Full Press Release Details
Frank J. Johnson (SBN 174882)
655 West Broadway, Suite 1400
Telephone: (619) 230-0063
Facsimile: (619) 255-1856
Email: frankj@johnsonfistel.com
Attorneys for Plaintiffs
[Additional Counsel appear on signature page]
SUPERIOR COURT OF THE STATE OF CALIFORNIA
NOTICE OF PENDENCY OF PROPOSED
SETTLEMENT OF STOCKHOLDER DERIVATIVE ACTION
PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY AS YOUR RIGHTS MAY BE AFFECTED BY PROCEEDINGS IN THE
THIS NOTICE RELATES TO A PROPOSED SETTLEMENT OF STOCKHOLDER DERIVATIVE ACTIONS AND CLAIMS ASSERTED ON BEHALF OF
IF THE COURT APPROVES THE SETTLEMENT AND DISMISSAL OF THE ACTIONS, STOCKHOLDERS OF NANTKWEST AND NANTKWEST WILL BE
FOREVER BARRED FROM CONTESTING THE APPROVAL OF THE PROPOSED SETTLEMENT AND FROM PURSUING THE SETTLED CLAIMS.
THIS ACTION IS NOT A
CLASS ACTION. THUS, THERE IS NO COMMON FUND UPON WHICH YOU CAN MAKE A CLAIM FOR A MONETARY PAYMENT.
NOTIFIED that the above-captioned stockholder derivative action (the Action ) is being settled on the terms set forth in the Stipulation of Settlement dated as of April 10, 2019 (the Stipulation ). This Notice is
provided by Order of the Superior Court of the State of California, County of San Diego (the Court ). It is not an expression of any opinion by the Court with respect to the truth of the allegations in the Action or the merits of the
claims or defenses asserted by or against any party. It is solely to notify you of the terms of the proposed Settlement, and your rights related thereto. The Court has made no findings or determinations concerning the merits of the Action.
Capitalized terms not otherwise defined shall have the definitions set forth in the Stipulation, which may be reviewed and downloaded at https://ir.nantkwest.com.
Your rights may be affected by the settlement of the Action. The Settling Parties to the Action have agreed upon terms to settle the Action and
have signed the Stipulation setting forth those settlement terms.
NOTICE OF PENDENCY OF PROPOSED
SETTLEMENT OF STOCKHOLDER DERIVATIVE ACTION
On October 16, 2017, NantKwest shareholder Stuart L. Meyer issued a demand for corrective action, pursuant to Delaware law, to the
NantKwest Board of Directors, requesting, inter alia, that the Board take action to remedy the purported harm to NantKwest resulting from certain alleged wrongful conduct beginning on July 28, 2015 and continuing through the present (the
Meyer Demand ). Specifically, the Meyer Demand alleged, inter alia, that the Individual Defendants are liable to NantKwest for: (i) breaching their fiduciary duties by issuing false and misleading statements regarding
Soon-Shiong s compensation, including (a) a secret warrant modification that elevated Soon-Shiong s compensation higher than any other executive in the United States and (b) a secret related-party lease arrangement NantKwest and
Soon-Shiong made prior to the Company s initial public offering on or about July 28, 2015, which caused NantKwest to incur millions of dollars in undisclosed liability; and (ii) artificially inflating the Company s financial
results and stock price contemporaneously with those allegedly misleading statements.
On December 5, 2017, Defendants counsel
requested Meyer s consent to postpone a response to the Meyer Demand pending a decision by the Delaware Court of Chancery on Defendants then-forthcoming motion to dismiss in a related derivative litigation, In re NantKwest, Inc.
