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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
STIPULATION OF SETTLEMENT
This Stipulation of Settlement ( Stipulation ) is made and entered into as of December 21, 2022, between and among, (a)(i) plaintiffs in the above-captioned consolidated derivative action (the Action ), (ii) plaintiffs in the consolidated derivative action pending in the United States District Court for the Northern District of California, captioned In re Geron Corporation Stockholder Derivative Litigation, C.A. No. 3:20-cv-02823-WHA (N.D. Cal.) (the Northern District Derivative Action ), and (iii) plaintiffs in the consolidated derivative action pending in the United States District Court for the District of Delaware, captioned In re Geron Corporation Stockholder Derivative Litigation, C.A. No. 1:20-cv-01207-GBW (D. Del) (the District of Delaware Derivative Action ) (collectively, Plaintiffs ), derivatively on behalf of Geron Corporation ( Geron or the Company ), (b) defendants John A. Scarlett, Karin Eastham, V. Bryan Lawlis, Susan M. Molineaux, Robert J. Spiegel, Olivia Bloom, Daniel M. Bradbury, Hoyoung Huh, and Stephen N. Rosenfield (the Individual Defendants ), and (c) nominal defendant Geron (together with the Individual Defendants, the Defendants, and collectively with Plaintiffs, the Parties and each a Party ). This Stipulation sets forth the terms and conditions of the settlement of the Derivative Litigation (as defined in paragraph 1.5 below) (the Settlement ), subject to the approval of the Court of Chancery of the State of Delaware (the Court ), and is intended to fully, finally, and forever compromise, discharge, resolve, release, and settle the Released Claims (as defined in paragraph 1.10 below).
SUMMARY OF THE PROCEEDINGS
A.Plaintiffs in the Derivative Litigation allege that the Individual Defendants breached their fiduciary duties to Geron, and engaged in other wrongdoing, by failing to oversee the Company's making of and/or causing the Company to make false and misleading statements about certain interim results from a Phase 2 clinical study of imetelstat Geron's sole drug candidate called IMbark.
B.On April 23, 2020, plaintiff Katharine Jameson filed a verified stockholder derivative complaint in the United States District Court for the Northern District of California (the Jameson Action ) against certain current and/or former directors and officers of Geron alleging breaches of fiduciary duty, unjust enrichment, and violations of Section 14(a) of the Securities Exchange Act of 1934 (the Exchange Act ).
C.On August 21, 2020, plaintiff Richard Di Laura filed a Verified Stockholder Derivative Complaint in this Court (the DiLaura Action ) against certain current and/or former directors and officers of Geron alleging breach of fiduciary duty.
D.On September 10, 2020, Jeffrey Byroade filed a verified stockholder derivative complaint in the United States District Court for the District of Delaware (the Byroade Action ) against certain current and/or former directors and officers of Geron alleging breach of fiduciary duty, unjust enrichment, and violations of Section 14(a) of the Exchange Act.
E.On November 12, 2020, plaintiff Michael Henry Mongiello filed a verified stockholder derivative complaint in the United States District Court for the District of Delaware (the Mongiello Action ) against certain current and/or former directors and officers of Geron alleging breach of fiduciary duty, unjust enrichment, waste, and violations of
Sections 14(a) and 20(a) of the Exchange Act.
F.On January 5, 2021, the Byroade Action and Mongiello Action were consolidated as the District of Delaware Derivative Action and stayed pending resolution of the defendants' motion to dismiss in a related federal securities class action, captioned Michael Tollen v. Geron Corporation and John A. Scarlett, Civil Action No. 20-cv-547-WHA, currently pending in the United States District Court for the Northern District of California (the Securities Action ).
G.On March 16, 2021, plaintiffs Ernesto Elizalde, Jr. ( Elizalde ) and Joseph Oriente ( Oriente ) filed a Verified Stockholder Derivative Complaint for Breach of Fiduciary Duty in this Court captioned Elizalde, et al. v. Scarlett, et al., C.A. No. 2020-0228-SG (the Elizalde Action ), against certain current and/or former directors and officers of Geron alleging breach of fiduciary duty.
