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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF PENNSYLVANIA
STIPULATION AND AGREEMENT OF SETTLEMENT
This Stipulation and Agreement of Settlement (the Stipulation ) is made and entered into by the following parties, each by and
through their respective counsel: (1) plaintiffs Pedram Beheshti ( Beheshti ), Arthur Isman ( Isman ), Krishna Kishor Devarakonda ( Devarakonda ), Brian Foster ( Foster ), and Brandon Fettig
( Fettig ) (the Federal Plaintiffs ) in the above-captioned consolidated stockholder derivative action (the Federal Action ) pending in the United States District Court for the Eastern District of Pennsylvania (the
Court ); plaintiff Leo Schumacher ( Schumacher, and collectively with the Federal Plaintiffs, the Derivative Plaintiffs ) in the shareholder derivative action Schumacher v. Benito, et al., C.A. No.
2022-0292-KJSM, pending in the Delaware Court of Chancery (the Delaware Chancery Action, and together with the Federal Action, the Derivative Actions ); stockholders Rita Azrelyant ( Azrelyant ) and Lydia Grech
( Grech ) (the Stockholders, and collectively with Derivative Plaintiffs, the Plaintiffs ), who made separate inspection demands pursuant to 8 Del. C. 220 ( Section 220 ) and a joint
litigation demand (the Demands ) on Inovio Pharmaceuticals, Inc. ( Inovio or the Company ); (2) individual defendants J. Joseph Kim, Simon X. Benito, Angel Cabrera, Ann C. Miller, Jay P. Shepard, David B. Weiner,
Wendy L. Yarno, Lota S. Zoth, Peter D. Kies, Robert J. Juba, Jr., Jacqueline Shea, Michael W. Cordera, and Laurent Humeau (collectively the Individual Defendants ); and (3) nominal defendant Inovio (together with the Individual
Defendants, Defendants ) (the Settling Parties refers collectively to Plaintiffs and Defendants).
This Stipulation, subject to the approval of the Court, is intended to fully, finally, and
forever resolve, discharge, and settle any and all Released Claims (as defined herein) upon the terms and subject to the conditions set forth herein.
Plaintiffs allege that, inter alia, between February 14, 2020 and September 28, 2020, at least, the Individual Defendants
breached their fiduciary duties by issuing and/or causing the Company to issue false and misleading statements and omissions to the public regarding the Company s COVID-19 vaccine candidate ( INO-4800 ), the amount of time it took the Company to develop INO-4800, and Inovio s capacity to manufacture the vaccine, by failing to maintain adequate
internal controls, and by engaging in improper insider selling.
On March 12, 2020, several Inovio stockholders filed a securities class action in the Court against the Company and defendant J. Joseph
Kim for violations of the Securities Exchange Act of 1934 (the Exchange Act ) alleging substantially the same false and misleading statements that are alleged in the Derivative Actions and Demands, captioned McDermid v. Inovio
Pharmaceuticals, Inc., et al., Case No. 2:20-cv-01402 (the Securities Class Action ). On February 16, 2021, Judge Gerald J. Pappert denied, in
part, a motion to dismiss in the Securities Class Action. (Securities Class Action, ECF No. 86). Following several amendments and a renewed motion to dismiss (Securities Class Action, ECF No. 60, 68, 129), the parties
to the Securities Class Action executed a Stipulation of Settlement on August 22, 2022. (Securities Class Action, ECF No. 149-1).
On April 20, 2020, plaintiff Beheshti filed a Verified Shareholder Derivative Complaint on behalf of Inovio against defendants J. Joseph
Kim, Simon X. Benito, Angel Cabrera, Ann C. Miller, Jay P. Shepard, David B. Weiner, Wendy L. Yarno, and Lota S. Zoth (the Federal Action Defendants ) in the Federal Action, formerly captioned Beheshti v. Kim, et al., Case No. 2:20-cv-01962, asserting claims for breaches of fiduciary duty, unjust enrichment, and for violations of the Exchange Act. (ECF No. 1). On June 5, 2020, plaintiff
Beheshti and the Federal Action Defendants filed a stipulation to stay the case until the entry of an order denying the motion to dismiss the amended complaint in the related Securities Class Action. (ECF No. 3). The Court entered an order
staying the case the same day. (ECF No. 4).
On June 12, 2020, plaintiff Isman filed a Verified Shareholder Derivative Complaint
on behalf of Inovio in the Court against defendants Simon X. Benito, J. Joseph Kim, Ann C. Miller, Jay P. Shepard, David B. Weiner, Wendy L. Yarno, and Lota S. Zoth in an action captioned Isman v. Benito, et al., Case No. 2:20-cv-02817-GJP (the Isman Action ), asserting claims substantially similar to those in the Federal Action.
(Isman Action, ECF No. 1).
