WebAccess regarding the terms

of the Proposed Settlement and the right to object. If one or more shareholder objects to the

proposed settlement, or otherwise in the Court's discretion, a hearing (the “Fairness Hearing”)


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should be set within 60 days after dissemination of the Proposed Notice, so that any objections to

the Proposed Settlement can be heard. The Settling Parties request that the Court thereafter enter

final approval of the Proposed Settlement and enter a Final Judgment similar in form to the

proposed Order and Final Judgment attached as Exhibit C to this Motion.

CONCLUSION AND PRAYER FOR RELIEF

WHEREFORE, PREMISES CONSIDERED, the Settling Parties pray for an Order: (1)

granting preliminary approval to the Proposed Settlement; (2) approving the Proposed Notice;

and (3) setting a Fairness Hearing, if necessary, within 60 days after dissemination of the

Proposed Notice.


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Respectfully submitted this 23rd day of December, 2005.

THE LAW FIRM OF

CISNEROS & SCHENDZIELOS, LLP

By: s/Daniel J. Schendzielos Daniel J. Schendzielos Roger Cisneros Suite 203, 1602 S. Parker Road Denver, Colorado 80231 Tel.: (303) 671-7600 John F. Bloss Clark, Bloss & Wall, PLLC 125 South Elm Street, Suite 600 Greensboro, North Carolina 27401

ATTORNEYS FOR PLAINTIFFS

SENN VISCIANO & KIRSCHENBAUM P.C.

By: s/Glenn W. Merrick Glenn W. Merrick Suite 4300 1801 California Street Denver, Colorado 80202 Tel. (303) 298-1122 Fax: (303) 296-9101

ATTORNEYS FOR WEBACCESS INTERNATIONAL, INC.


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HOLME ROBERTS & OWEN LLP

By: s/Peter A. Stokes John V. McDermott David Ball 1700 Lincoln St., Suite 4100 Denver, Colorado 80203-4541 Tel.: (303) 866-0265 Gerard G. Pecht Peter A. Stokes FULBRIGHT & JAWORSKI L.L.P. 1301 McKinney, Suite 5100 Houston, TX 77010-3095 Tel. (713) 651-5562 Fax (713) 651-5246

ATTORNEYS FOR DEFENDANTS L. SHAWN BRESKOW, JAMES W. STUCKERT, BLAIR WHITAKER, ARCHIBALD J. MCGILL, STEVEN A. SPESARD; STEVEN A. LYGA, CAROL L. LEVEQUE, J. ROGER MOODY, AND DANIEL W. BOYD. APPLE & LUCAS, P.C. By: s/Peter J. Lucas Peter J. Lucas, Esquire Apple & Lucas, P.C. 1917 Market Street, Suite A Denver, Colorado 80202 ATTORNEY FOR WILEY E. PRENTICE, JR.


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CERTIFICATE OF SERVICE I certify that a copy of this document was served on all counsel of record this 23rd day of December, 2005. s/Peter A. Stokes Peter A. Stokes


IN THE UNITED STATES DISTRICT COURTFOR THE DISTRICT OF COLORAD O

Civil Action No. 03-cv-1 52 1 -PSF-PA C

LEONARD STEPHENS,EDWARD BUHLMAN,JIM NOFFSINGER,GARY MCDONALD andBRUCE TALLMADGE,Individually and on Behalf of All Others Similarly Situated ,

Plaintiffs,

V.

WEBACCESS INTERNATIONAL, INC .,BLAIR WHITAKER ,J. ROGER MOODY,L. SHAWN BRESKOW,JAMES W. STUCKERT,ARCHIBALD J. MCGILL,WILEY E. PRENTICE, JR .,STEVEN A . SPESARD,STEVEN A . LYGA,CAROL L. LEVEQUE,DANIEL W . BOYD,JAMES ROGERS ,STEVEN E. ANDERSON andJJ.B. HILLIARD, W.L. LYONS, INC. ,

Defendants .

STIPULATION OF COMPROMISE AND SETTLEMENT

31051598 .2

This Stipulation of Compromise and Settlement (the "Stipulation") is made and entered

into as of this 23d day of December, 2005, subject to the approval of the Cou rt, by and between

Plaintiffs Leonard Stephens , Bruce Tallmadge, Gary McDonald, Ed Buhiman, and James

Noffsinger ("Plaintiffs"), suing on their own behalf and derivatively for and on behalf of

Defendant WebAccess International , Inc. ("WebAccess ") ; Defendants Wiley E. Prentice , Jr., L.

Shawn Breskow, James W. Stuckert, J . Roger Moody, Blair Whitaker, Archibald McGill, Steve

A. Spesard, Steven A. Lyga, Carol L. Carnie, and Daniel W. Boyd (the "WebAccess Individual

Defendants") ; and Defendant WebAccess (all part ies to the Stipulation are hereinafter

collectively referred to as the "Settling Parties") in the above captioned action (the Nominal and

Individual Defend ants who are parties to the Stipulation being referred to collectively as the

"Settling Defendants"), by their respective attorneys . The Settling Parties stipulate as follows :

WHEREAS :

A. Plaintiffs commenced this purported direct and derivative action (the "Action") by

filing suit on or about July 11, 2003 in the District Court of the City and County of Denver .

After the case was removed to this Court, Plaintiffs filed their Third Amended Complaint (the

"Complaint") on January 12, 2004, which is the most recent pleading filed by Plaintiffs in the

Action. The Complaint alleges that the Defendants named therein (including the Settling

Defendants) breached their alleged fiduciary duties to WebAccess by allegedly misappropriating

corporate funds, mismanaging the company, participating in interested-director transactions,

making false statements to investors, and causing the company to become insolvent . The

Complaint further alleges that the Defendants named therein (including the Settling Defendants)

are liable under Sections 10(b) and 20(a) of the Securities Exchange Act ; Sections 11 and 12 of

the Securities Act; the Racketeer Influenced and Corrupt Organizations Act ("RICO") ; the

31051598.2 2

Colorado Organized Crime Control Act ("COCCA"); various provisions of the Colorado

Securities Act; and common law theories of fraud and negligent misrepresentation for allegedly

making false statements and/or omissions in connection with securities offerings, including a

June 14, 1999 p rivate placement, a June 2000 confidential memorandum, and an August 2002

preferred stock offering . The Complaint asserted direct claims on behalf of the five named

Plaintiffs (and, until class certification was denied, on behalf of a putative class of WebAccess

investors) against all named Defendants in the Action (all such direct claims hereinafter referred

to as the "Direct Claims" ) and derivative claims on behalf of nominal Defend ant WebAccess

against Defendants Wiley E . Prentice, Jr., J. Roger Moody, Blair Whitaker, L. Shawn Breskow,

James W . Stuckert, Archibald McGill , Steve A . Spesard, Steven A . Lyga, Carol L . Carnie,

Daniel W . Boyd , James Rogers, Steven E . Anderson , and J .J .B . Hilliard , W.L. Lyons, Inc. (the

"Derivative Defendants") (all such derivative claims hereinafter referred to as the "De rivative

Claims").

B. On March 14, 2005, the Court, from the Bench, announced it was granting in part

and denying in part a Motion to Dismiss filed by various Defendants . In pertinent part, the Court

permitted the Section 10(b)/Rule lOb-5, common law fraud, COCCA, negligent

misrepresentation, and fiduciary duty claims to go forward and stated it was dismissing the

remaining claims . On October 19, 2005, the Court denied Plaintiffs' Motion to Certify Class .

Shortly thereafter, on November 17, 2005, the Court granted motions to compel arbitration and

to stay proceedings filed by Defendants J .J.B . Hilliard, W . Lyons, Inc ., Steven Anderson, James

Rogers, L . Shawn Breskow, and James W . Stuckert . 1

' Defendants Stuckert and Breskow are directors of WebAccess as well as employees as Hilliard Lyons . While theclaims against these Defendants were compelled to arbitration along with the Hilliard Lyons Defendants, theProposed Settlement includes the claims against Stuckert and Breskow . It does not include the claims agains t

31051598.2 3

C. On December 5, 2005, during a mediation conducted by U .S. Magistrate Judge

Patricia Coan, the Settling Parties reached a settlement of all claims in this action against the

Settling Defendants (the "Settled Claims"), including both the Direct Claims and the Derivative

Claims against the Settling Defendants (the "Proposed Settlement"). Pursuant to FED. R. Civ. P .

23 .1, the settlement of the Derivative Claims against the Settling Defendants is subject to Court

approval .

D. For their part, the Settling Defendants strenuously deny all allegations of

wrongdoing contained in any of the pleadings or papers in the Action, and maintain that no

reasonable likelihood of success exists with respect to any of the claims set forth in the Action .

The Settling Defendants have nevertheless agreed to the Proposed Settlement set forth herein in

order to avoid the burdens and expense which would result from the continued pursuit by

Plaintiffs of the claims in this Action.

E. The Settling Parties and their counsel concur that the Proposed Settlement

described herein is fair, reasonable, adequate and in the best interests of WebAccess and its

shareholders . The Settling Parties acknowledge that there are numerous potential obstacles to

Plaintiffs' ability to recover damages on the Direct Claims and Derivative Claims against the

Settling Defendants, including but not limited to the following : (1) Defendant Prentice has

limited resources and is unable to contribute more than $50,000 towards a judgment; (2) the

directors of WebAccess have asserted that they are protected from liability through an

exculpatory provision in the Company's Certificate of Incorporation, which, they contend, is

enforceable under Delaware law and requires proof of bad faith, disloyalty, or intentiona l

Hilliard Lyons, Anderson, and Rogers (the "Non-Settling Defendants"), which Plaintiffs are free to pursue inarbitration .

