Item 8.01 Other Events.
On September 17, 2020, Shiva Stein (“Plaintiff”) filed a Verified Stockholder Class Action Complaint (the “Complaint”) in the Court of Chancery of the State of Delaware against the Company and the members of its board of directors (the “Board”) captioned Shiva Stein v. Performant Financial Corporation, et al., C.A. No. 2020-0791-AGB (the “Action”). In the Action, Plaintiff alleged that the defendants breached their fiduciary duties of care and loyalty by allowing uninstructed shares to be purportedly “cast” as votes “For” a proposal to approve an amendment to our Certificate of Incorporation (the “Certificate”) authorizing the Board to effect a reverse stock split at a ratio ranging from 1 share-for-5 shares up to a ratio of 1 share-for-20 shares (the “Reverse Split Proposal”). Plaintiff sought to enjoin the declaration of any reverse stock split pursuant to any amendment to the Certificate effected in connection with the Reverse Split Proposal.
While the Company and the Board deny completely all of the allegations of wrongdoing in the complaint, on October 19, 2020, the Company filed with the U.S. Securities and Exchange Commission, a Form 8-K/A Current Report informing stockholders that following the filing of the Original 8-K, the Company was informed of an inconsistency related to broker discretion to vote shares for which a broker had not received instructions from the beneficial owner with respect to Proposal No. 3 (regarding the approval of an amendment of the Company’s certificate of incorporation to effect a reverse stock split of the outstanding shares of its common stock); that, without informing the Company, some but not all brokers treated Proposal No. 3 as a “routine” proposal despite the proxy materials for the Annual Meeting describing Proposal No. 3 as a “non-routine” proposal; and that, due to this inconsistency, the Company will not effect a reverse stock split at this time and will instead submit a new “routine” proposal to its stockholders, at a later date and subject to a new proxy statement, to amend its certificate of incorporation to effect a reverse stock split (the “Amended 8-K”). As a result of the Amended 8-K, Plaintiff agreed that her claims were moot and stipulated to dismissal of her claims.
On November 18, 2020, the Court entered a Stipulation and Order providing that Plaintiff’s action would be dismissed with prejudice only as to Plaintiff and the case will be closed. On February 19, 2021, Plaintiff and the Company entered into a settlement agreement under which the Company agreed to pay $100,000 in fees and expenses to Plaintiff’s counsel. The Court has not passed on the amount of fees and expenses. The description of the order is qualified in its entirety by reference to the order, which is attached as an exhibit hereto.
Plaintiff’s Counsel are Gustavo F. Bruckner of Pomerantz LLP, (212) 661-1100, Christopher J. Kupka of Fields Kupka & Shukurov LLP, (212) 231-1500, and Brian E. Farnan of Farnan LLP, (302) 777-0300, and the Company’s counsel are Bruce A. Ericson, Pillsbury Winthrop Shaw Pittman LLP, (415) 983-1000 and David J. Teklits, Morris, Nichols, Arsht & Tunnell LLP, (877) 772-6628.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits