Exhibit 10.1

 

SECOND AMENDED AND RESTATED

CHANGE OF CONTROL AND SEVERANCE AGREEMENT

 

This Second Amended and Restated Change of Control and Severance Agreement (the
“Agreement”) is made and entered into effective as of        , 2015, by and
between              (the “Employee”) and VIVUS, Inc., a Delaware corporation
(the “Company”).  [The Agreement amends, restates and replaces the Amended and
Restated Change of Control and Severance Agreement previously entered into
between Employee and the Company, which was dated            , 2013 (the “Prior
Agreement”).] [The Agreement supersedes and replaces the Participation Agreement
previously entered into between Employee and the Company on           with
respect to the Change in Control and Severance Plan (the “Prior Agreement”).] 
[Remove bracketed sentence that is not applicable to Employee.]

 

RECITALS

 

A.                                    It is expected that another company or
other entity may from time to time consider the possibility of acquiring the
Company or that a change in control may otherwise occur, with or without the
approval of the Company’s Board of Directors (the “Board”).  The Board
recognizes that such consideration can be a distraction to the Employee and may
cause the Employee to consider alternative employment opportunities.  The Board
has determined that it is in the best interests of the Company and its
shareholders to assure that the Company will have the continued dedication and
objectivity of the Employee, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined below) of the Company.  The Board
also recognizes that circumstances may arise whereby the Employee’s employment
is terminated other than in connection with a Change of Control.

 

B.                                    The Board believes that it is in the best
interests of the Company and its shareholders to provide the Employee with an
incentive to continue his or her employment with the Company.

 

C.                                    The Board believes that it is imperative
to provide the Employee with certain benefits upon termination of the Employee’s
employment in connection with a Change of Control, which benefits are intended
to provide the Employee with financial security and provide sufficient income
and encouragement to the Employee to remain with the Company notwithstanding the
possibility of a Change of Control.

 

D.                                    To accomplish the foregoing objectives,
the Board has directed the Company, upon execution of this Agreement by the
Employee, to agree to the terms provided in this Agreement.

 

E.                                     Certain capitalized terms used in the
Agreement are defined in Section 3 below.

 

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In consideration of the mutual covenants herein contained, and in consideration
of the continuing employment of Employee by the Company, the parties agree as
follows:

 

1.                                      At-Will Employment.  The Company and the
Employee acknowledge that the Employee’s employment is and shall continue to be
at-will, as defined under applicable law.  If the Employee’s employment
terminates for any reason, the Employee shall not be entitled to any severance
payments or benefits, other than as provided by this Agreement.  The terms of
this Agreement shall terminate upon the earlier of (i) the date that all
obligations of the parties hereunder have been satisfied, or (ii) eighteen (18)
months after a Change of Control (provided, however, that if Employee becomes
entitled to benefits under this Agreement during the term of this Agreement, the
Agreement will not terminate until all of the obligations of the parties hereto
with respect to this Agreement have been satisfied).  A termination of the terms
of this Agreement pursuant to the preceding sentence shall be effective for all
purposes, except that such termination shall not affect the payment or provision
of compensation or benefits on account of a termination of employment occurring
prior to the termination of the terms of this Agreement.

 

2.                                      Severance Benefits.

 

(a)                                 Termination Following A Change of Control. 
Subject to Sections 4, 7 and 8 below, if the Employee’s employment with the
Company is terminated at any time within three (3) months prior to or eighteen
(18) months after a Change of Control (the “Protection Period”), then the
Employee shall be entitled to receive severance benefits as follows:

 

(i)                                     Voluntary Resignation; Termination For
Cause. If the Employee voluntarily resigns from the Company (other than for Good
Reason (as defined below)) or if the Company terminates the Employee’s
employment for Cause (as defined below), then the Employee shall not be entitled
to receive severance payments.  The Employee’s benefits will be terminated under
the Company’s then existing benefit plans and policies in accordance with such
plans and policies in effect on the date of termination or as otherwise
determined by the Board.

 

(ii)                                  Involuntary Termination.  If the
Employee’s employment is terminated (x) by the Company other than for Cause and
other than due to Employee’s death or Disability, or (y) voluntarily by the
Employee for Good Reason, then Employee shall be entitled to receive the
following benefits:

 

(A) monthly severance payments during the period from the date of the Employee’s
termination until the date eighteen (18) months after the effective date of the
termination (the “COC Severance Period”) equal to the monthly salary which the
Employee was receiving immediately prior to the Change of Control;

 

(B) monthly severance payments during the COC Severance Period equal to
one-twelfth (1/12th) of the Employee’s Target Bonus (as defined herein) for the
fiscal year in which the termination occurs for each month in which severance
payments are made to the Employee pursuant to subsection (A) above;

 

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(C) a lump sum cash payment equal to the prorated amount of the Employee’s
Target Bonus for the fiscal year in which the termination occurs (and a prior
fiscal year to the extent the bonus for such prior fiscal year has not yet been
declared and paid by the Company), calculated based on the number of months
during such fiscal year in which the Employee was employed by the Company (or a
successor corporation) multiplied by the average of the actual bonus percentage
payouts in the two (2) most recent fiscal years prior to the year of termination
(i.e., if Employee is terminated in fiscal year 2016 at a time when the bonus
for fiscal year 2015 has not yet been declared and paid, then Employee shall be
entitled to receive a prorated Target Bonus for the months employed during
fiscal years 2015 and 2016 multiplied by the average of the actual bonus
percentage payouts in fiscal years 2013 and 2014); and

 

