Item 1.01. Entry into a Material Definitive Agreement.
The information set forth below in Item 1.03 in this Current Report on Form 8-K
under the caption "Restructuring Support Agreement" is incorporated by reference
into this Item 1.01.
Item 1.03. Bankruptcy or Receivership.
Voluntary Petition for Reorganization
On July 7, 2020 (the "Petition Date"), VIVUS, Inc. ("VIVUS," the "Company" or
"we") and all of its subsidiaries (the "Filing Subsidiaries and, together with
VIVUS, the "Debtors") filed voluntary petitions (collectively, the "Bankruptcy
Petitions") under chapter 11 ("Chapter 11"), of Title 11 of the U.S. Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"). The Debtors have filed a motion to have their
Chapter 11 cases (collectively, the "Chapter 11 Cases") jointly administered
under the caption In re VIVUS, Inc., et al. Each Debtor will continue to operate
its business and manage its properties as a "debtor in possession" under the
jurisdiction of the Bankruptcy Court and in accordance with the applicable
provisions of the Bankruptcy Code and the orders of the Bankruptcy Court.
On the Petition Date, the Company also filed the Joint Prepackaged Plan of
Reorganization of the Debtors (as may be amended, restated, amended and
restated, supplemented, or otherwise modified from time to time, the "Plan") and
Disclosure Statement thereto, which sets forth the proposed comprehensive
financial restructuring of the Company aimed to address the Company's funded
debt obligations and capital structure by deleveraging the Company's balance
sheet for longer-term viability upon the effective date of the Plan (the
"Effective Date"). Among other things, the Plan contemplates a settlement with
holders of existing equity interests in VIVUS as of the record date that satisfy
certain conditions set forth in the Plan, pursuant to which such holders of
VIVUS equity would receive their pro rata portion of $5 million and a
non-transferable contractual contingent value right to earn an additional $2 per
share if the Company meets certain financial milestones in 2021 and 2022. Under
the Plan, all VIVUS equity interests would be cancelled and the holders thereof
would neither receive nor retain any property on account thereof. The Plan also
contemplates the payment in full of general unsecured claims, other priority
claims, and other secured claims. The foregoing description of the Plan and the
Disclosure Statement thereto is qualified in its entirety by reference to the
full-text of the Plan, the Disclosure Statement and Amendment No. 1 to the
Disclosure Statement, which are attached hereto as Exhibits 99.1, 99.2 and 99.3,
respectively.
On the Petition Date, the Debtors filed a number of motions with the Bankruptcy
Court generally designed to stabilize their operations and facilitate the
Debtors' transition into Chapter 11. Certain of these motions seek approval from
the Bankruptcy Court for various forms of customary relief, including authority
to: continue using their existing cash management system; use cash collateral;
maintain and administer customer and sales programs; pay prepetition wages,
compensation and employee benefits; pay vendor claims in the ordinary course,
and pay prepetition tax, utilities and insurance obligations.
The Company's existing NOL Rights Plan will remain in place until completion of
the trading of its shares. The NOL Rights Plan will continue to provide, subject
to certain exceptions that if any person or group acquires 4.9% or more of the
Company's outstanding common stock, there would be a triggering event
potentially resulting in significant dilution in the voting power and economic
ownership of that person or group.
In addition, the Debtors filed a motion (the "NOL Motion") seeking entry of an
interim and final order establishing certain procedures (the "Procedures") with
respect to direct and indirect trading and transfers of stock of the Company,
and seeking related relief, in order to protect the potential value of the
Company's net operating loss carryforwards and certain other tax benefits of the
Company.
If the NOL Motion is granted by the Bankruptcy Court and the Procedures
approved, in certain circumstances, the Procedures would, among other things,
restrict transactions on or after today's date, July 7, 2020, involving, and
require notices of the holdings of and proposed transactions by, any person or
group of persons that is or, as a result of such a transaction, would become, a
Substantial Stockholder of the common stock issued by VIVUS (the "Common
Stock"). For purposes of the Procedures, a "Substantial Stockholder" is any
person or, in certain cases, group of persons that beneficially own, directly or
indirectly (and/or owns options to acquire) at least 800,000 shares of Common
Stock (representing approximately 4.5% of all issued and outstanding shares of
Common Stock as of April 30, 2020). If the Procedures are approved, any
prohibited transfer of stock of the Company on or after today's date, July 7,
2020, would be null and void ab initio and may lead to contempt, compensatory
damages, punitive damages, or sanctions being imposed by the Bankruptcy Court. A
direct or indirect holder of, or prospective holder of, stock issued by the
Debtors should consult the NOL Motion and Procedures proposed therein.
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The Debtors also requested authority to, among other things, schedule a combined
hearing to consider approval of the Plan and Disclosure Statement in light of
the prepackaged structure of the Chapter 11 Cases. The Debtors further requested
authority to employ Stretto as its claims and noticing agent.
All of the motions filed by the Debtors with the Bankruptcy Court, including the
NOL Motion and Procedures, are available without charge on the website
maintained by Stretto at https://cases.stretto.com/vivus.