On June 15, 2020, plaintiffs Devarakonda and Foster filed a Verified Shareholder
Derivative Complaint on behalf of Inovio in the Court against the Federal Action Defendants in an action captioned Devarakonda, et al. v. Kim, Case No. 2:20-cv-02829-GJP (the Devarakonda Action ), asserting claims substantially similar to those in the Federal and Isman Actions. (Devarakonda Action, ECF
On July 7, 2020, plaintiff Fettig filed a Verified Shareholder Derivative Complaint on behalf of Inovio in the Court
against the Federal Action Defendants in an action captioned Fettig v. Kim, et al., Case No. 2:20-cv-03316 (the Fettig Action ), asserting
claims substantially similar to those in the Federal, Isman, and Devarakonda Actions. (Fettig Action, ECF No. 1).
On July 14, 2020, plaintiffs Beheshti, Isman, and Devarakonda, filed a joint motion to
consolidate their three derivative actions and appoint The Brown Law Firm, P.C. and Gainey McKenna & Egleston as plaintiffs co-lead counsel. (ECF No. 5). On July 21, 2020, the Court
issued an order consolidating those three actions into the lead case, captioned In re Inovio Pharmaceuticals, Inc. Derivative Litigation, Lead Case No. 2:20-cv-01962-GJP (E.D. Pa.) (the Federal Action ), and appointing The Brown Law Firm, P.C. and Gainey McKenna & Egleston as plaintiffs
co-lead counsel. (ECF No. 6).
On August 27, 2020, the Court issued an order
consolidating the Fettig Action with the Federal Action. (ECF No. 7). The Federal Action was thereafter stayed pursuant to the terms set forth in the order entered by the Court on June 5, 2020. (ECF No. 4).
On July 28, 2020, plaintiff Schumacher sent an inspection demand to Inovio pursuant to Section 220, seeking to exercise his right as
a stockholder to inspect specific books and records relating to the development and manufacture of INO-4800, as well as the public statements concerning the production and FDA approval timeline for INO-4800. In response to the Section 220 demand, Inovio produced more than 1,400 pages of internal, Board-level documents to plaintiff Schumacher.
On March 28, 2022, plaintiff Schumacher filed a Verified Stockholder Derivative Complaint incorporating information from the documents
produced pursuant to the Section 220 demand, under seal in the Delaware Chancery Action on behalf of Inovio against defendants Simon X. Benito, J. Joseph Kim, Ann C. Miller, Jay Shepard, David B. Weiner, Wendy L. Yarno, Lota S. Zoth, and Angel
Cabrera in the Delaware Court of Chancery, alleging, inter alia, breaches of fiduciary duty and unjust enrichment. (Delaware Chancery Action, Trans. ID 67430261).
On March 31, 2022, plaintiff Schumacher filed a public version of his Verified
Stockholder Derivative Complaint, redacting information from the confidential materials produced pursuant to the Section 220 demand cited in his complaint. (Delaware Chancery Action, Trans. ID 67443918).
On May 3, 2022, the parties in the Delaware Chancery Action filed a stipulation with the Delaware Court of Chancery requesting the court
to stay the Delaware Chancery Action pending resolution of a motion to dismiss in the Securities Class Action, which the court granted the following day. (Delaware Chancery Action, Trans. ID 67581727, 67586977).
On September 2, 2022, plaintiff Schumacher informed defense counsel in the Delaware Chancery Action that, pursuant to paragraph 2 of the
May 4, 2022 stipulation, he no longer consented to the stay in light of the settlement of the Securities Class Action. (Delaware Chancery Action, Trans. ID 68261568).
On October 17, 2022, the parties in the Delaware Chancery Action filed a status report, advising the Delaware Court of Chancery that
plaintiff Schumacher had terminated the stay and that the parties were meeting and conferring about a mutually agreeable schedule. (Delaware Chancery Action, Trans. ID 68261568).
Following additional discussions, on November 14, 2022, the parties informed the Delaware Court of Chancery of their agreement to submit
the Delaware Chancery Action to mediation in January 2023. (Delaware Chancery Action, Trans. ID 68383283). On February 15, 2023, the parties informed the Delaware Court of Chancery of their continuing discussions regarding a resolution.
(Delaware Chancery Action, Trans. ID 69159066).
On March 26, 2021, Grech sent an inspection demand to Inovio pursuant to Section 220, seeking to exercise her right as a stockholder
to inspect specific books and records relating to the development and manufacture of INO-4800, as well as the public statements concerning the production and FDA approval timeline for INO-4800. In response, Inovio produced over 1,400 pages of internal, Board-level documents to Grech.
On April 16, 2021, Azrelyant sent an inspection demand to Inovio pursuant to
Section 220, seeking to exercise her right as a stockholder to inspect specific books and records relating to the development and manufacture of INO-4800, as well as the public statements concerning the
production and FDA approval timeline for INO-4800. In response, Inovio produced over 1,400 pages of internal, Board-level documents to Azrelyant. Counsel for Grech and Azrelyant subsequently agreed to work
together and, on September 15, 2021, served a joint litigation demand on the Board to investigate and bring action against the Individual Defendants for, inter alia, breach of their fiduciary duties. In response to the Demands, counsel
for Inovio s Board secured tolling agreements with each of the individuals alleged to have breached their fiduciary duties. Additionally, the Board deferred its investigation pending resolution of the various related securities and derivative
On October 18, 2021, the Federal Plaintiffs sent a settlement demand letter to Defendants that, inter alia, proposed a settlement
framework that included a comprehensive set of corporate governance reforms designed to address the governance deficiencies that resulted in the wrongdoing alleged in the Federal Action complaints.
