DEPOMED,INC. (NASDAQ:DEPO) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive
Agreement
On March28, 2017, Depomed,Inc. (the Company) entered into
a Cooperation and Support Agreement (the Cooperation
Agreement) with Starboard Value LP and certain of its
affiliates signatory thereto (collectively, Starboard).
Starboard currently has a beneficial ownership interest in shares
of common stock of the Company (the Common Stock)
totaling approximately 8.8% of the Common Stock issued and
outstanding on the date hereof.
The Company and Starboard have engaged in various constructive
discussions and communications concerning the Companys business,
financial performance, governance and strategic plans, and based
on, among other things, such discussions and communications the
Board of Directors of the Company (the Board) determined
that it is in the best interests of all Company shareholders
(i)to implement certain changes to the governance of the Company
and (ii)to have Starboards support and cooperation as a large
shareholder of the Company in connection with the implementation
of certain of those changes and other matters related therewith,
as provided in the Cooperation Agreement.
Among other things, the Cooperation Agreement reflects that as of
its execution the directors on the Companys Board are Ms.Karen
Dawes, Mr.James Fogarty, Mr.Arthur Higgins, Mr.William McKee,
Mr.Gavin Molinelli, Mr.Louis Lavigne, Mr.Robert Savage, Mr.Peter
Staple and Mr.James Tyree, and Starboard agrees to vote their
shares of Common Stock for the election of the foregoing
directors at the Companys 2017 Annual Meeting of Shareholders.
To enhance the cooperation between the parties, the Cooperation
Agreement also includes certain standstill commitments by
Starboard, until the date that is 15 business days prior to the
deadline for the submission of shareholder nominations for the
Companys 2018 Annual Meeting of Shareholders.
The description of the Cooperation Agreement contained herein is
qualified in its entirety by reference to the full text of the
Cooperation Agreement, a copy of which is filed as Exhibit10.1
and is incorporated herein by reference.
Item 5.02 Departure of Directors or
Certain Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers.
Resignation of James Schoeneck as Chief Executive
Officer
On March28, 2017, the Company announced the resignation of James
Schoeneck as President and Chief Executive Officer of the Company
and as a Director on the Board. The Company and Mr.Schoeneck
entered into a Waiver and Release Agreement (the Waiver and
Release Agreement) in connection with Mr.Schoenecks
resignation. Mr.Schoenecks resignation is not due to a
disagreement with the Company on any matter relating to the
Companys operations, policies or practices.
Under the terms of the Waiver and Release Agreement, the Company
has agreed to pay Mr.Schoeneck (i)$825,000, which is equal to 12
months of his current base salary, payable in equal installments
in accordance with the Companys ordinary payroll practices,
(ii)the full cost of the health insurance benefits provided to
Mr.Schoeneck, his spouse and dependents, as applicable, to the
terms of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended (COBRA) or other applicable law through
the earlier of (a)the end of the 12 month period following the
date of the Waiver and Release Agreement or (b)the date on which
Mr.Schoeneck is no longer eligible for such COBRA or other
benefits under applicable law and (iii)up to six months of
documented, bona fide, outplacement services not to exceed $5,000
per month. to the Waiver and Release Agreement Mr.Schoeneck has
agreed to forfeit all of his outstanding stock options (whether
vested or unvested) and unvested restricted stock units granted
to him under the Companys equity compensation plans (as in effect
from time to time). The Waiver and Release Agreement also
includes a standard a non-disparagement covenant, confidentiality
covenant, as well as a release of claims.
The foregoing description of the Waiver and Release Agreement
is qualified in its entirety by reference to the full text of
the agreement, which will be filed as an exhibit to the
Companys Form10-Q for the quarterly period ending March31,
2017.
Appointment of Arthur Higgins as Chief Executive
Officer
On March28, 2017, the Company entered into a letter agreement
(the Offer Letter) with Arthur Higgins to which
Mr.Higgins has agreed to serve as President and Chief Executive
Officer of the Company, effective immediately. In addition, the
Board has appointed Mr.Higgins to the Board to fill the vacancy
created by Mr.Schoenecks resignation, effective immediately.
Mr.Higgins will serve as the Companys principal executive
officer replacing Mr.Schoeneck in such capacity.
Arthur Higgins, 61, serves as a Senior Advisor to Blackstone
Healthcare Partners, the dedicated healthcare team of The
Blackstone Group, where he focuses on product-based healthcare
acquisitions. Prior to joining The Blackstone Group in 2010,
Mr.Higgins served as Chairman of the Board of Management of
Bayer HealthCare AG (Bayer HealthCare), a developer and
manufacturer of human and animal health products, and Chairman
of the Bayer HealthCare Executive Committee. Prior to joining
Bayer HealthCare in 2004, Mr.Higgins served as Chairman,
President and Chief Executive Officer of Enzon
Pharmaceuticals,Inc. (Enzon) from 2001 to 2004. Prior to
joining Enzon, Mr.Higgins spent 14 years with Abbott
Laboratories, most recently as President of the Pharmaceutical
Products Division from 1998 to 2001. He is a past member of the
Board of Directors of the Pharmaceutical Research and
Manufacturers of America (PhRMA), of the Council of the
International Federation of Pharmaceutical Manufacturers and
Associations (IFPMA) and President of the European Federation
of Pharmaceutical Industries and Associations (EFPIA).