Restructuring Support Agreement
. . .
Item 2.04. Triggering Events That Accelerate or Increase a Direct Financial
Obligation or an Obligation under an Off-Balance Sheet Arrangement.
The filing of the Bankruptcy Petitions constituted an event of default that
accelerated the Company's obligations under or in respect of a number of
instruments and agreements relating to direct financial obligations of the
Debtors, including:
· Indenture dated as of May 21, 2013, by and between VIVUS and Deutsche Bank
Trust Company Americas, as trustee, with respect to an aggregate outstanding
amount of not less than approximately $169.2 million of convertible senior
notes, plus accrued and unpaid interest (including default interest accrued
since May 1, 2020), reasonable and documented fees, expenses, costs and other
charges thereon.
· Indenture, dated as of June 8, 2018 and as amended or supplemented from time to
time, among the Registrant, the guarantors from time to time party thereto and
U.S. Bank National Association, as trustee and collateral agent with respect to
an aggregate outstanding amount of not less than approximately $64.5 million of
senior secured notes, plus interest, reasonable and documented fees, expenses,
costs and other charges thereon.
Pursuant to Section 362 of the Bankruptcy Code, the filing of the Bankruptcy
Petitions automatically stayed most actions against the Debtors, including
actions to collect indebtedness incurred prior to the Petition Date or to
exercise control over the Debtors' property. Subject to certain exceptions under
the Bankruptcy Code, the filing of the Debtors' Chapter 11 Cases also
automatically stayed the continuation of most legal proceedings or the filing of
other actions against or on behalf of the Debtors or their property to recover
on, collect or secure a claim arising prior to the Petition Date or to exercise
control over property of the Debtors' bankruptcy estates, unless and until the
Bankruptcy Court modifies or lifts the automatic stay as to any such claim.
Notwithstanding the general application of the automatic stay described above,
governmental authorities may determine to continue actions brought under their
police and regulatory powers.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
New Director
On July 6, 2020, the board of directors of the Company (the "Board") appointed
Jill Frizzley as a director of the Company. The Board has determined that Ms.
Frizzley is "independent" of the Company and its management pursuant to the
standards set forth by the SEC and the applicable standards set by the Nasdaq
listing rules. Ms. Frizzley and the Company entered into that certain
Independent Director Agreement, dated as of July 2, 2020 (the "Independent
Director Agreement"), pursuant to which Ms. Frizzley agreed to serve as an
independent director on the Board. The Independent Director Agreement provides
for a monthly fee of $40,000, without proration, which was paid to Ms. Frizzley
upon the execution of the agreement and will be paid on the first of the months
thereafter, $5,000 for each day that Ms. Frizzley is deposed, appears as a
witness in court or attends a mediation or settlement meeting, or otherwise
spends more than four hours addressing matters that are outside of routine
matters of the Board, and reimbursement of reasonable expenses) subject to a
$5,000 limit without prior written consent of the Company. The Independent
Director Agreement provides for a two-month term that may be extended by mutual
agreement of the parties; provided, however, that Ms. Frizzley may resign or be
removed at any time, subject to the Company's organizational documents, and
certain customary indemnification and confidentiality provisions.
Except as disclosed in this Current Report on Form 8-K, there were not any
arrangements or understandings between Ms. Frizzley and any other persons
pursuant to which she was elected as a director. There are no family
relationships between Ms. Frizzley and any director or executive officer of the
Company, and she has no direct or indirect material interest in any transaction
required to be disclosed pursuant to Item 404(a) of the SEC's Regulation S-K.
The foregoing summary of the Independent Director Agreement is qualified in its
entirety by reference to the full text of the agreement, a copy of which will be
filed with the Company's Quarterly Report on Form 10-Q for the second quarter of
2020 (the "Q2 2020 10-Q").
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Severance Plan and Agreement Amendments
In connection with the filing of the Chapter 11 Cases, on July 6, 2020, VIVUS
amended its Change in Control and Severance Plan and Summary Plan Description
(the "Severance Plan Amendment") and entered into amendments to the Third
Amended and Restated Change of Control and Severance Agreements ("Amended
Severance Agreements"), with each of its named executive officers, including
John P. Amos, Mark K. Oki, John L. Slebir and Santosh T. Varghese, and certain
other executive officers. Both the Severance Plan Amendment and the Amended
Severance Agreements amend the definition of "Change of Control" to clarify that
certain events, including direct or indirect acquisitions of equity securities
or assets of the Company by IEH Biopharma or its affiliates, a merger of the
Company with IEH Biopharma or its affiliate, or the replacement of VIVUS
directors by directors appointed by IEH Biopharma or its affiliates, will not
constitute a change of control.
Item 7.01. Regulation FD Disclosure
On July 7, 2020, the Company issued a press release announcing the filing of the
Chapter 11 Cases a copy of which is attached hereto as Exhibit 99.4.
As disclosed above, the Debtors also requested authority to employ Stretto as
its claims and noticing agent. If approved as such, documents filed with the
Bankruptcy Court and other documents related to the court-supervised process
would be available on a publicly available website at
https://cases.stretto.com/vivus.