(D) if Employee, and any spouse and/or dependents of Employee (“Family Members”)
has coverage on the date of Employee’s termination of employment under a group
health plan sponsored by the Company, then reimbursement to Employee of the
employer portion of the total applicable premium cost for continued group health
plan coverage under the Consolidated Omnibus Budget Reconciliation Act of 1986,
as amended (“COBRA”) for a period of up to eighteen (18) months following
Employee’s termination of employment or if earlier, the date upon which Employee
and Employee’s eligible dependents become covered under similar plans, provided
that Employee validly elects and is eligible to continue coverage under COBRA
for Employee and the Family Members, and, provided further, that if the Company
determines in its sole discretion that it cannot provide the COBRA reimbursement
benefits without potentially violating applicable laws (including, without
limitation, Section 2716 of the Public Health Service Act and the Employee
Retirement Income Security Act of 1974, as amended), the Company will in lieu
thereof provide to Employee a taxable lump sum payment in an amount equal to the
monthly COBRA premium that Employee would be required to pay to continue the
group health coverage in effect on the date of Employee’s termination of
employment (which amount will be based on the premium for the first month of
COBRA coverage) for a period of eighteen (18) months following Employee’s
termination of employment, which payment will be made regardless of whether
Employee elects COBRA continuation coverage.

 

(iii)                               Disability; Death.  If the Company
terminates Employee’s employment as a result of Employee’s disability, or
Employee’s employment terminates due to Employee’s death, then Employee shall
not be entitled to receive severance or other benefits except for those that
have been earned but not yet paid under this agreement and those, if any, as may
be established under the Company’s then existing benefit plans and practices or
pursuant to other written agreements with the Company.

 

(b)                                 Acceleration of Equity Awards.  If during
the Protection Period Employee’s employment is terminated (x) by the Company
other than for Cause, or (y) voluntarily by the Employee for Good Reason, each
equity award granted to the Employee by the Company, including, without
limitation, stock options and restricted stock units (the “Equity Awards”) shall
automatically vest in full and become immediately exercisable or issued.

 

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(c)                                  Termination Apart from a Change of
Control.  Subject to Sections 4, 7 and 8 below, if the Employee’s employment
with the Company is terminated at any time other than as provided in paragraph
2(a), then the Employee shall be entitled to receive severance benefits as
follows:

 

(i)                                     Voluntary Resignation; Termination For
Cause.  If the Employee voluntarily resigns from the Company (other than for
Good Reason) or if the Company terminates the Employee’s employment for Cause,
then the Employee shall not be entitled to receive severance payments.  The
Employee’s benefits will be terminated under the Company’s then existing benefit
plans and policies in accordance with such plans and policies in effect on the
date of termination or as otherwise determined by the Board.

 

(ii)                                  Involuntary Termination.  If the
Employee’s employment is terminated (x) by the Company other than for Cause, or
(y) voluntarily by the Employee for Good Reason, then the Employee shall be
entitled to receive the following benefits:

 

(A) monthly severance payments during the period from the date of the Employee’s
termination until the date nine (9) months after the effective date of the
termination (the “Severance Period”) equal to the monthly salary which the
Employee was receiving immediately prior to the termination date;

 

(B) monthly severance payments during the Severance Period equal to one-twelfth
(1/12th) of the Employee’s Target Bonus for the fiscal year in which the
termination occurs for each month in which severance payments are made to the
Employee pursuant to subsection (A) above;

 

(C) a lump sum cash payment equal to the prorated amount of the Employee’s
Target Bonus for the fiscal year in which the termination occurs, calculated
based on the number of months during such fiscal year in which the Employee was
employed by the Company (and a prior fiscal year to the extent the bonus for
such prior fiscal year has not yet been declared and paid by the Company) 
multiplied by the average of the actual bonus percentage payouts in the two
(2) most recent years prior to the year of termination (i.e., if Employee is
terminated in fiscal year 2016 at a time when the bonus for fiscal year 2015 had
not yet been declared and paid, then Employee shall be entitled to receive a
prorated Target Bonus for the months employed during fiscal years 2015 and 2016
multiplied by the average of the actual bonus percentage payouts in fiscal years
2013 and 2014);

 

(D) if Employee, and any Family Members has coverage on the date of Employee’s
termination of employment under a group health plan sponsored by the Company,
then reimbursement to Employee the employer portion of the total applicable
premium cost for continued group health plan coverage under COBRA for a period
of up to nine (9) months following Employee’s termination of employment or if
earlier, the date upon which Employee and Employee’s eligible dependents become
covered under similar plans, provided that Employee validly elects and is
eligible to continue coverage under COBRA for Employee and the Family Members,
and, provided further, that if the Company determines in its sole discretion
that it cannot provide the COBRA reimbursement benefits without potentially
violating applicable laws (including, without limitation, Section 2716 of the
Public Health Service Act and the Employee Retirement Income Security Act of
1974, as amended), the Company will in lieu thereof provide to Employee a
taxable

 

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lump sum payment in an amount equal to the monthly COBRA premium that Employee
would be required to pay to continue the group health coverage in effect on the
date of Employee’s termination of employment (which amount will be based on the
premium for the first month of COBRA coverage) for a period of nine (9) months
following Employee’s termination of employment, which payment will be made
regardless of whether Employee elects COBRA continuation coverage; and

 

(E)  fifty percent (50%) of Employee’s then-outstanding and unvested Equity
Awards shall automatically vest in full and become immediately exercisable or
issued.

 

(iii)                               Disability; Death.  If the Company
terminates Employee’s employment as a result of Employee’s disability, or
Employee’s employment terminates due to his or her death, then Employee shall
not be entitled to receive severance or other benefits except for those that
have been earned but not yet paid under this Agreement and for those, if any, as
may be established under the Company’s then-existing benefit plans and practices
or pursuant to other written agreements with the Company.