Mr.Higgins is a Director of Ecolab,Inc. and Zimmer Holdings,Inc
and Endo International plc (which he has agreed to resign from
on or before March31, 2017).
The Offer Letter provides Mr.Higgins with an annual base salary
of $800,000 and an annual target cash bonus of 50% of his base
salary. The Offer Letter also provides that the Company will
grant Mr.Higgins stock options that vest over a four-year
period with a value of $1.75 million and restricted stock units
that vest over a four-year period with a value of $1.75
million. The Company will grant such equity awards under its
current equity compensation plan. In addition, the Company will
reimburse Mr.Higgins for reasonable out-of-pocket relocation
expenses incurred by Mr.Higgins in connection with his
relocation to the San Francisco Bay Area so long as he
relocates within 12 months of his start date.
Mr.Higgins also entered into the Companys Management Continuity
Agreement (the Management Continuity Agreement), which
provides, among other things, change in control severance
benefits in the event Mr.Higgins employment is terminated by
the Company other than for cause, death or disability or by him
for good reason (in each case, as defined in the Management
Continuity Agreement), in each case in connection with, or
within the period beginning (a)90 days prior to the effective
date of a change in control of the Company and ending (b)24
months following the effective date of a change in control of
the Company. Upon such a qualifying termination of employment,
Mr.Higgins will be eligible to receive the following payments
and benefits: (i)all outstanding equity awards held by
Mr.Higgins will vest and, if applicable, become exercisable,
and any restrictions on stock or other equity awards made to
Mr.Higgins will lapse; (ii)a lump-sum cash severance payment
equal to two times the higher of (x)the base salary Mr.Higgins
was receiving immediately prior to the change in control or
(y)the base salary Mr.Higgins was receiving immediately prior
to the qualifying termination; (iii)a lump-sum cash severance
payment equal to two times Mr.Higgins target annual bonus;
(iv)continuation of payment by the Company of the full cost of
health insurance benefits provided to Mr.Higgins immediately
prior to the change of control through the earlier of the end
of the 24-month period following the qualifying termination or
until he is no longer eligible for such benefits under
applicable law; and (v)up to three (3)months of outplacement
services not to exceed $5,000 per month.
The Management Continuity Agreement further provides, among
other things, that in the event Mr.Higgins employment is
terminated by the Company other than for cause, death or
disability or by him for good reason (in each case not in
connection with a change in control), Mr.Higgins will receive
(i)three months of base salary, continued health coverage and
equity vesting if the termination is prior to July1, 2017;
(ii)six months of base salary, continued health coverage and
equity vesting if the termination is on or after July1, 2017
and before October1, 2017; (iii)nine months of base salary,
continued health coverage and equity vesting if the termination
is on or after October1, 2017 and before January1, 2018, and
(iv)18 months of base salary, continued health coverage and
equity vesting if the termination is on or after January1,
2018.
There is no arrangement or understanding between Mr.Higgins and
any other persons to which Mr.Higgins was selected as an
officer. There are no family relationships between Mr.Higgins
and any director or executive officer of the Company and no
transactions involving Mr.Higgins that would require disclosure
under Item 404(a)of Regulation S-K.
The foregoing descriptions of the Offer Letter and the
Management Continuity Agreement are qualified in their entirety
by reference to the full text of the agreements, which will be
filed as exhibits to the Companys Form10-Q for the quarterly
period ending March31, 2017.
Resignation of Samuel Saks and David Zenoff from the
Board
On March28, 2017, each of Dr.Samuel Saks, M.D and Mr. David
Zenoff, D.B.A. resigned as directors on the Board, effective
immediately. Neither Dr.Sakss nor Mr.Zenoffs resignation is due
to a disagreement with the Company on any matter relating to
the Companys operations, policies or practices.
Appointment of Gavin Molinelli and William McKee to the
Board
On March28, 2017, the Board appointed Mr.Gavin Molinelli and
Mr.William McKee to the Board.
Mr.Molinelli, 33, is a Partner of Starboard Value LP. Prior to
Starboards formation in 2011, as part of the spin-off,
Mr.Molinelli was a Director and an Investment Analyst at Ramius
LLC for the funds that comprised the Value and Opportunity
investment platform. Prior to joining Ramius in October2006,
Mr.Molinelli was an analyst in the Technology Investment
Banking group at Banc of America Securities LLC. Mr.Molinelli
was formerly on the board of Wausau Paper Corp and Actel Corp.
Mr.Molinelli received a B.A. in Economics from Washington and
Lee University.
Mr.McKee, 55, currently serves as the Chief Executive Officer
of MBJC Associates, LLC, a business consulting firm. Mr.McKee
served as Chief Operating Officer and Chief Financial Officer
for EKR Therapeutics,Inc. (EKR), from July2010 until
June2012 when EKR was sold to Cornerstone Therapeutics Inc.