31051598.2 4

misconduct as a condition to recovering money damages from the directors, which the Settling

Parties agree will be difficult to prove; (3) the economic environment in which WebAccess

competed was marred by a substantial and prolonged economic downturn in the

telecommunications and Internet sectors, which the Settling Defendants contend, made it highly

likely WebAccess would have failed regardless of any alleged misconduct by the Settling

Defendants ; (4) given the difficulties of proving causation and in quantifying the amount of

damages to WebAccess, WebAccess's best possible recovery, if it is entitled to recover anything

at all, is probably limited to the amount of money Prentice allegedly misappropriated fro m

WebAccess, which was previously estimated to be $160,000 ; (5) Prentice has asserted

counterclaims against WebAccess for certain salary and bonus payments that are allegedly owed

to him by WebAccess, which (if proved) would reduce or negate WebAccess's recovery from

Prentice ; (6) WebAccess is an insolvent corporation that has no realistic prospect of resuming

business activities or generating any value for shareholders ; (7) any recovery on the Derivative

Claims from the Settling Defendants would be subject to claims by WebAccess's creditors and

would not result in any distribution, dividend, payment, or other financial benefit for

WebAccess's shareholders; and (8) the costs of pursuing the Derivative Claims against the

Settling Defendants would likely dwarf any additional potential recovery on those claims .

Because of these concerns, and because litigating these claims will likely be highly expensive,

the Settling Parties acknowledge and agree that it would not serve WebAccess's interests to

expend more resources on its behalf to pursue claims against the Settling Defendants .

F. The Parties further acknowledge that pursuant to FED . R. Ctv. P . 23(e),, because

class certification was denied , the non -derivative claims asse rted in the Action by the individual

Plaintiffs can be settled and dismissed without Court approval and without notice to the putative

31051598.2 5

class . Pursuant to FED. R. Civ . P . 23.1, the settlement of the de rivative claims asserted in the

Action is subject to Court approval, with notice provided to the shareholders of WebAccess as

directed by the Court .

NOW THEREFORE, IT IS HEREBY STIPULATED AND AGREED , by and between

the undersigned counsel for the parties herein, and subject to the approval of the Court pursuan t

to FED. R. Civ. P . 23 .1, that all claims and causes of action that have been or could have been se t

forth in the Third Amended Complaint or any amendment thereof, and all claims or causes of

action in any way relating to or arising out of any of the acts, transactions and occurrences set

forth therein, shall be and hereby are compromised, settled, discontinued and dismissed, with

prejudice and without costs as to Plaintiffs or the Settling Defendants upon the foregoing terms

and conditions :

1 . The Proposed Settlement shall become effective only on the first day upon

which (i) an Order and Final Judgment (the "Order and Final Judgment"), substantially similar to

the proposed Order and Final Judgment attached as Exhibit B to this Stipulation, is entered by

the Court in the Action, approving the Proposed Settlement and dismissing the Action against the

Settling Defendants ; and (ii) such Order and Final Judgment has become final and unappealable

(the "Final Approval Date") .

2. As consideration for the settlement and release of all claims against the Se ttling

Defendants and their insurer, Defendants shall pay Plaintiffs the amount of' 7 ' • : (the

"Direct Action Settlement Payment") on or before December 28, 2005 . The money shall be

deposited in the Law Firm of Schendzielos & Associates, LLC COLTAF Trust Account and held

in escrow until the Final Approval Date, at which point the Direct Action Sett lement Payment

31051598.2 6

may be disbursed to Plaintiffs . The Settling Defendants bear no responsibility for (and shal l

have no liability in connection with) the distribution of the Direct Action Settlement Payment

among the five Plaintiffs and their counsel after the Final Approval Date .

3 . As further consideration for the settlement and release of all claims against the

Settling Defendants, on the Final Approval Date (as defined in paragraph 3 ), Defendant Prentice

shall pay to WebAccess the sum of $50,000.00 ("Fifty Thousand Dollars") (the "Derivative

Action Settlement Payment") in full satisfaction of all claims by WebAccess against Prentice .

WebAccess shall remit the Derivative Action Settlement Payment to the Internal Revenue

Service and direct (in a form reasonably acceptable to Prentice) that such amounts shall be

applied to the "trust fund" portion of the outstanding taxes owed by WebAccess, together with

any associated interest and penalties . The Derivative Action Settlement Payment shall be in full

satisfaction of the Derivative Claims against the Settling Defendants . Prentice has represented to

WebAccess that he lacks sufficient financial resources to pay any amount greater than the

Derivative Settlement Payment and shall provide to WebAccess on or before December 31, 2005

a sworn affidavit attesting, under penalty of perjury, to the accuracy of his financial

representation to WebAccess .

4. In exchange for,the payments described in paragraphs 2 and 3, each of the

Plaintiffs forever relinquishes and releases any and all claims, rights or causes of action o r

liabilities whatsoever, whether asserted directly, individually, derivatively, or in a representative

capacity, whether known or unknown or suspected to exist, and whether based on federal, state

or local statutory or common law or any other law, rule or regulation, in an y jurisdiction or

forum, that have been or could have been asserted in any pleadings or papers in the Action (the

"Released Claims") against any of the Released Parties (as defined below) which arise out of o r

31051598.2 7

relate in any way to Plaintiffs' investments in WebAccess, the affairs of WebAccess, or the

allegations, transactions, acts, facts, matters or occurrences, representations or omissions

involved, set forth, or referred to in the Third Amended Complaint or any predecessor or

successor pleadings in the Action, including but not limited to claims for selling unregistered

securities, securities fraud, violations of the Securities Act, Securities Exchange Act (or any rules

or regulations promulgated thereunder, including but not limited to SEC Rule lOb-5 and SEC

Rule lOb-9), RICO, COCCA, the Colorado Securities Act, any other federal or state securities

laws or regulations, common law fraud, negligent misrepresentation, breach of fiduciary duty ,

waste, mismanagement, violations of law, money damages or other relief, and any other claims

for money damages, injunctive relief, insurance coverage under any director and officer

insurance policy or similar insurance policy, third party relief, indemnification, or any other type

of relief, at law or at equity, under any theory of recovery. "Released Parties," as used in this

paragraph, means the Settling Defendants and The Travelers Indemnity Company, successor in

interest by merger to Gulf Insurance Company, or any of them, or any of their present or former

officers, directors, employees, agents, attorneys, insurers, stockholders, financial advisors,

accountants, commercial bank lenders, representatives, affiliates, associates, parents,

subsidiaries, predecessor companies, general and limited partners and partnerships, heirs,

executors, administrators, successors and assigns, but notwithstanding any language herein that

might be otherwise construed, does not include the Non-Settling Defendants .

5. In return for the mutual promises and valuable consideration described herein, the

Settling Parties hereby stipulate to the dismissal, with prejudice, of the Action in its entirety as to

the Settling Defendants, including both the Direct Claims and Derivative Claims against the

Settling Defendants . In addition, WebAccess shall dismiss with prejudice all claims against

31051598.2 8

Prentice currently pending in Civil Action Number 03-CV-2508, District Court in and for the

City and County of Denver, Colorado (the "State Court Action"), and Prentice shall dismiss with

prejudice all counterclaims against WebAccess currently pending in the State Court Action . The

Settling Parties further stipulate to the entry of an Order and Final Judgment substantially similar

to the proposed Order and Final Judgment attached as Exhibit B to this Stipulation .

6. The cost of printing and mailing of notice of settlement of this Action by first

class mail, return receipt requested, to the shareholders of WebAccess shall be bo rne by the

Settling Defendants . Upon placement of the notice of settlement in the mails to each WebAccess

shareholder, counsel for one of the Sett ling Defendants shall file an affidavit with the Cou rt

representing that notice has been served in compliance with this provision and FED . R. Civ. P .

23.1 .

7 . Except as provided in paragraph 6, each side shall bear their own costs, expenses,

and attorneys fees incurred during the litigation of the Action. The Settling Defendants shall

bear no responsibility for paying any part of Plaintiffs' legal fees, costs, and expenses for

litigating this Action, and plaintiffs shall bear no responsibility for paying any part of the Settling

Defendants' legal fees, costs, and expenses for litigating this Action .

8. As soon as practicable following the execution of this Stipulation, it shall be

submitted to the Court, together with a proposed Order in the form annexed hereto as Exhibit A,

scheduling a hearing for the purposes of determining whether the settlement and dismissal of the

derivative claims on the terms set forth herein, and the entry of an Order and Final Judgment

substantially similar to Exhibit B to this Stipulation, should be approved as fair, reasonable and

in the best interest of WebAccess and its shareholders and further providing for the mailing of a

31051598.2 9

notice, substantially in the form annexed hereto as Exhibit A, to all WebAccess shareholders o f

record as of the date hereof advising them of the claims asserted in the action and the terms o f

the Proposed Settlement.

9. The Proposed Sett lement embodied herein is expressly conditioned upon the entry

of an Order and Final Judgment, substantially in the form annexed hereto as Exhibit B, and suc h

judgment having become final . The Order and Final Judgment shall, inter alia :

(a) approve this Stipulation and the Proposed Settlement embodie d

herein and direct the consummation of its terms and provisions ;

(b) direct that the Third Amended Complaint an d all claims and causes

of action which have or could have been asserted therein, or in any amendment thereto, b e

dismissed with prejudice as to the Settling Defendants ;

(c) release and discharge each and all of the Settling Defendants from

any and all liability for the Released Claims, as defined in paragraph 4, above ; and

31051598.2 10

(d) provide that the Plaintiffs shall be permanently barred and enjoined

from prosecuting any of the Released Claims against any of the Released Parties in this or any

other jurisdiction, or in any arbitration or other judicial, quasi-judicial, or non judicia l

proceeding.