H.On April 2, 2021, plaintiff Zachary Gamlieli filed a verified stockholder derivative complaint in the United States District Court for the Northern District of California (the Gamlieli Action ) against certain current and/or former directors and officers of Geron alleging breaches of fiduciary duty, unjust enrichment, and violations of Section 10(B) and 21D of the Exchange Act.
I.On April 9, 2021, the Jameson Action and Gamlieli Action were consolidated as the Northern District Derivative Action.
J.On April 12, 2021, the court in the Northern District of California granted in part and denied in part the defendants' motion to dismiss the Securities Action.
K.On April 22, 2021, plaintiffs DiLaura, Elizalde, and Oriente and counsel for Defendants submitted a Stipulation and [Proposed] Order For Consolidation And Appointment Of Plaintiffs' Co-Lead Counsel And Delaware Counsel (the Consolidation Order ).
L.On April 26, 2021, the Court entered the Consolidation Order.
M.On May 28, 2021, plaintiffs DiLaura, Elizalde, and Oriente filed their Verified Consolidated Stockholder Derivative Complaint ( Consolidated Complaint ).
N.On June 8, 2021, the parties in the District of Delaware Derivative Action agreed to a further stay through resolution of Defendants' then-forthcoming motion to dismiss in this Action.
O.On June 8, 2021, Dennis Penney, a purported stockholder of Geron, filed a shareholder derivative complaint in the Superior Court of the State of California, County of San Mateo, alleging claims for breach of fiduciary duty, waste and unjust enrichment against the Individual Defendants based on the same alleged underlying wrongdoing asserted by Plaintiffs in the Derivative Litigation (the San Mateo Derivative Action ).
P.On June 28, 2021, the Northern District Derivative Action was stayed pending resolution of the plaintiffs' class certification motion in the Securities Action.
Q.On July 2, 2021, Defendants filed their motion to dismiss plaintiffs DiLaura, Elizalde, and Oriente's Consolidated Complaint pursuant to Rules 23.1 and 12(b)(6).
R.On August 5, 2021, Defendants filed a motion to dismiss the San Mateo Derivative Action. In their motion, Defendants argued that the San Mateo Derivative Action was filed in California state court in violation of Geron's bylaws, which provide that the Court is the sole and exclusive forum for derivative actions, actions alleging claims for breach of fiduciary duty, and actions alleging claims governed by the internal affairs doctrine.
S.On August 30, 2021, counsel for plaintiffs DiLaura, Elizalde, and Oriente informed counsel for Defendants that, rather than oppose Defendants' motion to dismiss, plaintiffs DiLaura, Elizalde, and Oriente would be filing an amended complaint pursuant to Rule 15(aaa).
T.On September 1, 2021, plaintiffs DiLaura, Elizalde, and Oriente filed their Amended Verified Consolidated Stockholder Derivative Complaint ( Amended Consolidated Complaint ).
U.On October 12, 2021, Defendants filed their motion to dismiss plaintiffs DiLaura, Elizalde, and Oriente's Amended Consolidated Complaint pursuant to Rules 23.1 and 12(b)(6) ( Motion to Dismiss ).
V.On November 16, 2021, the California state court granted Defendants' motion to dismiss the San Mateo Derivative Action finding that Defendants have met their burden of proving the action should be tried in Delaware Chancery Court pursuant to the forum selection bylaw. However, rather than dismiss the case, the California state court exercised its discretion and stayed the San Mateo Derivative Action.
W. On December 3, 2021, plaintiffs DiLaura, Elizalde, and Oriente filed their opposition to the Motion to Dismiss.
X.On December 23, 2021, Defendants filed their reply in support of the Motion to Dismiss.
Y.On February 15, 2022, the Court heard oral argument on Defendants' Motion to Dismiss.
Z.On April 2, 2022, the court in the Northern District of California certified the Securities Action as a class action under Rule 23 of the Federal Rules of Civil Procedure.
AA.On June 3, 2022, the Court issued a Memorandum Opinion staying consideration of Defendants' Motion to Dismiss pending the final resolution of the Securities Action or, alternatively, pending a delay or other change in circumstances in the Securities Action or as otherwise appropriate.
BB.On June 7, 2022, plaintiffs in the Northern District Derivative Action filed an amended stockholder derivative complaint.