Until March2010, Mr.McKee served as the Executive Vice
President, Chief Financial Officer and Treasurer of Barr
Pharmaceuticals, LLC, a subsidiary of Teva Pharmaceutical
Industries Limited (Teva), and the successor entity to
Barr Pharmaceuticals,Inc. (Barr), an NYSE listed
company, which was acquired by Teva in December2008. Mr.McKee
was also Executive Vice President and Chief Financial Officer
of Barr prior to its acquisition by Teva, after having served
in positions of increasing responsibility at Barr from 1995
until its acquisition. Prior to joining Barr, Mr.McKee served
as Director of International Operations and Vice
President-Finance at Absolute Entertainment,Inc. from June1993
until December1994. From 1990 until June1993, Mr.McKee worked
at Gramkow Carnevale, CPAs, and from 1983 until 1990, he worked
at Deloitte Touche. Mr.McKee received his Bachelor of Business
Administration degree from the University of Notre Dame.
Mr.McKee currently serves as a director of Cerulean Pharma Inc.
and Agile Therapeutics,Inc. and previously served on the board
of directors of Auxilium Pharmaceuticals,Inc.
Other than as described in Item 1.01 above and this Item 5.02,
there are no arrangements or understandings between
Messrs.Higgins, McKee and Molinelli and any other persons to
which they were selected as directors.
In connection with service on the Board, each of Messrs.McKee
and Molinelli is entitled to receive the compensation and
equity awards applicable to all of the Companys non-employee
directors, as more particularly described in the Companys
Non-Employee Director Compensation and Grant Policy (the
Policy), filed as Exhibit99.2 to the Companys Current
Report on Form8-K filed with the Securities Exchange Commission
on May23, 2014, and summarized in the Companys 2016 proxy
statement filed with the Securities and Exchange Commission on
April14, 2016. In accordance with the Policy, in connection
with initial appointment to the Board, each of Messrs.McKee and
Molinelli received an automatic grant of an option having a
value equal to $180,000 (calculated using the Black-Scholes
Valuation method based on assumptions consistent with the
methodology used in the Companys financial statements and with
an exercise price equal to the Fair Market Value (as defined in
the 2014 Plan) of the Companys common stock as of the date of
grant) that vests in 36 equal monthly installments. Each of
Messrs.McKee and Molinelli will also receive the cash
compensation and annual equity awards payable to non-employee
directors to the Policy. The Company also intends to enter into
its standard form of indemnification agreement with each of
Messrs.McKee and Molinelli.
There are no transactions involving neither Mr.McKee nor
Mr.Molinelli that would require disclosure under Item 404(a)of
Regulation S-K.
Appointments to Board Committees
On March28, 2017, the Board appointed Mr.Lavigne (Chairman),
Ms.Dawes, Mr.Staple and Mr.Tyree to comprise the Audit
Committee of the Board.
On March28, 2017, the Board appointed Mr.Savage (Chairman),
Mr.McKee, Mr.Molinelli and Mr.Staple to comprise the
Compensation Committee of the Board.
On March28, 2017, the Board appointed Mr.Molinelli (Chairman),
Mr.Lavigne, Mr.McKee and Mr.Savage to comprise the Nominating
and Corporate Governance Committee of the Board.
Appointment of James Fogarty as Chairman of the Board
On March28, 2017, Mr.Peter Staple resigned as independent
Chairman of the Board and Mr.James Fogarty was appointed
independent Chairman of the Board. Mr.Staple will continue to
serve as a director on the Board.
Item 8.01 Other Events
On March28, 2017, the Company issued a press release announcing
certain of the matters described in this Current Report on
Form8-K. A copy of this press release is attached hereto as
Exhibit99.1 and is incorporated by reference.
Item 9.01 Financial Statements and
Exhibits
(d) The following exhibits are filed as a part of this Report.
|
ExhibitNo. |
|
Description |
|
10.1 |
Cooperation and Support Agreement, dated March28, 2017, |
|
|
99.1 |
Press Release, dated March28, 2017. |
About DEPOMED, INC. (NASDAQ:DEPO)
Depomed, Inc. is a specialty pharmaceutical company. The Company focuses on pain and other central nervous system (CNS) conditions. Its products include NUCYNTA ER (tapentadol extended release tablets), NUCYNTA IR (NUCYNTA) (tapentadol), Gralise (gabapentin), CAMBIA (diclofenac potassium for oral solution), Zipsor (diclofenac potassium) and Lazanda (fentanyl). Its NUCYNTA ER (tapentadol extended release tablets) is a product for the management of pain severe enough to require daily long term opioid treatment, including neuropathic pain associated with diabetic peripheral neuropathy in adults, and its NUCYNTA (tapentadol) is a product for the management of moderate to severe acute pain in adults. Its Gralise (gabapentin) is a once-daily product for the management of postherpetic neuralgia. Its CAMBIA (diclofenac potassium for oral solution) is a product for the acute treatment of migraine attacks. DEPOMED, INC. (NASDAQ:DEPO) Recent Trading Information
DEPOMED, INC. (NASDAQ:DEPO) closed its last trading session down -0.67 at 14.23 with 1,777,969 shares trading hands.
