Exhibit 10.2


 


AMENDED AND RESTATED OPTION AND PUT AGREEMENT


 


This AMENDED AND RESTATED
OPTION AND PUT AGREEMENT (this “Agreement”), dated as of March 16,
2009, is by and among VIVUS, Inc., a Delaware corporation (the “Company”),
Deerfield ED Corporation, a Delaware corporation (“ED”), DEERFIELD
PRIVATE DESIGN FUND LP, a Delaware limited partnership (“Design Fund”)
and DEERFIELD PRIVATE DESIGN INTERNATIONAL L.P. (“International”), a
British Virgin Islands limited partnership (Design Fund and International each
a “Stockholder” and together the “Stockholders”) and DEERFIELD
PDI FINANCING L.P., a British Virgin Islands limited partnership (“BVI Fund”).


 


W  I  T
N  E  S  S  E  T  H:


 


WHEREAS, the Stockholders own
all of the issued and outstanding capital stock of ED;


 


WHEREAS, the Company and ED
are parties to a Funding and Royalty Agreement (the “Funding and Royalty
Agreement”) dated as of April 3, 2008, as amended to date, pursuant to
which ED has agreed to provide the Company with funding for the development of
certain products and the Company has granted ED the right to receive a Royalty
with respect to sales of MUSE and Avanafil; and


 


WHEREAS, pursuant to an
Option and Put Agreement, dated as of April 3, 2008 (the “Option and
Put Agreement”) the Stockholders have granted the Company an option to
purchase from the Stockholders all of the outstanding shares of common stock of
ED on the terms and conditions set forth therein, and the Company has granted
to the Stockholders an option to require the Company to purchase from the
Stockholders all of the outstanding shares of common stock of ED on the terms
and conditions set forth therein.


 


WHEREAS, concurrently with
the execution of this Agreement, ED is (i) entering into ED Loan
Agreements with the Design Fund and the BVI Fund, respectively, in order to
obtain funding to satisfy ED’s obligations under the Funding and Royalty
Agreement and (ii) terminating subscription agreements with the
Stockholders.


 


WHEREAS, the parties are
desirous of amending and restating the Option and Put Agreement.


 


NOW, THEREFORE, in
consideration of mutual agreements herein contained and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereto hereby amend and restate the Option and Put
Agreement so that as amended and restated the Option and Put Agreement shall
provide as follows:


 

















 


DEFINITIONS


 


1.1                                 Definitions.


 


“Avanafil” has the
meaning set forth in the Funding and Royalty Agreement.


 


“Arrangement Fee”
shall have the meaning set forth in Section 4.8.


 


“Base Option Price”
means $25,000,000 if the Option Closing Date occurs on or prior to April 3,
2011 and $28,000,000 if the Option Closing Date occurs subsequent to April 3,
2011.


 


“Base Put Price” means
(x) $23,000,000 in the case of a Put Closing that occurs on or prior to April 3,
2011 pursuant to a Major Transaction Notice, (y) $26,000,000 in the case
of a Put Closing that occurs subsequent to April 3, 2011 pursuant to a
Major Transaction Notice and (z) $17,000,000 in all other cases.


 


“Business Day” means a
day other than a Saturday, Sunday or day on which banks in the City of New York
are authorized or required to be closed.


 


“BVI Fund”  has the meaning set forth in the first
paragraph of this Agreement.


 


“BVI Fund Loan
Agreement”  mean the Loan Agreement,
dated as of the date hereof, between the BVI Fund and ED.


 


“BVI Fund Loan
Balance”  means the outstanding
balance, including accrued interest, of all outstanding notes and other
obligations of ED under the BVI Fund Loan Agreement as of the Option Closing
Date or the Put Closing Date, as the case may be.


 


“Cash” and “Cash
Equivalents” means (a) unrestricted funds in bank accounts; (b) marketable
direct obligations issued by, or unconditionally guaranteed by, the United
States Government or issued by any agency thereof and backed by the full faith
and credit of the United States, in each case maturing within one year from the
date of acquisition; (c) certificates of deposit, time deposits,
eurodollar time deposits or overnight bank deposits; (d) securities with
maturities of one year or less issued or fully guaranteed by any state,
commonwealth or territory of the United States, by any political subdivision or
taxing authority of such state, commonwealth or territory or by any foreign
government, the securities of which state, commonwealth, territory, political
subdivision, taxing authority or foreign government (as the case may be) are
rated at least A by Standard & Poor’s Rating Service (“S&P”)
or A by Moody’s Investors Service, Inc. (“Moody’s”); (e) money
market mutual or similar funds that invest exclusively in assets satisfying the
requirements of clauses (a) through (d) of this definition; (f) money
market funds that (i) comply with the criteria set forth in SEC Rule 2a-7
under the Investment Company Act of 1940, as amended, and (ii) are rated
AAA by S&P and Aaa by Moody’s or (g) available for sale securities
which are rated AAA by S&P and Aaa by Moody’s.


 


“Cash Adjustment”
means the amount of Cash Assets held by ED as of the Option Closing Date or the
Put Closing Date, as the case may be.


 


2

















 


“Cash and Cash Equivalent
Notice” has the meaning set forth in Section 3.3(b).


 


“Cash Assets” means (a) unrestricted
funds in bank accounts with no individual account exceeding $250,000; (b) marketable
direct obligations issued by the United 
States Treasury, in each case maturing within one year from the date of
acquisition; or (c) money market funds that (i) comply with the
criteria set forth in SEC Rule 2a-7 under the Investment Company Act of
1940, as amended, and (ii) are rated AAA by S&P and Aaa by Moody’s and
(iii)  invest exclusively in direct obligations of the United States
Treasury.


 


“Closing” shall have
the meaning set forth in Section 8.2.


 


“Company Documents”
has the meaning set forth in Section 6.2.


 


“Code” means the
Internal Revenue Code of 1986, as amended.


 


“Contract” means any
note, bond, mortgage, indenture, contract, agreement, guaranty, lien, pledge,
lease, purchase order, sales order, arrangement or other commitment, obligation
or understanding, written or oral, to which a Person is a party or by which a
Person or its assets or properties are bound.


 


“Damages” means any
loss, liability, claim, damage or expense (including reasonable attorneys’
fees).


 


“Design Fund
Loan Agreement”  means the Loan
Agreement, dated as of the date hereof, between Design Fund and ED.


 


“Design Fund
Loan Balance”  means the outstanding
balance, including accrued interest, of all outstanding notes and other
obligations of ED under the Design Fund Loan Agreement as of the Option Closing
Date or the Put Closing Date, as the case may be.


 


“ED Loan
Agreements” means the Design Fund Loan Agreement and the BVI Fund Loan
Agreement.


 


“ED Loan
Balance” means the total of the BVI Fund Loan Balance and the Design Fund
Loan Balance.


 


“Encumbrance” means
any security interest, mortgage, lien, pledge, charging order, warrant, option,
conversion right, purchase right or other encumbrance of any sort.


 


“Funding Adjustment”
means the amount of any Funding Payments that have not been made under the
Funding and Royalty Agreement.


 


“Funding and Royalty
Agreement” has the meaning set forth in the Recitals to this Agreement.


 


“Funding Payment” has
the meaning set forth in the Funding and Royalty Agreement.


 


3

















 


“GAAP” means generally
accepted accounting principles as recognized by the American Institute of
Certified Public Accountants.


 


“Governmental Authority”
means any nation or government, any state or other political subdivision
thereof, any municipal, local, city or county government, and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.


 


“Governmental
Authorization” means any approval, consent, license, permit, waiver or
other authorization issued, granted or given by or under the authority of any
Governmental Authority.


 


“Indemnified Party”
has the meaning set forth in Section 9.4(a).


 


“Indemnifying Party”
has the meaning set forth in Section 9.4(a).


 


“Law” means any
foreign, federal, national, supranational, state, provincial, local or similar
statute, law, ordinance, regulation, rule, code, Order, requirement or rule of
law (including common law), as amended and in effect from time to time.


 


“Legal Requirement”
means any federal, state, local or foreign statute, law, treaty, rule,
regulation, Order, decree, writ, injunction or determination of any arbitrator,
court or Governmental Authority and, with respect to any Person, includes all
such Legal Requirements applicable or binding upon such Person, its business or
the ownership or use of any of its assets.


 


“Liabilities” means
any and all debts, liabilities and obligations of any sort, whether accrued or
fixed, absolute or contingent, matured or unmatured, determined or
determinable, including, without limitation, those arising under the ED Loan
Agreements, any Legal Requirement or Contract or otherwise or any liability of
ED for Taxes.


 


“Major Transaction”
means (A) a consolidation, merger, exchange of shares, recapitalization,
reorganization, business combination or similar event (1) following which
the holders of common stock of the Company immediately preceding a
consolidation, merger, exchange of shares, recapitalization, reorganization,
business combination or similar event either (a) no longer hold a majority
of the shares of the common stock of the Company or (b) no longer have the
ability to elect a majority of the board of directors of the Company or (2) as
a result of which shares of common stock of the Company are changed into (or
the shares of common stock become entitled to receive) the same or a different
number of shares of the same or another class or classes of stock or securities
of the Company or another entity (collectively, a “Change in Control
Transaction”), (B) a sale or transfer of assets of the Company in one
transaction or a series of related transactions where the consideration to be
payable at and within thirty (30) days of closing of such transaction or
transactions has a value of more than $350,000,000, or a sale, transfer or
license of all or substantially all assets or proprietary rights of the Company
that relate specifically to MUSE or Avanafil, or (C) a purchase, tender or
exchange offer made to the holders of outstanding shares of the Company’s
common stock, such that following such purchase, tender or exchange offer a
Change in Control Transaction shall have occurred; or (D) an issuance or
series of issuances by the Company in related transactions of an aggregate
number of shares of common stock in excess of twenty percent (20%) of the
Company’s outstanding 


 


4

















 


common
stock as of April 3, 2008 if, immediately prior to such issuance or series
of issuances, the Market Capitalization of the Company is less than
$300,000,000.


