FILED: NEW YORK COUNTY CLERK 04/10/ :56 PM INDEX NO /2015 NYSCEF DOC. NO. 74 RECEIVED NYSCEF: 04/10/2017

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1 SUPREME COURT STATE OF NEW YORK COUNTY OF NEW YORK SPENCER SAVAGE and YOUSEF BARAKAT, Derivatively on Behalf of ibio, INC., vs. Plaintiffs, ROBERT B. KAY, ARTHUR Y. ELLIOTT, JAMES T. HILL, GLENN CHANG, PHILIP K. RUSSELL, JOHN D. MCKEY, and SEYMOUR FLUG, and, ibio, INC., Defendants, Nominal Defendant. Index No: /2015 AFFIRMATION OF THOMAS J. McKENNA IN SUPPORT OF MOTION FOR FINAL APPROVAL OF SETTLEMENT Motion Sequence No. 4 Fairness Hearing: April 24, 2017 before Justice Sherwood at 3 pm, Part 49, Room 252, 60 Centre Street, New York, New York Thomas J. McKenna, an attorney duly admitted to practice before the courts of the State of New York, hereby affirms the following to be true under penalty of perjury pursuant to CPLR 2106: 1. I represent Plaintiffs in the above-referenced derivative action brought on behalf of Nominal Defendant ibio, Inc. ( ibio or Company. I am fully familiar with the facts and circumstances of this action by virtue of a review of the file maintained in my office. 2. I make this Affirmation in support of Plaintiffs Motion for Final Approval of the proposed Settlement of this shareholder derivative litigation. I hereby state of record that there has been no collusion or complicity of any kind in connection with the negotiations for, or the agreement to, settle this derivative action. I state of record that all settlement negotiations in this 1 of 10

2 case were conducted at arms -length by adverse, represented parties and broke down more than once over disputes between the parties as to the terms of the settlement. 3. A true and correct copy of the Stipulation of Settlement ( Stipulation entered into by the Parties and dated September 20, 2016 is found on the Court s docket at Docket No. 57. All capitalized terms used herein have the same meaning as used in the Stipulation. 4. On January 20, 2017, this Court signed an Order which was entered on the Court s docket on January 23, 2017 as Docket No. 62. That Order reviewed the proposed Notice of Pendency of Proposed Settlement of Shareholder Derivative Action ( Notice which had been attached to the Plaintiffs Motion for Preliminary Settlement Approval (Motion Sequence No. 3 as Exhibit 3 (Docket No. 59 and found that The contents of the Settlement Notice provides a detailed background of the action, describes the terms of the settlement and the allocation of attorneys fees and costs, and includes a discussion of options available to shareholders in connection with the proceedings. See Order at p The Order also approved the Parties proposals for the manner and methods of disseminating the Notice of the proposed settlement to the shareholders of ibio. See Order at p. 2. Of course, the giving of notice is required by due process to allow shareholders of ibio to assert an objection to the proposed settlement if they so desired. of notice: 6. As to ibio, the Order provided that ibio should issue the following different types Within ten (10 calendar days after the entry of this Order, ibio shall (i mail by first class postage pre-paid mail a notice (the Notice, in the form used in the aforementioned Settlement Notice, to all ibio shareholders at the last known addresses appearing in the stock transfer records maintained by or on behalf of ibio; (ii post copies of the Notice, the Stipulation, and this Order on the Company website at least through the date of the Settlement Hearing; and (iii issue a press release, via a national newswire service, such as Business Wire, PR Newswire or Investor s Business Daily, announcing the Settlement and directing 2 2 of 10

3 persons to the Notice and related papers posted on ibio s website. ibio s Counsel shall file with the Court an appropriate affidavit or declaration documenting that ibio has satisfied the requirements of this paragraph as soon as practicable after ibio has done so. See Order at p. 2, para. No. 3. following: 7. As to Plaintiffs, the Order provided Plaintiffs counsel should perform the Within ten (10 calendar days after entry of this Order, Plaintiffs Counsel shall post copies of the Notice, the Stipulation, and this Order on its website and shall maintain it there through the date of the Settlement Hearing. Plaintiffs Counsel shall file with the Court an appropriate affidavit or declaration documenting that it has satisfied the requirements of this paragraph as soon as practicable after it has done so. 8. On February 1, 2017, ibio caused an Affidavit of Elizabeth R. Moyal to be filed, with attached exhibits, setting forth the various actions ibio took to publish the Notice of the proposed settlement to its shareholders. See Docket Nos. 63 through 68. Ms. Moyal reports that on January 26, 2017, ibio s web manager posted onto ibio s website, (a the Stipulation of Settlement of the above-captioned matter ( Stipulation, the (b a notice in the form used in the proposed Notice of Pendency of Proposed Settlement of Shareholder Derivative Action appended to the Stipulation (the Notice and (c the Court s order in this matter dated January 20, 2017 (the Order. On January 27, 2017, ibio s national newswire service, Marketwired, issued a press release which announced the Stipulation and directed persons to the Notice and related papers posted on ibio s website. In addition, ibio caused to be filed an Affidavit of Robert Zubrycki, sworn to on January 26, 2017, from Continental Stock Transfer & Trust Company, affirming that Continental mailed the Notice to a list of current ibio shareholders. 3 3 of 10