 

3.                                      Definition of Terms.  The following
terms referred to in this Agreement shall have the following meanings:

 

(a)                                 Change of Control.  “Change of Control”
shall mean the occurrence of any of the following events:

 

(i)                                     Ownership.  Any “Person” (as such term
is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended) is or becomes the “Beneficial Owner” (as defined in Rule l3d-3 under
said Act), directly or indirectly, of securities of the Company representing
fifteen percent (15%) or more of the total voting power represented by the
Company’s then outstanding voting securities without the approval of the Board;
or

 

(ii)                                  Merger/Sale of Assets.  A merger or
consolidation of the Company whether or not approved by the Board, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the shareholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
of the Company’s assets.

 

(iii)                               Change in Board Composition.  A change in
the composition of the Board, as a result of which fewer than a majority of the
directors are Incumbent Directors.  “Incumbent Directors” shall mean directors
who either (A) are directors of the Company as of May 1, 2015, or (B) are
elected, or nominated for election, to the Board with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such election or
nomination (but shall not include an individual whose election or nomination is
in connection with an actual or threatened Proxy contest relating to the
election of directors to the Company).

 

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(b)                                 Cause.  “Cause” shall mean (i) gross
negligence or willful misconduct in the performance of the Employee’s duties to
the Company where such gross negligence or willful misconduct has resulted or is
likely to result in substantial and material damage to the Company or its
subsidiaries, (ii) repeated unexcused absences from the Company,
(iii) commission of any act of fraud with respect to the Company, or
(v) conviction of a felony or a crime involving moral turpitude and causing
material harm to the standing and reputation of the Company, in each case as
determined in good faith by the Board.

 

(c)                                  Disability.  “Disability” shall mean total
and permanent disability as defined in Section 22(e)(3) of the Internal Revenue
Code unless the Company maintain a long-term disability plan at the time of
Employee’s termination, in which case the determination of disability under such
plan shall also be considered “Disability” for purposes of this Agreement.

 

(d)                                 Good Reason.  “Good Reason” shall mean the
Employee’s voluntary termination, upon thirty (30) days prior written notice to
the Company, after any one of the following events: (i) a material reduction or
change in job duties, responsibilities and requirements inconsistent with the
Employee’s position with the Company and the Employee’s prior duties,
responsibilities and requirements (including, for example, but not by way of
limitation, a material reduction due to the Company becoming part of a larger
entity, unless Employee receives substantially the same level of job duties,
responsibilities and requirements with respect to the total combined entity and
not only with respect to the Company as a division, subsidiary or business unit
of the total combined entity (e.g., a material reduction as a result of the
Chief Financial Officer of the Company not having the job duties,
responsibilities and requirements as the Chief Financial Officer of the combined
entity)); (ii) a material reduction in the authority, duties, or
responsibilities of the supervisor to whom Employee is required to report
(including, for example, but not by way of limitation, a material reduction due
to the Company becoming a part of a larger entity and Employee no longer
reporting to the Chief Executive Officer of the total combined entity) (iii) a
material reduction of the Employee’s base compensation; or (iv) the Employee’s
refusal to relocate to a facility or location more than thirty (30) miles from
the Company’s current location; provided, however, that (A) a voluntary
termination of Employee for any events listed under this Section (d)(i) through
(d)(iv) shall not constitute “Good Reason” if such event or events are cured by
the Company within thirty (30) days after receipt of written notice from the
Employee of Employee’s intent to terminate employment pursuant to this
Section and (B) a voluntary termination of Employee pursuant to
Section 2(c)(ii) for any events listed under this Section (d)(i) and
(d)(ii) shall not constitute “Good Reason” if a material reduction or change in
job duties, responsibilities and requirements is, directly or indirectly, the
result of a Company-wide reduction in budgets that affects each Company business
unit or division in a substantially similar manner.

 

(e)                                  Target Bonus.  “Target Bonus” shall mean
that percentage of the Employee’s base salary that is prescribed by the Company
under its Management Bonus Program as the percentage of such base salary payable
to the Company as a bonus if the Company pays bonuses at one-hundred percent
(100%) of its operating plan.

 

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4.                                      Limitation on Payments.  In the event
that the severance and other benefits provided for in this Agreement or
otherwise payable to Employee (i) constitute “parachute payments” within the
meaning of Section 280G of the Code and, (ii) but for this Section 4, would be
subject to the excise tax imposed by Section 4999 of the Code, then Employee’s
severance benefits under Section 2 (the “280G Amounts”) will be either:

 

(a)                                 delivered in full; or

 

(b)                                 delivered as to such lesser extent which
would result in no portion of such severance benefits being subject to excise
tax under Section 4999 of the Code, whichever of the foregoing amounts, taking
into account the applicable federal, state and local income taxes and the excise
tax imposed by Section 4999, results in the receipt by Employee on an after-tax
basis, of the greatest amount of severance benefits, notwithstanding that all or
some portion of such severance benefits may be taxable under Section 4999 of the
Code.  Unless the Company and Employee otherwise agree in writing, any
determination required under this Section 4 will be made in writing by a
nationally recognized firm of independent public accountants selected by the
Company (the “Accountants”), whose determination will be conclusive and binding
upon Employee and the Company for all purposes.  For purposes of making the
calculations required by this Section 4, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and may rely on
reasonable, good faith interpretations concerning the application of Sections
280G and 4999 of the Code.  The Company and Employee will furnish to the
Accountants such information and documents as the Accountants may reasonably
request in order to make a determination under this Section.  The Company will
bear all costs the Accountants may incur in connection with any calculations
contemplated by this Section 4.

 

In the event that a reduction of 280G Amounts is made in accordance with this
Section 4, the reduction will occur, with respect to the 280G Amounts considered
parachute payments within the meaning of Section 280G of the Code, in the
following order:  (1) reduction of cash payments in reverse chronological order
(that is, the cash payment owed on the latest date following the occurrence of
the event triggering the excise tax will be the first cash payment to be
reduced); (2) cancellation of equity awards that were granted “contingent on a
change in ownership or control” within the meaning of Code Section 280G;
(3) reduction of the accelerated vesting of equity awards in the reverse order
of date of grant of the awards (i.e., the vesting of the most recently granted
equity awards will be cancelled first); and (4) reduction of employee benefits
in reverse chronological order (i.e., the benefit owed on the latest date
following the occurrence of the event triggering the excise tax will be the
first benefit to be reduced).  In no event will Employee have any discretion
with respect to the ordering of payment reductions.

 

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5.                                      Successors.  Any successor to the
Company (whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
Company’s business and/or assets shall assume the obligations under this
Agreement and agree expressly to perform the obligations under this Agreement in
the same manner and to the same extent as the Company would be required to
perform such obligations in the absence of a succession.  The terms of this
Agreement and all of the Employee’s rights hereunder shall inure to the benefit
of, and be enforceable by, the Employee’s personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees.

 

6.                                      Notice.  Notices and all other
communications contemplated by this Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or when mailed by U.S.
registered or certified mail, return receipt requested and postage prepaid. 
Mailed notices to the Employee shall be addressed to the Employee at the home
address which the Employee most recently communicated to the Company in
writing.  In the case of the Company, mailed notices shall be addressed to its
corporate headquarters, and all notices shall be directed to the attention of
its Secretary.

 

7.                                      Conditions to Receipt of Severance.  As
a condition to receiving the severance and other benefits under this Agreement,
Employee will be required to sign and not revoke a separation and release of
claims agreement in substantially the form attached hereto as Exhibit A (the
“Release”).  The Release must become effective and irrevocable no later than the
sixtieth (60th) day following Employee’s termination of employment (the “Release
Deadline Date”).  If the Release does not become effective and irrevocable by
the Release Deadline Date, Employee will forfeit any right to the severance and
other benefits under this Agreement.  In no event will the severance or other
benefits under this Agreement be paid or provided until the Release becomes
effective and irrevocable.  Provided that the Release becomes effective and
irrevocable by the Release Deadline Date and subject to Section 9, the severance
payments and benefits under this Agreement will be paid, or in the case of
installments, will commence, within ten (10) days following the date that the
Release becomes effective and irrevocable (such payment date, the “Severance
Start Date”), and any severance payments or benefits otherwise payable to
Employee during the period immediately following Employee’s termination of
employment with the Company through the Severance Start Date will be paid in a
lump sum to Employee on the Severance Start Date, with any remaining payments to
be made as provided in this Agreement.

 

8.                                      Miscellaneous Provisions.

 

(a)                                 No Duty to Mitigate.  The Employee shall not
be required to mitigate the amount of any payment contemplated by this Agreement
(whether by seeking new employment or in any other manner), nor, except as
otherwise provided in this Agreement, shall any such payment be reduced by any
earnings that the Employee may receive from any other source.

 

(b)                                 Waiver.  No provision of this Agreement
shall be modified, waived or discharged unless the modification, waiver or
discharge is agreed to in writing and signed by the Employee and by an
authorized officer of the Company (other than the Employee).  No waiver by
either party of any breach of, or of compliance with, any condition or provision
of this Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at another time.

 

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(c)                                  Whole Agreement.  No agreements,
representations or understandings (whether oral or written and whether express
or implied) which are not expressly set forth in this Agreement have been made
or entered into by either party with respect to the subject matter hereof. This
Agreement supersedes any agreement of the same title and concerning similar
subject matter dated prior to the date of this Agreement, including but not
limited to the Prior Agreement, and by execution of this Agreement both parties
agree that any such predecessor agreement shall be deemed null and void.

 

(d)                                 Choice of Law.  The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of California without reference to conflict of laws
provisions.

 

(e)                                  Severability.  If any term or provision of
this Agreement or the application thereof to any circumstance shall, in any
jurisdiction and to any extent, be invalid or unenforceable, such term or
provision shall be ineffective as to such jurisdiction to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining terms and provisions of this Agreement or the application of such
terms and provisions to circumstances other than those as to which it is held
invalid or unenforceable, and a suitable and equitable term or provision shall
be substituted therefor to carry out, insofar as may be valid and enforceable,
the intent and purpose of the invalid or unenforceable term or provision.

 

(f)                                   Arbitration.  Any dispute or controversy
arising under or in connection with this Agreement may be settled at the option
of either party by binding arbitration in the County of Santa Clara, California,
in accordance with the rules of the American Arbitration Association then in
effect.  Judgment may be entered on the arbitrator’s award in any court having
jurisdiction.

 

(g)                                  Legal Fees and Expenses.  The parties shall
each bear their own expenses, legal fees and other fees incurred in connection
with this Agreement.  Provided, however, in the event that Employee is required
to incur attorneys’ fees in order to obtain any payments or benefits under this
Agreement, and provided that Employee prevails on at least one material issue
related to his or her claim(s) under the Plan, then the Company will reimburse
the attorneys’ fees incurred by Employee.

 

(h)                                 No Assignment of Benefits.  The rights of
any person to payments or benefits under this Agreement shall not be made
subject to option or assignment, either by voluntary or involuntary assignment
or by operation of law, including (without limitation) bankruptcy, garnishment,
attachment or other creditor’s process, and any action in violation of this
subsection (h) shall be void.

 

(i)                                     Employment Taxes.  All payments made
pursuant to this Agreement will be subject to withholding of applicable income
and employment taxes.

 

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(j)            Assignment by Company.  The Company may assign its rights under
this Agreement to an affiliate, and an affiliate may assign its rights under
this Agreement to another affiliate of the Company or to the Company; provided,
however, that no assignment shall be made if the net worth of the assignee is
less than the net worth of the Company at the time of assignment.  In the case
of any such assignment, the term “Company” when used in a section of this
Agreement shall mean the corporation that actually employs the Employee.

 

(k)           Counterparts.  This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.

 

9.             Section 409A.

 

(a)           Notwithstanding anything to the contrary in this Agreement, no
severance payments or benefits to be paid or provided to Employee, if any, under
this Agreement that, when considered together with any other severance payments
or separation benefits, are considered deferred compensation under Section 409A
of the Code, and the final regulations and any guidance promulgated thereunder
(“Section 409A”) (together, the “Deferred Payments”) will be paid or provided
until Employee has a “separation from service” within the meaning of
Section 409A.  Similarly, no severance payable to Employee, if any, under this
Agreement that otherwise would be exempt from Section 409A pursuant to Treasury
Regulation Section 1.409A-1(b)(9) will be payable until Employee has a
“separation from service” within the meaning of Section 409A.

 

(b)           It is intended that none of the severance payments or benefits
under this Agreement will constitute Deferred Payments but rather will be exempt
from Section 409A as a payment that would fall within the “short-term deferral
period” as described in 9(d) below or resulting from an involuntary separation
from service as described in Section 9(e) below.  In no event will Employee have
discretion to determine the taxable year of payment of any Deferred Payment. 
Any severance payments or benefits under this Agreement that would be considered
Deferred Payments will be paid on, or in the case of installments commence on,
the sixty-first (61st) day following Employee’s separation from service, or if
later, such time as required by Section 9(c).  Except as required by
Section 9(c), any payments that would have been made to Employee during the
sixty (60) day period immediately following Employee’s separation from service
but for the preceding sentence will be paid to Employee on the sixty-first
(61st) day following Employee’s separation from service and any remaining
payments will be made as provided in this Agreement.

 

(c)           Notwithstanding anything to the contrary in this Agreement, if
Employee is a “specified employee” within the meaning of Section 409A at the
time of Employee’s separation from service (other than due to death), then the
Deferred Payments, if any, that are payable within the first six (6) months
following Employee’s separation from service, will become payable on the date
six (6) months and one (1) day following the date of Employee’s separation from
service.  All subsequent Deferred Payments, if any, will be payable in
accordance with the payment schedule applicable to each payment or benefit. 
Notwithstanding anything herein to the contrary, in the event of Employee’s
death following Employee’s separation from service, but before the six (6) month

 

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anniversary of the separation from service, then any payments delayed in
accordance with this paragraph will be payable in a lump sum as soon as
administratively practicable after the date of Employee’s death and all other
Deferred Payments will be payable in accordance with the payment schedule
applicable to each payment or benefit.  Each payment and benefit payable under
this Agreement is intended to constitute a separate payment under
Section 1.409A-2(b)(2) of the Treasury Regulations.

 

(d)           Any amount paid under this Agreement that satisfies the
requirements of the “short-term deferral” rule set forth in
Section 1.409A-1(b)(4) of the Treasury Regulations will not constitute Deferred
Payments for purposes of Section 9(a) above.

 

(e)           Any amount paid under this Agreement that qualifies as a payment
made as a result of an involuntary separation from service pursuant to
Section 1.409A-1(b)(9)(iii) of the Treasury Regulations that does not exceed the
Section 409A Limit (as defined below) will not constitute Deferred Payments for
purposes of Section 9(a) above.

 

(f)            The foregoing provisions are intended to comply with or be exempt
from the requirements of Section 409A so that none of the payments and benefits
to be provided under the Agreement will be subject to the additional tax imposed
under Section 409A, and any ambiguities herein will be interpreted to so comply
or be exempt.  The Company and Employee agree to work together in good faith to
consider amendments to this Agreement and to take such reasonable actions which
are necessary, appropriate or desirable to avoid imposition of any additional
tax or income recognition before actual payment to Employee under Section 409A. 
In no event will the Company reimburse Employee for any taxes that may be
imposed on Employee as result of Section 409A.

 

For purposes of this Agreement “Section 409A Limit” will mean the lesser of two
(2) times: (i) Employee’s annualized compensation based upon the annual rate of
pay paid to Employee during the Company’s taxable year preceding the Company’s
taxable year of Employee’s termination of employment as determined under
Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1) and any Internal Revenue Service
guidance issued with respect thereto; or (ii) the maximum amount that may be
taken into account under a qualified plan pursuant to Section 401(a)(17) of the
Code for the year in which Employee’s employment is terminated.

 

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by its duty authorized officer, as of the day and year first
above written.

 

 

VIVUS, Inc.

 

Employee

 

 

 

 

 

 

 

 

 

Name:

 

 

Name:

 

Title:

 

 

Title:

 

Date:

 

 

Date:

 

 

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EXHIBIT A

 

SEPARATION AGREEMENT AND RELEASE

 

This Separation Agreement and Release (“Agreement”) is made by and between
                (“Employee”) and VIVUS, Inc. (the “Company”) (collectively
referred to as the “Parties” or individually referred to as a “Party”).

 

Whereas, in connection with Employee’s termination of employment effective as of
                   , 201  , Employee is eligible to receive the severance
benefits provided in the Second Amended and Restated Change of Control and
Severance Agreement (the “Severance Agreement”) dated [DATE], 2015, subject to
the terms and conditions set forth therein including (but not limited to)
entering into a release of claims agreement in favor of the Company under
Section 7 of the Severance Agreement.

 

Whereas, in consideration for such severance benefits provided under the
Severance Agreement and pursuant to Section 7 of the Severance Agreement, the
Parties wish to resolve any and all disputes, claims, complaints, grievances,
charges, actions, petitions, and demands that Employee may have against the
Company and any of the Releasees as defined below, including, but not limited
to, any and all claims arising out of or in any way related to Employee’s
employment with or separation from the Company.

 

Now, therefore, Employee covenants and agrees as follows:

 

1.             Payment of Salary and Receipt of All Benefits.  Employee
acknowledges and represents that, other than the consideration set forth in this
Agreement, the Company has paid or provided all salary, wages, bonuses, accrued
vacation/paid time off, premiums, leaves, housing allowances, relocation costs,
interest, severance, outplacement costs, fees, reimbursable expenses,
commissions, stock, stock options, vesting, and any and all other benefits and
compensation due to Employee.

 

2.             Release of Claims.  Employee agrees that the foregoing
consideration represents settlement in full of all outstanding obligations owed
to Employee by the Company and its current and former officers, directors,
employees, agents, investors, attorneys, shareholders, administrators,
affiliates, benefit plans, plan administrators, insurers, trustees, divisions,
and subsidiaries, and predecessor and successor corporations and assigns
(collectively, the “Releasees”).  Employee, on his/her own behalf and on behalf
of his/her respective heirs, family members, executors, agents, and assigns,
hereby and forever releases the Releasees from, and agrees not to sue
concerning, or in any manner to institute, prosecute, or pursue, any claim,
complaint, charge, duty, obligation, demand, or cause of action relating to any
matters of any kind, whether presently known or unknown, suspected or
unsuspected, that Employee may possess against any of the Releasees arising from
any omissions, acts, facts, or damages that have occurred up until and including
the Effective Date (as defined below) of this Agreement, including, without
limitation:

 

a.             any and all claims relating to or arising from Employee’s
employment relationship with the Company and the termination of that
relationship;

 

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b.             any and all claims relating to, or arising from, Employee’s right
to purchase, or actual purchase of shares of stock of the Company, including,
without limitation, any claims for fraud, misrepresentation, breach of fiduciary
duty, breach of duty under applicable state corporate law, and securities fraud
under any state or federal law;

 

c.             any and all claims for wrongful discharge of employment;
termination in violation of public policy; discrimination; harassment;
retaliation; breach of contract, both express and implied; breach of covenant of
good faith and fair dealing, both express and implied; promissory estoppel;
negligent or intentional infliction of emotional distress; fraud; negligent or
intentional misrepresentation; negligent or intentional interference with
contract or prospective economic advantage; unfair business practices;
defamation; libel; slander; negligence; personal injury; assault; battery;
invasion of privacy; false imprisonment; conversion; and disability benefits;

 

d.             any and all claims for violation of any federal, state, or
municipal statute, including, but not limited to, Title VII of the Civil Rights
Act of 1964; the Civil Rights Act of 1991; the Rehabilitation Act of 1973; the
Americans with Disabilities Act of 1990; the Equal Pay Act; the Fair Labor
Standards Act; the Fair Credit Reporting Act; the Age Discrimination in
Employment Act of 1967; the Older Workers Benefit Protection Act; the Employee
Retirement Income Security Act of 1974; the Worker Adjustment and Retraining
Notification Act; the Family and Medical Leave Act; the Sarbanes-Oxley Act of
2002; the California Family Rights Act; the California Labor Code; the
California Workers’ Compensation Act; and the California Fair Employment and
Housing Act;

 

e.             any and all claims for violation of the federal or any state
constitution;

 

f.             any and all claims arising out of any other laws and regulations
relating to employment or employment discrimination;

 

g.             any claim for any loss, cost, damage, or expense arising out of
any dispute over the nonwithholding or other tax treatment of any of the
proceeds received by Employee as a result of this Agreement; and

 

h.             any and all claims for attorneys’ fees and costs.

 

Employee agrees that the release set forth in this section shall be and remain
in effect in all respects as a complete general release as to the matters
released.  This release does not extend to any obligations incurred under this
Agreement.  This release does not release claims that cannot be released as a
matter of law, including, but not limited to, Employee’s right to file a charge
with or participate in a charge by the Equal Employment Opportunity Commission,
or any other local, state, or federal administrative body or government agency
that is authorized to enforce or administer laws related to employment, against
the Company (with the understanding that any such filing or participation does
not give Employee the right to recover any monetary damages against the Company;
Employee’s release of claims herein bars Employee from recovering such monetary
relief from the Company).  Notwithstanding the foregoing, Employee acknowledges
that any and all disputed wage claims that are released herein shall be subject
to binding arbitration in accordance

 

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with Paragraph 9, which precludes Employee from filing a claim with the Division
of Labor Standards Enforcement.  Further, Employee will not be deemed to have
waived his/her right to indemnification in accordance with the Company’s
certificate of incorporation and bylaws[, which indemnifies and holds Employee
harmless from and against any and all liability, loss, damages or expenses
incurred as a result of, arising out of, or in any way related to, Employee’s
service as an officer or director of the Company, to the same extent as with
respect to other officers and directors of the Company].  Employee represents
that he/she has made no assignment or transfer of any right, claim, complaint,
charge, duty, obligation, demand, cause of action, or other matter waived or
released by this Section.

