This case was last updated from Santa Clara County Superior Courts on 09/09/2020 at 09:24:40 (UTC).

Whiteley v. Barracuda Networks, Inc., et al.

Case Summary

On 01/08/2018 Whiteley filed a Contract - Security lawsuit against Barracuda Networks, Inc . This case was filed in Santa Clara County Superior Courts, Downtown Superior Court located in Santa Clara, California. The Judge overseeing this case is Kuhnle, Thomas. The case status is Disposed - Dismissed.

Case Details Parties Documents Dockets

 

Case Details

  • Case Number:

    ******1523

  • Filing Date:

    01/08/2018

  • Case Status:

    Disposed - Dismissed

  • Case Type:

    Contract - Security

  • Court:

    Santa Clara County Superior Courts

  • Courthouse:

    Downtown Superior Court

  • County, State:

    Santa Clara, California

Judge Details

Judge

Kuhnle, Thomas

 

Party Details

Plaintiff

Whiteley, Robert

Defendants

Kapoor, Chet

Mullaney, Stephen P.

Kispert, John H.

Perone, Michael D.

Barracuda Networks, Inc.

Allen, Jeffry A.

Jenkins, William, Jr.

Other

Superior Court of California

Attorney/Law Firm Details

Plaintiff Attorney

Smith, Evan Jason

Other Attorney

Superior Court of CA, County of Santa Clara

 

Court Documents

Order

Order Granting Plaintiff's Request for Dismissal: Comment: Order Granting Plaintiff's Request for Dismissal - signed/TEK

Notice

Notice CMC reset from 5-4-18 to 8-3-18: Comment: CMC reset from 5/4/18 to 8/3/18

Declaration: In Support

Declaration In Support: Comment: Evan J. Smith

Request

Request: Comment: Request for Voluntary Dismissal

Order: Deeming Case Complex

Order Deeming Case Complex & Staying Discovery: Guidelines for Motions relating to Class Certification: Comment: and Staying Discovery and Responsive Pleading Deadline signed/TEK

Notice

Civil Lawsuit Notice: ADR CV-5003: Comment: Civil Lawsuit Notice (1st CMC set for 5/4/18 at 10am in D5; assigned to Hon. Thomas E. Kuhnle)

Order: Deeming Case Complex

Order Deeming Case Complex & Staying Discovery: Guidelines for Motions relating to Class Certification: Comment: and Staying Discovery and Responsive Pleading Deadline signed/TEK

Notice

Civil Lawsuit Notice: ADR CV-5003: Comment: Civil Lawsuit Notice (1st CMC set for 5/4/18 at 10am in D5; assigned to Hon. Thomas E. Kuhnle)

Summons: Issued/Filed

Summons Issued Filed:

Civil Case Cover Sheet

Civil Cover Sheet - Final Signed - 20180108.pdf: Comment: COMPLEX

Complaint (Unlimited) (Fee Applies)

Complaint (Unlimited) (Fee Applies):

 

Docket Entries

  • 08/03/2018
  • DocketConference: Case Management - Judicial Officer: Kuhnle, Thomas; Hearing Time: 10:00 AM; Cancel Reason: Vacated; Comment: (1st CMC) Proposed Class Action * Securities Litigation * Discovery stayed and responsive pleading deadline stayed, as of 1/10/18, when the case was deemed complex.

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  • 04/25/2018
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  • DocketOrder - Order Granting Plaintiff's Request for Dismissal: Comment: Order Granting Plaintiff's Request for Dismissal - signed/TEK

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  • 03/29/2018
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  • DocketNotice - Notice CMC reset from 5-4-18 to 8-3-18: Comment: CMC reset from 5/4/18 to 8/3/18

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  • 03/29/2018
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  • DocketDeclaration: In Support - Declaration In Support: Comment: Evan J. Smith

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  • 03/29/2018
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  • DocketRequest - Request: Comment: Request for Voluntary Dismissal

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  • 01/10/2018
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  • DocketOrder: Deeming Case Complex - Order Deeming Case Complex & Staying Discovery: Guidelines for Motions relating to Class Certification: Comment: and Staying Discovery and Responsive Pleading Deadline signed/TEK

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  • 01/08/2018
  • View Court Documents
  • DocketNotice - Civil Lawsuit Notice: ADR CV-5003: Comment: Civil Lawsuit Notice (1st CMC set for 5/4/18 at 10am in D5; assigned to Hon. Thomas E. Kuhnle)

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  • 01/08/2018
  • View Court Documents
  • DocketSummons: Issued/Filed - Summons Issued Filed:

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  • 01/08/2018
  • View Court Documents
  • DocketCivil Case Cover Sheet - Civil Cover Sheet - Final Signed - 20180108.pdf: Comment: COMPLEX

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  • 01/08/2018
  • View Court Documents
  • DocketComplaint (Unlimited) (Fee Applies) - Complaint (Unlimited) (Fee Applies):

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Complaint Information

E-FILED

1/8/2018 8:04 AM

E\l}a?l?sfiflfz Es’é\ggfiefl' LLC Clerk of Court

0595 Wilshire Boulevard, Suite 900 Superior fC ourt of fliAr Beverly Hills, CA 90212 County of Santa Clara Phone: (877) 534-2590 18CV321523

Facsimile: (610) 667-9029 Reviewed By: R. Walker

esmith@ brodsky-smith.com Attorneys for Plaintiff

IN THE SUPERIOR COURT OF CALIFORNIA IN AND FOR THE COUNTY OF SANTA CLARA

ROBERT WHITELEY, On Behalf of Case No.: 18c V32 1523

Himself and all Others Similarly Situated,

LASS ACTI

Plaintiff, CLASS ALTION - CLASS ACTION COMPLAINT FOR: ' (1) Breach of Fiduciary Duties BARRACUDA NETWORKS, INC,, JEFFRY R.ALLEN, MICHAEL D. DEMAND FOR JURY TRIAL

PERONE, WILLIAM JENKINS, JR.,, JOHN H. KISPERT, CHET KAPOOR, and STEPHEN P. MULLANEY,

Defendants.