 


“Major Transaction Notice”
has the meaning set forth in Section 3.3.


 


“Market Capitalization of
the Company” means the aggregate of the value of all of the Company’s
outstanding shares of common stock based on the volume weighted average price
of such shares on the NASDAQ Global Market as reported by Bloomberg Financial
Markets or an equivalent reliable reporting source (“Bloomberg”) or if
NASDAQ is not the principal trading market for such shares, the volume weighted
average price of such shares on the principal securities exchange or the
trading market whose such shares are listed or traded as reported by Bloomberg.


 


“MUSE” has the meaning
set forth in the Funding and Royalty Agreement.


 


“Net Sales” shall have
the meaning ascribed to that term in the Funding and Royalty Agreement.


 


“Option” has the
meaning set forth in Section 2.1.


 


“Option Closing” has
the meaning set forth in Section 2.5.


 


“Option Closing Date”
has the meaning set forth in Section 2.4, as modified, if
applicable, in accordance with Section 3.1B(a) hereof.


 


“Option Period” has
the meaning set forth in Section 2.4.


 


“Option Premium” has
the meaning set forth in Section 2.2.


 


“Option Purchase Price”
has the meaning set forth in Section 2.3.


 


“Order” means any
binding order, judgment, ruling, subpoena or verdict rendered by any
Governmental Authority or by any arbitrator.


 


“Party” means the
Company, ED and the Stockholders, and “Parties” means all such Persons.


 


“Permitted Encumbrances”
means (i) all Encumbrances approved in writing by the Company; (ii) mechanics’,
materialmen’s, carriers’, workmen’s, warehousemen’s, repairmen’s and landlords’
liens or other like Encumbrances arising or incurred in the ordinary course of
business for amounts which are not material and not yet due and payable; (iii) Encumbrances
for Taxes and other governmental charges that are not due and payable or
delinquent or which are being contested in good faith through appropriate
Proceedings and (iv) Encumbrances arising under Contracts with third
parties entered into in the ordinary course of business in respect of amounts
still owing.


 


“Person” means any
corporation, association, joint venture, partnership, limited liability
company, organization, business, individual, trust, Governmental Authority or
other legal entity.


 


5

















 


“Proceeding” means any
action, arbitration, audit, hearing, investigation, litigation or suit (whether
civil, criminal or administrative) commenced, conducted, or heard by or before
any Governmental Authority or arbitrator.


 


“Put Closing” has the
meaning set forth in Section 3.6.


 


“Put Closing Date”
means the date on which the Shares are sold to the Company pursuant to the Put
Right, as modified, if applicable, in accordance with Section 3.1B(a) hereof.


 


“Put Exercise Notice”
has the meaning set forth in Section 3.5.


 


“Put Period” has the
meaning set forth in Section 3.2.


 


“Put Purchase Price”
has the meaning set forth in Section 3.4.


 


“Put Right” has the
meaning set forth in Section 3.1.


 


“Royalty” has the
meaning set forth in the Funding and Royalty Agreement.


 


“Royalty Adjustment”
means the amount of accrued and unpaid Royalties for all periods of time ending
on the Option Closing Date or the Put Closing Date, as the case may be.  For purposes of determining the amount of
Royalties payable with respect to the quarterly period during which an Option
Closing or Put Closing occurs, it shall be assumed that Net Sales of MUSE were
made at the same rate as Net Sales in the comparable period of the prior year
and that Net Sales of PDE-5I were made at the same rate as Net Sales in the
immediately preceding quarter.


 


“Royalty Default Notice”
shall have the meaning set forth in Section 3.2.


 


“Securities Act” means
the Securities Act of 1933, as amended.


 


“Security Agreement”
has the meaning set forth in Section 3.1A.


 


“Shares” shall have
the meaning set forth in Section 4.2.


 


“Stockholder Documents”
has the meaning set forth in Section 5.2.


 


“Stockholders” has the
meaning set forth in the first paragraph of the Agreement.


 


“Straddle Period”
means any Taxable Period that begins on or before, and ends after, the Option
Closing Date or the Put Closing Date, as applicable.


 


“Tax Adjustment” means
the amount of Taxes of ED due and payable by ED or in the case of the Straddle
Period that includes the applicable Closing, accrued by ED for all Taxable
Periods (including Straddle Periods) up to the Option Closing or the Put
Closing, as the case may be, in each case to the extent such Taxes have not
been paid by ED as of the applicable Closing.


 


“Taxable Period” shall
mean any taxable year or any other period that is treated as a taxable year (or
other period, or portion thereof, in the case of a Tax imposed with respect to 


 


6

















 


such
other period; e.g., a quarter) with respect to which any Tax may be
imposed under any applicable statute, rule, or regulation.


 


“Taxes” means any and
all U.S. federal, state and local taxes, assessments and other governmental
charges, duties, impositions, levies and liabilities, including, without
limitation, taxes based upon or measured by gross receipts, income profits,
sales, use and occupation, and value added, goods and services, ad valorem,
transfer, gains, franchise, withholding, payroll, recapture, employment,
excise, unemployment, insurance, social security, business license, occupation,
business organization, stamp, environmental and property taxes, together with
any interest, penalties and additions imposed with respect to such
amounts.  For purposes of this Agreement,
“Taxes” also includes any obligations under any agreements or arrangements with
any Person with respect to the liability for, or sharing of, Taxes.


 


“Tax Return” means any
return, statement, declaration, report, estimate, notice, form, schedule or
other document (including estimated Tax returns and reports, withholding Tax
returns and reports, any schedule or attachment, information returns and
reports and any amendment to any of the foregoing) relating to Taxes.


 


OPTION


 


2.1                                 Option.  On the terms and subject to the conditions of
this Agreement, the Stockholders have granted the Company an option (the “Option”)
which, when exercised, shall obligate each of the Stockholders to sell the
Shares to the Company, and the Company to purchase the Shares from each of the
Stockholders.


 


2.2                                 Option
Premium.  In consideration of the
grant by the Stockholders to the Company of the Option, the Company has
previously paid the Stockholders Two Million Dollars ($2,000,000) (the “Option
Premium”).  Such amount has been
allocated between the Stockholders as provided in Exhibit 2
hereto.  If the Option is exercised by
the Company, upon closing of the sale of the Shares the Option Premium shall be
applied against the Option Purchase Price in accordance with Section 2.3
below.  In all other circumstances,
including but not limited to the sale of the Shares pursuant to the Put Right,
the Stockholders shall be entitled to retain the Option Premium.


 


2.3                                 Option Purchase Price.  If
the Company exercises the Option, the aggregate consideration to be paid by the
Company (the “Option Purchase Price”) to the Stockholders for the Shares
shall be equal to the sum of the Base Option Price plus the Cash Adjustment
plus the Royalty Adjustment, and minus the Option Premium, the Tax Adjustment,
the Funding Adjustment, the ED Loan Balance and any other outstanding
liabilities of ED to the extent not otherwise taken into account in the
calculation of the Option Purchase Price. 
The Stockholders and ED shall provide written notice of the amount of
the Cash Adjustment, the Tax Adjustment (including adequate supporting
documentation), the Design Fund Loan Balance, the BVI Fund Loan Balance, and
any other outstanding liabilities of ED, and the Company shall provide written
notice of the amount of the Royalty Adjustment (including adequate supporting


 


7

















 


documentation),
no later than five (5) Business Days prior to the Option Closing
Date.  At the Option Closing, the Company
shall pay the Option Purchase Price to the Stockholders by wire transfer of
immediately available funds to an account or accounts designated in writing by
the Stockholders.  The Option Purchase
Price shall be allocated between the Stockholders pro rata in accordance with
the percentage of the Shares held by the Stockholders.


 


2.4                                 Term
and Method of Exercise of Option. 
The Option commenced on April 3, 2008 and shall terminate at 5:00 p.m.
Eastern time on April 3, 2012 (the “Option Period”).  Except as hereafter provided, at any time
prior to the expiration of the Option Period, the Company may exercise the
Option by delivery to the Stockholders of a written notice (the “Option
Exercise Notice”) substantially in the form of Exhibit 3
hereto.  The Option Exercise Notice shall
constitute a binding obligation of the Company to purchase, and the
Stockholders to sell, all of the Shares pursuant to the terms and conditions of
this Agreement.  The Option Exercise
Notice may be delivered on any Business Day during the Option Period that is at
least twenty (20) days prior to the expiration of the Option Period and shall
specify a Business Day (the “Option Closing Date”) that is not earlier
than ten (10) nor later than twenty (20) days, after the date of the
Option Exercise Notice, for the closing of the sale of the Shares pursuant to
the Option.


 


2.5                                 Option
Closing.  The closing of the sale of
Shares pursuant to the Option (the “Option Closing”) shall take place at
the offices of Katten Muchin Rosenman LLP, in New York, New York, commencing at
10:00 a.m., local time, on a Business Day within the Option Period (except
that the Option Closing may take place on a date following the expiration of
the Option Period to the extent the process provided for under Section 3.1B(a) through
(d) hereof is invoked on a timely basis, in accordance with the terms
thereof).  The Option Closing shall be
effective as of 5:00 p.m., local time, on the Option Closing Date, and all
actions scheduled in this Agreement for the Option Closing Date shall be deemed
to occur simultaneously at that time, except as otherwise contemplated hereby
or as expressly agreed in writing by the Parties.  At the Option Closing the Stockholders shall
deliver to the Company certificates representing the Shares, duly endorsed in
blank (or accompanied by duly executed stock powers in blank), and the Company
shall deliver to the Stockholders the Option Purchase Price by wire transfer of
immediately available funds to an account or accounts specified by the
Stockholders.


 


2.6                                 Satisfaction
of Obligations under ED Loan Agreements.  
Simultaneously with the Option Closing (i) the Company shall be
obligated, on behalf of ED, to pay the Design Fund Loan Balance to the Design
Fund by wire transfer of immediately available funds to an account specified by
the Design Fund  and the Design Fund
shall be obligated to (A) accept that amount in full satisfaction of all
obligations of ED under the Design Fund Loan Agreement and (B) deliver to
the Company the cancelled notes of ED and (ii) the Company shall be
obligated, on behalf of ED, to pay the BVI Fund Loan Balance to the BVI Fund by
wire transfer of immediately available funds to an account specified by the BVI
Fund and the BVI Fund shall (A) accept that amount in full satisfaction of
all obligations of ED under the BVI Fund Loan Agreement, and (B) deliver
to the Company the cancelled notes.


 


8

















 


PUT RIGHT


 


3.1                                 Put Right.  On the terms and subject to the
conditions of this Agreement, the Company hereby grants the Stockholders an
option (the “Put Right”) which, when exercised, shall obligate the
Company to purchase the Shares from each of the Stockholders, and obligate each
of the Stockholders to sell the Shares to the Company.


 


3.2                                 The Put Period.  The
Put Right shall commence on the earliest of (a) April 3, 2011, (b) any
date on which (i) the Market Capitalization of the Company falls below
$50,000,000 or (ii) the amount of Cash and Cash Equivalents held by the
Company falls below $15,000,000, (c) the fifteenth day following the
delivery of written notice to the Company (a “Royalty Default Notice”)
that the Company has failed to pay Royalties in accordance with the provisions
of the Funding and Royalty Agreement, which failure constitutes a breach of the
Funding and Royalty Agreement, unless the Company shall have paid such
Royalties prior to such fifteenth day and (d) the closing of a Major
Transaction.  The Put Right shall
terminate on the tenth anniversary of the date hereof.  The period during which the Shares may be
sold pursuant to the Put Right is referred to as the “Put Period.”


 


3.3                                 Major Transaction Notice and Cash and Cash
Equivalent Notice.  (a) At least twenty (20) days prior to
the consummation of any Major Transaction, but, in any event, not later than
the date of the public announcement of such Major Transaction, the Company
shall deliver to the Stockholders a written notice setting forth the terms of
such Major Transaction (a “Major Transaction Notice”).  If, subsequent to the delivery of the Major
Transaction Notice, the Stockholders shall have delivered a Put Exercise Notice
(as defined below) then, not less than three (3) Business Days prior to
the consummation of such Major Transaction, the Company shall deliver to the
Stockholders a dated written notice specifying the anticipated closing date for
such Major Transaction.


 


(b)                                 Not less than two (2) Business Days after
any date on which the amount of Cash and Cash Equivalents of the Company falls
below $15,000,000, the Company shall deliver written notice (a “Cash and
Cash Equivalent Notice”) thereof to the Stockholders.


 


3.4                                 Put Purchase Price.  If
the Stockholders exercise the Put Right, the aggregate consideration to be paid
by the Company (the “Put Purchase Price”) to the Stockholders for the
Shares shall be equal to the Base Put Price plus the Cash Adjustment and the
Royalty Adjustment and minus the Tax Adjustment, the Funding Adjustment, the ED
Loan Balance and any other outstanding liabilities of ED to the extent not
otherwise taken into account in the calculation of the Put Purchase Price.  The Stockholders and ED shall provide written
notice of the amount of the Cash Adjustment, the Tax Adjustment (including
adequate supporting documentation), the Design Fund Loan Balance, the BVI Fund
Loan Balance and any other outstanding liabilities of ED, and the Company shall
provide written notice of the amount of the Royalty Adjustment (including
adequate supporting documentation), no later than five (5) Business Days
prior to the Put Closing Date.  At the
Put Closing, the Company shall pay the Put Purchase Price to the Stockholders
by wire transfer of immediately available funds to an account or accounts
designated in writing by the Stockholders. 
The Put Purchase Price shall be allocated


 


9

















 


among
the Stockholders pro rata in accordance with the number of the Shares held
respectively by the Stockholders.


 


3.5                                 Method of Exercise. 
Except as hereinafter provided, at any time during the Put Period, all,
but not less than all, of the Stockholders may exercise the Put Right by
delivery to the Company of a written notice executed by each of the Stockholders
(the “Put Exercise Notice”) substantially in the form of Exhibit 3
hereto.  The Put Exercise Notice shall
constitute a binding obligation of the Company to purchase, and the
Stockholders to sell, all of the Shares pursuant to the terms and conditions of
this Agreement.  The Put Exercise Notice
may be delivered on any Business Day during the Put Period that is at least
twenty (20) days prior to the expiration of the Put Period.  In addition, the Put Exercise Notice given in
respect of (a) the Put Right provided for in Section 3.2(a) may
also be given on any date that is no more than twenty (20) days prior to April 3,
2011, (b) the Put Right provided for in Section 3.2(b)(ii) and
3.2(d) may also be given at any time after the delivery of a Cash and
Cash Equivalent Notice or a Major Transaction Notice, as the case may be, and (c) the
Put Right provided for in Section 3.2(c) may be given
simultaneously with or at any time after the delivery of a Royalty Default
Notice.  The Put Exercise Notice in
respect of all Put Rights other than the Put Right provided for in Section 3.2(d) shall
specify a Business Day that is not earlier than ten (10), nor later than twenty
(20), days after the date of the Put Exercise Notice, for the closing of the
sale of Shares pursuant to the Put Right. 
The Put Exercise Notice in respect of the Put Right provided for in Section 3.2(d) shall
specify that the closing date for the sale of the Shares shall take place
simultaneously with the closing of the Major Transaction or on a date that is
mutually agreeable to the Stockholders and the Company that is prior to the
closing of the Major Transaction.


 


3.6                                 Put
Closing.  The closing of the purchase
of the Shares pursuant to the Put Right (the “Put Closing”) shall take
place at the offices of Katten Muchin Rosenman LLP, in New York, New York,
commencing at 10:00 a.m., local time on a Business Day within the Put
Period (except that the Put Closing may take place on a date following
expiration of the Put Period to the extent the process provided under Article 3.1B(a) through
(d) hereof is invoked on a timely basis in accordance with the terms
thereof).  The Put Closing shall be
effective as of 5:00 P.M., local time, on the Put Closing Date, and all
actions scheduled in this Agreement for the Put Closing Date shall be deemed to
occur simultaneously at that time, except as otherwise contemplated hereby or
as expressly agreed in writing by the Parties. 
At the Put Closing the Stockholders shall deliver to the Company
certificates representing the Shares, duly endorsed in blank (or accompanied by
duly executed stock powers in blank), and the Company shall deliver to the
Stockholders the Put Purchase Price, by wire transfer of immediately available
funds to an account or accounts specified by the Stockholders in writing to the
Company.


 


3.7                                 Major
Transaction Closing.  Notwithstanding
anything to the contrary contained herein, including, without limitation, Section 3.1B
hereof, the Company shall not consummate a Major Transaction if the
Stockholders have previously delivered a Put Exercise Notice unless the Put
Purchase Price is paid to the Stockholders in full prior to or simultaneously
with the consummation of such Major Transaction.


 


3.8                                 Satisfaction
of Obligations under ED Loan Agreements.  
Simultaneously with the Put Closing (i) the Company shall be
obligated, on behalf of ED, to pay the Design Fund Loan Balance (less any
applicable withholding Taxes) to the Design Fund by wire transfer of


 


10

















 


immediately available
funds to an account specified by the Design Fund  and the Design Fund shall be obligated to (A) accept
that amount in full satisfaction of all obligations of ED under the Design Fund
Loan Agreement and (B) deliver to the Company the cancelled notes of ED
and (ii) the Company shall be obligated, on behalf of ED, to pay the BVI
Fund Loan Balance (less any applicable withholding Taxes) to the BVI Fund by
wire transfer of immediately available funds to an account specified by the BVI
Fund and the BVI Fund shall (a) accept that amount in full satisfaction of
all obligations of ED under the BVI Fund Loan Agreement and (b) deliver to
the Company the cancelled notes.


 


ARTICLE IIIA


 


SECURITY AGREEMENT


 


3.1A                       Security Agreement.  As security for the performance of its
obligations with respect to the Put Right, the Company has entered into the
Security Agreement (the “Security Agreement”) annexed hereto as Exhibit 4.


 


ARTICLE IIIB


 


TAX ADJUSTMENT OBJECTIONS


 


Notwithstanding anything herein to the contrary:


 


3.1B                         (a)                                  The Company shall have the right to object in
good faith to the Tax Adjustment amount (the “Initial Tax Adjustment
Calculation”) set forth in the written notice (the “Initial Adjustment
Notice”) provided by the Stockholders and ED pursuant to Section 2.3
or Section 3.4 hereof, (other than in respect of a Put Right set forth in Section 3.2(b) or
(c), objections to which shall be handled in accordance with subsection (e), (f) and
(g) below), by delivering written notice of a specific objection and the
basis therefor (a “Tax Adjustment Objection Notice”), together with
available supporting documentation, to the Stockholders no less than two (2) Business
Days prior to the applicable Option Closing Date or Put Closing Date, as the
case may be, set forth in the Option Exercise Notice or Put Exercise Notice, as
applicable (or such other date as shall have been mutually agreed to in writing
by the parties to constitute the Option Closing Date or Put Closing Date, as
the case may be). The Tax Adjustment Objection Notice shall specify a postponed
date for the Option Closing or Put Closing, as the case may be, which date
shall be a Business Day that is no more than forty-five (45) calendar days
following the date of the Tax Adjustment Objection Notice. Such postponed date
shall thereafter constitute the “Option Closing Date” or “Put Closing Date”, as
the case may be, for all purposes hereunder.