 

3.             Acknowledgment of Waiver of Claims under ADEA. [The following
provision to be included if Employee is at least 40 years of age:] Employee
acknowledges that he/she is waiving and releasing any rights he/she may have
under the Age Discrimination in Employment Act of 1967 (“ADEA”), and that this
waiver and release is knowing and voluntary.  Employee agrees that this waiver
and release does not apply to any rights or claims that may arise under the ADEA
after the Effective Date of this Agreement.  Employee acknowledges that the
consideration given for this waiver and release is in addition to anything of
value to which Employee was already entitled.  Employee further acknowledges
that he/she has been advised by this writing that: (a) he/she should consult
with an attorney prior to executing this Agreement; (b) he/she has twenty-one
(21) days within which to consider this Agreement; (c) he/she has seven (7) days
following his/her execution of this Agreement to revoke this Agreement; (d) this
Agreement shall not be effective until after the revocation period has expired;
and (e) nothing in this Agreement prevents or precludes Employee from
challenging or seeking a determination in good faith of the validity of this
waiver under the ADEA, nor does it impose any condition precedent, penalties, or
costs for doing so, unless specifically authorized by federal law.  In the event
Employee signs this Agreement and returns it to the Company in less than the
21-day period identified above, Employee hereby acknowledges that he/she has
freely and voluntarily chosen to waive the time period allotted for considering
this Agreement.  Employee acknowledges and understands that revocation must be
accomplished by a written notification to the person executing this Agreement on
the Company’s behalf that is received prior to the Effective Date.

 

4.             California Civil Code Section 1542.  Employee acknowledges that
he/she has been advised to consult with legal counsel and is familiar with the
provisions of California Civil Code Section 1542, a statute that otherwise
prohibits the release of unknown claims, which provides as follows:

 

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH
IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH
THE DEBTOR.

 

Employee, being aware of said code section, agrees to expressly waive any rights
he/she may have thereunder, as well as under any other statute or common law
principles of similar effect.

 

14

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5.             No Pending or Future Lawsuits.  Employee represents that he/she
has no lawsuits, claims, or actions pending in his/her name, or on behalf of any
other person or entity, against the Company or any of the other Releasees.
Employee also represents that he/she does not intend to bring any claims on
his/her own behalf or on behalf of any other person or entity against the
Company or any of the other Releasees.

 

6.             Trade Secrets and Confidential Information/Company Property. 
Employee reaffirms and agrees to observe and abide by the terms of the At-Will
Employment, Confidential Information, Invention Assignment, and Arbitration
Agreement (the “Confidentiality Agreement”), specifically including the
provisions therein regarding nondisclosure of the Company’s trade secrets and
confidential and proprietary information, and nonsolicitation of Company
employees.  Employee’s signature below constitutes his/her certification under
penalty of perjury that he/she has returned all documents and other items
provided to Employee by the Company, developed or obtained by Employee in
connection with his/her employment with the Company, or otherwise belonging to
the Company.

 

7.             No Admission of Liability.  Employee understands and acknowledges
that this Agreement constitutes a compromise and settlement of any and all
actual or potential disputed claims by Employee.  No action taken by the Company
hereto, either previously or in connection with this Agreement, shall be deemed
or construed to be (a) an admission of the truth or falsity of any actual or
potential claims or (b) an acknowledgment or admission by the Company of any
fault or liability whatsoever to Employee or to any third party.

 

8.             Costs.  The Parties shall each bear their own costs, attorneys’
fees, and other fees incurred in connection with the preparation of this
Agreement.

 

9.             ARBITRATION.  THE PARTIES AGREE THAT ANY AND ALL DISPUTES ARISING
OUT OF THE TERMS OF THIS AGREEMENT, THEIR INTERPRETATION, AND ANY OF THE MATTERS
HEREIN RELEASED, SHALL BE SUBJECT TO ARBITRATION IN SANTA CLARA COUNTY, BEFORE
JUDICIAL ARBITRATION & MEDIATION SERVICES (“JAMS”), PURSUANT TO ITS EMPLOYMENT
ARBITRATION RULES & PROCEDURES (“JAMS RULES”).  THE ARBITRATOR MAY GRANT
INJUNCTIONS AND OTHER RELIEF IN SUCH DISPUTES.  THE ARBITRATOR SHALL ADMINISTER
AND CONDUCT ANY ARBITRATION IN ACCORDANCE WITH CALIFORNIA LAW, INCLUDING THE
CALIFORNIA CODE OF CIVIL PROCEDURE, AND THE ARBITRATOR SHALL APPLY SUBSTANTIVE
AND PROCEDURAL CALIFORNIA LAW TO ANY DISPUTE OR CLAIM, WITHOUT REFERENCE TO ANY
CONFLICT-OF-LAW PROVISIONS OF ANY JURISDICTION.  TO THE EXTENT THAT THE JAMS
RULES CONFLICT WITH CALIFORNIA LAW, CALIFORNIA LAW SHALL TAKE PRECEDENCE.  THE
DECISION OF THE ARBITRATOR SHALL BE FINAL, CONCLUSIVE, AND BINDING ON THE
PARTIES TO THE ARBITRATION.  THE PARTIES AGREE THAT THE PREVAILING PARTY IN ANY
ARBITRATION SHALL BE ENTITLED TO INJUNCTIVE RELIEF IN ANY COURT OF COMPETENT
JURISDICTION TO ENFORCE THE ARBITRATION AWARD.  THE PARTIES

 