10. The Order and Final Judgment shall be deemed to have become final, for

purposes of this Stipulation, at such time as (i) it has been entered by the Court and the time for

appeal therefrom has run without any appeal having been taken, or (ii) if an appeal is taken,

either the Order and Final Judgment is affirmed without material modification or the appeal is

dismissed, and there is no longer any possibility of any further appeal being taken, either because

the appellate court has ruled finally and there is no further opportunity for modification of the

ruling or no higher court to which an appeal can be taken or because the time for seeking such

modification or taking such an appeal has expired without any such modification having been

sought or appeal having been taken .

11 . Neither this Stipulation nor any negotiations, statements or proceedings in

connection herewith shall be construed as, or be deemed to be, evidence or an admission or

concession on the part of any Settling Defendant of any liability or wrongdoing whatsoever or of

having engaged in any of the conduct alleged in the Third Amended Complaint or any of the

pleadings or papers filed in the Action, which liability and wrongdoing are expressly and

vigorously denied by the Settling Defendants . In addition, neither this Stipulation nor any

negotiations, statements or proceedings in connection therewith shall be offered or received in

evidence in any action or proceeding in any court or other tribunal, nor shall it be offered or used

in any way as an admission, concession or evidence of any liability, wrongdoing or misconduc t

31051598 .2 11

of any nature by any Settling Defendant, except that this Stipulation may be used in an action or

proceeding to enforce its terms .

12. The Settling Parties agree to use their best efforts to promptly effectuate an d

implement all of the terms and conditions of this Stipulation, including obtaining the Court's

approval of the Proposed Settlement . However, in the event the Proposed Settlement as provided

for herein is not approved by the Court, the Settling Parties fail for any reason to obtain a Final

Judgment, or if for any other reason, this Stipulation and the Proposed Settlement embodied

herein does not become effective, then, in any of such events, this Stipulation shall become null

and void and of no further force or effect, and shall not be used or referred to for any purpose

whatsoever. In such event, this Stipulation and all negotiations and proceedings relating hereto

shall be withdrawn without prejudice as to the rights of all parties hereto, who shall be restored

to their respective positions existing prior to the execution of this Stipulation . The contents of

the Stipulation shall not be construed as an admission by any party regarding the factual or legal

merits of this case, nor will the existence or contents of the Stipulation be submitted as evidence

in support of (or opposition to) a motion for summary judgment, nor will the contents of this

Stipulation be read or otherwise provided to the factfmder at trial, either in this case or in any

other case relating to the affairs of WebAccess . In the event the Court does not approve the

Proposed Settlement, Plaintiffs shall return the Direct Action Settlement Payment to the Settling

Defendants within ten (10) days after the Court's denial or rejection of the Proposed Settlement,

and WebAccess shall return the Derivative Action Settlement Payment to Prentice within ten

(10) days after the Court's denial or rejection of the Proposed Settlement .

31051598.2 12

13. All counsel who have executed this Stipulation represent that they have authorit y

to do so on behalf of their clients .

14. This Stipulation shall be construed and governed according to the laws of the

State of Delaware, without giving effect to its conflict of laws principles . This Stipulation

contains the entire agreement among the Settling Parties with respect to the Action and may not

be altered, modified or amended unless by a writing executed by counsel for all of the Settling

Parties . The Settling Parties reserve the right, upon agreement of all of them and subject to the

Court's approval, to make any reasonable extensions of time or modifications to the Exhibits

annexed hereto that may be necessary to carry out any of the provisions of this Stipulation .

15 . The Settling Parties shall keep the terms of this Stipulation confidential, includin g

without limitation the dollar amount of the Direct Action Settlement Payment, except that :

(a) The Settling Parties may disclose the terms of this Stipulation to their

respective accountants, attorneys and insurers if those persons agree to be

bound by the terms of the confidentiality of this paragraph .

(b) The Parties may also disclose the terms of this Stipulation as ordered by a

court or arbitration panel, or as required by a government agency or law or

regulation .

The Settling Parties recognize that a violation of this provision would lead to immediate

and irreparable harm that could not be compensated monetarily, and that the aggrieved party ma y

seek immediate ex parte injunctive relief in any court of competent jurisdiction for any suc h

violation of this provision .

31051598 .2 13

16. The Stipulation shall be binding upon and inure to the benefit of the Settlin g

Parties and their respective successors in interest, assigns, heirs, executors, administrators,

affiliates, parents, subsidiaries, directors and officers, and any partnership or corporation into or

with which any party hereto may merge, consolidate or recognize . The Court shall retain

continuing and exclusive jurisdiction over the parties hereto and over the matters set forth in this

Stipulation, including the administration and enforcement of the Settlement. Any disputes or

controversies arising with respect to the interpretation, enforcement or implementation of the

Settlement must be raised by motion to the Court .

17 . This Stipulation may be executed in one or more counterparts which, when taken

together, shall be the same as if a single document shall have been executed .

31051598.2 14

Respectfully submitted this 23rd day of December, 2005 .

THE LAW FIRM O FCISNEROS & SCHENDZIELOS, LL P

By: s/Daniel J . SchendzielosDaniel J . SchendzielosRoger Cisnero sSuite 203, 1602 S . Parker RoadDenver, Colorado 8023 1Tel . : (303) 671-7600

John F. BlossClark, Bloss & Wall, PLL C125 South Elm Street, Suite 600Greensboro, North Carolina 2740 1

ATTORNEYS FOR PLAINTIFFS

SENN VISCIANO & KIRSCHENBAUMP.C.

By: s/Glenn W . MerrickGlenn W . MerrickSuite 43001801 California StreetDenver, Colorado 80202Tel . (303) 298-1122Fax: (303) 296-910 1

ATTORNEYS FOR WEBACCESSINTERNATIONAL, INC .

31051598.2 15

HOLME ROBERTS & OWEN LLP

By : s/Peter A. StokesJohn V. McDermottDavid Bal l1700 Lincoln St., Suite 4100Denver, Colorado 80203-4541Tel . : (303) 866-0265

Gerard G. PechtPeter A. StokesFULBRIGHT & JAWORSKI L.L.P .1301 McKinney , Suite 5100Houston, TX 77010-3095Tel . (713) 651-5562Fax (713) 651-5246

ATTORNEYS FOR DEFENDANTSL. SHAWN BRESKOW, JAMES W.STUCKERT, BLAIR WHITAKER,ARCHIBALD J . MCGILL, STEVEN A.SPESARD; STEVEN A. LYGA, CAROLL. LEVEQUE, J. ROGER MOODY, ANDDANIEL W. BOYD .

APPLE & LUCAS, P .C.

By : s/Peter J . LucasPeter J . Lucas, EsquireApple & Lucas, P .C .1917 Market Street, Suite ADenver, Colorado 80202ATTORNEY FOR WILEY E. PRENTICE,JR .

31051598.2 16

CERTIFICATE OF SERVICE

I certify that a copy of this document was served on all counsel of record this 23rd day ofDecember, 2005 .

s/Peter A. StokesPeter A. Stokes

31051598.2 17


Civil Action No. 03-cv-1521-PSF-PA C

LEONARD STEPHENS, EDWARDBUHLMAN, JIM NOFFSINGER,GARY MCDONALD, and BRUCETALLMADGE, Individually, Derivativelyfor WebAccess International, Inc ., and OnBehalf of All Others Similarly Situated ,

Plaintiffs ,

V.

WEBACCESS INTERNATIONAL, INC.a Delaware , corporation authorized totransact business in the State of Colorado,its officers and directors individually,BLAIR WHITAKER ,J. ROGER MOODY,L. SHAWN BRESKOW,JAMES W. STUCKERT, ARCHIBALDJ. MCGILL, WILEY E . PRENTICE, JR.,STEVEN A. SPESARD, STEVEN A.LYGA, CAROL L. LEVEQUE, DANIELW. BOYD, JAMES ROGERS, STEVENE. ANDERSON, and J.J.B. HILLIARD,W.L. LYONS, INC. and all others whomay be additionally named as defendantsindividually, jointly and severally ,

Defendants.

NOTICE OF PROPOSED SETTLEMENT OF CERTA IN DERIVATIVECLAIMS, FAIRNESS HEARING AND RIGHT TO APPEAR

TO: ALL CURRENT RECORD HOLDERS AND BENEFICIAL OWNERS OF STOCK OFWEBACCESS INTERNATIONAL, INC . ("WEBACCESS" OR THE "COMPANY")AS OF DECEMBER 23, 2005 (THE "RECORD DATE") .

PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. THISNOTICE RELATES TO A PROPOSED SETTLEMENT OF LITIGATION ANDCONTAINS IMPORTANT INFORMATION REGARDING YOUR RIGHTS . YOUR

RIGHTS WILL BE AFFECTED BY LEGAL PROCEEDINGS IN THIS LITIGATION .IF THE COURT APPROVES THE SETTLEMENT, SHAREHOLDERS OFWEBACCESS WILL BE FOREVER BARRED FROM CONTEST ING THEFAIRNESS, REASONABLENESS OR ADEQUACY OF THE PROPOSEDSETTLEMENT, OR FROM PURSUING THE SETTLED CLAIMS .