 


(b)                                 If the Company shall have delivered a Tax
Adjustment Objection Notice, it shall retain a “Big 4” accounting firm that is
reasonably acceptable to the Company and the


 


11

















 


Stockholders (the “Resolving Accountant”) to review and, if
necessary, recalculate the Initial Tax Adjustment Calculation and the Tax
Adjustment Objection Notice.  The
retention set forth in the immediately preceding sentence shall be made
pursuant to a retention agreement providing for terms that are reasonably
acceptable to the Company and the Stockholders, including the granting of
access to the Company and the Stockholders to the Resolving Accountant during
the engagement period and providing for the Resolving Accountant to circulate
to the Company and the Stockholders, in writing at least ten (10) Business
Days prior to the Option Closing Date or Put Closing Date set forth in the Tax
Objection Notice, the Resolving Accountants’ preliminary calculations of the
Tax Adjustment, together with its basis therefor and adequate supporting
documentation.  From the date that such
preliminary calculations have been received by the Company and the Stockholders
until 5:00 p.m. New York City time on the date that is three (3) Business
Days thereafter, the Company and the Stockholders shall have the opportunity to
comment on such preliminary calculations. 
The fees of the Resolving Accountant shall be paid equally by the
Company and the Stockholders.


 


(c)                                  The final Tax Adjustment determined by the
written report of the Resolving Accountant issued to the Company and the
Stockholders at least five (5) Business Days prior to the revised Option
Closing Date or Put Closing Date, as the case may be (the “Report Deadline”),
shall be the final Tax Adjustment reflected in the Option Purchase  Price or Put Purchase Price, as the case may
be.  If such report shall not be issued
to the Company and the Stockholders prior to the Report Deadline (a “Report
Failure”), then the Tax Adjustment calculation set forth in the notice
provided for in subsection (d) below shall constitute the  final Tax Adjustment reflected in the Option
Purchase Price or Put Purchase Price, as the case may be.


 


(d)                                 In order to reflect changes to such amounts
since the date of the Initial Adjustment Notice, no later than five (5) Business
Days prior to the revised Option Closing Date or Put Closing Date, as the case
may be, the Stockholders and ED shall provide written notice of the revised
amount of the Cash Adjustment, the Design Fund Loan Balance, the BVI Fund Loan
Balance and any other liabilities of ED, and the Company shall provide written
notice of the revised amount of the Royalty Adjustment. Such revised amounts
shall be the final amounts of such items reflected in the Option Purchase Price
or Put Purchase Price, as the case may be, except that the Tax Adjustment
Calculation set forth in such notice by the Stockholders and ED shall only be
reflected in the Option Purchase Price or Put Purchase Price if there shall be
a Report Failure as set forth in subsection (c) above.


 


(e)                                  The Tax Adjustment amount set forth in the
written notice provided by the Stockholders and ED pursuant to Section 3.4
hereof in respect of a Put Right provided for under Section 3.2(b) or
(c) hereof (the “Initial 3.2 Adjustment Notice”) shall be the Tax
Adjustment amount that is reflected in the Put Purchase Price paid by the Company
at the Put Closing even if the Company shall have delivered a Section 3.2
Tax Adjustment Objection Notice (as defined in the immediately following
sentence). The Company shall have the right to object to the Tax Adjustment
Amount set forth in the Initial 3.2 Adjustment Notice, by delivering written
notice of a specific objection and the basis therefor (a “Section 3.2
Tax Adjustment Objection Notice”), together with adequate supporting
documentation, to the Stockholders no less than two (2) Business Days prior
to the applicable Put Closing Date set forth in the Put Exercise Notice (or


 


12

















 


such other date as shall have been mutually agreed to in writing by the
parties to constitute the Put Closing Date).


 


(f)                                    If the Company shall have delivered a Section 3.2
Tax Adjustment Objection Notice, it shall retain a “Big 4” accounting firm that
is reasonably acceptable and, if necessary, recalculate to the Company and the
Stockholders (the “Section 3.2(b) Resolving Accountant”) to
review and, if necessary, recalculate the Tax Adjustment calculation set forth
in the Initial 3.2 Adjustment Notice and the Section 3.2 Tax Adjustment
Objection Notice.  The retention set
forth in the immediately preceding sentence shall be made pursuant to a
retention agreement providing for terms that are reasonably acceptable to the
Company and the Stockholders, including the granting of access to the Company
and the Stockholders to the Section 3.2 Resolving Accountant during the
engagement period and providing for the Section 3.2 Resolving Accountant
to circulate to the Company and the Stockholders, in writing not more than
forty-five (45) Business Days following the Put Closing Date, the Section 3.2
Resolving Accountants’ preliminary calculations of the Tax Adjustment, together
with its basis therefor and adequate supporting documentation.  From the date that such preliminary
calculations have been delivered by the Resolving Accountants to the Company
and the Stockholders until 5:00 p.m. New York City time on the date that
is five (5) Business Days thereafter, the Company and the Stockholders
shall have the opportunity to comment on such preliminary calculations.  The Section 3.2 Resolving Accountants’
final calculations of the Tax Adjustment, together with its basis therefor and
adequate supporting documentation, shall be circulated to the Company no later
than forty (40) Business Days following the Put Closing Date (the “3.2
Resolving Deadline”).  The fees of
the Section 3.2 Resolving Accountant shall be paid equally by the Company
and the Stockholders.


 


(g)                                 If the final Tax Adjustment determined by the
written report of the Section 3.2 Resolving Accountant circulated to the
Company and the Stockholders no later than the 3.2 Resolving Deadline is higher
than the Tax Adjustment set forth in the Initial 3.2 Adjustment Notice, then
the Stockholders shall pay to the Company, within ten (10) Business Days
following the date such report was issued, an amount equal to the amount paid
by the Company as the Put Purchase Price on the Put Closing Date, less the
amount that would have constituted the Put Purchase Price had the finalized Tax
Adjustment determined by the Section 3.2 Resolving Accountant been used in
calculating the Put Purchase Price.


 


(h)                                 The Company and the Stockholders agree to
fully and in good faith cooperate with one another and with the Resolving
Accountant with respect to the process set forth in this Article IIIB.


 


REPRESENTATIONS RELATING TO ED


 


The Stockholders
and ED jointly and severally represent to the Company that:


 


13
















 


4.1                                 ED
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware.  ED
has the requisite corporate power and authority to own the assets that it owns
and to conduct its business. The current officers of ED are as follows: Peter
Steelman, President; Alexander Karnal, Secretary and Jeffrey Kaplan, Treasurer.
The Stockholders shall notify the Company as soon as practicable following any
change in the officers of ED that occurs prior to the earlier of (x) the
exercise of the Option or the Put Right and (y) the expiration of the
Option and the Put Right.


 


4.2                                 The
authorized capital stock of ED consists of 21,000 shares of common stock having
a par value of $0.001 per share.  As of
the date of this Agreement, 8,357 shares of Common Stock are outstanding.  All of the foregoing shares have been duly
authorized and validly issued and are fully paid and nonassessable and free of
preemptive and similar rights.  Except
for the foregoing shares and outstanding debt contemplated under the ED Loan
Agreements there are no outstanding (i) shares of capital stock, debt
securities or other voting securities of ED; (ii) securities of ED which
are or may become convertible into or exchangeable for shares of capital stock,
debt securities or voting securities or ownership interests in ED; (iii) Contracts
that grant or may grant the right to acquire from ED, or obligations of ED to
issue any capital stock, debt securities, voting securities or other ownership
interests in, or any securities convertible into or exchangeable or exercisable
for any capital stock, voting securities, debt securities or ownership
interests in, ED, or obligations of ED to grant, extend or enter into any such
agreement or commitment; or (iv) obligations of ED to repurchase, redeem
or otherwise acquire any outstanding securities of ED, or to vote or to dispose
of any shares of the capital stock of ED. 
All of the outstanding equity securities of ED have been offered and
issued in compliance with all applicable federal and state securities laws,
including “blue sky” laws.  Any
outstanding shares of capital stock of ED are referred to as the “Shares.”


 


4.3                                 There
are no agreements, arrangements, proxies or understandings that restrict or
otherwise affect the transfer of any of the Shares except as set forth in this
Agreement.


 


4.4                                 ED
has all requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement, and the execution and delivery of this
Agreement and the performance of all of its obligations hereunder have been
duly authorized by ED and the Stockholders. 
This Agreement has been duly executed and delivered by ED and
constitutes the legal, valid and binding obligation of ED, enforceable against
ED in accordance with its terms, except as enforceability may be limited or
affected by applicable bankruptcy, insolvency, moratorium, reorganization or
other laws of general application relating to or affecting creditors’ rights
generally.


 


4.5                                 The
signing, delivery and performance of this Agreement by ED is not prohibited or
limited by, and will not result in the breach of or a default under, any
provision of the certificate of incorporation or bylaws of ED, or of any
applicable Law, Order, writ, injunction or decree of any Governmental
Authority, except for such prohibition, limitation or default as would not
prevent consummation by ED of the transactions contemplated hereby.