15

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TO THE ARBITRATION SHALL EACH PAY AN EQUAL SHARE OF THE COSTS AND EXPENSES OF
SUCH ARBITRATION, AND EACH PARTY SHALL SEPARATELY PAY FOR ITS RESPECTIVE COUNSEL
FEES AND EXPENSES; PROVIDED, HOWEVER, THAT THE ARBITRATOR SHALL AWARD ATTORNEYS’
FEES AND COSTS TO THE PREVAILING PARTY, EXCEPT AS PROHIBITED BY LAW.  THE
PARTIES HEREBY AGREE TO WAIVE THEIR RIGHT TO HAVE ANY DISPUTE BETWEEN THEM
RESOLVED IN A COURT OF LAW BY A JUDGE OR JURY.  NOTWITHSTANDING THE FOREGOING,
THIS SECTION WILL NOT PREVENT EITHER PARTY FROM SEEKING INJUNCTIVE RELIEF (OR
ANY OTHER PROVISIONAL REMEDY) FROM ANY COURT HAVING JURISDICTION OVER THE
PARTIES AND THE SUBJECT MATTER OF THEIR DISPUTE RELATING TO THIS AGREEMENT AND
THE AGREEMENTS INCORPORATED HEREIN BY REFERENCE.  SHOULD ANY PART OF THE
ARBITRATION AGREEMENT CONTAINED IN THIS PARAGRAPH CONFLICT WITH ANY OTHER
ARBITRATION AGREEMENT BETWEEN THE PARTIES, THE PARTIES AGREE THAT THIS
ARBITRATION AGREEMENT SHALL GOVERN.

 

10.          Tax Consequences.  The Company makes no representations or
warranties with respect to the tax consequences of the payments and any other
consideration provided to Employee or made on his/her behalf under the terms of
this Agreement.  Employee agrees and understands that he/she is responsible for
payment, if any, of local, state, and/or federal taxes on the payments and any
other consideration provided hereunder by the Company and any penalties or
assessments thereon.

 

11.          Authority.  The Company represents and warrants that the
undersigned has the authority to act on behalf of the Company and to bind the
Company and all who may claim through it to the terms and conditions of this
Agreement.  Employee represents and warrants that he/she has the capacity to act
on his/her own behalf and on behalf of all who might claim through him/her to
bind them to the terms and conditions of this Agreement.  Each Party warrants
and represents that there are no liens or claims of lien or assignments in law
or equity or otherwise of or against any of the claims or causes of action
released herein.

 

12.          No Representations.  Employee represents that he/she has had an
opportunity to consult with an attorney, and has carefully read and understands
the scope and effect of the provisions of this Agreement.  Employee has not
relied upon any representations or statements made by the Company that are not
specifically set forth in this Agreement.

 

13.          Severability.  In the event that any provision or any portion of
any provision hereof or any surviving agreement made a part hereof becomes or is
declared by a court of competent jurisdiction or arbitrator to be illegal,
unenforceable, or void, this Agreement shall continue in full force and effect
without said provision or portion of provision.

 

14.          Attorneys’ Fees.  Except with regard to a legal action challenging
or seeking a determination in good faith of the validity of the waiver herein
under the ADEA, in the event that either Party brings an action to enforce or
effect its rights under this Agreement, the prevailing Party shall be entitled
to recover its costs and expenses, including the costs of mediation,
arbitration, litigation, court fees, and reasonable attorneys’ fees incurred in
connection with such an action.

 

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15.          Entire Agreement.  This Agreement represents the entire agreement
and understanding between the Company and Employee concerning the subject matter
of this Agreement and Employee’s employment with and separation from the Company
and the events leading thereto and associated therewith, and supersedes and
replaces any and all prior agreements and understandings concerning the subject
matter of this Agreement and Employee’s relationship with the Company, with the
exception of the Confidentiality Agreement.

 

16.          No Oral Modification.  This Agreement may only be amended in a
writing signed by Employee and the Company’s Chief Executive Officer or Chief
Financial Officer.

 

17.          Governing Law.  This Agreement shall be governed by the laws of the
State of California, without regard for choice-of-law provisions.  Employee
consents to personal and exclusive jurisdiction and venue in the State of
California.

 

18.          Effective Date.  [Employee understands that this Agreement shall be
null and void if not executed by him/her within twenty one (21) days.   Each
Party has seven (7) days after that Party signs this Agreement to revoke it. 
This Agreement will become effective on the eighth (8th) day after Employee
signed this Agreement, so long as it has been signed by the Parties and has not
been revoked by either Party before that date (the “Effective Date”).]/OR/[If
Employee is under age 40, the following provision will apply:  Employee
understands that this Agreement shall be null and void if not executed by
him/her within seven (7) days.  This Agreement will become effective on the date
it has been signed by both Parties (the “Effective Date”).]

 

19.          Counterparts.  This Agreement may be executed in counterparts and
by facsimile, and each counterpart and facsimile shall have the same force and
effect as an original and shall constitute an effective, binding agreement on
the part of each of the undersigned.

 

20.          Voluntary Execution of Agreement.  Employee understands and agrees
that he/she executed this Agreement voluntarily, without any duress or undue
influence on the part or behalf of the Company or any third party, with the full
intent of releasing all of his/her claims against the Company and any of the
other Releasees.  Employee acknowledges that:

 

(a)           he/she has read this Agreement;

 

(b)                                 he/she has been represented in the
preparation, negotiation, and execution of this Agreement by legal counsel of
his/her own choice or has elected not to retain legal counsel;

 

(c)                                  he/she understands the terms and
consequences of this Agreement and of the releases it contains; and

 

(d)           he/she is fully aware of the legal and binding effect of this
Agreement.

 

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IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective
dates set forth below.

 

 

 

                                         , an individual

 

 

 

 

Dated:                               , 201

 

 

[Employee Name]

 

 

 

 

 

VIVUS, INC.

 

 

 

 

Dated:                 , 201

By

 

 

 

[Name, Title]

 

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