THE COURT HAS MADE NO FINDINGS OR DETERMINATIONS RESPECTINGTHE MERITS OF THIS CASE . THE RECITATION OF THE BACKGROUND ANDCIRCUMSTANCES OF THE SETTLEMENT CONTAINED HEREIN DOES NOTCONSTITUTE THE FINDINGS OF THE COURT. IT IS BASED ONREPRESENTATIONS MADE TO THE COURT BY COUNSEL FOR THE PARTIES .

IF YOU WERE NOT THE BENEFICIAL, OWNER OF WEBACCESS STOCK ONTHE RECORD DATE, PLEASE TRANSMIT THIS DOCUMENT TO SUCHBENEFICIAL OWNER.

THIS NOTICE IS GIVEN pursuant to FED. R. Civ. P. 23 .1 and an Order of the Court (the

"Hearing Order") entered in the above-captioned shareholder derivative action ("Derivative

Action") brought on behalf of nominal defendant WebAccess. The purpose of this Notice is to

inform you of the proposed settlement of the Derivative Action as to certain Defendants (the

"Proposed Settlement") and of a hearing (the "Fairness Hearing"), to be held o n

2006, at o'clock m. before the Honorable Phillip Figa, Judge

of the United States District Court for the District of Colorado (the "Court") in Courtroom A635

of the Alfred A. Arraj United States Courthouse, 901 19th Street, Denver, Colorado 80294-3589 .

In the event no objections are filed with the Court and served on counsel as provided in

Paragraph 9 below, the Fairness Hearing may be cancelled without notice . The purpose of the

Fairness Hearing is : (i) to determine whether the Proposed Settlement, as set forth in a

Stipulation of Compromise and Settlement entered into by the parties to the Derivative Action

and dated as of December 19, 2005 (the "Stipulation"), is fair, reasonable, adequate, in the best

interests of WebAccess and should be approved by the Court ; (ii) to determine whether a

judgment should be entered in the Derivative Action pursuant to the Proposed Settlement tha t

2

will, among other things, dismiss the Derivative Action with prejudice as to certain Defendants

and release the Released Claims (as defined herein) ; (iii) to consider such other matters as the

Court may deem appropriate.DESCRIPTION OF THE LITIGATION

1 . Plaintiffs commenced this Derivative Action by filing their Original Complaint on

or about July 11, 2003 in the District Court of the City and County of Denver . The Derivative

Action was later removed to the United States District Court for the District of Colorado, where

it remains pending. On January 12, 2004, Plaintiffs filed their Third Amended Complaint (the

"Derivative Complaint"), which is the most recent pleading in the Derivative Action . The

Derivative Complaint alleges (derivatively on behalf of WebAccess) that Defendants Wiley E .

Prentice, Jr ., J . Roger Moody, Blair Whitaker, L. Shawn Breskow, James W . Stuckert, Archibald

McGill, Steve A . Spesard, Steven A. Lyga, Carol L . Carnie, Daniel W. Boyd, James Rogers,

Steven E. Anderson, and J.J.B. Hilliard, W .L. Lyons, Inc . (the "Derivative Defendants") violated

federal and state securities laws, breached their fiduciary duties to WebAccess, and violated the

Colorado Organized Crime Control Act ("COCCA") by allegedly misappropriating or misusing

WebAccess corporate funds, failing to exercise adequate oversight, participation in interested

director transactions, creating and disseminating false financial statements, and other actions

described in the Derivative Complaint (the "Derivative Claims") .

2. The Derivative Claims were asserted by Plaintiffs on behalf of WebAccess ,

meaning that any damages recovered on the Derivative Claims would go to WebAccess . It is the

Settling Parties' current understanding and belief that WebAccess has outstanding unpaid

obligations to creditors in excess of $1,500,000.000 ("One million five hundred thousand

dollars") . Accordingly, unless WebAccess collects more than $1,500,000 .00 in damages, net of

3

legal fees and expenses, from its pursuit of the Derivative Claims (which the Settling Parties

believe is extremely unlikely), all proceeds from the Derivative Action would be paid to

WebAccess's creditors, and there would be no distribution to shareholders of any proceeds from

the Derivative Action .

3. Counsel for Plaintiffs and counsel for Wiley E . Prentice, Jr., J . Roger Moody,

Blair Whitaker, L . Shawn Breskow, James W. Stuckert, Archibald McGill, Steve A . Spesard,

Steven A. Lyga, Carol L . Carnie and Daniel W. Boyd (the "Settling Defendants") (collectively

with Plaintiffs, the "Settling Parties") entered into a Stipulation of Settlement dated December

19, 2005 (the "Proposed Settlement"), providing for the comprehensive settlement of the

Derivative Action as to the Settling Defendants . The Proposed Settlement does not cover the

Derivative Claims against J .J.S. Hilliard, W .L. Lyons, Inc . ("Hilliard Lyons"), Steven Anderson,

and James Rogers (collectively with Hilliard Lyons, the "Hilliard Lyons Defendants") . Plaintiffs

may continue to pursue these claims (the "Hilliard Lyons Claims") derivatively on behalf of

WebAccess against the Hilliard Lyons Defendants in arbitration, pursuant to the terms of

Plaintiffs' arbitration agreements with Hilliard Lyons. The Proposed Settlement is subject to

Court approval following notice to WebAccess shareholders and, if deemed necessary by the

Court, a hearing on fairness and adequacy of such settlement .

4. The principal terms, conditions and other matters that are part of the Propose d

Settlement, which is subject to approval by the Court, are summarized below .

4

THE SETTLEMENT

5. In order to resolve the Derivative Action as to the Settling Defendants, and solely

as a result of it, but with the Settling Defendants denying any liability whatsoever, the Settling

Parties agreed to the following terms, which are more fully set forth in the Stipulation on file

with the Clerk of the Court:

A. On the date the Settlement is deemed final (as defined below and in th e

Stipulation), Defendant Prentice shall pay to WebAccess the sum of $50,000 .00 ("Fifty

Thousand Dollars") in full satisfaction of all claims by WebAccess against Prentice (the

"Derivative Settlement Payment"). The Derivative Settlement Payment shall be in full


WebAccess that he lacks sufficient financial resources to pay any amount greater than the


a sworn affidavit attesting, under penalty of perjury, to the accuracy of his financial


B. The Stipulation also provides for the entry of a judgment dismissing th e

Derivative Action with prejudice as to the Settling Defendants (but not the Hilliard Lyons

Defendants) and barring and releasing any known or unknown claims that have been or could

have been brought in any court by Plaintiffs or WebAccess against any of the Settling

Defendants relating to any of the claims or matters that were or could have been alleged in the

Complaint or any amendment thereto (the "Released Claims") .

C. The Proposed Settlement shall become effective only on the first day upon which

(i) an Order and Final Judgment (the "Order and Final Judgment"), substantially as described in

paragraph 10 below, is entered in the Derivative Action, approving the Proposed Settlement an d

5

dismissing the Derivative Action against the Settling Defendants ; and (ii) such Order and Final

Judgment has become final and unappealable (the "Final Approval Date") .

D. If the Settlement does not become final as described herein and in the Stipulation,

the Proposed Settlement shall be null and void and of no force and effect, and shall not be

deemed to prejudice in any way the position of any of the Settling Parties with respect to the

Derivative Action, who will be returned to their respective legal positions prior to the execution

of this Stipulation . The contents of the Stipulation shall not be construed as an admission by any

party regarding the factual or legal merits of this case, nor will the existence or contents of the

Stipulation be submitted as evidence in support of (or opposition to) a motion for summary

judgment, nor will the contents of this Stipulation be read or otherwise provided to the factfinder

at trial, either in this case or in any other case relating to the affairs of WebAccess .

E. The parties have agreed that the Stipulation shall be governed by, and construed

in accordance with, the laws of the State of Delaware, without regard to Delaware rules with

respect to conflict of laws.

6. The Settling Parties recognize that there are significant litigation risks involved in

continuing to pursue the Derivative Claims against the Settling Defendants . The Settling

Defendants contend that : (1) Defendant Prentice has limited resources and is unable to contribute

more than $50,000 towards a judgment ; (2) the directors of WebAccess contend that they are

protected from liability through an exculpatory provision in the Company's Certificate of

Incorporation, which, the Settling Defendants assert, is enforceable under Delaware law and, if

enforceable, requires proof of bad faith, disloyalty, or intentional misconduct as a condition to

recovering money damages from the directors, which the Settling Parties agree would be difficult

to prove; (3) the economic environment in which WebAccess competed was marred by a

6

substantial and prolonged economic downturn in the telecommunications and Internet sectors,

which, the Settling Defendants contend, made it highly likely WebAccess would have failed

anyway regardless of any alleged misconduct by the Settling Defendants ; (4) WebAccess's best

possible recovery, if it is entitled to recover anything at all, is probably limited to the amount of

money Prentice allegedly misappropriated from WebAccess, which was previously estimated to

be $160,000, less attorney's fees and costs awarded by the Court; (5) Prentice has asserted

counterclaims against WebAccess for certain salary and bonus payments that are allegedly owed

to him by WebAccess, which (if proved) would reduce or negate WebAccess's recovery from



Claims from the Settling Defendants would be subject to claims by WebAccess's creditors

(including but not limited to a claim by the Internal Revenue Service for unpaid "941" or "trust

fund" taxes in excess of $50,000.00, to which the Derivative Settlement Payment will be

directed) and would not result in any distribution, dividend, payment, or other financial benefit

for WebAccess's shareholders ; and (8) the costs of pursuing the Derivative Claims against the

Settling Defendants will likely dwarf any potential recovery on those claims .

7. Plaintiffs believe that the Proposed Settlement provided for the Stipulation wil l

provide substantial benefits to WebAccess, when weighed against the continued risk of litigation .