 


4.6                                 There
is no Proceeding pending or threatened, directly or indirectly, involving ED or
the transactions contemplated hereby or ED’s ability to perform its obligations
hereunder.  ED is not a party or subject
to or in default under any Order applicable to ED


 


14

















 


4.7                                 No
insolvency Proceeding of any character, including, without limitation,
bankruptcy, receivership, reorganization, composition or arrangement with
creditors, voluntary or involuntary, has been commenced by or against ED or any
of its assets, nor is any such Proceeding threatened.  Neither the Stockholders nor ED contemplates,
nor has ED or either Stockholder taken any action in contemplation of, the
institution of any such insolvency Proceedings.


 


4.8                                 No
broker, investment banker, agent, finder or other intermediary acting on behalf
of ED or under the authority of ED is or will be entitled to any broker’s or
finder’s fee or any other commission or similar fee directly or indirectly in
connection with any of the transactions contemplated hereby, except for the
arrangement fee paid to Deerfield Management Company, L.P. pursuant to Section 6(a) of
the Securities Purchase Agreement dated as of April 3, 2008, among VIVUS,
the Stockholders and Deerfield Management Company, L.P. (the “Arrangement
Fee”).


 


4.9                                 As
of the date of this Agreement, ED’s sole assets consist of Cash Assets and Cash
Equivalents and its rights under the Funding and Royalty Agreement.  ED has no Liabilities, other than those
Liabilities that are incidental to the permitted activities of ED or are
otherwise created by the Funding and Royalty Agreement, this Agreement or the
ED Loan Agreements or relate to the payment of Taxes.  ED has timely filed all material Tax Returns
required to be filed by it and has timely paid all material Taxes required to
be paid by it.  ED does not own any
interest in any other Person.


 


4.10                           There
are no Encumbrances upon any of the Shares other than those created by this
Agreement.


 


4.11                           None of
the Shares has been issued in violation of any Legal Requirement or the
certificate of incorporation or bylaws of ED or in violation of any preemptive,
subscription or similar rights.


 


4.12                           ED was
formed solely for the purpose of engaging in the transactions contemplated by
this Agreement and the Funding and Royalty Agreement.  ED has not owned, operated or conducted and,
other than its receipt of Royalties and loans under the ED Loan Agreements,
will not own any assets other than Cash and Cash Equivalents or operate or
conduct any assets, businesses or activities other than in connection with its
organization, the negotiation and execution of this Agreement and the
consummation of the transactions contemplated hereby and by the Funding and
Royalty Agreement.


 


4.13                           No
Governmental Authorization is required by ED in connection with the execution
or delivery by ED of this Agreement or the performance by ED of ED’s
obligations under this Agreement. 
Neither the execution and delivery of this Agreement by ED nor the
performance of ED’s obligations hereunder shall (with or without notice or
lapse of time) (i) result in the creation of any Encumbrance upon the
Shares or (ii) conflict with or violate any Legal Requirement applicable
to ED.


 


4.14                           The
Board of Directors of ED and the Stockholders have approved this Agreement, the
Funding and Royalty Agreement and the transactions contemplated hereby and


 


15

















 


thereby and the Board of
Directors of ED has approved the ED Loan Agreements.  Design Fund and BVI Fund have approved each
of the ED Loan Agreements to which they are a party.


 


4.15                           ED is
not, and does not intend to conduct its business in a manner in which it would
be, required to be registered as an “investment company” as defined in Section 3(a) of
the Investment Company Act of 1940, as amended.


 


4.16                           EXCEPT
AS EXPRESSLY SET FORTH IN THIS ARTICLE IV AND IN ARTICLE V AND ARTICLE VA,
NEITHER THE STOCKHOLDERS NOR ED MAKES, AND NO PARTY SHALL BE ENTITLED TO RELY
UPON, ANY REPRESENTATION OR WARRANTY AS TO ANY FACT OR MATTER ABOUT ED UNDER
THIS AGREEMENT.


 


REPRESENTATIONS RELATING TO THE
STOCKHOLDERS


 


Each Stockholder
represents to the Company, solely with respect to itself, that:


 


5.1                                 Organization.  Such Stockholder is a limited partnership and
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization.


 


5.2                                 Authority;
Enforceability.  Such Stockholder has
the requisite legal power and authority to (i) execute and deliver this
Agreement and each certificate, document and agreement to be executed by such
Stockholder in connection herewith (collectively, the “Stockholder Documents”)
and (ii) perform its obligations hereunder and thereunder, and such
execution, delivery and performance have been duly and validly authorized by
such Stockholder.  This Agreement has
been duly and validly executed and delivered by such Stockholder and
constitutes, and upon execution and delivery by such Stockholder of each
Stockholder Document to which such Stockholder is a party, each such
Stockholder Document will constitute, a legal, valid and binding obligation of
such Stockholder, enforceable against such Stockholder in accordance with its
terms, except as the enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other laws relating to or
limiting creditors’ rights generally or by general principles of equity.


 


5.3                                 No
Violation; Enforceability.  The
signing, delivery and performance of this Agreement by such Stockholder is not
prohibited or limited by, and will not result in the breach of or a default
under, any provision of the limited partnership agreement or other formation
documents of such Stockholder, or of any material agreement or instrument
binding on such Stockholder, or of any applicable law or Order, except for such
prohibition, limitation or default as would not prevent consummation by such
Stockholder of the transactions contemplated hereby.  The execution, delivery and performance of
this Agreement by such Stockholder and such Stockholder’s compliance with the
terms and provisions hereof do not and will not conflict with or result in a
breach of any of the terms and provisions of or constitute a default, with or
without the passage of time and the giving of notice, under any material
Contract binding or affecting such Stockholder or such Stockholder’s property.


 


16

















 


5.4                                 No
Proceedings.  There is no Proceeding
pending or threatened involving such Stockholder that would materially affect
such Stockholder’s ability to perform its obligations hereunder.


 


5.5                                 Financial
Condition.  No insolvency Proceeding
of any character, including, without limitation, bankruptcy, receivership,
reorganization, composition or arrangement with creditors, voluntary or
involuntary, has been commenced by or against such Stockholder or any of its
assets or properties, nor is any such Proceeding threatened.  Such Stockholder does not contemplate, and
has not taken any action in contemplation of, the institution of any such
insolvency Proceedings.


 


5.6                                 Sufficient
Funds.  Design Fund has sufficient
capital commitments to be capable of funding its obligations under the Design
Fund Loan Agreement on the terms and conditions set forth in the Design Fund
Loan Agreement.


 


5.7                                 Consents
and Approvals; No Violation.


 


(a)                                  No
Governmental Authorization is required by such Stockholder in connection with
the execution or delivery by such Stockholder of this Agreement or the
Stockholder Documents to which such Stockholder is a party, or the performance
by such Stockholder of the Stockholder’s obligations under this Agreement or
the Stockholder Documents to which such Stockholder is a party, except for any
Governmental Authorizations that are not material.


 


(b)                                 Neither
the execution and delivery of this Agreement and the Stockholder Documents by
such Stockholder nor the performance of such Stockholder’s obligations
hereunder or thereunder shall (with or without notice or lapse of time)
conflict with or violate any Legal Requirement applicable to such Stockholder,
except for any Legal Requirements that are not material.


 


5.8                                 Capital
Stock.  As of the date of this
Agreement, Design Fund and International are the sole record and beneficial
owners of 3,201 shares and 5,156 Share’s respectively, free and clear of any
Encumbrances (other than restrictions on transfer under applicable Legal
Requirements).


 


5.9                                 Brokers,
Etc.  No broker, investment banker,
agent, finder or other intermediary acting on behalf of such Stockholder or
under the authority of such Stockholder is or will be entitled to any broker’s
or finder’s fee or any other commission or similar fee directly or indirectly
in connection with any of the transactions contemplated hereby, except for the
Arrangement Fee.


 


5.10                           Investment
Company Act of 1940.  Such
Stockholder is not, and does not intend to conduct its business in a manner in
which it would be, required to be registered as an “investment company” as
defined in Section 3(a) of the Investment Company Act of 1940, as
amended.


 


5.11                           No
Other Representations or Warranties. 
EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE IV, ARTICLE V AND THIS ARTICLE
VA, NEITHER THE STOCKHOLDERS NOR ED MAKES, AND NO PARTY SHALL BE ENTITLED TO
RELY


 


17

















 


UPON, ANY REPRESENTATION
OR WARRANTY AS TO ANY FACT OR MATTER ABOUT THE STOCKHOLDERS UNDER THIS
AGREEMENT.


 


ARTICLE VA


 


REPRESENTATIONS RELATING TO THE
BVI FUND


 


International and
the BVI Fund represent to the Company that:


 


5.1A                       Organization.  The BVI Fund is a limited partnership duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization.


 


5.2A                       Authority;
Enforceability.  The BVI Fund has the
requisite legal power and authority to (i) execute and deliver the BVI
Fund Loan Agreement and (ii) perform its obligations thereunder, and such
execution, delivery and performance have been duly and validly authorized by
the BVI Fund.  The BVI Fund Loan
Agreement has been duly and validly executed and delivered by the BVI Fund and
constitutes, a legal, valid and binding obligation of the BVI Fund, enforceable
against it in accordance with its terms, except as the enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer or other laws relating to or limiting creditors’ rights generally or
by general principles of equity.


 


5.3A                       No
Violation; Enforceability.  The
signing, delivery and performance of the BVI Fund Loan Agreement by the BVI
Fund is not prohibited or limited by, and will not result in the breach of or a
default under, any provision of the formation documents of the BVI Fund, or of
any agreement or instrument binding on the BVI Fund, or of any applicable law
or Order, except for such prohibition, limitation or default as would not
prevent consummation by the BVI Fund of the transactions contemplated
thereby.  The execution, delivery and
performance of the BVI Fund Loan Agreement by the BVI Fund and the BVI Fund’s
compliance with the terms and provisions thereof do not and will not conflict
with or result in a breach of any of the terms and provisions of or constitute
a default, with or without the passage of time and the giving of notice, under
any material Contract binding or affecting the BVI Fund or the BVI Fund’s
property.