Plaintiff Robert Whiteley (“Plaintiff”), by his attorneys, on behalf of himself and those similarly situated, files this action against the defendants, and alleges upon information and belief, except for those allegations that pertain to him, which are alleged upon personal knowledge, as follows:

SUMMARY OF THE ACTION

1. Plaintiff brings this stockholder class action on behalf of himself and all other public stockholders of Barracuda Networks, Inc. (“Barracuda” or the “Company”), against Barracuda, and the Company’s Board of Directors (the ‘“Board” or the “Individual Defendants”)(collectively with the Company, the “Defendants”), for breaches of fiduciary duty as a result of Defendants’ efforts to sell the Company to affiliates of Thoma Bravo, LLC, namely Sub,” and collectively with Thoma Bravo, LLC and Parent, “Thoma Bravo™) as a result of an unfair process for an unfair price, and to enjoin a stockholder vote in which Thoma Bravo will acquire each outstanding share of Barracuda common stock for $27.55 per share in cash, with a total valuation of approximately $1.6 billion (the “Proposed Transaction”).

2. The terms of the Proposed Transaction were memorialized in a November 27, 2017 filing with the Securities and Exchange Commission (“SEC”) on Form 8-K attaching the definitive Agreement and Plan of Merger (the “Merger Agreement”).

3. On December 27, 2017, Barracuda filed a Solicitation/Recommendation Statement on Schedule Prem14A (the “Preliminary Proxy”) with the Securities and Exchange Commission (the “SEC”) in support of the Proposed Transaction.

4, Notably, the Preliminary Proxy reveals that the Proposed Transaction was entered into without a proper market check and with no oversight by an independent special committee of the Company Board.

D. Defendants breached their fiduciary duties to the Company’s stockholders by agreeing to the Proposed Transaction which undervalues Barracuda and is the result of a flawed sales process. Post-closure, Barracuda stockholders will be frozen out of seeing the return on their investment of any and all future profitability of Barracuda.

0. Further, pursuant to the terms of the Merger A greement, upon the consummation of the Proposed Transaction, Company Board Members and executive officers will be able to exchange large, illiquid blocks of Company stock for massive payouts, in addition to receiving cash in exchange for all outstanding and unvested options and/or other types of restricted stock units. Moreover, certain Directors and otherinsiders will also be the recipients of lucrative change- in-control agreements, triggered upon the termination of their employment as a consequence of the consummation of the Proposed Transaction. Such large paydays upon the consummation of the Proposed Transaction, have clearly tainted the motivations of the Board in approving it.

7. Finally, in violation of their fiduciary duties, Defendants caused to be filed the materially deficient Preliminary Proxy on December 27, 2017 with the SEC in an effort to solicit

stockholders to vote their Barracuda shares in favor of the Proposed Transaction. The Preliminary Proxy is materially deficient and deprives Barracuda stockholders of the information they need to make an intelligent, informed and rational decision of whether to vote their shares in favor of the Proposed Transaction. As detailed below, the Preliminary Proxy omits and/or misrepresents material information concerning, among other things: (a) the sales process leading to the Proposed Transaction; (b) the Company’s financial projections; and (c) the data and inputs underlying the financial valuation analyses that purport to support the fairness opinions provided by the Company’s financial advisor, Morgan Stanley & Co., LLC (“Morgan Stanley™).

8. Absent judicial intervention, the merger will be consummated, resulting in irreparable injury to Plaintiff and the Class. This action seeks to enjoin the Proposed Transaction or, in the event the Proposed Transaction is consummated, to recover damages resulting from breach of fiduciary duties by D efendants.

PARTIES

9. Plaintiff is a citizen of the State of New Y ork and, at all times relevant hereto, has been a Barracuda stockholder.

10. Defendant Barracuda designs and delivers security and data protection solutions. The company offers cloud-enabled solutions that enable customers to address security threats, enhance network performance, and protect and store their data. Barracuda common stock is publicly traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “CUDA.” Barracudais a Delaware corporation with its principal executive offices located at 3175 Winchester Boulevard, Campbell, CA 95008.

11. Defendant Jeffry R. Allen ("Allen") has been a Director of the Company at all relevant times. In addition, Allen serves as a member on the Board’s Audit and Executive Committees.

12. Defendant Michael D. Perone ("Perone") has been a director of the Company at all relevant times. Additionally Perone, a Co-Founder of the Company, currently serves as an Executive Vice President of Barracuda, and as the Company’s Chief Marketing Officer (“CMQO”). Notably, according to the Preliminary Proxy, Perone has held a social relationship with the

Orlando Bravo, managing Partner of Thoma Bravo, for years. 13. Defendant William Jenkins, Jr. ("Jenkins") has been a director of the Company at all relevant times. In addition, Jenkins serves as the Company’s President and Chief Executive Officer (“CEO”).

14. Defendant John H. Kispert ("Kispert") has been a director of the Company at all relevant times. In addition, Kispert serves as the Chair of the Board’s Audit Committee and as a member on the Board’s Compensation Committee.

15. Defendant Chet Kapoor ("Kapoor ") has been a director of the Company at all relevant times. In addition, Kapoor serves as the Chair of the Board’s Compensation Committee and as a member on the Board’s Audit Committee.