Derivative Litig., Consol. C.A. No. 2017-0774-VCL (the Delaware Litigation ). In exchange, Meyer s Counsel requested that (1) NantKwest promptly make available to Meyer a set of
documents produced to the stockholder plaintiffs in the Delaware Litigation pursuant to 8 Del. C. 220 ( Section 220 ); (2) the applicable statute of limitations be tolled during the course of the postponement;
(3) should Meyer commence litigation in connection with the Meyer Demand, NantKwest must consider in good faith whether to permit that litigation to proceed in California instead of Delaware; and (4) Meyer must be included within any
settlement discussions in the Delaware Litigation or any other threatened or filed derivative litigation involving the same or similar subject matter contained in the Meyer Demand. Defendants Counsel agreed, and the parties reached an
agreement on December 6, 2017 to postpone a response to the Meyer Demand pending a decision on the motion to dismiss in the Delaware Litigation. The court in the Delaware Litigation dismissed the action under Court of Chancery Rule 23.1 on
NOTICE OF PENDENCY OF PROPOSED
SETTLEMENT OF STOCKHOLDER DERIVATIVE ACTION
On January 5, 2018, NantKwest stockholder Paul J. Kaprelian ( Kaprelian )
issued a litigation demand, pursuant to Delaware law, to the Board. Like the Meyer Demand, Kaprelian demanded an investigation into alleged breaches of fiduciary duty as a result of purportedly issuing false and misleading statements
regarding Soon-Shiong s compensation, including an alleged secret warrant modification and an alleged secret related-party lease arrangement NantKwest and Soon-Shiong made prior to the Company s initial public offering.
On February 16, 2018, Kaprelian entered into a substantially similar agreement with Defendants as Meyer did in December 2017.
On November 9, 2017, NantKwest stockholder Steve Schnipper ( Schnipper ) submitted a stockholder demand for inspection of books
and records to the Company, pursuant to Section 220. On December 6, 2017, Schnipper and the Company executed a Confidentiality and Non-Disclosure Agreement. On December 13, 2017, the Company
produced documents to Schnipper which were previously produced in response to two other Section 220 demands.
2018, Schnipper issued a litigation demand pursuant to Delaware law to the Board which, like the demands made by Kaprelian and Meyer, demanded an investigation into alleged breaches of fiduciary duty as a result of purportedly issuing false and
misleading statements.
On March 5, 2018, Schnipper entered into a substantially similar agreement with Defendants as Meyer and
In light of the Delaware Court of Chancery s dismissal of the Delaware Litigation and for the sake of efficiency and in an effort to
preserve the resources of the Settling Parties and the Court, in August 2018, Meyer s Counsel conferred with Defendants Counsel to explore an appropriate global settlement resolving the Demands.
Accordingly, in or around September 24, 2018, Plaintiffs Counsel submitted a detailed and confidential global settlement demand
letter to Defendants Counsel outlining a proposed framework for settlement, which included, inter alia, detailed proposed corporate governance reforms.
NOTICE OF PENDENCY OF PROPOSED
SETTLEMENT OF STOCKHOLDER DERIVATIVE ACTION
After service of Plaintiffs global settlement demand letter, the Settling Parties
engaged in arm s-length negotiations into December 2018. Those negotiations culminated in a mediation held in San Diego, California on December 21, 2018 with Justice Howard B. Wiener, and attended by
counsel for the Settling Parties. Before that point, no potential fees for Plaintiffs Counsel were discussed. That in-person mediation conducted with the oversight of Justice Wiener culminated in an
agreement in principle by the Settling Parties to resolve the issues raised in the Demands, and which are set forth in this Action. The Settling Parties have now reached a definitive agreement to settle the Action upon the terms and subject to the
conditions set forth in the Stipulation.
As a result of the filing, prosecution, and settlement of the Action, Plaintiffs obtained relief for NantKwest by causing NantKwest s
Board of Directors to agree to, within one hundred and twenty-five (125) calendar days from the Effective Date of the Settlement, adopt and/or maintain for a period of no less than four (4) years from the Effective Date of the Settlement
certain Corporate Governance Reforms. The Corporate Governance Reforms include, inter alia: (i) Board independence reforms; (ii) the creation or maintenance of a Disclosure and Controls Committee; (iii) Compensation Committee
reforms; (iv) the creation of a Related-Party Transaction Committee; (v) Audit Committee reforms; and (vi) the adoption or maintenance of a Compliance Officer charged with developing and maintaining compliance procedures.
The full text of the Corporate Governance Reforms are set forth in Exhibit A to the Stipulation, which may be found at
Additionally, the Company and the Board acknowledge that: the adoption, implementation, and maintenance of the
Corporate Governance Reforms confer substantial and material benefits upon the Company, and that the issuance of the Demands, and the filing, prosecution, and resolution of the Derivative Action, were the only factor for the implementation of the
Corporate Governance Reforms.
