December 10, 2020 – The Court hearing the VIVUS Inc. cases issued an order confirming the Debtors' Second Amended Prepackaged Plan [Docket No. 420].

On July 7, 2020, VIVUS, Inc. and three affiliated Debtors (Nasdaq: VVUS; “VIVUS” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case number 20-11779 (Judge Silverstein). At filing, the Debtors, a biopharmaceutical company committed to the development and commercialization of innovative therapies, noted estimated assets of $213.9mn and estimated liabilities of $281.7mn.

Upon emergence, the Debtors will be a wholly-owned subsidiary of IEH Biopharma LLC, an affiliate of Icahn Enterprises.

In a press release heralding the Plan's confirmation, VIVUS stated: "The Bankruptcy Court approved the disclosure statement and solicitation procedures and confirmed the second amended chapter 11 plan of reorganization, which implements the mediated settlement among the Company, Icahn Enterprises Holdings L.P. (dba IEH Biopharma LLC), and the Equity Committee. VIVUS will emerge from chapter 11 as a wholly-owned subsidiary of Icahn Enterprises L.P.

As set forth in a letter filed with the Bankruptcy Court, the Plan has the full support of the official committee of equity security holders appointed in the Company’s chapter 11 case (the 'Equity Committee') and incorporates the terms and conditions of the plan support agreement filed with the Bankruptcy Court on November 5, 2020."

Plan Overview

The Debtors' supplemental memorandum of law in support Plan confirmation [Docket No. 389] provided the following pre-Plan confirmation hearing overview: “The Second Amended Plan incorporates a global settlement among the Debtors, the equity committee appointed at the direction of the Court (the 'Equity Committee') and IEH Biopharma LLC as the sole holder of the Secured Notes and the Convertible Note (the 'Supporting Noteholder'). The revised Existing Stock Settlement resolves the parties’ disputes with respect to confirmation of the plan, the Debtors’ enterprise value and solvency, and recoveries available for stockholders under the Second Amended Plan – which plan the Debtors submit is fair and equitable and otherwise complies with the absolute priority rule and other applicable provisions of Bankruptcy Code. The Second Amended Plan, which has the full support of the Equity Committee, sets a clear path to emergence from chapter 11 under a plan of reorganization that has been pressure-tested by an adversarial process – including Court-ordered mediation – to ensure such plan is in the best interests of all of the Debtors’ stakeholders.”

The Disclosure Statement [Docket No. 14] notes, “Under the terms of the Restructuring Support Agreement, the Supporting Noteholder has agreed, subject to the terms and conditions therein, to support a consensual restructuring of the Debtors’ existing debt obligations in chapter 11 through the Plan (the ‘Restructuring’). The Restructuring will leave the Debtors’ business intact, while reorganizing the Debtors’ existing corporate structure and balance sheet, and will substantially deleverage the Debtors’ capital structure through the implementation of the Restructuring Transactions. As described more fully herein, the Restructuring Transactions provided in the Plan will enable the Debtors to reduce their balance sheet liabilities from approximately $235.43 million in funded debt, not including interest, fees, and other expenses incurred in connection with the Convertible Notes Indenture, to approximately $90,000,000 in funded debt, if the Exit Facility (as defined below) is fully drawn down, which represents an approximate 62% reduction of debt on the Effective Date relative to the Petition Date. This deleveraging will enhance the Debtors’ long-term growth prospects and competitive position and will provide the Debtors with excess capital to invest in and grow their business. 

With respect to the Supporting Unsecured Noteholder’s Convertible Note Claims, under the Plan, in full and final satisfaction, settlement, release, and discharge of, and in exchange for each Allowed Convertible Note Claims, on the Effective Date (i) the holder of the Convertible Note shall receive 100% of the equity in Reorganized VIVUS (the ‘Reorganized VIVUS Equity’) and any fees and expenses (including the Supporting Unsecured Noteholder’s and Convertible Note Trustee’s reasonable attorneys’ and other advisor fees and expenses) shall be paid in accordance with Section 2.5(b) of the Plan.