 


5.4A                       No
Proceedings.  There is no Proceeding
pending or threatened involving the BVI Fund that would affect the BVI Fund’s
ability to perform its obligations, under the BVI Fund Loan Agreement.


 


5.5A                       Financial
Condition.  No insolvency Proceeding
of any character, including, without limitation, bankruptcy, receivership,
reorganization, composition or arrangement with creditors, voluntary or
involuntary, has been commenced by or against the BVI Fund or any of its assets
or properties, nor is any such Proceeding threatened.  The BVI Fund does not contemplate, and has
not taken any action in contemplation of, the institution of any such
insolvency Proceedings.


 


5.6A                       Sufficient
Funds.  The BVI Fund has sufficient
capital commitments to be capable of funding its obligations under the BVI Fund
Loan Agreement on the terms and conditions set forth in the BVI Fund Loan
Agreement.


 


18

















 


5.7A                       Consents
and Approvals; No Violation.


 


(a)                                  No
Governmental Authorization is required by the BVI Fund in connection with the
execution or delivery by the BVI Fund of the BVI Fund Loan Agreement or the
performance by the BVI Fund of the BVI Fund’s obligations thereunder except for
any Governmental Authorizations that are not material.


 


(b)                                 Neither
the execution and delivery of  the BVI
Fund Loan Agreement nor the performance of the BVI Fund’s obligations
thereunder shall (with or without notice or lapse of time) conflict with or
violate any Legal Requirement applicable to the BVI Fund, except for any Legal
Requirements that are not material.


 


5.8A                       No Other
Representations or Warranties. 
EXCEPT AS EXPRESSLY SET FORTH IN ARTICLE IV, ARTICLE V AND THIS ARTICLE
VA, NEITHER THE STOCKHOLDERS NOR ED MAKES, AND NO PARTY SHALL BE ENTITLED TO
RELY UPON, ANY REPRESENTATION OR WARRANTY AS TO ANY FACT OR MATTER ABOUT THE
STOCKHOLDERS UNDER THIS AGREEMENT.


 


5.9A                       Compliance
With Laws.  BVI Fund is in compliance
with all material Legal Requirements applicable to the BVI Fund.  BVI Fund has not received any written notice
from any Governmental Authority regarding any violation of, or failure to
comply with, any material Legal Requirement.


 


REPRESENTATIONS RELATING TO THE
COMPANY


 


The Company
represents to the Stockholders and ED:


 


6.1                                 Organization.  The Company is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
organization.  The Company has the
requisite power and authority to own, lease and use the properties and assets
that it owns, leases and uses and to conduct its business as presently
conducted.


 


6.2                                 Authority;
Enforceability.  The Company has the
requisite power and authority to (i) execute and deliver this Agreement,
the Security Agreement, the Funding and Royalty Agreement and each certificate,
document and agreement to be executed by the Company in connection herewith and
therewith (collectively, the “Company Documents”) and (ii) perform
its obligations hereunder and thereunder. 
The execution and delivery of this Agreement, the Security Agreement,
the Funding and Royalty Agreement and the Company Documents and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by all necessary corporate action on the part of the
Company, and no other Proceedings on the part of the Company are necessary to authorize
this Agreement, the Security Agreement, the Funding and Royalty Agreement, or
any of the Company Documents or to consummate the transactions contemplated
hereby or thereby.  This Agreement, the
Security Agreement, and the Funding and Royalty Agreement have been duly and
validly executed and delivered by the Company and constitute, and upon
execution and delivery by the Company of


 


19

















 


each Company Document,
each Company Document will constitute, a legal, valid and binding obligation of
the Company, enforceable against it in accordance with its terms, except as the
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other laws relating to or limiting creditors’
rights generally or by general principles of equity.


 


6.3                                 Consents
and Approvals; No Violation.


 


(a)                                  No
Governmental Authorization is required by the Company in connection with the
execution or delivery by the Company of this Agreement, the Security Agreement,
the Funding and Royalty Agreement, or the Company Documents, or the performance
of the Company’s obligations under this Agreement, the Security Agreement, the
Funding and Royalty Agreement, or the Company Documents.


 


(b)                                 Neither
the execution and delivery of this Agreement, the Security Agreement, the
Funding and Royalty Agreement, and the Company Documents by the Company nor the
performance of the Company’s obligations hereunder or thereunder shall (with or
without notice or lapse of time):  (i) conflict
with or violate any provision of the certificate of incorporation or bylaws of
the Company or any resolution adopted by the board of directors or stockholders
of the Company, (ii) conflict with or breach any of the terms or
provisions of, or give any Person a right to declare a default or exercise any
remedy under, any material Contract binding on the Company or (iii) conflict
with or violate any Legal Requirement applicable to the Company, but excluding
from the foregoing clauses (ii) and (iii) conflicts, breaches,
defaults, remedies and violations that would not be reasonably likely, either
individually or in the aggregate, to adversely affect the Company’s ability to
consummate the transactions contemplated by this Agreement.


 


6.4                                 Compliance
With Laws.  The Company is in
compliance with all material Legal Requirements applicable to the Company.  The Company has not received any written
notice from any Governmental Authority regarding any violation of, or failure
to comply with, any material Legal Requirement.


 


6.5                                 Litigation.  There are no Proceedings that are pending
against or threatened against the Company that would adversely affect its
ability to consummate the transactions contemplated by this Agreement.  The Company is not subject to any Order that
could affect the enforceability of this Agreement against the Company or that
would adversely affect the Company’s ability to consummate the transactions
contemplated by this Agreement.


 


6.6                                 Investment
Interest.  The Company is an “accredited
investor” within the meaning of Regulation D promulgated under the Securities
Act and the Shares were acquired for its own account for investment purposes
only and not with a view to, or for sale or resale in connection with, any
distribution within the meaning of Section 2(11) of the Securities
Act.  The Company understands that the
Shares are characterized as “restricted securities” under the federal
securities laws inasmuch as they are being acquired from the Stockholders in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act only in certain limited circumstances.


 


20

















 


6.7                                 Brokers.  No broker, investment banker, agent, finder
or other intermediary acting on behalf of the Company or under the authority of
the Company is or will be entitled to any broker’s or finder’s fee or any other
commission or similar fee directly or indirectly in connection with any of the
transactions contemplated hereby, except for the Arrangement Fee.


 


6.8                                 No
Other Representations.  EXCEPT AS
EXPRESSLY SET FORTH IN THIS ARTICLE VI, THE COMPANY DOES NOT MAKE, AND
NO PARTY SHALL BE ENTITLED TO RELY UPON, ANY REPRESENTATION AS TO ANY FACT OR
MATTER ABOUT THE COMPANY.


 


COVENANTS


 


7.1                                 Tax.


 


(a)                                  From
the date that the Option or Put Right is exercised to the Option Closing Date
or Put Closing Date, as the case may be, ED will not:


 


(1)                                  make
any new Tax election except as described in Section 7.1(a)(3) below;


 


(2)                                  consent
to any claim or assessment relating to any material Taxes or any waiver of the
statute of limitations for any such claim or assessment; and


 


(3)                                  make
any material change in a Tax accounting method (except as required below)
without the Company’s prior written consent (which consent may not be
unreasonably withheld, conditioned or delayed).


 


(b)                                 From
the date the Option or Put Right is exercised to the Option Closing Date or Put
Closing Date, as the case may be:


 


(1)                                  ED
will promptly notify the Company of any Tax Proceeding initiated against ED
where an adverse determination could result in a material Tax Liability or
materially and adversely affect the Tax attributes of ED; and


 


(2)                                  for
purposes of apportioning a Tax to any pre-Closing portion of a Straddle Period,
the Parties shall treat such Straddle Period as if it were two Tax Periods, one
ending with the Option Closing or the Put Closing, as the case may be, and the
other beginning immediately following such Option Closing or Put Closing; the
Parties shall elect to do so if permitted by applicable law.


 


(c)                                  From
the date hereof to the Option Closing Date or Put Closing Date, as the case may
be, ED will timely file all Tax Returns required to be filed by it during such
period and will pay when due all Taxes due and payable by ED during such
period.


 


7.2                                 Operations
During Purchase Period.  From April 3,
2008 through the first to occur of (a) the expiration or termination of
the Option and the Put Right or (b) the Option Closing


 


21

















 


Date or the Put Closing
Date, ED shall, and the Stockholders shall cause ED to, engage in no other
business other than the payment of the Funding Payments pursuant to the Funding
and Royalty Agreement, the receipt of the Royalties, the investment of
Royalties in Cash and the distribution of Cash to the Stockholders and the
payment of obligations under the ED Loan Agreements.  Without limiting the foregoing, ED shall not,
and the Stockholders shall not cause ED to, do any of the following without the
prior written consent of the Company:


 


(a)                                  amend
its Certificate of Incorporation or By-laws;


 


(b)                                 except
for Shares issued prior to the date of this Amended and Restated Option and Put
Agreement, issue any capital stock or any option, warrant or right relating
thereto or any securities convertible into or exchangeable for any shares of
capital stock, equity securities or other equity interests.


 


(c)                                  permit,
allow or suffer any of its assets to be subject to any Encumbrance other than
Permitted Encumbrances;


 


(d)                                 sell,
transfer or lease rights to the Royalties;


 


(e)                                  acquire
or agree to acquire any assets other than (A) Royalties and (B) Cash
and Cash Equivalents;


 


(f)                                    utilize
the proceeds of any loans received under the ED Loan Agreements for any purpose
other than the satisfaction of funding obligations of ED under the Funding and
Royalty Agreement; and


 


(g)                                 agree
to any of the foregoing.