16. Defendant Stephen P. Mullaney ("Mullaney") has been a director of the Company at all relevant times. In addition, Mullaney serves as the Chair of the Board’s Executive Committee.

17. Defendants Allen, Perone, Jenkins, Kispert, Kapoor, and Mullaney, identified in 11 — 16 are collectively referred to as the “Individual Defendants.”

18. Non-party Parent is a Delaware limited liability company and a wholly owned subsidiary of Thoma Bravo LLC. Parent can be served care of its agent for service of process, The Corporation Trust Company, at Corporation Trust Center, 1209 Orange St, Wilmington, DE 19801.

19. Non-party Merger Sub is a Delaware corporation and a wholly owned subsidiary of Thoma Bravo LLC. Merger Sub can be served care of its agent for service of process, The Corporation Trust Company, at Corporation Trust Center, 1209 Orange St, Wilmington, DE 19801.

JURISDICTION AND VENUE

20. This Court has jurisdiction over the Company because it is a resident of the State of California and may be served in the State of California through its president or any vice- president. To the extent that the Individual Defendants are not residents of the State of California, conducting activities in the State of California and engaged in the conduct more particularly described herein thereby subjecting themselves to the jurisdiction of the California courts.

21. Venue 1s proper in this Court inasmuch as the Defendants’ principal place of business is in this County and it regularly transacts business in this County and there are multiple defendants with no single venue applicable, and thus can be sued for damages in this County.

CLASSACTION ALLEGATIONS

22. Plaintiff brings this action as a class action individually and on behalf of the stockholders of Barracuda common stock who are being and will be harmed by Defendants’ actions described herein (the “Class”). The Class specifically excludes Defendants herein, and any person, firm, trust, corporation or other entity related to, or affiliated with, any of the Defendants.

23. Class actions are certified when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court. Cal. Civ. Proc. Code § 382. The California Supreme Court has stated that a class should be certified when the party seeking certification has demonstrated the existence of a “well-defined community of interest” among the members of the proposed class. Richmond v. Dart Indus., Inc., 29 Cal.3d 462, 470 (1981); see also Daar v. Yellow Cab Co., 67 Cal.2d 695, 704 (1967).

24, Class actions are especially valuable in a context such as this one, in which individual damages may be modest. It is well settled that a plaintiff need not prove the merits of the action at the class certification stage.

20. Rather, the decision of whether to certify a class is “essentially a procedural one” and the appropriate analysis is whether, assuming the merits of the claims, they are suitable for resolution on a class-wide basis:

Asthe focus in a certification dispute is on what types of questions common or individual are likely to arise in the action, rather than on the merits of the case, in determining whether there is substantial evidence to support a trial

court’s certification order, we consider whether the theory of recovery 20.

advanced by the proponents of certification is, as an analytical matter, likely

to prove amenable to class treatment.

Sav-On Drug Stores, Inc. v. Superior Court, 34 Cal.4th 319, 327 (2004) (citations omitted).

This action is properly maintainable as a class action because:

d.

The Class is so numerous that joinder of all members is impracticable. As of September 29, 2017, there were more than 53 million common shares of Barracuda stock outstanding. The actual number of public stockholders of Barracuda will be ascertained through discovery; There are questions of law and fact which are common to the Class, including inter alia, the following: i. Whether the Individual Defendants have engaged in self-dealing, to the detriment of the Company’s public shareholders;; ii. Whether Defendants made material misrepresentations and/or omitted material facts in the Preliminary Proxy; iil. Whether the class is entitled to injunctive relief and/or damages as a result of the wrongful conduct committed by D efendants; and iv. Whether Plaintiff and the other members of the Class have and will continue to suffer irreparable injury if the Proposed Transaction is consummated.

Plaintiff is an adequate representative of the Class, has retained competent counsel experienced in litigation of this nature and will fairly and adequately protect the interests of the Class;

Plaintiff’s claims are typical of the claims of the other members of the Class and Plaintiff does not have any interests adverse to the Class;

The prosecution of separate actions by individual members of the Class would members of the Class which would establish incompatible standards of conduct for the party opposing the Class;

f. Plaintiff anticipates that there will be no difficulty in the management of this litigation and, thus, a class action is superior to other available methods for the fair and efficient adjudication of this controversy; and

g. Defendants have acted on grounds generally applicable to the Class with respect to the matters complained of herein, thereby making appropriate the relief sought herein with respect to the Class as a whole.

THE INDIVIDUAL DEFENDANTS’ FIDUCAIRY DUTIES

27. By reason of the Individual Defendants’ positions with the Company as officers and/or directors, said individuals are in a fiduciary relationship with Barracuda and owe the Company the duties of due care, loyalty, and good faith.

28. By virtue of their positions as directors and/or officers of Barracuda, the Individual Defendants, at all relevant times, had the power to control and influence, and did control and influence and cause Barracuda to engage in the practices complained of herein.

29. Each of the Individual Defendants are required to act with due care, loyalty, good faith and in the best interests of the Company. To diligently comply with these duties, directors of a corporation must:

a. act with the requisite diligence and due care that is reasonable under the circumstances;

b. actin the best interest of the company;

C. use reasonable means to obtain material information relating to a given action or decision;

d. refrain from acts involving conflicts of interest between the fulfillment of their roles in the company and the fulfillment of any other roles or

their personal affairs; e. avoid competing against the company or exploiting any business opportunities of the company for their own benefit, or the benefit of others; and

f. disclose to the Company all information and documents relating to the company’s affairs that they received by virtue of their positions in the company.