With respect to the Supporting Secured Noteholder’s Secured Notes Claims, under the Plan, in full and final satisfaction, settlement, release, and discharge of, and in exchange for each Allowed Secured Notes Claims, on the Effective Date (i) the $61,351,000 (sixty-one million, three hundred and fifty-one thousand United States Dollars) principal amount of the Secured Notes Claims shall at the option of the Debtors (and the Supporting Noteholder) or the Reorganized Debtors, as applicable be (a) paid in full in Cash from the proceeds of the Exit Facility or (b) exchanged dollar for dollar for new debt under the Exit Facility and (ii) all unpaid prepayment premium, the applicable payment date fee, and accrued interest (collectively, in an amount not less than $3,173,636.10 (three million, one hundred seventy-three thousand, six hundred and thirty-six United States Dollars and ten cents)), plus interest, reasonable and documented fees, expenses, costs, and other charges of the Secured Notes Trustee and the Supporting Secured Noteholder arising and payable under that certain Secured Notes Indenture shall be paid in full in Cash by the Debtors on the Effective Date from the proceeds of the Exit Facility.

Further, on the Effective Date, IEH will provide the Reorganized Debtors with a new term loan facility in an aggregate principal amount of $90,000,000 in accordance with the Exit Facility Documents (the ‘Exit Facility’).

The proceeds of the Exit Facility will be used by the Reorganized Debtors to (i) effect the Plan, (ii) refinance, in cash or by exchange, the Secured Notes, (iii) fund working capital requirements and (iv) pay fees and expenses related to the transactions contemplated hereunder. The Exit Facility will be provided on the terms and conditions set forth in the Exit Facility Documents, which provide IEH’s commitment to enter into the Exit Facility Agreement to be filed by the Debtors with the Plan Supplement.”

The effect of the Restructuring contemplated by the Plan on the Debtors’ capital structure is summarized as follows:

The following is a summary of classes, claims, voting rights and expected recoveries (defined terms are as in the Plan and/or Disclosure Statement; see also the Liquidation Analysis below):

• Class 1 (“Other Priority Claims”) is unimpaired, presumed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $3.3mn and the estimated recovery is 100%.
• Class 2 (“Other Secured Claims”) is unimpaired, presumed to accept and not entitled to vote on the Plan. The estimated recovery is N/A.
• Class 3 (“Secured Notes Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $65.6mn and the estimated recovery is 100%. On the Effective Date (i) The $61,351,000 (sixty-one million, three hundred and fifty one thousand United States Dollars) principal amount of the Secured Notes Claims shall at the option of the Debtors (and the Supporting Noteholder) or the Reorganized Debtors, as applicable be (a) paid in full in Cash from the proceeds of the Exit Facility or (b) exchanged dollar for dollar for new debt under the Exit Facility; and (ii) All unpaid prepayment premium, the applicable payment date fee, and accrued interest (collectively, in an amount not less than $4,199,135.11 (four million, one hundred and ninety-nine thousand, one hundred and thirty-five United States Dollars and eleven cents)), plus interest, reasonable and documented fees, expenses, costs, and other charges of the Secured Notes Trustee and the Supporting Secured Noteholder arising and payable under that certain Secured Notes Indenture shall be paid in full in Cash by the Debtors on the Effective Date from the proceeds of the Exit Facility.
• Class 4 (“Convertible Note Claims”) is impaired and entitled to vote on the Plan. The aggregate amount of claims is $170.9mn and the estimated recovery is 76%.  In full and final satisfaction, settlement, release, and discharge of, and in exchange for each Allowed Convertible Note Claims, on the Effective Date (i) the holder of the Convertible Note shall receive 100% of the Reorganized VIVUS Equity and (ii) any fees and expenses (including the Supporting Unsecured Noteholder’s and Convertible Note Trustee’s reasonable attorneys’ and other advisor fees and expenses) shall be paid in accordance with Section 2.5(b of the Plan.
• Class 5 (“General Unsecured Claims”) is unimpaired, presumed to accept and not entitled to vote on the Plan. The aggregate amount of claims is $20.2mn and the estimated recovery is 6%.
• Class 6 (“Intercompany Claims”) is unimpaired/impaired, deemed to accept/reject and not entitled to vote on the Plan.
• Class 7 (“Interests”) is impaired, deemed to reject and not entitled to vote on the plan.
• Class 8 (“Subordinated Claims”) is impaired, deemed to reject and not entitled to vote on the plan.

Voting Results

On August 18, 2020, the Debtors’ claims agent notified the Court of the Plan Voting Results [Docket No. 187], which were as follows:

• Class 3 (“Secured Notes Claim”) 1 claims holders, representing $64,524,636.10 in amount and 100% in number, accepted the Plan.
• Class 4 (“Convertible Note Claim”) 1 claims holders, representing $170,901,327.85 in amount and 100% in number, accepted the Plan.

