Item 1.01 Entry into a Material Definitive Agreement.
Settlement Agreement
On January 18, 2022, Metuchen Pharmaceuticals LLC ("Metuchen"), a wholly owned
subsidiary of Petros Pharmaceuticals, Inc. (the "Company"), and VIVUS LLC, a
Delaware limited liability company and formerly VIVUS, Inc. ("VIVUS") entered
into a Settlement Agreement (the "Settlement Agreement") relating to the
settlement of certain previously disclosed disputes between VIVUS and Metuchen
that arose in connection with the performance of the Commercial Supply
Agreement, dated September 30, 2016 (the "Supply Agreement"), which was later
terminated effective September 30, 2021, related to the minimum purchase
requirements under the Supply Agreement in 2018, 2019 and 2020 and certain
reimbursement rights asserted by a third-party retailer in connection with
quantities of the Company's Stendra® product that were delivered to the
third-party retailer and later returned.
In connection with the Settlement Agreement, Metuchen retains approximately $7.3
million of active pharmaceutical ingredient ("API") inventory (which represents
the 2018 and 2019 minimum purchase requirements mentioned above) in conjunction
with forgiveness of $9,622,430 of current liabilities relating to returned goods
and minimum purchase commitments. The API retained is sole sourced from VIVUS
and is estimated to provide adequate supply for the foreseeable future. In
exchange for the API and reduction of current liabilities, Metuchen has agreed
to execute an interest-bearing promissory note (the "Note") in favor of VIVUS in
the principal amount of $10,201,758.04. The parties have also agreed to enter
into a Security Agreement (the "Security Agreement") to secure the obligations
of Metuchen under the Note.
Metuchen and VIVUS are parties to the License and Commercialization Agreement
dated as of September 30, 2016 (the "Original License Agreement"). Pursuant to
the Settlement Agreement, the parties also executed an Amendment No. 1 to the
Original License Agreement (the "Amendment" and, together with the Original
License Agreement, the "License Agreement"). The Amendment provides that VIVUS
shall retain its co-exclusive right along with the Company to develop,
manufacture, commercialize and otherwise exploit the Stendra® product in the
territory covered by the License Agreement, provided that VIVUS shall not
exercise such right unless an Event of Default occurs under the Settlement
Agreement, the Note, or the Security Agreement. The Amendment further provides
that, upon such an Event of Default, the License Agreement will terminate and
VIVUS will have the right to use all regulatory documentation and submissions of
Metuchen and other rights as may be necessary for VIVUS to exercise its right to
exploit the Stendra® product. The Amendment also acknowledges that Metuchen has
assigned its rights under the License Agreement to VIVUS as a "financing entity"
and provides that such rights may be assigned in certain circumstances.
In addition to the payments to be made in accordance with the Note, Metuchen
further agreed in the Settlement Agreement to (i) grant to VIVUS a right of
first refusal to provide certain types of debt and convertible equity (but not
preferred equity) financing issued by or to Metuchen (including any subsidiaries
and intermediaries) until the Note is paid in full, and (ii) undertake to make
certain regulatory submissions to effectuate VIVUS' ability to exercise its
rights under the License Agreement. Upon Metuchen's satisfaction of certain
regulatory submissions and making a prepayment of the obligations under the Note
in the amount of $900,000 and a payment of $1,542,904 with respect to the
purchase order made in 2021 to VIVUS, VIVUS agreed to release 50% of the
quantity of bulk Stendra® tablets under Metuchen's existing open purchase order
(the "Open Purchase Order") being held by VIVUS, which represents approximately
a six month supply of inventory. VIVUS also agreed to release the remaining 50%
of the quantity of bulk Stendra® tablets under the Open Purchase Order upon
Metuchen's satisfaction of the remaining regulatory submission requirements (not
to exceed 180 days from the date of the Settlement Agreement). The Settlement
Agreement stipulated that VIVUS is the sole owner of all active pharmaceutical
ingredient (API) unless or until such time as certain quantities of API are
shipped to Metuchen upon the fulfillment of the aforementioned payment
conditions.
Promissory Note and the Security Agreement
Under the terms of the Note, the principal amount of $10,201,758.04 is payable
in consecutive quarterly installments beginning on April 1, 2022 through
January 1, 2027, on the dates and in the respective amounts set forth in
Schedule A to the Note. Interest on the principal amount will accrue at a rate
of 6% per year until the principal is repaid in full and is due and payable, in
arrears, on the first day of each January, April, July, and October of each
calendar year, commencing on April 1, 2022.
Under the terms of the Note, Metuchen may prepay the Note, in whole or in part,
at any time, with no premium or penalty. In the event that Metuchen defaults
under the Security Agreement, all principal outstanding under the Note at the
time of the default will bear interest at a rate of 9% per year until the full
and final payment of all principal and interest under the Note (regardless of
whether any default is waived or cured). If the Note is placed in the hands of
any attorney for collection, or if it is collected through any legal proceeding
at law or in equity or in bankruptcy, receivership, or other court proceedings,
Metuchen will also be required to pay all costs of collection including, but not
limited to, court costs and attorneys' fees.
Pursuant to the Security Agreement, dated January 18, 2022, Metuchen granted to
VIVUS a continuing security interest in all of its Stendra® API and products and
its rights under the License Agreement. The Security Agreement contains
customary events of default.
The description of terms of the Settlement Agreement, the Note, the Security
Agreement, and the Amendment set forth herein do not purport to be complete and
are qualified in their entirety by the full text of the such documents, which
are attached hereto as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, and
incorporated herein by reference.
Creation of a Direct Financial Obligation or an Obligation under an
Item 2.03 Off-Balance Sheet Arrangement of a Registrant.
The information contained in Item 1.01 of this Current Report on Form 8-K in
relation to the entry into the Settlement Agreement, the Note, and the Security
Agreement is incorporated herein by reference.
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