In determining that the Proposed Settlement fairly and adequately protects the interests of

WebAccess, Plaintiffs and their counsel have considered the expense and length of time

necessary to prosecute the Derivative Action against the Settling Defendants through trial, the

defenses available to the Settling Defendants, the uncertainties of the outcome of the Derivative

Action, the fact that a judgment in favor of Plaintiffs in the Derivative Action would likely be

7

appealed by Defendants, and the ability of the Settling Defendants to pay a judgment . In light of

these considerations, Plaintiffs, through their counsel, have engaged in arm's-length negotiations

with counsel for the Settling Defendants under the direct supervision of the Court in an attempt

to achieve a positive resolution of the Derivative Action as to the Settling Defendants and has

determined that it is in the best interests of WebAccess and all shareholders of WebAccess to

settle the Derivative Action as to the Settling Defendants on the terms set forth herein .

8 The Settling Defendants, and each of them, have at all times denied, and continu e

to deny, that they have committed, or have threatened to commit, any wrongful act or violation

of law of any nature whatsoever in connection with any of the matters alleged, or which could

have been alleged, in the Derivative Action . The Settling Defendants entered into the Proposed

Settlement because it will terminate the substantial expense, inconvenience and distraction

resulting from continued litigation of the Plaintiffs' claims, finally put to rest those claims and

dispel any uncertainty that may exist as a result of the Derivative Action .

NOTICE OF SETTLEMENT HEARING AND RIGHT TO APPEAL

9. Any Shareholder who objects to the Proposed Settlement, or who otherwise

wishes to be heard may appear in person or by attorney at the Fairness Hearing and present any

evidence or argument that may be proper and relevant, provided that, no later than

2006, such person shall file with the Clerk of the Court and, on or befor e

such filing, shall serve a notice of such person's intention to appear, by hand or by first-class

mail, postage pre-paid, upon each and all of the counsel specified below .

Daniel J . SchendzielosCISNEROS & SCHENDZIELOS, LLP1602 South Parker Road, Suite 203Denver, Colorado 8023 1Tel . : (303) 671-7600

8

Gerard G . PechtPeter A. StokesFULBRIGHT & JAWORSKI L.L.P .1301 McKinney, Suite 5100Houston, Texas 77010-309 5Tel . (713) 651-515 1

Glenn W . MerrickSENN VISCIANO KIRSCHENBAUM MERRICK P .C .1801 California, Suite 4300Denver, Colorado 80202Tel. (303) 298-1122

Peter J . LucasAPPEL & LUCAS, PC1917 Market St., Suite ADenver, CO 8020 2Tel. (303) 297-9800

Such notice shall : (1) contain a notarized statement that such person is a current WebAccess

shareholder and the date(s) such person acquired his, her or its WebAccess shares (2) contain a

detailed statement of such person's specific position with respect to the matters to be heard at the

Fairness Hearing and the grounds therefor and (3) include copies of any papers such person

intends the Court to consider. Any WebAccess shareholder who fails to object in the above-

prescribed manner shall be deemed to have waived his or her objection and shall be barred from

raising such objection in this or any other action or proceeding . Shareholders who have no

objection to the proposed Settlement do not need to appear at the Fairness Hearing or take

any other action. If the Settlement is not approved, the case will continue to be prepared for

trial or other judicial resolution, and the Stipulation with respect to the Settlement shall become

null and void and of no further force or effect .

9

DISMISSAL OF THE ACTION

10. If the Court approves the Proposed Settlement, the Settling Parties jointly will

move the Court to enter an Order and Final Judgment :

(a) approving the Proposed Settlement as fair, reasonable and adequate an d

directly consummation of the Proposed Settlement, in accordance with the terms and condition s

of the Stipulation ;

(b) dismissing the Derivative Action with prejudice on the merits as to the

Settling Defendants, without costs except as provided in the Stipulation, and releasing th e

Settling Defendants from all liabilities for the Released Claims ;

(c) permanently barring and enjoining the shareholders from instituting,

commencing, prosecuting, participating in or continuing an y shareholder derivative action

against the Settling Defendants in any court, arbitration proceeding, or tribunal of this or an y

other jurisdiction, asserting an y claims that are, arise out of, or in any way relate to, the Released

Claims; and

(d) reserving jurisdiction over all matters related to the consummation of th e

Proposed Settlement.

11 . The Court has the right to approve the Proposed Settlement with modification s

and without further notice to the shareholders . The Court may also adjourn the Fairness Hearing

or any adjournment thereof without further notice other than to counsel for the parties .

12. By Order of the Court, pending final determination of whether the Proposed

Settlement should be approved, no shareholder may institute, commence or continue, directly,

individually, derivatively, representatively, any shareholder derivative action against the Settling

10

Defendants in any court, arbitration proceeding, or tribunal of this or any other jurisdiction,

asserting any claims that are, arise out of, or in any way relate to, the Released Claims .

SPECIAL NOTICE TO SECURITIES BROKERS AND OTHER NOMINEE S

13. If you held shares of WebAccess stock for any other person as of the Record

Date, defined herein, you are requested promptly to provide a copy of this Notice to each such

other person . Nominees should be aware of the dates and deadlines referred to in this Notice and

should act promptly to accomplish this notification to beneficial owners required by this

paragraph . Additional copies of this Notice will be provided upon request . Alternatively, you

may provide a list of the names and addresses of the beneficial owners for whom you hold

WebAccess shares to Gerard G . Pecht and Peter A. Stokes , Fulbright & Jaworski L.L.P, 1301

McKinney, Suite 5100, Houston, Texas 77010 (electronic mail : gpecht a,fulbright.coni and

pstokes@fulbright . com), who will arrange for a copy of the Notice to be mailed to such persons.

SCOPE OF THIS NOTICE

14. The foregoing description of the Derivative Action, the Fairness Hearing, the

terms of the Proposed Settlement and other matters described herein does not purport to be

comprehensive. Shareholders are referred to the Stipulation and documents publicly filed with

the Court in the Derivative Action, including the pleadings and other papers, which you or your

attorney may examine during regular business hours of each business day at the offices of the

Clerk for the United States District Court for the District of Colorado at the Alfred A . Arraj

United States Courthouse, 901 19th Street, Denver, Colorado 80294-3589 .

11

FURTHER INFORMATION

13 . Any questions you have about the matters in this Notice should not be directed t o

the Court but should be directed by telephone or in writing to counsel for Plaintiffs and th e

Settling Defendants at the addresses set forth in paragraph 9 above.

DATED :

HONORABLE U .S. DISTRICT JUDGE

12

IN THE UNITED STATES DISTRICT COURTFOR THE DISTRICT OF COLORADO

Civil Action No. 03-cv-1521-PSF-PAC

LEONARD STEPHENS,EDWARD BUHLMAN,JIM NOFFSINGER,GARY MCDONALD andBRUCE TALLMADGE,Individually and on Behalfof All Others Similarly Situated ,

Plaintiffs ,

V .

WEBACCESS INTERNATIONAL, INC .,BLAIR WHITAKER,J. ROGER MOODY ,L. SHAWN BRESKOW,JAMES W. STUCKERT,ARCHIBALD J. MCGILL,WILEY E. PRENTICE, JR.,STEVEN A. SPESARD,STEVEN A . LYGA,CAROL L. LEVEQUE,DANIEL W . BOYD,JAMES ROGERS ,STEVEN E. ANDERSON andJJ.B. HILLIARD, W.L. LYONS, INC. ,

Defendants.

ORDER AND FINAL JUDGMENT

The Court has reviewed the Motion to Approve Settlement ("Motion") and the

Stipulation of Compromise and Settlement ("Stipulation") submitted by the Settling Parties, as

well as any objections from shareholders of WebAccess International, Inc . ("WebAccess") that

were properly filed with the Court . After reviewing the aforementioned filings and, if necessary,

conducting a hearing to assess the fairness of the Stipulation, and having provided fair notice to

the shareholders of WebAccess in compliance with FED. R. Civ. P. 23 .1, the Court has

determined, for the reasons set forth in the Motion, that the Stipulation is fair and reasonable to

WebAccess and its shareholders and was made in good faith . The Court therefore grants the

Motion for the reasons set forth therein and adopts all terms of the Stipulation and renders final

judgment as provided therein .

Accordingly, it is hereby ordered that all claims, rights or causes of action or liabilitie s

whatsoever, whether asserted directly, individually, derivatively, or in a representative capacity,

whether known or unknown or suspected to exist, and whether based on federal, state or local

statutory or common law or any other law, rule or regulation, that have been or could have been

asserted in the Third Amended Complaint or any other pleadings or papers in the above-

captioned litigation against WebAccess, Blair Whitaker, J. Roger Moody, L . Shawn Breskow,

James W. Stuckert, Archibald J . McGill, Wiley E. Prentice, Jr., Steve A. Spesard, Steven A .

Lyga, Carol L. Carrie (formerly Carol L. Leveque), and Daniel W. Boyd are hereby dismissed

with prejudice . Each Party shall bear their own legal fees, costs, and expenses incurred during

the litigation of this Action .

This is a Final Judgment . All relief not expressly awarded herein is denied .

Dated this day of , 2006 .

UNITED STATES DISTRICT JUDGE


Civil Action No . 03-cv- 152 1 -PSF-PAC

LEONARD STEPHENS, EDWARDBUHLMAN, JIM NOFFSINGER,GARY MCDONALD, and BRUCE

TALLMADGE, Individually, Derivativelyfor WebAccess International, Inc., and OnBehalf of All Others Similarly Situated ,

Plaintiffs ,

V.