Restructuring Support Agreement

On May 31st , the Debtors entered into a Restructuring Support Agreement (the “RSA”) with Icahn Enterprises Holdings L.P. (dba IEH Biopharma LLC) (the “Supporting Noteholder”) as the sole holder of the Convertible Notes which, inter alia, extended a 30-day grace period with respect to payment of the principal amount of Convertible Notes otherwise due May 1, 2020.  The extension gave the Debtors through June 30th to refinance the Convertible Notes in full or, failing that, until July 13th to file for bankruptcy. The RSA is attached as Exhibit A to Docket No. 17.

In a press release announcing the filing, VIVUS  advised that it: “has completed the solicitation of an in-court prepackaged plan of reorganization, under which IEH Biopharma LLC ('IEH') will take 100% ownership of VIVUS (the 'Prepackaged Plan'), ahead of its July 7, 2020 chapter 11 filing.  The Company solicited IEH―as the only holder of claims in classes entitled to vote on the Prepackaged Plan―and has received IEH’s ballots voting in favor of the Prepackaged Plan in accordance with the amended and restated Restructuring Support Agreement executed by the Company and IEH on July 6, 2020….The Company will request a combined disclosure statement and confirmation hearing for August 17, 2020, subject to the Court’s availability.  Upon confirmation of the Prepackaged Plan, the Company intends to consummate the restructuring transactions shortly thereafter.

Under the Prepackaged Plan, VIVUS stockholders of record as of July 2, 2020 will receive, subject to the satisfaction of certain conditions, a pro rata share of (a) $5 million and (b) a non-transferable contractual contingent value right to earn another $2 per share if the Company meets certain financial milestones in both 2021 and 2022.

The Company expects that its common stock will be delisted from the Nasdaq Global Select Market because of the chapter 11 filing in connection with this transaction.”

Events Leading to the Chapter 11 Filing

In a declaration in support of the Chapter 11 filing (the “Oki Declaration”) [Docket No. 17], Mark A. Oki, the Debtors’ Chief Financial Officer, detailed the events leading to VIVUS’s Chapter 11 filing. The Oki Declaration provides: “The commencement of these Chapter 11 Cases is largely on account of unfavorable timing and circumstances beyond the Company’s control. Beginning in late 2019, the Company began to canvass the market for sources of new capital to refinance the Convertible Note because the Company had insufficient cash on hand to pay the full amount of the outstanding Convertible Note at the Convertible Note Maturity Date (May 1, 2020). 

The Company received several offers from interested parties, engaged in productive negotiations with various financing sources and expected to close a refinancing transaction by mid/late April 2020. However, in mid-March 2020, the COVID-19 global pandemic upended the financial markets and caused the interested parties to significantly reduce the amount of their investment. In addition, on April 1, 2020, the Company announced that it had raised some capital through a direct offering for the sale of issued common stock in VIVUS; however, after initial, productive conversations with IEH—the largest holder of the Convertible Note—the Company suspended its capital raise efforts to pursue a potential transaction with IEH. As a result, the Company’s refinancing efforts came to a standstill. 

With the Convertible Note Maturity Date still looming and insufficient cash on hand to pay the outstanding Convertible Note in full, the Company accelerated its contingency planning and contemplated filing for chapter 11 protection. During this time, the Company entered into active discussions with IEH, as the holder of approximately $170.1 million of the $181.6 million outstanding principal amount of Convertible Notes set to mature on the Convertible Note Maturity Date. As a result of these discussions, both parties came to the understanding that an extension of time was necessary to further negotiate a potential consensual deal. Accordingly, on April 29, 2020, the Company and IEH entered into that certain Material Definitive Agreement with the Convertible Note Trustee and IEH (the ‘Noteholder Agreement’) pursuant to which IEH agreed, among other things, to grant the Company the Grace Period with respect to payment of the principal amount of the Convertible Note through June 1, 2020 (which was later extended through July 13, 2020 pursuant to the Restructuring Support Agreement). The Noteholder Agreement provided IEH with certain exclusive rights with respect to the Debtors’ refinancing efforts. Notwithstanding IEH, all outstanding holders of the Convertible Note were repaid in full on the Convertible Note Maturity to facilitate the Restructuring Transactions. As a result, IEH became the sole holder of the Convertible Note so that the Plan could be negotiated consensually.”

