8-KOther Events

Cloudflare, Inc. 8-K Report, Corporate Update (May 25, 2022)

Filed May 25, 2022For Securities:NET

Summary

Cloudflare, Inc. (NET) has disclosed the resolution of a class action lawsuit filed on April 6, 2022, in the Delaware Court of Chancery. The lawsuit, initiated by a stockholder named Cindy Xu, alleged breaches of fiduciary duty against the company and its directors concerning disclosure deficiencies in the preliminary proxy statement for the 2022 Annual Meeting of Stockholders. Specifically, the complaint raised concerns about the definition of "interested stockholders" in the vote for stock option grants to co-founders and alleged coercive voting aspects. In response to the lawsuit, Cloudflare took corrective actions, including supplementing its definitive proxy statement and amending the Performance Awards. These actions aimed to moot the allegations and revise the voting participant definition to exclude certain stockholders, as well as remove perceived coercive elements. Following these remedial measures, the plaintiff withdrew her motion for a preliminary injunction and voluntarily dismissed the action. Cloudflare has agreed to pay $1,600,000 to the plaintiff's counsel for attorneys' fees and expenses, resolving this matter.

Key Highlights

  • 1Cloudflare has resolved a class action lawsuit related to its 2022 Annual Meeting of Stockholders.
  • 2The lawsuit alleged breaches of fiduciary duty regarding proxy statement disclosures and stock option grants to co-founders.
  • 3Cloudflare took corrective actions, including supplemental disclosures and amendments to stock awards, to address the lawsuit's claims.
  • 4The plaintiff voluntarily dismissed the lawsuit after Cloudflare's corrective actions.
  • 5Cloudflare will pay $1,600,000 to the plaintiff's counsel for attorneys' fees and expenses.
  • 6The company's actions appear to have successfully mooted the allegations and allowed the 2022 Stockholder Meeting and related votes to proceed without injunction.
  • 7The Court of Chancery retained jurisdiction solely for the payment of attorneys' fees and expenses, not to rule on their reasonableness.

Frequently Asked Questions

The class action lawsuit alleged breaches of fiduciary duty by Cloudflare and its directors. The core issues were alleged deficiencies in the company's preliminary proxy statement for the 2022 Annual Meeting, concerns about the definition of 'interested stockholders' for a vote on co-founder stock options, and claims of coercive voting practices.

Cloudflare took several corrective actions, including filing supplemental disclosures in its definitive proxy statement and amending the terms of the Performance Awards for co-founders and other executive awards. These amendments revised the definition of participants in the majority-of-the-disinterested-stockholders vote to exclude certain allegedly interested parties and removed allegedly coercive voting aspects.

The plaintiff voluntarily dismissed the action with prejudice as to herself only on April 25, 2022. However, the dismissal was without prejudice as to any other putative class member, meaning the court retains jurisdiction solely for the purpose of deciding the plaintiff's counsel's application for attorneys' fees and expenses.

Cloudflare agreed to pay $1,600,000 to the plaintiff's counsel for attorneys' fees and expenses. This payment is in full satisfaction of the claim for attorneys' fees and expenses related to the action.