4 9. On February 2, 2017, the undersigned filed an Affirmation dated February 2, 2017, affirming that on January 28, 2017, my law firm caused to be posted to its law firm webpage, the following: a true and correct copy of (1 the Notice of Pendency of Proposed Settlement of Shareholder Derivative Action which had been attached to the Stipulation of Settlement previously filed with this Court, except revised to set forth the date, time and location of the fairness hearing, (2 the Stipulation of Settlement with exhibits and (3 this Court s Order dated January 20, See Docket No. 71, para. No These three documents have remained posted to our firm website to the present and will remain posted until at least April 24, 2017, the date of the Final Fairness Hearing, or until further order of this Court. 11. Accordingly, all of the various methods and manners of Notice to the current shareholders have been given in the manner in which this Court s Order required. 12. The Notice provides that the last date on which a shareholder can lodge an objection is fourteen (14 days before the April 24, 2017 final fairness hearing. That date is April 10, As of today s date, counsel for the Plaintiffs has received no objections and has confirmed with counsel for the Defendants that they too have received no objections. No objections are posted to the Court s docket. If any late objections are received after today s date, Plaintiffs will review them and provide a response as appropriate in advance of or at the Fairness Hearing. 14. For the reasons set forth below, Counsel for Plaintiffs respectfully submits that the proposed settlement has achieved a substantial benefit for the Company and is otherwise fair, reasonable and adequate and should be given final approval. 4 4 of 10

5 15. On or about December 4, 2015, Spencer Savage, acting by and through counsel, filed a lawsuit styled Spencer Savage, Derivatively on Behalf of Nominal Defendant ibio, Inc., v. Robert B. Kay, et al., Index No: /2015, in the Supreme Court, New York County, Commercial Division (the Litigation. On or about March 16, 2016, Plaintiff Savage amended his complaint and Plaintiff Yousef Barakat joined the Litigation as an additional Plaintiff ( Amended Complaint. Plaintiffs essentially alleged, among other things, that the Individual Defendants failed in their duties to supervise the management of the Company and that the failure of supervision allowed certain officers and directors to make false public statements that damaged the Company. This failure resulted in the Company becoming the subject of a securities class action lawsuit filed in the U.S. District Court for the District of Delaware and captioned Vamsi Andavarapu v. ibio, et al., Case No. 1:14-cv-1343-RGA (the Securities Litigation. The U.S. District Court for the District of Delaware gave final approval to a settlement of the Securities Litigation on April 21, 2016, requiring the payment by the Company of $1.875 million. 16. After that date, the Settling Parties, through counsel, engaged in negotiations to attempt to settle this Litigation. First, certain corporate reforms were agreed upon between the Settling Parties. Then an agreement was reached for the payment of $160,000 towards attorneys fees, case expenses and case contribution awards for the two named Plaintiffs. 17. The corporate governance reforms were designed to address the making of the public statements that embroiled the Company in the securities litigation and increased the risk to the Company of an inability to raise money because of a loss of reputation and trust in the capital markets. The Stipulation provides that the Company has implemented and/or shall implement the following Corporate Governance Changes: 5 5 of 10

6 (a Committee Rotation: Starting prospectively from the date the settlement is approved, the chair of the Audit/Compensation/Nominating and Governance Committee will rotate at least once every five years. (b Director Orientation: The Company shall implement a Director Orientation program which shall include presentations from appropriate personnel regarding the Company's general policies and procedures and key operational and strategic initiative risks. A new director will undergo the orientation program at the latest within three months of his or her election to the Board. (c Reputational Risk: The charter of each Board committee will be amended to provide that the committee will consider the potential effects on the Company s reputation of Company actions and public statements within its scope of responsibility. (d Oversight: The Company shall enhance its oversight of material market communications by appointing a senior officer to ensure their accurate and timely dissemination and that timely corrective disclosures to any inaccurate statements would be made as soon as practicable after any material misstatement or omission in the original disclosure is discovered by the Company. (e Code of Business Conduct and Ethics: The Company s policy of requiring employees and directors to re-certify on an annual basis their knowledge and compliance with the Code of 6 6 of 10