Key Documents

The Disclosure Statement [Docket No. 14] attached the following Exhibits:

• Exhibit A: Plan (separately filed [Docket No. 13])
• Exhibit B: Restructuring Support Agreement 
• Exhibit C: Organizational Chart and Capital Structure 
• Exhibit D: Liquidation Analysis 
• Exhibit E: Financial Projections 
• Exhibit F: Valuation Analysis

The Debtor filed Plan Supplements at Docket Nos. 100 and 114, 213, 367, 376 and 418, and attached the following documents: 

Docket No. 100

• Exhibit A: Form of Contingent Value Rights Agreement

Docket No. 114

• Exhibit A: New Corporate Governance Documents 
  • o   Exhibit A-1: Amended and Restated By-Laws of VIVUS, Inc. 
  • o   Exhibit A-2: Amended and Restated Certificate of Incorporation of VIVUS, Inc.
  • o   Exhibit A-3: Amended and Restated By-Laws of Vivus Digital Health Corporation 
  • o   Exhibit A-4: Amended and Restated Certificate of Incorporation of Vivus Digital Health Corporation 
  • o   Exhibit A-5: Deed of Amendment of the Articles of Association of Vivus B.V. 
  • o   Exhibit A-6: Articles of Vivus Pharmaceuticals Limited 
• Exhibit B: Directors and Officers of Reorganized Debtors 
• Exhibit C: Schedule of Rejected Contracts 
• Exhibit D: Exit Facility Agreement

Docket No. 213

• Exhibit A: Exit Facility Agreement
• Exhibit B: Redline of Exit Facility Agreement Against Initial Exit Facility Agreement

Docket No. 367

• Exhibit A: Draft Form of Royalty Agreement 
• Exhibit B: Draft Form of Liquidating Trust Agreement (which identifies the Liquidating Trust Initial Funding Amount) 
• Exhibit C: Exit Facility Agreement 
  • o   Exhibit C-1: Redline of Revised Exit Facility Agreement (against last version filed at Docket No. 213) 
• Exhibit D: Form of Opt-Out Notice 
• Exhibit E: New Corporate Governance Documents o 
  • o   Exhibit E-1: Amended and Restated By-Laws of VIVUS, Inc. o 
  • o   Exhibit E-2: Amended and Restated Certificate of Incorporation of VIVUS, Inc. 
  • o   Exhibit E-3: Amended and Restated By-Laws of Vivus Digital Health Corporation 
  • o   Exhibit E-4: Amended and Restated Certificate of Incorporation of Vivus Digital Health Corporation  
  • o   Exhibit E-5: Deed of Amendment of the Articles of Association of Vivus B.V. 
  • o   Exhibit E-6: Articles of Vivus Pharmaceuticals Limited 
• Exhibit F: Directors and Officers of Reorganized Debtors 
• Exhibit G: Schedule of Rejected Contracts

Docket No. 418 (revised from No. 376)

• Exhibit A: Form of Royalty Agreement 
  • o   Exhibit A-1: Redline of Form of Royalty Agreement (against the Amended Royalty Agreement) 
• Exhibit B: Form of Liquidating Trust Agreement 
  1. Exhibit B-1: Redline of Form of Liquidating Trust Agreement (against the Amended Liquidating Trust Agreement)

Liquidation Analysis (See Exhibit D to Disclosure Statement [Docket No. 14] for notes)

About the Debtors

According to the Debtors: "VIVUS is a biopharmaceutical company committed to the development and commercialization of innovative therapies that focus on advancing treatments for patients with serious unmet medical needs."

The Oki Declaration adds: "VIVUS is a specialty pharmaceutical company with a twenty-one-year history of advancing innovative clinical therapies to address the therapeutic needs of patients with serious medical conditions and life-limiting diseases. The Company’s current approved therapies are: (i) Qsymia® ('Qsymia'), a chronic weight management therapy; (ii) PANCREAZE®/PANCREASE® MT ('Pancreaze'), a treatment of exocrine pancreatic insufficiency ('EPI') due to cystic fibrosis or other conditions; and (iii) STENDRA® ('Stendra'), an FDA-approved erectile dysfunction ('ED') medication, which has also been approved by the European Commission ('EC') under the trade name SPEDRA ('Spedra'). In addition to the three approved therapies, the Company is also developing a new medication—identified as VI-0106—with the potential to treat patients with pulmonary arterial hypertension ('PAH').

Corporate Structure Chart

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