Item 1.01 Entry into a Material Definitive Agreement.
On May 13, 2022, Turtle Beach Corporation (the “Company”)
entered into a Cooperation Agreement (the “Agreement”) with The
Donerail Group LP (“Donerail”), SCW Capital Management, LP (“SCW”)
and the other parties named therein (collectively with Donerail and
SCW, the “Donerail Group”) related to the composition of the
Company’s board of directors (the “Board”) and certain other
matters.
Pursuant to the Agreement, as promptly as practicable after the
execution of the Agreement, the Board will accept the resignation
of one incumbent director, appoint three new directors
(collectively, the “Initial New Directors”) to serve on the Board
and increase the size of the Board from six to eight members in
connection therewith. The three new directors will be selected from
five of the Donerail Group’s nominees for the Company’s 2022 annual
meeting of stockholders (the “2022 Annual Meeting”), consisting of
Terry Jimenez, Kimberly Kreuzberger, Katherine L. Scherping,
Brian Stech and Michelle D. Wilson. In addition, the Company
agreed to nominate the Initial New Directors for election at the
2022 Annual Meeting. As promptly as practicable after the execution
of the Agreement, the Board will accept the resignation of one
incumbent director effective immediately. Pursuant to the
Agreement, the Company has further agreed to accept the resignation
of one additional director (other than the Initial New Directors)
promptly after 120 days from the date of the Agreement and,
concurrently with such resignation, appoint either William Wyatt or
Wesley Calvert, both affiliated with Donerail, as a director (the
“Fourth New Director”) to fill the vacancy resulting from such
resignation. If either Mr. Wyatt or Mr. Calvert cannot
serve or will not be able to serve on the Board, then Donerail will
propose additional candidates such that the Board will have at
least two candidates to choose from. Promptly after such
appointment of the Fourth New Director, the newly constituted Board
will initiate a process of identifying and appointing another
additional director (the “Fifth New Director,” and collectively
with the Initial New Directors and the Fourth New Director, the
“New Directors”), who will be mutually agreed upon by the Board and
Donerail or otherwise selected pursuant to the terms of the
Agreement, and will increase the size of the Board from eight to
nine members in connection therewith. During the term of the
Agreement the Board will not increase the size of the Board to
greater than nine members without the unanimous consent of all the
members of the Board. Pursuant to the Agreement, if the Company
agrees to nominate the Fourth New Director for election at its 2023
annual meeting of stockholders (the “2023 Annual Meeting”) and the
Fourth New Director agrees to be nominated, then the Company agreed
to also include each of the New Directors and any Replacement
Directors (as defined in the Agreement) in the Company’s slate of
nominees at the 2023 Annual Meeting.
The Board has formed a Strategic Review Committee (the “Strategic
Committee”) for the purpose of overseeing an expanded and
wide-ranging process to identify a buyer for the Company. Pursuant
to the Agreement, the Strategic Committee will be restructured to
be comprised of four directors: two incumbent directors who served
on the Board as of the execution of the Agreement and two Initial
New Directors. Mr. Wyatt will be permitted to be present as an
observer at meetings of the Strategic Committee and, in such
capacity, will have the right to notice of and materials provided
at the meetings of the Strategic Committee and a reasonable
opportunity to review and comment on any public disclosure
regarding the committee or other strategic matters. As a condition
to such observer rights, Mr. Wyatt is required to enter into a
mutually agreed non-disclosure agreement (the “NDA”).
Any breach of the NDA will be deemed a material breach of the
Agreement by the Donerail Group and will entitle the Company to
terminate the Agreement. The Strategic Committee will cease to
exist upon the conclusion of the ongoing assessment.
The Agreement also provides that Donerail will maintain certain
rights to designate candidates to replace the New Director pursuant
to the terms of the Cooperation Agreement should any of the New
Directors cease to serve as a member of the Board during the term
of the Agreement, provided that Donerail will no longer have the
right to designate such replacement candidates if the Donerail
Group ceases to beneficially own, in the aggregate, at least 2.0%
of the outstanding shares of the Company’s common stock.
Pursuant to the Agreement, concurrently with the appointment of the
Initial New Directors, the Board will appoint one of the Initial
New Directors to the Nominating and Governance Committee of the
Board.
The Donerail Group has agreed to withdraw its notice of intent to
nominate director candidates for election at the 2022 Annual
Meeting. The Donerail Group and the Company have each agreed to a
general release of each other and their respective affiliates with
respect to claims arising on or prior to the date of the Agreement.
During the term of the Agreement, the Company and the Donerail
Group have agreed that they will not disparage each other or
initiate any litigation against each other.