7 Business Conduct and Ethics shall be amended to further require that employees and directors confirm that they are not aware of any acts which they believe are not compliant with this Code and applicable laws and regulations. 18. The Stipulation also provides for the entry of judgment dismissing the Litigation on the merits with prejudice, and a complete release of the Released Claims as detailed in the Stipulation. 19. The Settling Parties have determined that it is desirable and beneficial that the Litigation, 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. 20. The undersigned and my law firm conducted an extensive investigation relating to the claims and the underlying events and transactions alleged in the Litigation. Plaintiffs believe that the Litigation has substantial 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 in the Litigation. 21. However, Plaintiffs and the undersigned recognize and acknowledge the significant risk, expense, and length of continued proceedings necessary to prosecute the Litigation against the Individual Defendants through trial and through possible appeals. The undersigned also has taken into account the uncertain outcome and the risk of any litigation, as well as the difficulties and delays inherent in such litigation. We are also mindful of the inherent problems of establishing that demand on the Board was futile, and the possible defenses to the claims alleged in the Litigation. 7 7 of 10

8 22. Defendants have denied and continue to deny each and all of the claims and allegations of wrongdoing made by Plaintiffs in the Litigation and they assert they have meritorious defenses. Defendants have also contended that many of the allegations in the Amended Complaint are materially inaccurate. 23. The Individual Defendants also have denied and continue to deny, among other allegations, the allegations that Plaintiffs, ibio, or its shareholders have suffered damage or that Plaintiffs, ibio or its shareholders were harmed in any way by the conduct or statements alleged in the Litigation or otherwise. The Individual Defendants also asserted that at all times they acted in good faith and in a manner they reasonably believe to be and that was in the best interests of ibio and its shareholders. 24. Based on our thorough review and analysis of the relevant facts, allegations, defenses, and controlling legal principles, we believe that the Settlement set forth in the Stipulation is fair, reasonable, and adequate, and confers substantial benefits upon ibio and its shareholders. Based upon our evaluation, Plaintiffs have determined that the Settlement is in the best interests of ibio and its shareholders and have agreed to settle the Litigation upon the terms and subject to the conditions set forth in the Stipulation. 25. In addition, the undersigned believes that the Defendants have also concluded that further litigation activities would be protracted and expensive, and that the Settlement confers substantial benefits on ibio and is fair, reasonable, adequate, and in the best interests of ibio and its shareholders. 26. Plaintiffs Counsel has not received any payment for our work in connection with the Litigation, nor have we been reimbursed for our out-of-pocket expenses. After negotiating the substantive terms of the Settlement, the undersigned and Defendants Counsel negotiated a 8 8 of 10

9 fair and reasonable sum to be paid to Plaintiffs' Counsel for attorneys' fees and expenses (the Fee and Expense Amount. The Fee and Expense Amount agreed to by the Settling Parties is $160,000 in total. 27. From that amount, besides legal fees, will also be deducted Plaintiffs Counsel s out-of-pocket case expenses and the proposed Plaintiff Case Contribution Award to the two Plaintiffs in the amount of $2,000 each. This agreed upon Fee and Expense Amount voluntarily reached by the Settling Parties is designed to compensate Plaintiffs Counsel and Plaintiffs for the results achieved in the Litigation and the risks of undertaking the prosecution of the Litigation on a contingent basis. 28. Attached hereto as Exhibit 1 is an Affirmation of Thomas J. McKenna in support of an Award of Fees and Expenses ( McKenna Fee Affirm., setting forth the time expended by Plaintiff s counsel in the prosecution and settlement of this action to date, and the out-of-pocket case-related expenses incurred to date. The total time ( lodestar of Plaintiffs counsel is $179, As can be seen from the McKenna Fee Affirm., the total time expended is a negative lodestar of 0.89% of the agreed-upon combined Fee and Expense Amount. In addition, the total case-related expenses are $ See McKenna Fee Affirm. at 3-4. Also attached to the McKenna Fee Affirm. as Exhibit A is a true and correct copy of the firm resume of Gainey McKenna & Egleston. 29. Defendants have agreed in the Stipulation not to oppose the agreed-upon Fee and Expense Amount so long as it does not exceed $160,000. See Stipulation, In addition, Defendant agreed not to oppose a case contribution award to the two named Plaintiffs, so long as it was deducted from the agreed upon $160,000 fee and that the awards did not exceed $2,000 per Plaintiff. The undersigned has worked closely with both 9 9 of 10

10 Plaintiffs throughout the duration of the instant action, including during the investigative phase and throughout the litigation. Both Plaintiffs were extremely responsive and supplied necessary information to the undersigned, reviewed and supervised the progress of the litigation and were consulted about and approved the proposed settlement. It is respectfully submitted that the modest $2,000 case contribution award to each Plaintiff is well-justified. As it will be paid from the agreed-upon Fee and Expense Amount of $160,000, it will cost the Company nothing extra. 31. Therefore, it is respectfully submitted that the proposed settlement has conferred a substantial benefit upon the Company in addressing the conduct which previously caused the Company harm and is otherwise fair, adequate and reasonable in all its particulars. Accordingly, it is respectfully submitted that the instant motion to give final approval to the settlement and to award $160,000 in total for attorneys fees, case expenses and case contribution awards should be granted in its entirety. Dated: April 10, 2017 FURTHER YOUR AFFIANT SAYETH NAUGHT. s/ Thomas J. McKenna Thomas J. McKenna of 10