WEBACCESS INTERNATIONAL, INC .a Delaware, corporation authorized totransact business in the State of Colorado,its officers and directors individually,BLAIR WHITAKER ,J. ROGER MOODY ,L. SHAWN BRESKOW,JAMES W. STUCKERT, ARCHIBALDJ. MCGILL, WILEY E . PRENTICE, JR.,STEVEN A. SPESARD, STEVEN A.LYGA, CAROL L . LEVEQUE, DANIELW. BOYD, JAMES ROGERS, STEVENE. ANDERSON , and J .J .B . HILLIARD,W.L. LYONS, INC. and all others whomay be additionally named as defendantsindividually , jointly and severally,

Defendants

NOTICE OF PROPOSED SETTLEMENT OF CERTAIN DERIVATIVECLAIMS, FAIRNESS HEARING AND RIGHT TO APPEAR

TO: ALL CURRENT RECORD HOLDERS AND BENEFICIAL OWNERS OF STOCK OFWEBACCESS INTERNATIONAL, INC . ("WEBACCESS" OR THE "COMPANY")AS OF DECEMBER 23, 2005 (THE "RECORD DATE") .

PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY . THISNOTICE RELATES TO A PROPOSED SETTLEMENT OF LITIGATION ANDCONTAINS IMPORTANT INFORMATION REGARDING YOUR RIGHTS . YOUR

RIGHTS WILL BE AFFECTED BY LEGAL PROCEEDINGS IN THIS LITIGATION.IF THE COURT APPROVES THE SETTLEMENT, SHAREHOLDERS OFWEBACCESS WILL BE FOREVER BARRED FROM CONTESTING THEFAIRNESS, REASONABLENESS OR ADEQUACY OF THE PROPOSEDSETTLEMENT, OR FROM PURSUING THE SETTLED CLAIMS .

THE COURT HAS MADE NO FINDINGS OR DETERMINATIONS RESPECTINGTHE MERITS OF THIS CASE . THE RECITATION OF THE BACKGROUND ANDCIRCUMSTANCES OF THE SETTLEMENT CONTAINED HEREIN DOES NOTCONSTITUTE THE FINDINGS OF THE COURT. IT IS BASED ONREPRESENTATIONS MADE TO THE COURT BY COUNSEL FOR THE PARTIES .

IF YOU WERE NOT THE BENEFICIAL OWNER OF WEBACCESS STOCK ONTHE RECORD DATE, PLEASE TRANSMIT THIS DOCUMENT TO SUCHBENEFICIAL OWNER .

THIS NOTICE IS GIVEN pursuant to FED . R . Civ . P . 23 . 1 and an Order of the Court (the

"Hearing Order") entered in the above-captioned shareholder derivative action ("Derivativ e

Action") brought on behalf of nominal defendant WebAccess . The purpose of this Notice is t o

inform you of the proposed settlement of the Derivative Action as to certain Defendants (th e

"Proposed Settlement") and of a hearing (the "Fairness Hearing"), to be held o n

2006, at o'clock in . before the Honorable Phillip Figa, Judg e

of the United States District Court for the District of Colorado (the "Court") in Courtroom A63 5

of the Alfred A . Arraj United States Courthouse, 901 19th Street, Denver , Colorado 80294-3589 .

In the event no objections are filed with the Court and served on counsel as provided i n

Paragraph 9 below, the Fairness Hearing may be cancelled without notice . The purpose of the

Fairness Hearing is : (i) to determine whether the Proposed Settlement, as set forth in a

Stipulation of Compromise and Settlement entered into by the parties to the Derivative Actio n

and dated as of December 19, 2005 (the "Stipulation"), is fair, reasonable, adequate, in the bes t

interests of WebAccess and should be approved by the Court ; ( ii) to determine whether a

judgment should be entered in the Derivative Action pursuant to the Proposed Settlement that

2

will, among other things, dismiss the Derivative Action with prejudice as to certain Defendants

and release the Released Claims (as defined herein) ; (iii) to consider such other matters as the

Court may deem appropriate .

DESCRIPTION OF THE LITIGATION

1 . Plaintiffs commenced this Derivative Action by filing their Original Complaint on

or about July 11, 2003 in the District Court of the City and County of Denver . The Derivative

Action was later removed to the United States District Court for the District of Colorado, where

it remains pending . On January 12, 2004, Plaintiffs filed their Third Amended Complaint (the

"Derivative Complaint"), which is the most recent pleading in the Derivative Action . The

Derivative Complaint alleges (derivatively on behalf of WebAccess) that Defendants Wiley E .

Prentice, Jr., J . Roger Moody, Blair Whitaker, L . Shawn Breskow, James W . Stuckert, Archibald

McGill, Steve A . Spesard, Steven A. Lyga, Carol L. Carnie, Daniel W. Boyd, James Rogers,

Steven E. Anderson, and J .J .B. Hilliard, W.L. Lyons, Inc . (the "Derivative Defendants") violated

federal and state securities laws, breached their fiduciary duties to WebAccess, and violated the

Colorado Organized Crime Control Act ("COCCA") by allegedly misappropriating or misusing

WebAccess corporate funds, failing to exercise adequate oversight, participation in interested

director transactions, creating and disseminating false financial statements, and other actions

described in the Derivative Complaint (the "Derivative Claims") .

2. The Derivative Claims were asserted by Plaintiffs on behalf of WebAccess ,

meaning that any damages recovered on the Derivative Claims would go to WebAccess . It is the

Settling Parties' current understanding and belief that WebAccess has outstanding unpaid

obligations to creditors in excess of $1,500,000 .000 ("One million five hundred thousand

dollars") . Accordingly, unless WebAccess collects more than $1,500,000 .00 in damages, net o f

3

legal fees and expenses, from its pursuit of the Derivative Claims (which the Settling Parties

believe is extremely unlikely), all proceeds from the Derivative Action would be paid to

WebAccess's creditors, and there would be no distribution to shareholders of any proceeds from

the Derivative Action .

3. Counsel for Plaintiffs and counsel for Wiley E. Prentice, Jr., J . Roger Moody,

Blair Whitaker, L . Shawn Breskow, James W . Stuckert, Archibald McGill, Steve A . Spesard,

Steven A. Lyga, Carol L. Carnie and Daniel W . Boyd (the "Settling Defendants") (collectively

with Plaintiffs, the "Settling Parties") entered into a Stipulation of Settlement dated December

19, 2005 (the "Proposed Settlement"), providing for the comprehensive settlement of the

Derivative Action as to the Settling Defendants . The Proposed Settlement does not cover the

Derivative Claims against J .J .B . Hilliard, W .L. Lyons, Inc . ("Hilliard Lyons"), Steven Anderson,

and James Rogers (collectively with Hilliard Lyons, the "Hilliard Lyons Defendants") . Plaintiffs

may continue to pursue these claims (the "Hilliard Lyons Claims") derivatively on behalf of

WebAccess against the Hilliard Lyons Defendants in arbitration, pursuant to the terms of

Plaintiffs' arbitration agreements with Hilliard Lyons . The Proposed Settlement is subject to

Court approval following notice to WebAccess shareholders and, if deemed necessary by the

Court, a hearing on fairness and adequacy of such settlement .

4. The principal terms, conditions and other matters that are part of the Proposed

Settlement, which is subject to approval by the Court, are summarized below .

4

THE SETTLEMENT

5 . In order to resolve the Derivative Action as to the Settling Defendants, and solel y

as a result of it, but with the Settling Defendants denying any liability whatsoever, the Settlin g

Parties agreed to the following terms, which are more fully set forth in the Stipulation on fil e

with the Clerk of the Court :

A. On the date the Settlement is deemed final (as defined below and in th e

Stipulation), Defendant Prentice shall pay to WebAccess the sum of $50,000 .00 ("Fifty

Thousand Dollars") in full satisfaction of all claims by WebAccess against Prentice (the

"Derivative Settlement Payment") . The Derivative Settlement Payment shall be in ful l


WebAccess that he lacks sufficient financial resources to pay any amount greater than th e


a sworn affidavit attesting, under penalty of perjury, to the accuracy of his financia l


B. The Stipulation also provides for the entry of a judgment dismissing th e

Derivative Action with prejudice as to the Settling Defendants (but not the Hilliard Lyons

Defendants) and barring and releasing any known or unknown claims that have been or could

have been brought in any court by Plaintiffs or WebAccess against any of the Settlin g

Defendants relating to any of the claims or matters that were or could have been alleged in the

Complaint or any amendment thereto (the "Released Claims")

C. The Proposed Settlement shall become effective only on the first day upon whic h

(i) an Order and Final Judgment (the "Order and Final Judgment"), substantially as described i n

paragraph 10 below , is entered in the Derivative Action , approving the Proposed Settlement and

5

dismissing the Derivative Action against the Settling Defendants ; and (ii) such Order and Final

Judgment has become final and unappealable (the "Final Approval Date") .

D. If the Settlement does not become final as described herein and in the Stipulation,

the Proposed Settlement shall be null and void and of no force and effect, and shall not be

deemed to prejudice in any way the position of any of the Settling Parties with respect to the

Derivative Action, who will be returned to their respective legal positions prior to the execution

of this Stipulation . The contents of the Stipulation shall not be construed as an admission by any

party regarding the factual or legal merits of this case, nor will the existence or contents of the

Stipulation be submitted as evidence in support of (or opposition to) a motion for summary

judgment, nor will the contents of this Stipulation be read or otherwise provided to the factfinder

at trial, either in this case or in any other case relating to the affairs of WebAccess .