In December 2022, Plaintiffs and Defendants agreed to mediate the Derivative Actions and Demands to attempt to resolve the claims and
potential claims asserted therein. The mediation was set for January 18, 2023, with Michelle Yoshida, Esq. (the Mediator ), an experienced mediator with Phillips ADR.
On December 20, 2022, Plaintiffs sent a global settlement demand letter to Defendants
that, inter alia, proposed a settlement framework that included a comprehensive set of corporate governance reforms designed to address the governance deficiencies alleged in the Derivative Actions and Demands.
On January 10, 2023, in anticipation of the mediation, Plaintiffs submitted a joint mediation statement to Defendants and the Mediator,
addressing relevant arguments and allegations in the Derivative Actions and Demands. That same day, Defendants provided Plaintiffs and the Mediator with their own mediation statement.
On January 18, 2023, Plaintiffs and Defendants participated in the full-day mediation, in which
some participants attended in person and others attended remotely. That day, the Settling Parties were able to reach an agreement in principle on the substantive terms of the settlement, including the corporate governance reforms that Inovio would
adopt as consideration for the settlement as reflected in the term sheet attached hereto as Exhibit A (the Corporate Governance Reforms ).
Following the Settling Parties agreement in principle on the substantive terms of the settlement, the Settling Parties separately
negotiated the attorneys fees and expenses to be paid to counsel for the Stockholders in consideration of the substantial benefits achieved for the Company through their efforts. On February 17, 2023, the Settling Parties accepted a
double-blind mediator s proposal for Inovio to pay $1,175,000.00 in attorneys fees and expenses to Plaintiffs, subject to Court approval.
Plaintiffs believe that the derivative claims in the Derivative Actions and the potential claims in the Demands have substantial merit, and
Plaintiffs entry into this 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 or potential claims alleged in the Derivative Actions or Demands.
However, Plaintiffs and Plaintiffs Counsel recognize and acknowledge the significant risk, expense, and length of continued proceedings necessary to prosecute derivative claims against the Individual Defendants through trial and possible
appeals. Plaintiffs Counsel also have taken into account the uncertain outcome and the risk of any litigation, especially in complex cases such as derivative actions, as well as the difficulties and delays inherent in such litigation.
Plaintiffs Counsel are also mindful of the inherent problems of establishing standing in derivative litigation, and the possible defenses to the claims alleged in the Derivative Actions and the Demands.
Plaintiffs Counsel have conducted extensive investigation and analysis, including, inter alia: (i) reviewing and analyzing
Inovio press releases, public statements, filings with the U.S. Securities and Exchange Commission ( SEC ); (ii) reviewing and analyzing securities analysts reports and advisories and media reports about the Company;
(iii) reviewing and analyzing the pleadings contained in the Securities Class Action; (iv) researching the applicable law with respect to the claims alleged and the potential defenses thereto; (v) preparing and filing initial
complaints in the Derivative Actions; (vi) researching, preparing and sending the Demands and related correspondence; (vii) reviewing internal documents produced by the Company pursuant to the Section 220 demands;
(viii) researching and evaluating factual and legal issues relevant to the claims; (ix) engaging in settlement negotiations with Defendants counsel regarding the specific facts, and perceived strengths and weaknesses of the
Derivative Actions and the Demands, and other issues in an effort to facilitate negotiations; (x) researching the Company s corporate governance structure in connection with settlement efforts; (xi) preparing comprehensive written
settlement demands and modified demands over the course of the Settling Parties settlement negotiations; (xii) preparing a mediation statement; (xiii) participating in the full-day mediation;
and (xiv) negotiating and drafting this comprehensive Stipulation.
Based on Plaintiffs Counsel s thorough review and analysis of the relevant facts,
allegations, defenses, and controlling legal principles, Plaintiffs Counsel believe that the Settlement set forth in this Stipulation is fair, reasonable, and adequate, and confers substantial benefits upon Inovio. Based upon Plaintiffs
Counsel s evaluation, Plaintiffs have determined that the Settlement is in the best interests of Inovio and its shareholders, and have agreed to settle the Derivative Actions and the Demands upon the terms and subject to the conditions set
Defendants deny that they have committed or engaged in any wrongdoing or violation of law whatsoever. Defendants further deny each and all of
the claims and contentions alleged by Plaintiffs in the Derivative Actions and the Demands. The Individual Defendants have expressly denied and continue to deny all charges of wrongdoing or liability against them arising out of any of the conduct,
statements, acts, or omissions alleged, or that could have been alleged in the Derivative Actions or the Demands.
Nonetheless, Defendants
have concluded that it is desirable for the Derivative Actions and the Demands to be fully and finally settled in the matter and upon the terms and conditions set forth in this Stipulation. Defendants have also taken into account the uncertainty and
risks inherent in any litigation, especially in complex derivative actions. Defendants have, therefore, determined that it is in the best interests of Inovio for the Derivative Actions and the Demands to be settled in the manner and upon the terms
and conditions set forth in this Stipulation.