30. In accordance with their duties of loyalty and good faith, the Individual

Defendants, as directors and/or officers of Barracuda, are obligated to refrain from:

a. participating in any transaction where the directors’ or officers’ loyalties are divided; o} participating in any transaction where the directors or officers are

entitled to receive personal financial benefit not equally shared by the Company or its public stockholders; and/or

C. unjustly enriching themselves at the expense or to the detriment of the Company orits stockholders.

31. Plaintiff alleges herein that the Individual Defendants, separately and together, in connection with the Proposed Transaction, violated, and are violating, the fiduciary duties they owe to Barracuda, Plaintiff and the other public stockholders of Barracuda, including their duties of loyalty, good faith, and due care.

32. As a result of the Individual Defendants’ divided loyalties, Plaintiff and Class members will not receive adequate, fair or maximum value for their Barracuda common stock in

SUBSTANTIVE ALLEGATIONS

Company Background

33. Barracuda designs and delivers security and data protection solutions. The Company offers cloud-enabled solutions that enable customers to address security threats, enhance network performance, and protect and store their data.

34. The Company provides various security solutions, including Barracuda Essentials for Email Security that offers multi-layer cloud-based protection against email-based attacks, data loss, and business disruption; Barracuda Email Threat Scan/Barracuda Email Threat Scanner, a cloud-based service that examines Office 365 mailboxes to identify latent threats and provide administrators with an in-depth view of their risk profile; and Barracuda Web Security Gateway, a solution to protect users from Web-based threats, and enhance productivity and optimize bandwidth,

35. The Company’s security solutions also comprise Barracuda NextGen Firewalls to secure the network, and prioritize and optimize traffic flows; Barracuda W eb A pplication Firewall that provides reverse-proxy-based protection for applications deployed in physical, virtual, or public cloud environments, as well as protects Web applications and W ebsites from data breaches and downtime; and Barracuda Load Balancer ADC, an integrated platform that distributes network traffic across multiple servers or data centers to offload computing functions from backend servers and enhance application response time.

36. In addition, Barracuda offers data protection solutions, such as Barracuda Backup, a backup solution; and Barracuda Cloud A rchiving, which provides cloud-based archiving.

37. The Company sells its appliances, services, and software products to education, government, financial services, healthcare, professional services, telecommunications, retail, and manufacturing industries through its sales personnel, distribution partners, managed service providers, and resellers in approximately 100 countries.

38. Barracuda’s most recent financial performance press release before the announcement of the Proposed Transaction indicated sustained and solid financial performance.

For example, in an October 10, 2017, press release announcing its Q2 financial results for Fiscal 2018, the Company noted such highlights as a total revenue increase of 7% year-on-year, from $87.9 million to $94.3 million.

39. Speaking on these tremendous results, Defendant and CEO Jenkins stated, “We delivered a strong second quarter achieving core billings growth of 22% year-over-year and gross billings of $108.5 million, which was above our guidance. Our performance was driven by continued traction in the areas of the market where we have been investing, especially email and public cloud security, and we are pleased to see that our efforts are generating stronger top-line results.”

40. Defendant Jenkins continued, noting that the Company’s finances have trended upwards consistently in recent months, noting, “...we have generated four consecutive quarters of double-digit billings growth.” Jenkins also spoke positively of the Company’s future financial performance, stating, “We believe we have the right strategy in place, are focused on the right areas of the market, and provide innovative security solutions that are affordable and consumable in the form that is best suited for our customers' needs.”

41. These positive financial results are not an anomaly, but rather, are indicative of a trend of continued financial success by Barracuda. Looking further back, one can see evidence for this typical success. For example, in a July 10, 2017 press release announcing the Company’s Q1 financial results for Fiscal 2018, Barracuda reported such highlights as a 9% increase of total revenue year-on-year, from $86.7 million to $94.2 million.

42. Again, these results saw Defendant Jenkins praising the Company’s outstanding fiscal performance, stressing that “We delivered a strong first quarter exceeding our guidance on both revenue and billings, driven by continued momentum with our email security, public cloud and MSP solutions, which led to 20% core product billings growth year-over-year.” Jenkins continued, “We also had strong customer renewals in the quarter that contributed to an annualized renewal rate of 93% and included expanding a multi-year public cloud engagement with a Fortune 500 customer.”

43. Despite this upward trajectory and continually increasing financial results, the depriving Plaintiff and other public stockholders of the Company the opportunity to reap the benefits of Barracuda’s present and future success The Flawed Sales Process

44, The process deployed by the Individual D efendants was flawed and inadequate, and conducted out of the self-interest of the Individual Defendants, and seems to have been designed solely to effectuate a quick transaction for Thoma Bravo’s benefit. Of particular note, the Company attempted to piggyback on the fiduciary compliance efforts in its previous market outreach process that did not result in a sale, even though that process occurred more than a year before the process and negotiations that resulted in the Proposed Transaction.

45. Most notably, the sales process conducted by the Company was non-existent at the time of discussions between Thoma Bravo and the Company. Specifically, the Board of Directors determined that no market outreach was necessary during the autumn of 2017 when the Proposed Transaction was negotiated, on the basis that a previous market outreach and negotiations with potentially interested third parties was conducted by the Company more than a year prior. The Preliminary Proxy is silent as to why the Board felt that no additional market check for potentially interested third parties would be necessary at the relevant time.

46. Inaddition, while the 2016 market outreach conducted by Barracuda saw the Board create a special committee of independent directors to approve any potential strategic alternatives before a vote by the full board, the special committee was dissolved along with the 2016 outreach process in 2016. Notably, when negotiations with Thoma Bravo began in April 2017, and continued throughout summer and autumn of 2017 resulting in multiple bids from Thoma Bravo, the Board did not reconstitute the special committee. Rather, it simply appointed Defendant Kispert as the ‘principal negotiator.” The Preliminary Proxy gives no reason as to why a ‘principal negotiator’ was more desirable than a special committee, or if the powers retained by a ‘principal negotiator’ were the same as those previously held by the special committee.