The information set forth in Item 7.01 of this Form 8-K, including Exhibit 99.4,
is being furnished and shall not be deemed "filed" for purposes of Section 18 of
the Exchange Act, or otherwise subject to the liabilities of such section. The
information in Item 7.01 of this Form 8-K shall not be incorporated by reference
into any filing under the Securities Act of 1933, as amended, or the Exchange
Act, regardless of any incorporation by reference language in any such filing.
Cautionary Note Regarding Forward-Looking Statements
Certain statements in this Current Report on Form 8-K are forward-looking within
the meaning of the Private Securities Litigation Reform Act of 1995 and other
provisions of the federal securities laws. Such forward-looking statements are
based on current expectations, management's beliefs and certain assumptions made
by the Company's management. These statements may be identified by the use of
forward-looking words such as "will," "shall," "may," "believe," "expect,"
"forecast," "intend," "anticipate," "predict," "should," "plan," "likely,"
"opportunity," "estimated," and "potential," the negative use of these words or
other similar words. All forward-looking statements included in this document
are based on our current expectations, and we assume no obligation to update any
such forward-looking statements except to the extent otherwise required by law
or the Bankruptcy Court.
Important factors that could cause actual results to differ materially from
those in the forward-looking statements include, but are not limited to: the
transactions contemplated in the Amended RSA, including the filing of the
Bankruptcy Petitions and reorganization of the Company under the Chapter 11
Cases, are subject to certain conditions or other factors, some of which may be
outside of the Company's control, which may include: risks and uncertainties
relating to the Chapter 11 Cases, including but not limited to, the Company's
ability to obtain Bankruptcy Court approval with respect to motions filed by the
Debtors in the Chapter 11 Cases (including the cash collateral motion and NOL
Motion), the effects of the Chapter 11 Cases on the Company and on the interests
of various constituents, Bankruptcy Court rulings in the Chapter 11 Cases and
the outcome of the Chapter 11 Cases in general, the length of time the Company
will operate under the Chapter 11 Cases, risks associated with third-party
motions in the Chapter 11 Cases, the potential adverse effects of the Chapter 11
Cases on the Company's liquidity or results of operations and increased legal
and other professional costs necessary to execute the Company's reorganization;
the Company's ability to implement and realize any anticipated benefits of
Chapter 11 bankruptcy protection; the Company's ability to operate as a going
concern; compliance with the applicable covenants of the Amended RSA; the timely
negotiation of terms, conditions and provisions of exit financing; the ability
of the Company to obtain requisite support for the Plan; the ability of the
Company to execute any plan of reorganization, including the Plan, in the manner
and on the timeline as set forth under the Plan, including the execution of the
settlement with existing holders of equity; the Company's debt profile and risks
related to its capital structure; the effects of disruption from any
reorganization and restructuring making it more difficult to maintain business,
financing and operational relationships, to obtain and maintain normal terms
with customers, suppliers and service providers and to retain key executives and
to maintain various licenses and approvals necessary for the Company to conduct
its business; the risk of acceleration of the Company's debt obligations;
trading price and volatility of VIVUS common stock and its continued listing on
the Nasdaq Global Select Market; and the widespread domestic and global impact
of the COVID-19 pandemic on the Company's business, results of operations,
customers, suppliers and other counterparties, and employees; as well as other
risk factors set forth in the Company's most recent Annual Report on Form 10-K
filed with the SEC on March 3, 2020 and amended on April 29, 2020, and
subsequent filings with the SEC, including but not limited to this Form 8-K.
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These risks and uncertainties could cause actual results to differ materially
from those referred to in these forward-looking statements. The reader is
cautioned not to rely on these forward-looking statements. Investors should read
the risk factors set forth in the Company's Form 10-Q for the first quarter
ended March 31, 2020, as filed on May 6, 2020, Form 10-K for the year ended
December 31, 2019, as filed on March 3, 2020, as amended by the Form 10-K/A
filed on April 29, 2020, and other reports filed with, or furnished to, the SEC
under the Exchange Act.
The above factors, risks and uncertainties are difficult to predict, contain
uncertainties that may materially affect actual results and may be beyond the
Company's control. New factors, risks and uncertainties emerge from time to
time, and it is not possible for management to predict all such factors, risks
and uncertainties. Although the Company believes that the assumptions underlying
the forward-looking statements contained herein and in the confidential
information are reasonable, any of the assumptions could be inaccurate, and
therefore any of these statements may prove to be inaccurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the Company's objectives
and plans will be achieved. These forward-looking statements speak only as of
the date such statements were made or any earlier date indicated, and the
Company does not undertake any obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events, changes in underlying assumptions or otherwise, unless otherwise
required by law or the Bankruptcy Court.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description
10.1 Amended RSA, dated July 6, 2020.
99.1 Joint Prepackaged Plan of Reorganization.
99.2 Disclosure Statement.
99.3 Amendment No. 1 to Disclosure Statement
99.4 Press Release dated July 7, 2020.
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