 


7.3                                 Preservation
of Shares.  No Stockholder shall (a) sell,
lease or otherwise dispose of any Shares or (b) permit, allow or suffer
any Shares to be subject to any Encumbrance, in each case until the expiration
or termination of the Option and the Put Right.


 


7.4                                 Further
Assurances.  Upon the terms and subject
to the conditions of this Agreement, each Party shall use commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
Legal Requirements to consummate and make effective the transactions
contemplated by this Agreement as promptly as practicable, including, without
limitation, the prompt preparation and filing of all forms, registrations and
notices required to be filed to consummate the transactions contemplated by
this Agreement and the taking of such commercially reasonable actions as are
necessary to obtain any requisite consents, Orders, exemptions or waivers by
any Governmental Authority or any other Person. 
Each Party shall promptly consult with the other Parties with respect
to, provide the other Parties any necessary information with respect to and
provide the other Parties (or their respective counsel) copies of, all filings
made by such Party with any Governmental Authority or any other Person or any
other information supplied by such Party to a Governmental Authority or any
other Person in connection with this Agreement and the transactions
contemplated by this Agreement.  From
time to time after the Option Closing or Put Closing, without additional
consideration, each Party will execute and deliver such further instruments and
take such other action as may be necessary or reasonably requested by each


 


22

















 


other Party to make
effective the transactions contemplated by this Agreement and to provide each
other Party with the benefits of this Agreement.


 


CLOSING CONDITIONS


 


8.1                                 Mutual
Condition.  The obligation of the
Parties to consummate the Option Closing or the Put Closing, as applicable, shall
be subject to the satisfaction (or waiver, if permissible under applicable
Legal Requirements) of the following conditions:


 


(a)                                  No
Legal Requirement, temporary restraining Order, preliminary injunction or
permanent injunction, judgment or ruling enacted, promulgated, issued, entered,
amended or enforced by any Governmental Authority shall be in effect enjoining,
restraining, preventing or prohibiting the consummation of such Option Closing
or Put Closing, as applicable.


 


(b)                                 The
Company shall have delivered to the Stockholders the Option Exercise Notice or
the Stockholders shall have delivered to the Company the Put Exercise Notice,
as applicable.


 


8.2                                 The
Company’s Conditions.  The obligation
of the Company to consummate the Option Closing or the Put Closing (each, a “Closing”),
as applicable, shall be subject to the satisfaction (or waiver, if permissible
under applicable Legal Requirements) of the following conditions:


 


(a)                                  Each
of the representations and warranties of ED and each Stockholder set forth in
this Agreement, shall be true and correct in all material respects, in each
case as of (i) the date of this Agreement; and (ii) the Closing, as
though made on and as of the Closing, except for representations and warranties
that are made as of the date of this Agreement (which shall be true and correct
as of the date of this Agreement) and except where the failure or failures to
be true and correct would not in the aggregate reasonably be expected to
materially and adversely affect the Company.


 


(b)                                 ED
and each Stockholder shall have performed in all material respects all
obligations and complied with all covenants required to be performed by it
under this Agreement at or prior to the Closing.


 


(c)                                  The
Stockholders shall have delivered to the Company a certificate certifying the
matters set forth in Sections 8.2(a) and (b).


 


(d)                                 As
of the Closing, all Cash and Cash Equivalents held by the Company shall have
been converted to Cash Assets.


 


8.3                                 Stockholders’
Conditions.  The obligation of ED and
the Stockholders to consummate any Closing shall be subject to the satisfaction
(or waiver, if permissible under applicable Legal Requirements) of the
following conditions:


 


23
















 


(a)                                  Each
of the representations and warranties of the Company set forth in this
Agreement shall be true and correct in all material respects, in each case as
of (i) the date of this Agreement and (ii) the Closing, as though
made on and as of the Closing, except for representations and warranties that
are made as of the date of this Agreement (which shall be true and correct as
of the date of this Agreement) and except where the failure or failures to be
true and correct would not in the aggregate reasonably be expected to
materially and adversely affect the Stockholders.


 


(b)                                 The
Company shall have performed in all material respects all obligations and
complied with all covenants required to be performed by it under this Agreement
at or prior to the Closing.


 


(c)                                  The
Company shall have delivered to the Stockholders a certificate certifying the
matters set forth in Sections 8.3(a) and (b) executed by
a duly authorized officer of the Company.


 


INDEMNIFICATION


 


9.1                                 Survival.  All representations and warranties made by
the Stockholders, ED and the Company in this Agreement and the documents to be
executed in connection with this Agreement shall survive the Closing until the
earlier of the expiration of the applicable statute of limitations with respect
to such matters or the payment of all Royalty obligations by the Company under
the Funding and Royalty Agreement.  All
covenants and agreements contained in this Agreement and the documents to be
executed in connection with this Agreement shall survive the Closing in
accordance with their respective terms.


 


9.2                                 Indemnification
by the Stockholders.  Subject to the
limitations set forth in this Article IX, after the Closing the
Stockholders shall jointly and severally indemnify and hold harmless the
Company from, and shall pay to the Company, any and all Damages arising,
directly or indirectly, from or in connection with:


 


(a)                                  the
breach of any of the representations, warranties, covenants or agreements of
any Stockholder or ED contained in this Agreement;


 


(b)                                 any
Liabilities of ED arising prior to the Option Closing Date or Put Closing Date,
as the case may be (including any Liability for Taxes attributable to any
Taxable Period or portion thereof (calculated as provided in Section 7.1(b)(2)),
ending on or prior to the Option Closing Date or Put Closing Date, as the case
may be, other than (i) obligations arising solely from ED’s right to
receive the Royalties, (ii) Liabilities (including any Tax Adjustment)
that have been reflected in the computation of the Option Purchase Price or the
Put Purchase Price, as the case may be, and (iii) Liabilities caused by
the acts or omissions of the Company, but only to the extent such Liabilities
are caused by the acts or omissions of the Company; and


 


(c)                                  the
violation by ED or any Stockholder of any Legal Requirement, or any gross
negligence or willful misconduct of ED or any Stockholder, or the performance
by ED or any Stockholder of its obligations under this Agreement.


 


24

















 


9.3                                 Indemnification
by the Company.  Subject to the
limitations set forth in this Article IX, after the Closing the
Company shall indemnify and hold harmless the Stockholders from, and shall pay
to the Stockholders, any and all Damages arising, directly or indirectly, from
or in connection with:


 


(a)                                  the
breach of any of the representations, warranties, covenants or agreements of
the Company contained in this Agreement; and


 


(b)                                 the
violation by the Company of any Legal Requirement, or any gross negligence or willful
misconduct of the Company, or the failure by the Company of its obligations
under this Agreement.


 


9.4                                 Procedure
for Indemnification — Third Party Claims.


 


(a)                                  If
any Person shall claim indemnification hereunder arising from any claim or
demand or potential claim or demand of a third party, the Party seeking
indemnification (the “Indemnified Party”) shall notify the Party from
whom indemnification is sought (the “Indemnifying Party”) in writing of
the basis for such claim or demand and such notice shall set forth the nature
of the claim or demand in reasonable detail. 
The failure of the Indemnified Party to so notify the Indemnifying Party
shall not relieve the Indemnifying Party of any indemnification obligation
hereunder except to the extent that the defense of such claim or demand is
prejudiced by the failure to give such notice.


 


(b)                                 If
any Proceeding is brought by a third party against an Indemnified Party and the
Indemnified Party gives notice to the Indemnifying Party pursuant to Section 9.4(a),
the Indemnifying Party may assume the defense and control the settlement of
such Proceeding.  The Indemnified Party
shall, in its sole discretion, have the right to employ separate counsel (who
may be selected by the Indemnified Party in its sole discretion) in any such
Proceeding and to participate in the defense thereof, and the fees and expenses
of such counsel shall be paid by such Indemnified Party.  If the Indemnified Party assumes the defense
of such Proceeding pursuant to Section 9.4(c) because of the
failure of the Indemnifying Party to conduct such defense in good faith, the
fees and expenses of such counsel shall be paid by the Indemnifying Party.  The Indemnified Party shall cooperate fully
with the Indemnifying Party and its counsel in the defense or settlement of
such Proceeding.  If the Indemnifying
Party assumes the defense of a Proceeding, no compromise or settlement of such
claims may be effected by the Indemnifying Party without the Indemnified Party’s
consent unless (i) there is no finding or admission of any violation of
Legal Requirements or the rights of any Person by the Indemnified Party and no
material adverse effect on the Indemnified Party with respect to any other
claims that may be made against it, and (ii) the sole relief provided is
monetary damages that are paid in full by the Indemnifying Party.


 


(c)                                  If
(i) notice is given to the Indemnifying Party of the commencement of any
third party Proceeding and the Indemnifying Party does not, within ten (10) days
after the Indemnified Party’s notice is given, give notice to the Indemnified
Party of its election to assume the defense of such Proceeding, or (ii) having
assumed the defense of such Proceeding, the Indemnifying Party fails to conduct
such defense in good faith, then the Indemnified Party shall (upon notice to
the Indemnifying Party) have the right to undertake the defense, compromise or
settlement of


 


25

















 


such Proceeding; provided
that no compromise or settlement of such Proceeding may be affected by the
Indemnified Party without the Indemnifying Party’s consent, if (A) the
Indemnifying Party will be liable for any amounts to be paid to compromise or
settle the Proceeding, (B) there is a finding or admission of any
violation by the Indemnifying Party of any Legal Requirement or the rights of
any Person, or (C) the compromise or settlement would have a material
adverse effect on the Indemnifying Party with respect to any other claims that
may be made against it.  The Indemnifying
Party shall reimburse the Indemnified Party for the costs and expenses of
defending against the third party Proceeding (including reasonable attorneys’
fees and expenses) and the Indemnifying Party shall remain responsible for any
Damages arising from or related to such third party Proceeding to the extent
provided in this Article IX. 
The Indemnifying Party may elect to participate in such Proceedings,
negotiations or defense at any time at its own expense.