CC.On June 22, 2022, the Court issued an Order staying this Action until the resolution of the Securities Action, or until further Order of the Court on the application of any party.
DD.On July 6, 2022, the court in the Northern District of California further stayed the Northern District Derivative Action until the earlier of the following two
events: (a) public announcement of a settlement of the Securities [ ] Action; or (b) a final judgment in the Securities [ ] Action, including the lapse of any time to appeal and/or the final
non-appealable resolution of any filed appeal.
EE.On August 31, 2022, Scott D. Cicero, a purported stockholder of Geron, served a demand on Geron's board of directors ( Board ) requesting that the Board investigate and pursue claims for breach of fiduciary duty against the Individual Defendants and certain other officers of the Company based on the same alleged underlying wrongdoing asserted by Plaintiffs in the Derivative Litigation.
FF.On September 2, 2022, the parties in the Securities Action filed a Stipulation and Agreement of Settlement ( Securities Action Settlement ).
GG.After the filing of the Securities Action Settlement, the Parties began to discuss the prospect of holding formal settlement negotiations and the selection of a mediator.
HH.On November 1, 2022, the Parties participated in a full-day mediation with former Vice Chancellor Joseph R. Slights III of the law firm Wilson, Sonsini, Goodrich & Rosati, LLP. During the mediation, the Parties reached an agreement on corporate governance reforms that would be instituted by Geron in connection with the Settlement, subject to approval of the Court, and entered into a term sheet where the Parties agreed to use best efforts to draft and execute a final and binding Stipulation of Settlement within thirty (30) calendar days (i.e., by November 30, 2022).
II. On November 3, 2022, the Parties reached agreement on the language of the releases that are included in this Stipulation and agreed to present this Stipulation for approval in this Court.
JJ.On November 7, 2022, the Parties participated in a second full-day mediation with former Vice Chancellor Slights regarding the amount of the Fee Award (as defined in paragraph 26 below) that Plaintiffs' Counsel would apply for in connection with the Court's consideration of the Settlement. The Parties were unable to reach a resolution on that issue at the November 7 mediation but continued arm's-length negotiations and discussions thereafter, all of which were overseen by former Vice Chancellor Slights.
KK.On December 1, 2022, former Vice Chancellor Slights issued a confidential, double-blind mediator's proposal for Plaintiffs' Counsel's attorneys' fees and expenses in the amount of $1,350,000 (the Mediator's Proposal ), subject to Court approval.
LL.On December 4, 2022, former Vice Chancellor Slights informed the Parties that all Parties had accepted the Mediator's Proposal.
MM.On December 12, 2022, the plaintiff in the San Mateo Derivative Action filed a stipulation requesting that the San Mateo Derivative Action be dismissed without prejudice in light of the proposed Settlement in the Derivative Litigation.
NN.On December 13, 2022, the California state court dismissed the San Mateo Derivative Action.
OO.The Parties agree that Plaintiffs commenced and pursued the Derivative Litigation in good faith. Plaintiffs maintain that entry by Plaintiffs into this Stipulation is not an admission as to the lack of any merit of any claims asserted by Plaintiffs in the Derivative Litigation.
PP.Defendants have denied, and continue to deny, that they committed any breach of duty, violated any law, or engaged in any wrongdoing, expressly maintain that they diligently and scrupulously complied with their fiduciary and other legal duties, to the extent such duties exist, and further believe that the Derivative Litigation is without merit. Defendants are entering into this Stipulation to eliminate the uncertainty, burden and expense of further protracted litigation. This Stipulation shall in no event be construed or deemed to be evidence of or an admission or concession on the part of any of the Defendants, with respect to any claim or allegation of any fault or liability or wrongdoing or damage whatsoever, or any infirmity in the defenses that Defendants have, or could have, asserted in the Derivative Litigation. Defendants expressly deny that Plaintiffs have asserted any valid claims as to any of them, and expressly deny any and all allegations of fault, liability, wrongdoing or damages whatsoever.
NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED, BY AND AMONG THE PARTIES TO THIS STIPULATION, subject to the approval of the Court pursuant to Rule 23.1 of the Rules of the Court of Chancery of the State of Delaware, that the Derivative Litigation shall be fully and finally compromised and settled, that the Released Claims shall be released by the Releasing Parties (as defined in paragraph 1.14 below) as against the Released Parties (as defined in paragraph 1.12 below), and that the Derivative Litigation shall be dismissed with prejudice, upon and subject to the following terms and conditions, and further subject to the approval of the Court:
1.In addition to the terms defined elsewhere in this Stipulation, the following terms have the meanings specified below:
1.1 Applicable Geron Stockholders means any and all individuals or entities who held of record, or beneficially owned, directly or indirectly, common stock of Geron during the Relevant Period (as defined below in paragraph 1.15) or who hold of record, or beneficially own, directly or indirectly, common stock of Geron as of the close of business on the date the Court enters the Scheduling Order (as defined in paragraph 13 below), excluding the Individual Defendants, the officers and directors of Geron, members of their immediate families, and their legal representatives, heirs, successors, or assigns, and any entity in which the Individual Defendants have or had a controlling interest.
1.2 Corporate Governance Reforms means the corporate governance reforms set forth in Exhibit A attached to this Stipulation.
1.3 Defendants' Released Claims means any and all claims, demands, rights, liabilities, losses, obligations, duties, damages, costs, debts, expenses, interest, penalties, sanctions, fees, attorneys' fees, actions, potential actions, causes of action, suits, judgments, defenses, counterclaims, offsets, decrees, matters, issues and controversies of any kind, nature or description whatsoever, whether known or unknown, including Unknown Claims, that Plaintiffs asserted or could have asserted on behalf of nominal defendant Geron in the Derivative Litigation or in any other court, tribunal, forum or proceeding, whether based on state, federal, local, foreign, statutory, regulatory, common or other law or rule, and which are based upon, arise out of, or relate in any way to, or involve, directly or indirectly, (a) the
actions, inactions, deliberations, disclosures, discussions, decisions, votes, or any other conduct of any kind by any of the Released Defendant Parties (as defined below in paragraph 1.11), relating in any way to any facts, matters, events, circumstances, claims, or allegations alleged or that could have been alleged in the Derivative
Litigation, or (b) the institution, commencement, prosecution, defense, mediation, or settlement of the Derivative Litigation.
1.4 Defendants' Releasing Parties means Defendants and their respective agents, spouses, heirs, predecessors, successors, transferors, transferees, personal representatives, representatives and assigns.
1.5 Derivative Litigation means, collectively, this Action, the Northern District Derivative Action, and the District of Delaware Derivative Action.
1.6 Final Approval means the later of (a) the expiration of the time for the filing or noticing of an appeal or motion for reargument or rehearing from the Court's Order and Final Judgment (as defined below in paragraph 17) approving the Settlement; (b) the date of final affirmance of the Court's Order and Final Judgment on any appeal or reargument or rehearing; or (c) the final dismissal of any appeal.
1.7 Plaintiffs' Counsel means deLeeuw Law LLC, Glancy Prongay & Murray LLP, Johnson Fistel LLP, Levi & Korsinsky LLP, Cooch and Taylor, P.A. Robbins LLP and Shuman, Glenn & Stecker.
1.8 Plaintiffs' Released Claims means all claims and causes of action of every nature and description, whether known or unknown, whether arising under federal, state, common or
foreign law, including Unknown Claims, that arise out of or relate in any way to Released Plaintiff Parties' (as defined below in paragraph 1.13) institution, prosecution, or settlement of the Derivative Litigation.
1.9 Plaintiffs' Releasing Parties means Plaintiffs, Geron, and all Applicable Geron Stockholders, whether acting directly, representatively, or derivatively on behalf of Geron, and their respective agents, spouses, heirs, predecessors, successors, transferors, transferees, personal representatives, representatives and assigns.
1.10 Released Claim(s) means Plaintiffs' Released Claims and Defendants' Released Claims; provided, however, for the avoidance of doubt, that Released Claims shall not include any claims relating to the enforcement of this Stipulation or Settlement or any claims by Geron or the Individual Defendants for insurance coverage or any claims by the Individual Defendants for indemnification or advancement.
