The derivative action brought on behalf of Galena and its shareholders arises from allegations that certain officers and/or directors of Galena secretly hired a stock promotion firm to “pump up” Galena’s stock price, so that they could later sell Galena stock while in possession of non-public information and at a time when Galena stock was trading at artificially inflated prices. It is also alleged that certain of Galena’s directors used inside information to improperly grant stock options to themselves and fellow officers and/or directors which violated Delaware law because such options were spring-loaded, i.e., granted just prior to the release of material information that was reasonably expected to drive the market price of Galena stock higher, and also failed to comply with the statutory requirements of the Delaware General Corporation Law.
Hynes Keller & Hernandez, LLC was an integral part of a team of law firms that resolved the matter on favorable terms to Galena and its shareholders. The settlement requires the payment of $15 million to Galena by its directors and officers’ liability insurance carriers and the payment of $4.5 million by the Company’s insurance carriers to resolve the payment of attorneys’ fees in connection with the case. In addition, as part of the settlement, a total of 1.2 million stock options that were alleged to have been improperly granted to the director defendants have been cancelled in their entirety. Further, the former CEO forfeited over $800,000 of contractual severance payments due to him and over 1.1 million stock options with an intrinsic value of approximately $503,062. In total, the settlement provides Galena with financial consideration worth over $20.8 million.
Furthermore, the settlement requires the implementation of significant corporate governance reforms at Galena specifically designed to protect against future instances of wrongdoing as alleged. These measures include reforms to Galena’s stock option granting practices, the appointment of a new independent director, reforms to the board of directors and management structure and policies, the adoption of a formal Enterprise Risk Management program and other reforms designed to make Galena’s officers and directors more effective and responsive fiduciaries. In sum, the settlement is an outstanding package of relief that provides Galena with substantial financial benefits as well as significant non-monetary benefits, which will provide value to Galena and its stockholders for years to come.