E. The parties have agreed that the Stipulation shall be governed by, and construed

in accordance with, the laws of the State of Delaware, without regard to Delaware rules with

respect to conflict of laws .

6. The Settling Parties recognize that there are significant litigation risks involved i n

continuing to pursue the Derivative Claims against the Settling Defendants . The Settling

Defendants contend that : (1) Defendant Prentice has limited resources and is unable to contribute

more than $50,000 towards a judgment ; (2) the directors of WebAccess contend that they are

protected from liability through an exculpatory provision in the Company's Certificate of

Incorporation, which, the Settling Defendants assert, is enforceable under Delaware law and, if

enforceable, requires proof of bad faith, disloyalty, or intentional misconduct as a condition to

recovering money damages from the directors, which the Settling Parties agree would be difficult

to prove; (3) the economic environment in which WebAccess competed was marred by a

6

substantial and prolonged economic downturn in the telecommunications and Internet sectors ,

which, the Settling Defendants contend, made it highly likely WebAccess would have failed

anyway regardless of any alleged misconduct by the Settling Defendants ; (4) WebAccess's best

possible recovery, if it is entitled to recover anything at all, is probably limited to the amount of

money Prentice allegedly misappropriated from WebAccess, which was previously estimated t o

be $160,000, less attorney's fees and costs awarded by the Court ; (5) Prentice has asserted

counterclaims against WebAccess for certain salary and bonus payments that are allegedly owe d

to him by WebAccess, which (if proved) would reduce or negate WebAccess's recovery fro m



Claims from the Settling Defendants would be subject to claims by WebAccess's creditor s

(including but not limited to a claim by the Internal Revenue Service for unpaid "941" or "trust

fund" taxes in excess of $50,000 .00, to which the Derivative Settlement Payment will b e

directed) and would not result in any distribution, dividend, payment, or other financial benefi t

for WebAccess's shareholders; and (8) the costs of pursuing the Derivative Claims against the

Settling Defendants will likely dwarf any potential recovery on those claims .

7 . Plaintiffs believe that the Proposed Settlement provided for the Stipulation wil l

provide substantial benefits to WebAccess, when weighed against the continued risk of litigation.

In determining that the Proposed Settlement fairly and adequately protects the interests of

WebAccess, Plaintiffs and their counsel have considered the expense and length of time

necessary to prosecute the Derivative Action against the Settling Defendants through trial, th e

defenses available to the Settling Defendants, the uncertainties of the outcome of the Derivativ e

Action, the fact that a judgment in favor of Plaintiffs in the Derivative Action would likely be

7

appealed by Defendants, and the ability of the Settling Defendants to pay a judgment . In light of

these considerations, Plaintiffs, through their counsel, have engaged in arm's-length negotiations

with counsel for the Settling Defendants under the direct supervision of the Court in an attemp t

to achieve a positive resolution of the Derivative Action as to the Settling Defendants and has

determined that it is in the best interests of WebAccess and all shareholders of WebAccess to

settle the Derivative Action as to the Settling Defendants on the terms set forth herein .

8 The Settling Defendants, and each of them, have at all times denied, and continue

to deny, that they have committed, or have threatened to commit, any wrongful act or violatio n

of law of any nature whatsoever in connection with any of the matters alleged, or which coul d

have been alleged, in the Derivative Action . The Settling Defendants entered into the Propose d

Settlement because it will terminate the substantial expense, inconvenience and distractio n

resulting from continued litigation of the Plaintiffs' claims , finally put to rest those claims and

dispel any uncertainty that may exist as a result of the Derivative Action.

NOTICE OF SETTLEMENT HEARING AND RIGHT TO APPEA L

9. Any Shareholder who objects to the Proposed Settlement, or who otherwis e

wishes to be heard may appear in person or by attorney at the Fairness Hearing and present an y

evidence or argument that may be proper and relevant, provided that, no later than

2006, such person shall file with the Clerk of the Court and, on or before

such filing, shall serve a notice of such person's intention to appear, by hand or by first-clas s

mail, postage pre-paid, upon each and all of the counsel specified below .

Daniel J . Schendzielo sCISNEROS & SCHENDZIELOS, LLP1602 South Parker Road, Suite 203Denver, Colorado 8023 1Tel . : (303) 671-7600

8

Gerard G. PechtPeter A. StokesFULBRIGHT & JAWORSKI L .L.P .1301 McKinney, Suite 5100Houston, Texas 77010-3095Tel. (713) 651-515 1

Glenn W. MerrickSENN VISCIANO KIRSCHENBAUM MERRICK P .C .1801 California, Suite 430 0Denver, Colorado 80202Tel . (303) 298-112 2

Peter J . LucasAPPEL & LUCAS, PC1917 Market St ., Suite ADenver, CO 80202Tel. (303 ) 297-9800

Such notice shall : (1) contain a notarized statement that such person is a current WebAccess

shareholder and the date(s) such person acquired his, her or its WebAccess shares (2) contain a

detailed statement of such person's specific position with respect to the matters to be heard at th e

Fairness Hearing and the grounds therefor and (3) include copies of any papers such person

intends the Court to consider. Any WebAccess shareholder who fails to object in the above-

prescribed manner shall be deemed to have waived his or her objection and shall be barred from

raising such objection in this or any other action or proceeding. Shareholders who have no

objection to the proposed Settlement do not need to appear at the Fairness Hearing or take

any other action . If the Settlement is not approved, the case will continue to be prepared for

trial or other judicial resolution, and the Stipulation with respect to the Settlement shall become

null and void and of no further force or effect .

9

DISMISSAL OF THE ACTION

10. If the Court approves the Proposed Settlement, the Settling Parties jointly wil l

move the Court to enter an Order and Final Judgment :

(a) approving the Proposed Settlement as fair, reasonable and adequate an d

directly consummation of the Proposed Settlement, in accordance with the terms and condition s

of the Stipulation ;

(b) dismissing the Derivative Action with prejudice on the merits as to th e

Settling Defendants, without costs except as provided in the Stipulation, and releasing th e

Settling Defendants from all liabilities for the Released Claims ;

(c) permanently barring and enjoining the shareholders from instituting ,

commencing, prosecuting, participating in or continuing any shareholder derivative actio n

against the Settling Defendants in any court, arbitration proceeding, or tribunal of this or any

other jurisdiction, asserting any claims that are, arise out of, or in any way relate to, the Release d

Claims; and

(d) reserving jurisdiction over all matters related to the consummation of th e

Proposed Settlement .

11 . The Court has the right to approve the Proposed Settlement with modification s

and without further notice to the shareholders . The Court may also adjourn the Fairness Hearing

or any adjournment thereof without further notice other than to counsel for the parties .

12. By Order of the Court, pending final determination of whether the Propose d

Settlement should be approved, no shareholder may institute, commence or continue, directly ,

individually, derivatively, representatively, any shareholder derivative action against the Settlin g

10

Defendants in any court, arbitration proceeding, or tribunal of this or any other jurisdiction,

asserting any claims that are, arise out of, or in any way relate to, the Released Claims.

SPECIAL NOTICE TO SECURITIES BROKERS AND OTHER NOMINEE S

13 . If you held shares of WebAccess stock for any other person as of the Record

Date, defined herein, you are requested promptly to provide a copy of this Notice to each such

other person . Nominees should be aware of the dates and deadlines referred to in this Notice and

should act promptly to accomplish this notification to beneficial owners required by this

paragraph . Additional copies of this Notice will be provided upon request . Alternatively, you

may provide a list of the names and addresses of the beneficial owners for whom you hold

WebAccess shares to Gerard G. Pecht and Peter A. Stokes, Fulbright & Jaworski L.L.P, 1301

McKinney, Suite 5100, Houston, Texas 77010 (electronic mail : gpecht @fulbri hg . t .com and

pstokes@fulbright .com), who will arrange for a copy of the Notice to be mailed to such persons .

SCOPE OF THIS NOTICE

14. The foregoing desc ription of the Derivative Action, the Fairness Hearing, the

terms of the Proposed Settlement and other matters desc ribed herein does not purport to be

comprehensive . Shareholders are referred to the Stipulation and documents publicly filed with

the Court in the Derivative Action, including the pleadings and other papers, which you or your

a ttorney may examine during regular business hours of each business day at the offices of the

Clerk for the United States District Court for the District of Colorado at the Alfred A. Arraj

United States Courthouse, 901 19th Street , Denver, Colorado 80294-3589.

11

FURTHER INFORMATION

13 . Any questions you have about the matters in this Notice should not be directed t o

the Court but should be directed by telephone or in writing to counsel for Plaintiffs and th e

Settling Defendants at the addresses set forth in paragraph 9 above .

DATED:

HONORABLE U.S . DISTRICT JUDGE

12

IN THE UNITED STATES DISTRICT COURTFOR THE DISTRICT OF COLORADO

Civil Action No . 03-cv-1521-PSF-PA C

LEONARD STEPHENS,EDWARD BUHLMAN,JIM NOFFSINGER,GARY MCDONALD andBRUCE TALLMADGE,Individually and on Behalf of All Others Similarly Situated,

Plaintiffs ,

V.

WEBACCESS INTERNATIONAL, INC .,BLAIR WHITAKER,J. ROGER MOODY ,L. SHAWN BRESKOW,JAMES W. STUCKERT,ARCHIBALD J . MCGILL,WILEY E. PRENTICE, JR.,STEVEN A. SPESARD,STEVEN A. LYGA,CAROL L. LEVEQUE,DANIEL W. BOYD,JAMES ROGERS,STEVEN E. ANDERSON andJJ.B. HILLIARD, W.L. LYONS, INC . ,

Defendants .