1.11 Released Defendant Parties means all Defendants in the Derivative Litigation, and any and all of their and Geron's respective current or former agents, parents, controlling persons, general or limited partners, members, managers, managing members, direct or indirect equity holders, subsidiaries, affiliates, employees, officers, directors, predecessors, successors, attorneys, heirs, assigns, insurers, reinsurers, consultants, and other representatives, servants and related persons, in their capacities as such.
1.12 Released Party or Released Parties means each and all of the Released Plaintiff Parties and the Released Defendant Parties.
1.13 Released Plaintiff Parties means Plaintiffs and Plaintiffs' Counsel and each of their respective agents, assigns, and related persons.
1.14 Releasing Parties means Plaintiffs' Releasing Parties and Defendants' Releasing Parties.
1.15 Relevant Period means November 1, 2016, through the date of Final Approval.
1.16 Unknown Claims means any Released Claim which the Releasing Party does not know or suspect to exist in his, her or its favor at the time of Final Approval of the Released Claims as against the Released Parties, including without limitation those which, if known, might have affected the decision to enter into or object to the Settlement.
2.Upon Final Approval of the Settlement, Plaintiffs' Releasing Parties, by operation of the Settlement and to the fullest extent permitted by law, shall completely, fully, finally and forever release, relinquish, settle and discharge each and all of the Released Defendant Parties from any and all of the Defendants' Released Claims.
3.Upon Final Approval of the Settlement, Defendants' Releasing Parties, by operation of the Settlement and to the fullest extent permitted by law, shall completely, fully, finally and forever release, relinquish, settle and discharge each and all of the Released Plaintiff Parties from any and all of the Plaintiffs' Released Claims.
4.The Settlement is intended to extinguish all of the Released Claims by the Releasing Parties as against the Released Parties and, consistent with such intention, upon Final Approval of the Settlement, the Releasing Parties shall waive and relinquish, to the fullest extent permitted by law, the provisions, rights, and benefits of any state, federal,
or foreign law or principle of common law, which may have the effect of limiting the Released Claims. This shall include a waiver of any rights pursuant to California Civil Code 1542 (and equivalent, comparable, or analogous provisions of the laws of the United States or any state or territory thereof, or of the common law), which provides:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, AND THAT IF KNOWN BY HIM OR HER WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR THE RELEASED PARTY.
5.Plaintiffs acknowledge, and the Plaintiffs' Releasing Parties shall be deemed by operation of the entry of the Order and Final Judgment upon Final Approval of the Settlement to have acknowledged, that the foregoing waiver in paragraph 4 was expressly bargained for, is an integral term of the Settlement, and was relied upon by each and all of the Released Defendant Parties in entering into the Settlement.
6.Nothing herein shall in any way release, waive, impair, or restrict the rights of any Party to enforce the terms of this Stipulation.
SETTLEMENT CONSIDERATION
7.The Parties agree that as a direct result of Plaintiffs' investigation, initiation and litigation of the Derivative Litigation, in consideration for the full Settlement and release of the Released Claims, and upon Court approval of the Settlement, Geron will implement the Corporate Governance Reforms, of which Plaintiffs were the primary cause.
8.In further consideration for the full Settlement and release of the Released Claims, Geron and the Individual Defendants also acknowledge that Plaintiffs and the Derivative Litigation were a factor in Geron's July 2022 revisions to the Company's Insider Trading Compliance policy.
9.The Corporate Governance Reforms shall remain in effect for a period of at least five (5) years from the date of adoption; provided, however, that the Corporate Governance Reforms shall not be binding upon any successor or acquirer of the Company in the event of a change in control transaction.
10.Defendants acknowledge that the Corporate Governance Reforms confer substantial benefits on the Company and its stockholders.
11.Pending Final Approval of the Settlement by the Court, Plaintiffs agree to stay the Derivative Litigation, and Plaintiffs and Plaintiffs' Counsel agree not to initiate any other proceedings related to the Derivative Litigation other than those incident to the Settlement itself.
12.The Parties will request that the Court order that, pending Final Approval of the Settlement, Plaintiffs and all Applicable Geron Stockholders are barred and enjoined from commencing, prosecuting, instigating or in any way participating in the commencement, prosecution, or instigation of any action asserting any of the Released Claims, either directly, representatively, derivatively, or in any other capacity, against Geron, the Individual Defendants, or any of the Released Defendant Parties. To ensure compliance with this term, within five (5) business days of submission of this
Stipulation to the Court, the Plaintiffs in the Northern District Derivative Action and the District of Delaware Derivative Action will (a) give those respective courts notice of this Stipulation and Settlement, and (b) take all steps necessary to ensure that those respective actions are stayed pending Final Approval of the Settlement by the Court.
SUBMISSION AND APPLICATION TO THE COURT
13.As soon as reasonably practicable after this Stipulation has been executed, the Parties shall jointly apply for a scheduling order (the Scheduling Order ), substantially in the form attached hereto as Exhibit B, establishing the procedure for the approval of notice to Applicable Geron Stockholders substantially in the form attached hereto as Exhibit C (the Notice ) and Exhibit D (the Summary Notice ).
14.Geron shall undertake the primary responsibility for giving notice to Applicable Geron Stockholders, in accordance with the terms of the Scheduling Order, and shall be solely responsible for paying the costs and expenses associated with providing the notice described in this paragraph. By no later than sixty (60) calendar days prior to the date the Court sets for the Settlement Hearing (as defined below in paragraph 17), Geron shall mail the Notice, substantially in the form attached hereto as Exhibit C, to all record stockholders of Geron at their respective addresses currently set forth in Geron's stock records. In addition, the Company shall use reasonable efforts to give notice to all beneficial owners of Geron stock by: (a) filing copies of this Stipulation and the Notice as exhibits to a Form 8-K with the United States Securities and Exchange Commission; (b) posting links to this Stipulation and the Notice on the Company's Investor Relations
page of its website through the date of the Settlement Hearing; and (c) including in the Notice a statement that a copy of this Stipulation can be found on the Company's Investor Relations page of its website along with the website's address.
15.Counsel for Defendants shall, at least ten (10) business days before the Settlement Hearing, file with the Court an appropriate affidavit with respect to compliance with the requirements set forth in the foregoing paragraph.
16.In addition to the notice provided by Geron, Plaintiffs' Counsel shall post copies of this Stipulation and the Notice on their respective websites.
ORDER AND FINAL JUDGMENT
17.If the Settlement (including any modifications thereto made with the consent of the Parties as provided for herein) shall be approved by the Court following a hearing (the Settlement Hearing ) as fair, reasonable, and adequate and in the best interests of Geron, the Parties shall jointly request that the Court enter an order substantially in the form attached hereto as Exhibit E (the Order and Final Judgment ).
18.The Order and Final Judgment shall, among other things, provide for full and complete dismissal of the Action with prejudice, and the Settlement and release of the Released Claims by the Releasing Parties as against the Released Parties.
19.Within ten (10) business days of the Register in Chancery entering and docketing the Order and Final Judgment, Plaintiffs in the Northern District Derivative Action and the District of Delaware Derivative Action shall file a copy of the Order and Final Judgement and seek as expeditiously as possible the dismissal with prejudice of those respective actions.
20.The Parties and their respective counsel agree to cooperate fully with one another in seeking the Court's approval the Settlement, and to use their best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things reasonably necessary, proper, or advisable under applicable laws, regulations, and agreements to obtain the Court's approval of the Settlement, consummate and make effective, as promptly as practicable, this Stipulation and the Settlement provided for hereunder (including, but not limited to, using their best efforts to resolve any objections raised to the Settlement) and the dismissal of the Derivative Litigation with prejudice without costs, fees or expenses to any Party (except as provided for herein).
21.Without further order of the Court, the Parties may agree to reasonable extensions of time not expressly set forth by the Court in order to carry out any provisions of this Stipulation.
CONDITIONS OF SETTLEMENT
22.The Settlement is conditioned upon the fulfillment of each of the following:
22.1The entry by the Court of an Order and Final Judgement in the form attached hereto as Exhibit E approving the proposed Settlement and dismissing the Action with prejudice without the award of any damages, costs, fees or the grant of any further relief except for an award of fees and expenses to Plaintiffs' Counsel that the Court may make as contemplated herein;