47. Moreover, itis unclear what role, if any, the relationship between D efendant Perone and Thoma Bravo’s managing partner, Orlando Bravo, had on the eventual Proposed Transaction, known each other for years, including socially”. Despite such information it is unclear if Perone recused himself from discussions regarding the Proposed Transaction, or if he did not, to what level he participated in them. Such a close, personal relationship may have led to a bias in favoring Thoma Bravo above other potentially interested third parties, and could very well be tied to the Board’s willingness to forego a market check at the time of the negotiations of the Proposed Transaction.

48. The Preliminary Proxy is completely silent as to whether the Company entered into any non-disclosure agreements (“NDA”) regarding a potential transaction with Thoma Bravo or any additional third party. The Preliminary Proxy is also silent as the nature of such NDA's, should they exist, including the similarity or dissimilarity of their terms as compared to one another, or if any contained standstill provisions with “don’t-ask, don’t-waive” provisions, and under what conditions, if any, such provisions would fall away.

49, Finally, the Preliminary Proxy identifies an activist fund, Okumus Fund Management, as having filed a Schedule 13G on February 11, 2016 with the SEC announcing an approximate 7.0% ownership share of the Company. While the Preliminary Proxy states that Okumus Fund Management later liquidated its holdings in the Company by September 30, 2016, it is completely silent as to what affect, if any, this activist fund had on the sales process of the Company.

The Proposed Transaction

50. On November 27, 2017, Barracuda issued a press release announcing the Proposed

Transaction. The press release stated, in relevant part:

Campbell, CA — Nov. 27, 2017 — Barracuda Networks, Inc. (NYSE: CUDA), a leading provider of cloud-enabled security and data protection solutions, today announced that it has entered into an agreement to be acquired by leading private equity investment firm Thoma Bravo, LLC in an all-cash transaction valued at $1.6 billion, privately-held company with a continued focus on email security and management, network and application security, and data protection solutions that can be deployed in cloud and hybrid environments.

“We believe the proposed transaction offers an opportunity for us to accelerate our growth with our industry-leading security platform that’s purpose-built for highly distributed, diverse cloud and hybrid environments. We will continue Barracuda’s tradition of delivering easy-to-use, full-featured solutions that can be deployed in the way that makes sense for our customers,” said BJ Jenkins, chief executive officer of Barracuda. “Thoma Bravo has an excellent history of investing in growing security businesses, and this transaction speaks to the value and strength of Barracuda’s security platform, which helps customers protect and manage their networks, applications, and data. I expect that our employees, customers, and partners will benefit from this partnership.”

“Barracuda 1s a proven industry leader, consistently bringing powerful, comprehensive solutions to customers in an increasingly prevalent, hostile, and complex threat environment,” said Seth Boro, a managing partner at Thoma Bravo. “We believe that Barracuda is at the forefront of innovation in several highly strategic areas of the cybersecurity market and are excited to be the company’s partner in the next phase of its growth.”

The proposed transaction is expected to close before Barracuda’s fiscal year end of Feb. 28, 2018, and 1s subject to approval by Barracuda’s shareholders and regulatory authorities, and the satistaction of other customary closing conditions.

Morgan Stanley & Co. LLC is serving as financial advisor to Barracuda, and Wilson Sonsini Goodrich & Rosati, Professional Corporation, is serving as its legal advisors. Financing for the transaction is being provided by Goldman Sachs & Co. LLC, Credit Suisse, and UBS Investment Bank. Goldman Sachs & Co. LLC, Credit Suisse, and UBS Investment Bank are also serving as financial advisors to Thoma Bravo, and Kirkland & Ellis LLP is serving as its legal counsel.

The Inadequate Merger Consideration

51. Significantly, analyst expectations and the Company’s financial prospects and opportunities for future growth establish the inadequacy of the merger consideration.

52. First, the compensation afforded under the Proposed Transaction to Company stockholders significantly undervalues the Company. The proposed valuation does not adequately reflect the intrinsic value of the Company. Moreover, the valuation does not adequately take into consideration how the Company is performing, considering key total revenue increases in many 53. For example, while the Company and Thoma Bravo tout that the Proposed Acquisition contains a high premium compared to Barracuda’s recent stock closing price, financial analysts at The Motley Fool caution stockholders not to believe the hype. In its November 27, 2017 article describing the deal, the financial publication notes that so-called ‘premium’ exists only due to the Proposed Acquisition’s timing coming “on the heels of a big post-earnings plunge” from the previous months.

54. Evidence of the low value of the merger consideration is also seen when compared to recent financial analyst coverage that indicates a high target above the deal price, with JP Morgan Chase & Co valuing the Company’s stock at $35.00 per share as recently as October 11, 2017, or greater than 27.04% above the value being proffered in the Proposed Transaction.

55. Additionally, Barracuda’s future success is extremely likely, given the consistent increases in its total revenues, and execution of its strategic plans as evidenced in its last four quarters of financial reports. Obviously, the opportunity to invest in such a company on the rise is a great coup for Thoma Bravo, however it undercuts the foresight and investment of Plaintiff and all other public stockholders who have done the same.

56. Moreover, post-closure, Barracuda stockholders will be completely cashed out from any and all ownership interest in the Company, forever foreclosing them from receiving any future benefit in their investment as Barracuda continues on its upward financial trajectory.

57. It is clear from these statements and the facts set forth herein that this deal is designed to maximize benefits for Thoma Bravo at the expense of Barracuda and Barracuda stockholders, which clearly indicates that Barracuda stockholders were not an overriding concern in the formation of the Proposed Transaction.