NOTICE OF PENDENCY OF PROPOSED
SETTLEMENT OF STOCKHOLDER DERIVATIVE ACTION
The Settlement also provides for the entry of judgment dismissing the Action on the merits
with prejudice, and the release of the Released Claims as detailed in the Stipulation.
The Settling Parties have determined that it is desirable and beneficial that the Action, and all of the disputes related thereto, be fully and
finally settled in the manner and upon the terms and conditions set forth in the Stipulation.
Plaintiffs Counsel conducted an extensive investigation relating to the claims and the underlying events and transactions alleged in the
Action. Plaintiffs and Plaintiffs Counsel believe that the issues raised in the Demands and the claims subsequently asserted in the Action have merit, and Plaintiffs entry into the Stipulation is not intended to be and shall not be
construed as an admission or concession concerning the relative strength or merit of the claims alleged. Nonetheless, Plaintiffs and Plaintiffs Counsel have concluded that it is desirable that the Action be fully and finally settled in the
manner and upon the terms and conditions set forth in this Stipulation. In so doing, Plaintiffs and Plaintiffs Counsel recognize the expense and length of continued proceedings necessary to prosecute the Action against the Individual
Defendants through trial and any appeal(s). Plaintiffs and Plaintiffs Counsel also have taken into account the uncertain outcome and the risk of any litigation, especially in complex actions such as the Action, as well as the difficulties and
delays inherent in such litigation. Plaintiffs and Plaintiffs Counsel also are mindful of the inherent problems of proof of, and possible defenses to, the claims asserted in the Action. Based on their investigation and evaluation (detailed
below), Plaintiffs and Plaintiffs Counsel have determined that the Settlement set forth in this Stipulation is in the best interests of NantKwest and its stockholders.
Plaintiffs Counsel have conducted an extensive investigation, including, inter alia: (i) reviewing NantKwest s press
releases, public statements, U.S. Securities and Exchange Commission ( SEC ) filings, and securities analysts reports and advisories about the Company; (ii) reviewing media reports about the Company; (iii) researching the
applicable law with respect to the claims alleged in the Action and the potential defenses thereto; (iv) preparing and issuing the
NOTICE OF PENDENCY OF PROPOSED
SETTLEMENT OF STOCKHOLDER DERIVATIVE ACTION
respective Demands; (v) preparing a mediation statement; (vi) preparing and filing the complaint; (vii) reviewing and analyzing relevant pleadings in related litigation, including
but not limited to the related securities fraud class action, Sudunagunta v. NantKwest, Inc. et al., Case No. 2:16-cv-1947 (C.D. Cal.) (the Related
Securities Class Action ), and evaluating the merits of, and Defendants liability in connection with, the Related Securities Class Action and the Action; (viii) reviewing the Company s existing corporate governance
policies and preparing an extensive settlement demand detailing proposed corporate governance reforms to strengthen the Company s governance; (ix) participating in extensive, prolonged settlement discussions, including an in-person mediation held on December 21, 2018, as well as continued follow-up emails and telephone calls with Defendants Counsel; (x) reviewing documents
produced by the Company to Plaintiffs; and (xi) negotiating this Stipulation and all exhibits hereto.
Counsel s thorough review and analysis of the relevant facts, allegations, defenses, and controlling legal principles, Plaintiffs and Plaintiffs Counsel believe that the Settlement set forth in this Stipulation is fair, reasonable, and
adequate, and confers substantial benefits upon NantKwest and its stockholders. Based upon these reforms as well as Plaintiffs Counsel s evaluation, Plaintiffs have determined that the Settlement is in the best interests of NantKwest and
its stockholders, and have agreed to settle the Action upon the terms and subject to the conditions.
The Individual Defendants have denied, and continue to deny, any and all allegations of wrongdoing or liability asserted in the Action. Without
limiting the foregoing, the Individual Defendants have denied, and continue to deny, among other things, that they breached their fiduciary duties or any other duty owed to NantKwest or its stockholders; committed or engaged in any violation of law
or wrongdoing whatsoever; or that Plaintiffs, NantKwest, or its stockholders suffered any damage or were harmed as a result of any act, omission, or conduct by the Individual Defendants alleged in the Demands, Action, or otherwise. The Individual
Defendants have further asserted, and continue to assert, that at all relevant times, they acted in good faith and in a manner that they reasonably believed to be in the best interests of NantKwest and its stockholders.
NOTICE OF PENDENCY OF PROPOSED