ORDER AND FINAL JUDGMENT

The Court has reviewed the Motion to Approve Settlement ("Motion") and the

Stipulation of Compromise and Settlement ("Stipulation") submitted by the Settling Parties, as

well as any objections from shareholders of WebAccess International, Inc . ("WebAccess") that

were properly filed with the Court . After reviewing the aforementioned filings and, if necessary,

conducting a hearing to assess the fairness of the Stipulation, and having provided fair notice to

the shareholders of WebAccess in compliance with FED. R. CIV. P. 23.1, the Court has

determined, for the reasons set forth in the Motion, that the Stipulation is fair and reasonable to

WebAccess and its shareholders and was made in good faith . The Court therefore grants the

Motion for the reasons set forth therein and adopts all terms of the Stipulation and renders final

judgment as provided therein.

Accordingly, it is hereby ordered that all claims, rights or causes of action or liabilities

whatsoever, whether asserted directly, individually, derivatively, or in a representative capacity,

whether known or unknown or suspected to exist, and whether based on federal, state or local

statutory or common law or any other law, rule or regulation, that have been or could have been

asserted in the Third Amended Complaint or any other pleadings or papers in the above-

captioned litigation against WebAccess, Blair Whitaker, J . Roger Moody, L . Shawn Breskow,

James W. Stuckert, Archibald J . McGill, Wiley E. Prentice, Jr., Steve A. Spesard, Steven A .

Lyga, Carol L . Carnie (formerly Carol L . Leveque), and Daniel W . Boyd are hereby dismissed

with prejudice . Each Party shall bear their own legal fees, costs, and expenses incurred during

the litigation of this Action.

This is a Final Judgment. All relief not expressly awarded herein is denied.

Dated this day of , 2006 .

UNITED STATES DISTRICT JUDGE

Ex . D

CROSSROADS MANAGEMENT PARTNERS, LLCTRANSIT/®N MANAGEMENT SPECIALIST S

June 3, 200 3

WebAccess International Inc . Board of DirectorsC/O Brega & Winters P.C.1700 Lincoln Street, Suite 1300Denver, CO 80203

Dear Sirs ,

This letter highlights the accounting procedures performed on the bank accounts of WebAccessInternational, Inc. ("WAIL") by Crossroads M anagement Partners, LLC ("CRIMP, LLC") . Theagreed -upon procedures enumerated below we re conducted in accordance with attestationstandards established by the American Institute of Certified Public Account an ts . The sufficiencyof these procedures is solely the responsibility of the specified users of this report .Consequently , we make no rep resentation regarding the sufficiency of the procedures describedbelow either for the purpose for which this report has been requested or for any other purpose.

Background

CRMP LLC was retained by Brega & Winters, PC (WAII Corporate Counsel ) to review bankrecords and internally generated accounting detail for WAII and its subsidiaries for the periodfrom October 1, 2001 to November 30, 2002 . The data were provided to us by WAII, andincluded monthly statements for seven bank accounts and partial general ledger account detailfor WAII cash accounts in a spreadsheet . To the extent that the records allowed , we catego rizedin flows, out flows and transfers for each account . We also performed additional agreed uponprocedures as directed by your corporate counsel . For each of the seven accounts, we compiled amonthly statement of cash sources , uses and transfers, rolling forward the beginning and endingbalances each month. Finally, we co: ipiled a consolidated ~t t :r,7 ; P,t of cash sources, uses andtransfers for WAIT and its' subsidiaries .

Consolidated Results

A summary of the WAII consolidated cash sources, uses and transfers is presented in Exhibit lbelow. As this exhibit illustrates, the consolidated cash sources totaled $8,908,352, and includedproceeds from investors ($5,994,972), business deposits ($2,058,570), proceeds from loans($600,000) and other miscellaneous deposits ($254,810) . We identified cash uses totaling$10,171,275. These consisted of employee salaries and related expenses ($2,640,104), varioustax payments ($1,056,046), telecommunications related expenses ($3,223,567), investor and debtservice related expenses ($607,700), and other general business operating expenses ($2,643,858) .

1625 Seventeenth Street , Suite 311Denver, CO 80202

FM- 006496

WebAccess International , Inc. Board of DirectorsPage 2 of 3

In addition, inter-bank account transfers into and out of the seven related bank accounts resultedin a positive balance totaling S 139,026.

Exhibits 1Summary Cash Sources , Uses And Transfers

WelbAccess IInternailio nal, Inc. Audi Subsidiaries

TOTAL TOTAL

BEGINNING BALANCE ( 10/1/2001 ) S -1,175,421 .65

IIDEPOSITSICREDIITSLOAN PROCEEDS (SVB LOAN #1100 109622) 600,000.00 6.7%INVESTMENT 5,994,972 .21 67.3%BUSINESS & OTHER DEPOSITS 2,058,570.30 23 .1%EMPLOYEE AND MISCELLANEOUS OTHER DEPOSITS 254,809.57 2.9%

SUB-TOTAL IIDEIPOSIITSICRE DII TS S 8,908,352.08 100.0%

WIITHDRAWLS/DEBIITS 0 3,113 .13I.C"

EMPLOYEE SALARIES , COMMISSIONS & RELATED 2,640,103 .80 26.0%GENERAL OPERATING EXPENSE 1 ,521,700.09 15.0%VARIOUS TAX PAYMENTS 1,056,046 .19 10.4%INVESTMENT/INVESTORS /DEBT SERVICE 607,700. 35 6.0%LEGAL 572,974.58 5.6%RENT 382,807 .21 3.8 %TELECOMMUNICATIONS RELATED 3,223,566.69 31.7%MISCELLANEOUS OTHER 166,376.41 1 .6%

SUB-TOTAL WITHIlDRAWLS /DEI3IITS S 10,171,275.32 100.0%

TOTAL IINTERACCOUNT TRANSFERS (NET) $ 139,026.37 -' 0 V``' '

ENDING BALANCE (11/30/2002) S 51,524.78

In summary, we were able to account for all but an immaterial amount of the cash sources anduses from the records provided to us . We did not encounter any material unexplained omissionsof cash from our examination of the WAII bank records and accounting detail during the analysisperiod. Please note that we did not audit or review any corporate records and, accordingly, donot express an opinion or any other form of assurance on them . The accounting records providedto us omit substantially all of the disclosures and the financial activities of the Companyordinarily included in statements prepared on the modified cash basis of accounting . If theomissions described above were included in the financial statements, they might influence ourconclusions about the consolidated bank statements . Accordingly, these statements are notdesigned for those who are not informed about such matters .

(jo dugs

t ~t',• t,~ y

HL 006497

WebAccess International , Inc . Board of DirectorsPage 3 of3

Otheu- Issues

While we could not identify any material omission or unexplained cash outflows from therecords provided to us, it appears that the company made a number of payments to AmericanExpress with notations pertaining to the CEO, Mr. Wiley (Bud) Prentice. These paymentstotaled approximately $161,500 through the analysis period, with the majority (approximately$93,200) incurred during the final five months from July to November 2003. Further review ofthe American Express quarterly statements indicates that not all of these expenditures may berelated to normal WAII business activities .

Another item of. note is an acceleration of payments made to telecommunications providerstowards the end of the analysis period, including a number of payments made to Level 3Communications, Inc . totaling $708,085 from August to October 2002. This compares topayments totaling $505,000 made to this vendor during the first seven months of the year . Inaddition, WAR made a payment in the amount of $284,371 to Copper Mountain Networks inSeptember 2002 from the Silicon Valley Bank Account, which was not recorded in theCompany's accounting records provided to us .

Sincerely,

olin . L isManaging Director

~ HL 006498

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Civil Action No. 03-cv-1521-PSF-PAC LEONARD STEPHENS, EDWARD ) BUHLMAN, JIM NOFFSINGER, ) GARY MCDONALD, and BRUCE ) TALLMADGE, Individually, Derivatively ) for WebAccess International, Inc., and On ) Behalf of All Others Similarly Situated, ) )

Plaintiffs, ) )

v. ) ) WEBACCESS INTERNATIONAL, INC. ) a Delaware, corporation authorized to ) transact business in the State of Colorado, ) its officers and directors individually, ) BLAIR WHITAKER, ) J. ROGER MOODY, ) L. SHAWN BRESKOW, ) JAMES W. STUCKERT, ARCHIBALD ) J. MCGILL, WILEY E. PRENTICE, JR., ) STEVEN A. SPESARD, STEVEN A. ) LYGA, CAROL L. LEVEQUE, DANIEL ) W. BOYD, JAMES ROGERS, STEVEN ) E. ANDERSON, and J.J.B. HILLIARD, ) W.L. LYONS, INC. and all others who ) may be additionally named as defendants ) individually, jointly and severally, ) )

Defendants. ) ORDER GRANTING PRELIMINARY APPROVAL OF DERIVATIVE SETTLEMENT

The Court, having considered the Motion to Approve Settlement of Derivative Claims

Against Certain Defendants, Approve Form and Method of Notice to Shareholders, and Set

Hearing on Fairness of Settlement (the “Motion”) and all supporting and responsive documents

on file, has concluded that the Motion is well-taken and should be granted. For the reasons set

2

forth in the Motion, the Court grants preliminary approval to the Proposed Settlement of the

Derivative Claims against the Settling Defendants as embodied in the Stipulation attached to the

Motion, subject to the right of WebAccess shareholders to object and be heard within 60 days

from the issuance of this Order as directed by the Court.

DATED:______________________________, _______

HONORABLE U.S. DISTRICT JUDGE

in the united states district court for the district...

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