Preclusive Deal Mechanisms

58. The Merger Agreement contains certain provisions that unduly benefit Thoma Bravo by making an alternative transaction either prohibitively expensive or otherwise impossible. Significantly, the Merger A greement contains a termination fee provision that requires Barracuda to pay up to $48.26 million to Thoma Bravo if the Merger A greement is terminated under certain if it consummates any Competing A cquisition Transaction (as defined in the Merger A greement) within 12 months following the termination of the Merger Agreement. The termination fee will make the Company that much more expensive to acquire for potential purchasers. The termination fee in combination with other preclusive deal protection devices will all but ensure that no competing offer will be forthcoming.

59. The Merger A greement also contains a “No Solicitation” provision that restricts Barracuda from considering alternative acquisition proposals by, inter alia, constraining Barracuda’s ability to solicit or communicate with potential acquirers or consider their proposals. Specifically, the provision prohibits the Company from directly or indirectly soliciting, initiating, proposing or inducing any alternative proposal, but permits the Board to consider an unsolicited bona fide “written Company Takeover Proposal” if it constitutes or is reasonably calculated to lead to a “Company Superior Proposal” as defined in the Merger Agreement.

60. Moreover, the A greement further reduces the possibility of a topping offer from an unsolicited purchaser. Here, the Individual Defendants agreed to provide Thoma Bravo information in order to match any other offer, thus providing Thoma Bravo access to the unsolicited bidder’s financial information and giving Thoma Bravo the ability to top the superior offer. Thus, arival bidderis notlikely to emerge with the cards stacked so much in favor of Thoma Bravo.

61. These provisions, individually and collectively, materially and improperly impede the Board’s ability to fulfill its fiduciary duties with respect to fully and fairly investigating and pursuing other reasonable and more valuable proposals and alternatives in the best interests of the Company and its public stockholders.

62. Accordingly, the Company’s true value is compromised by the consideration offered in the Proposed Transaction.

Potential Conflicts of Interest 63. Barracuda insiders are the primary beneficiaries of the Proposed Transaction, not conflicted because they will have secured unique benefits for themselves from the Proposed Transaction not available to Plaintiff and the public stockholders of Barracuda.

64. Of particular note, Defendant Perone, who may have caused the Proposed Transaction to be tainted by bias due to his personal relationship with the Managing Partner of Thoma Bravo, stands to gain over sixty-five million dollars as a result of the consummation of the Proposed Transaction.

65. Certain insiders stand to receive massive financial benefits as a result of the Proposed Transaction. Notably, Company insiders currently own large, illiquid portions of Company stock that will be exchanged for cash upon the consummation of the Proposed Transaction.

66. Furthermore, upon the consummation of the Proposed Transaction, each outstanding Company equity award, option, or restricted stock unit (“RSU”’), will be canceled and converted into the right to receive from the surviving corporation a cash consideration.

67. The below table outlines the large cash payouts to Company insiders in exchange for large illiquid blocks of Company stock, Company equity awards, options, or RSUs that will

result from the consummation of the Proposed Transaction:

RSUs Shares Shares Options Options Held RSUs Held

Name Held (#) Held (3) # ®A) # (9 Total ($)

William D. “BJ” Jenkins, Jr. 310,952 8,566,728 800,000 10,366,600 245,000 6,749,750 25,683,078 Dustin Driggs 9,342 257,372 61,949 880,283 27,063 745,586 1,883,241 Erin Hintz — — — — 12,500 344,375 344,375 Diane C. Honda 8,801 242,468 55,312 755,001 26,5603 731,811 1,729,339 Michael D. Hughes 21,853 602,050 79,004 1,010,552 46,875 1,291,406 2,904,008 Jeffry R. Allen 138,225 3,808,099 72,575 904,952 9,617 204,948 4,977,999 Chet Kapoor 3,810 104,966 — — 8,023 221,033 325,999 John H. Kispert 2,105 57,993 13,591 74,437 9,164 252,468 384,898 Stephen P. Mullaney 3,703 102,018 — — 8,023 221,034 323,051 Michael D. Perone (3) 2,348,121 64,690,734 — — — — 64,690,734 69. The following table sets forth the Golden Parachute compensation for certain

Barracuda directors and officers, as well as their estimated value payable:

Perquisites/ Cash Equity Benefits Total Name ®QA) 9)2AB) (E)]CY) ($) William D. “BJ” Jenkins, Jr. 872,500 17,116,350 24,948 18,013,798 Michael D. Hughes 300,000 2,301,958 24,948 2,626,900

Michael D. Perone (5) — _ _ _

This amount represents the severance payments Messrs. Jenkins and Hughes are entitled to under their offer letter agreements: (i)(a) upon a change in control, Mr. Jenkins is entitled to a “single trigger” lump sum cash severance payment equal to the base salary and bonus paid to him over the twelve (12) months immediately preceding the date of the change in control and (b) upon a termination of his employment for other than for cause, death or disability under his offer letter agreement, Mr. Jenkins is entitled to continued payment of severance for twelve (12) months at the rate equal to his base salary; and (ii) upon a termination of employment other than for cause within 12 months of a change in control, Mr. Hughes is entitled to “double trigger” continued payment of severance of up to twelve (12) months at a rate equal to his then-current base salary.

Upon a “change in control” Mr. Jenkins is entitled to “single trigger” accelerated vesting of his Company Options and RSUs. The amount for Mr. Jenkins represents the product of (i) $27.55 per share, multiplied by (ii) the number of shares subject to Mr. Jenkins’ outstanding in-the-money options (i.e., options to purchase shares of common stock with an exercise price of less than $27.55 per share), and RSUs (and, in the case of the in-the-money options, further reduced by their aggregate exercise price).

Upon a termination of employment other than for “cause” within 12 months of a “change in control”,

Mr. Hughes is entitled to “double-trigger” accelerated vesting of outstanding equity awards that would have vested had he remained employed with Barracuda for an additional 12 months. This amount represents the product of (i) $27.55 per share, multiplied by (ii) the number of shares subject to Mr. Hughes’ outstanding in- the-money options (i.e., options to purchase shares of common stock with an exercise price of less than $27.55 per share), and RSUs (and, in the case of the in-the-money options, further reduced by their aggregate exercise price).

This amount equals the estimated value of the COBRA benefits to which (i) Mr. Jenkins is entitled to upon a termination of his employment for other than for cause, death or disability under his offer letter agreement, and (ii) Mr. Hughes is entitled to upon a termination of employment other than for cause within 12 months of a change in control under his offer letter agreement. These COBRA benefits will become due under the same terms and conditions of the cash severance payments described in footnote 1.

Mr. Perone ceased being the Chief Marketing Officer on June 30, 2017 and an employee of Barracuda on July 31, 2017. Under his Resignation A greement, Mr. Perone is providing consulting services to Barracuda from July 31, 2017 for twelve (12) months and is entitled to $175,000 per quarter, with such amounts payable on October 30, 2017, January 31, 2018, April 30, 2018, and July 31, 2018

70. Itis no wonder that, in light of the extremely lucrative profits for themselves, the

Board allowed the Company to be sold far under its proper value in order to secure a quick sale.

71. Thus, while the Proposed Transaction is not in the best interests of Barracuda’s

stockholders, it will produce lucrative benefits for the Company’s officers and directors. 72. On December 17, 2017, Barracuda filed with the SEC a materially misleading and

incomplete Preliminary Proxy that failed to provide the Company’s stockholders with material

information and/or provides them with materially misleading information critical to the total mix

of information available to the Company’s stockholders concerning the financial and procedural

fairness of the Proposed Transaction.

Omissions and/or Material Misrepresentations Concerning the Sales Process leading up to the Proposed Transaction

73. Specifically, the Preliminary Proxy fails to provide material information

concerning the process conducted by the Company and the events leading up to the Proposed

Transaction. In particular, the Proxy fails to disclose:

d.

The Preliminary Proxy fails to disclose if Defendant Perone recused himself, in any manner, from the sales process(es);

The Preliminary Proxy fails to disclose what impact, if any, the personal relationship between Defendant Perone and Orlando Bravo had on the sales process and/or the Proposed Transaction;

The Preliminary Proxy fails to disclose adequate or specific reasoning for the Board’s decision to not engage in a market check when Thoma Bravo indicated interest in the Company during 2017;

The Preliminary Proxy fails to disclose adequate or specific reasoning for the Board’s decision to not reconvene the special committee when Thoma Bravo indicated interest in the Company during 2017;

The Preliminary Proxy fails to disclose what specific powers Defendant Kispert had 1n acting as the “principal negotiator” with Thoma Bravo, and whether his role was designed to fulfill the role of a special committee;

The Preliminary Proxy fails to disclose the specific existence or nature of any NDA entered into by the Company with any potentially interested third party, including Thoma Bravo, and their provisions, including any standstill would prevent those counterparties from submitting superior offers to acquire the Company, and under what conditions, if any, such conditions would fall away. Without this information, stockholders may have the mistaken belief that, if these potentially interested parties wished to come forward with a superior offer, they are or were permitted to do so, when in fact they are or were contractually prohibited from doing so; and

g. The Preliminary Proxy fails to disclose if the described ‘activist fund’ of Okumus Fund Management made any demands or had input regarding the conduct of the sales process, either before or after the filing of the Schedule

13D on February 11, 2016.

Omissions and/or Material Misrepresentations Concerning Barracuda’s Financial

Projections

74. The Preliminary Proxy fails to provide material information concerning financial projections provided by Barracuda’s management and relied upon by Morgan Stanley in its analyses. Courts have uniformly stated that “projections ... are probably among the most highly- prized disclosures by investors. Investors can come up with their own estimates of discount rates or [] market multiples. What they cannot hope to do is replicate management’s inside view of the company’s prospects.” In re Netsmart Techs., Inc. S’ holders Litig., 924 A .2d 171, 201-203 (Del. Ch. 2007).

75. Significantly, the Preliminary Proxy fails to provide a reconciliation of all non- GAAP to GAAP financial metrics. When a company discloses information in a proxy that includes non-GA AP financial metrics, such as Adjusted EBITDA and Free Cash Flow, the company must also disclose comparable GAAP metrics and a quantitative reconciliation of the non-GAAP metrics to GAAP metrics. See 17 C.F.R. § 244.100 (requiring that the disclosure of material non- GAAP financial measures be accompanied by an identification and presentation of the most directly comparable GAAP measure, and a reconciliation of the non-GAAP measure to the emphasized that disclosure of unreconciled non-GAAP projections is inherently misleading, and has heightened its scrutiny of the use of such projections.

76. Notably, Defendants failed to disclose for fiscal years 2018 to 2021: (i) other expense, net, (ii) provision for (benefit from) income taxes, (iii) acquisition and other charges, (iv) stock-based compensation expense, (v) amortization of intangible assets, including certain losses on disposal and impairment of intangible assets, and (vi) depreciation expense, including certain losses on disposal of fixed assets. This omitted information is necessary for Barracuda stockholders to make an informed decision on whether to vote in favor of the Proposed Transaction.

77. Without accurate projection data presented in the Preliminary Proxy, Plaintiff and other stockholders of Barracuda are unable to properly evaluate the Company’s true worth, the accuracy of Morgan Stanley’s financial analyses, or make an informed decision whether to vote

their Company stock in favor of the Proposed Transaction.

Omissions and/or Material Misrepresentations Concerning the Financial Analyses by Morgan Stanley

78. In the Preliminary Proxy, Morgan Stanley describes its respective fairness opinion and the various valuation analyses performed to render such opinion. However, the descriptions fail to include necessary underlying data, support for conclusions, or the existence of, or basis for, underlying assumptions. Without this information, one cannot replicate the analyses, confirm the valuations or evaluate the fairness opinions.

79. For example, the Preliminary Proxy does not disclose material details concerning the analyses performed by Morgan Stanley in connection with the Proposed Transaction, including (among other things):

a. Public Trading Comparables Analysis b. Precedent Transactions A nalysis

The Preliminary Proxy fails to disclose the following: (i) the transaction by transaction multiples; (i) whether Morgan Stanley performed any benchmarking analysis for the comparable transactions; and (iii) the transaction values for the transactions utilized in the analysis. In addition, with respect to the Precedent Premiums Paid Analysis, (i) why Morgan Stanley used different transactions than for the actual precedent transactions analysis; and (1) the transaction values.

c. Discounted Cash Flow Analysis The Preliminary Proxy fails to disclose the following: (i) the basis for the perpetuity growth rates utilized; (ii) the WA CC determined by Morgan Stanley; (iii) the basis for utilizing discount rates of

9.1% to 11.1%; and (iv) the extrapolations prepared by Morgan Stanley for years 2022-2027.

d. Discounted Equity Value Analysis

The Preliminary Proxy fails to disclose the following: (i) the basis for the selected multiple range of 10.0x — 16.0x; and (ii) the basis for the discount rate of 10.2%.

FIRST COUNT

Claim for Breach of Fiduciary Duties (A gainst the Individual Defendants)

81. Plaintiff repeats all previous allegations as if set forth in full herein.

82. The Individual Defendants have violated their fiduciary duties of care, loyalty and good faith owed to Plaintiff and the Company’s public stockholders.

83. By the acts, transactions and courses of conduct alleged herein, Defendants, individually and acting as a part of a common plan, are attempting to unfairly deprive Plaintiff and other members of the Class of the true value of their investment in Barracuda.

84. As demonstrated by the allegations above, the Individual Defendants failed to exercise the care required, and breached their duties of loyalty and good faith owed to the stockholders of Barracuda by entering into the Proposed Transaction through a flawed and unfair process and failing to take steps to maximize the value of Barracuda to its public stockholders.

85. Indeed, Defendants have accepted an offer to sell Barracuda at a price that fails to reflect the true value of the Company, thus depriving stockholders of the reasonable, fair and adequate value of their shares.

86. Moreover, the Individual Defendants breached their duty of due care and candor by failing to disclose to Plaintiff and the Class all material information necessary for them to make an informed vote on whether to approve the Merger.

87. The Individual Defendants dominate and control the business and corporate affairs of Barracuda, and are in possession of private corporate information concerning Barracuda’s assets, business and future prospects. Thus, there exists an imbalance and disparity of knowledge and economic power between them and the public stockholders of Barracuda which makes it inherently unfair for them to benefit their own interests to the exclusion of maximizing stockholder value.

88. By reason of the foregoing acts, practices and course of conduct, the Individual Defendants have failed to exercise due care and diligence in the exercise of their fiduciary

obligations toward Plaintiff and the other members of the Class. 89. Asaresult of the actions of the Individual Defendants, Plaintiff and the Class will suffer irreparable injury in that they have not and will not receive their fair portion of the value of Barracuda’s assets and have been and will be prevented from obtaining a fair price for their common stock.

90. Unless the Individual Defendants are enjoined by the Court, they will continue to breach their fiduciary duties owed to Plaintiff and the members of the Class, all to the irreparable harm of the Class.

91. Plaintiff and the members of the Class have no adequate remedy at law. Only through the exercise of this Court’s equitable powers can Plaintiff and the Class be fully protected from the immediate and irreparable injury which Defendants’ actions threaten to inflict.

WHEREFORE, Plaintiff demands injunctive relief, in its favor and in favor of the Class, and against the Defendants, as follows:

A. Ordering that this action may be maintained as a class action and certifying Plaintiff as the Class representatives and Plaintiff’s counsel as Class counsel;

B. Enjoining the Proposed Transaction;

C. In the event Defendants consummate the Proposed Transaction, rescinding it and setting 1t aside or awarding rescissory damages to Plaintiff and the Class;

D. Declaring and decreeing that the Merger Agreement was agreed to in breach of the fiduciary duties of the Individual Defendants and is therefore unlawful and unenforceable; E. Directing the Individual Defendants to exercise their fiduciary duties to commence a sale process that is reasonably designed to secure the best possible consideration for Barracuda and obtain a transaction which is in the best interests of Barracuda and its stockholders;

F. Directing defendants to account to Plaintiff and the Class for damages sustained because of the wrongs complained of herein;

G. Awarding Plaintiff the costs of this action, including reasonable allowance for I

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Plaintiff’s attorneys’ and experts’ fees; and H. Granting such other and further relief as this Court may deem just and proper.

DEMAND FOR JURY TRIAL

Plaintiff hereby demands a jury on all issues which can be heard by a jury.

Dated: January 8, 2018 BRODSKY & SMITH, LL.C ) By: ~ |

Evan J. Smith, Esquire

9595 Wilshire Boulevard, Suite 900 Beverly Hills, CA 90212

Phone: (877) 534-2590

Facsimile: (610) 667-9029 esmith@brodsky-smith.com

Attorneys for Plaintiff

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