 


9.5                                 Limitation
on Damages.


 


(a)                                  The
Stockholders’ aggregate liability for Damages under this Agreement shall be
limited to the amount of the Option Purchase Price or the Put Purchase Price,
as the case may be.


 


(b)                                 The
Company’s aggregate liability for Damages under this Agreement shall be limited
to the amount of the Option Purchase Price or the Put Purchase Price, as the
case may be.


 


(c)                                  Upon
any payment of Damages to or on behalf of an Indemnified Party, the
Indemnifying Party shall be subrogated to all rights of the Indemnified Party
with respect to the Damages to which such indemnification relates to the extent
of the amount of such payment.


 


(c)                                  The
Indemnified Party shall have no right to recover consequential, punitive or
multiplied damages pursuant to this Article IX except to the extent
the Indemnified Party is liable to a third party for such damages.


 


9.6                                 Tax
Treatment of Indemnity. 
Notwithstanding anything to the contrary in this Article IX,
any Tax or other amount for which indemnification is provided under this
Agreement shall be treated as an adjustment to the Option Purchase Price or the
Put Purchase Price, as the case may be.


 


MISCELLANEOUS PROVISIONS


 


10.1                           No
Joint Venture.  The relationship
between the Parties is that of independent contractors.  The Parties are not joint venturers, partners,
principal and agent, master and servant, employer or employee, and have no
relationship other than as independent contracting parties.  No Party shall have the power to bind or
obligate any other in any manner.


 


10.2                           Expenses.  Except as set forth in Section 3.1B(b) and
(f), each Party shall pay all costs and expenses incurred by such Party in
connection with this Agreement and the transactions contemplated hereby,
including in each case all fees and expenses of investment bankers, finders,
brokers, agents, representatives, consultants, counsel and accountants.


 


26

















 


10.3                           Amendment
and Modification.  This Agreement may
be amended, modified or supplemented only by an agreement in writing signed by
the Party against whom such amendment, modification or supplement is sought to
be enforced.


 


10.4                           Waiver
of Compliance; Consents.  The rights
and remedies of the Parties are cumulative and not alternative and may be
exercised concurrently or separately.  No
failure or delay by any Party in exercising any right, power or privilege under
this Agreement shall operate as a waiver of such right, power or privilege, and
no single or partial exercise of any such right, power or privilege shall
preclude any other or further exercise of such right, power or privilege or the
exercise of any other right, power or privilege.  To the maximum extent permitted by applicable
law, (i) no claim or right arising out of this Agreement can be discharged
by one Party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other Parties; (ii) no waiver that
may be given by a Party shall be applicable except in the specific instance for
which it is given; and (iii) no notice to or demand on one Party shall be
deemed to be a waiver of any obligation of such Party or of the right of the
Party giving such notice or demand to take further action without notice or
demand as provided in this Agreement. 
Any consent required or permitted by this Agreement is binding only if
in writing.


 


10.5                           Notices.  All notices, consents, waivers and other
communications hereunder shall be in writing and shall be (i) delivered by
hand, (ii) sent by facsimile transmission, or (iii) sent by certified
mail or by a nationally recognized overnight delivery service, charges prepaid,
to the address set forth below (or such other address for a Party as shall be
specified by like notice):


 


If to the Stockholders or ED, to:


 


	
   

  	
  c/o
  Deerfield Capital, L.P.

  
	
   

  	
  780
  Third Avenue, 37th Floor

  
	
   

  	
  New
  York, New York 10017

  
	
   

  	
  Attention:
  James E. Flynn

  
	
   

  	
  Facsimile: (212) 573-8111

  



 


27

















 


	
  Copies
  to:

  	
  Katten
  Muchin Rosenman LLP

  
	
   

  	
  575
  Madison Avenue

  
	
   

  	
  New
  York, New York 10022

  
	
   

  	
  Attention:
  Mark I. Fisher

  
	
   

  	
  Facsimile:
  (212) 894-5877

  
	
   

  	
   

  
	
  If
  to the Company, to:

  
	
   

  	
   

  
	
   

  	
  VIVUS, Inc.

  
	
   

  	
  1172
  Castro Street

  
	
   

  	
  Mountain
  View, California 94040

  
	
   

  	
  Attention: Leland
  F. Wilson

  
	
   

  	
  Timothy Morris

  
	
   

  	
  Lee Perry

  
	
   

  	
  Facsimile:

  	
  (650)
  934-5389

  
	
   

  	
   

  
	
  Copy
  to:

  	
  Wilson
  Sonsini Goodrich & Rosati

  
	
   

  	
  650
  Page Mill Road

  
	
   

  	
  Palo
  Alto, CA 94304

  
	
   

  	
  Attn:

  	
  Mark
  Reinstra, Esq.

  
	
   

  	
   

  	
  John
  Slebir

  
	
   

  	
  Facsimile:
  650-493-6811

  
				



 


Each such notice or other communication shall be deemed to have been
duly given and to be effective (x) if delivered by hand, immediately upon
delivery if delivered on a Business Day during normal business hours and, if
otherwise, on the next Business Day; (y) if sent by facsimile
transmission, immediately upon confirmation that such transmission has been
successfully transmitted on a Business Day before or during normal business
hours and, if otherwise, on the Business Day following such confirmation; or (z) if
sent by a nationally recognized overnight delivery service, on the day of
delivery by such service or, if not a Business Day, on the first Business Day
after delivery.  Notices and other
communications sent via facsimile must be followed by notice delivered by hand
or by overnight delivery service as set forth herein within five (5) Business
Days.


 


10.6                           Publicity.  No Party shall issue any press release or any
other form of public disclosure regarding the existence of this Agreement or
the terms hereof, or use the name of any other Party hereto in any press
release or other public disclosure without the prior written consent of the other
Parties, except (i) for those disclosures and notifications contemplated
by this Agreement and (ii) as required by any Legal Requirement and solely
to the extent necessary to satisfy such Legal Requirement.


 


10.7                           Assignment;
Third-Party Rights.  This Agreement
and all of the provisions hereof shall be binding upon and inure to the benefit
of the Parties hereto and their respective successors and permitted assigns,
but neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any Party hereto without the prior written
consent of each other Party.  Notwithstanding the foregoing, and subject to
compliance with Section 3.7, in the event the Option Closing or Put
Closing has not occurred prior to or simultaneously with the closing of


 


28

















 


a Major Transaction,  the Company
shall assign this Agreement to the surviving or acquiring entity in such Major
Transaction, and shall cause the successor entity resulting from such Major
Transaction to assume all of the obligations of the Company under this
Agreement pursuant to an assumption agreement in form and substance reasonably
satisfactory to the Stockholders. This Agreement and, its provisions are for
the sole benefit of the Parties to this Agreement and their successors and
permitted assigns and shall not give any other Person any legal or equitable
right, remedy or claim; provided, however, that the BVI Fund, and its
successors and assigns, shall be a third party beneficiary of the obligations
of the Company under Section 2.6 and Section 3.8 with
full rights of enforcement as if a party under this Agreement.


 


10.8                           Confidentiality.  Each Stockholder and ED hereby agrees, and
shall cause its respective employees and agents, not to disclose to any third
party any material non-public information received from or on behalf of the
Company in connection with this Agreement, or to use such material non-public
information for any purpose except as expressly permitted under this Agreement.  Each Stockholder and ED further agrees that
it and its respective employees and agents have not and will not engage in any
trades, transfers or other similar transactions involving the Company’s common
stock in violation of federal securities laws while in receipt of such
non-public information of the Company. 
Notwithstanding the foregoing, the Parties shall be permitted to make
such public and other statements as are necessary for it to comply with
applicable federal and state securities laws or rules.


 


10.9                           Governing
Law.  The execution, interpretation
and performance of this Agreement, and any disputes with respect to the
transactions contemplated by this Agreement, including any fraud claims, shall
be governed by the internal laws and judicial decisions of the State of
Delaware, without regard to principles of conflicts of laws.


 


10.10                     Severability.  If any provision contained in this Agreement
shall for any reason be held invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein,
unless the invalidity of any such provision substantially deprives any Party of
the practical benefits intended to be conferred by this Agreement.  Notwithstanding the foregoing, any provision
of this Agreement held invalid, illegal or unenforceable only in part or degree
shall remain in full force and effect to the extent not held invalid or
unenforceable, and the determination that any provision of this Agreement is
invalid, illegal or unenforceable as applied to particular circumstances shall
not affect the application of such provision to circumstances other than those
as to which it is held invalid, illegal or unenforceable.


 


10.11                     Construction.  Each Party acknowledges that it and its
attorneys have been given an equal opportunity to negotiate the terms and
conditions of this Agreement and that any rule of construction to the
effect that ambiguities are to be resolved against the drafting Party or any
similar rule operating against the drafter of an agreement shall not be
applicable to the construction or interpretation of this Agreement.


 


10.12                     Counterparts.  This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.  This Agreement may be executed on signature pages exchanged
by facsimile, in


 


29

















 


which event each Party
shall promptly deliver to the others such number of original executed copies as
the other Parties may reasonably request.


 


10.13                     Entire
Agreement.  This Agreement
constitutes the entire agreement and understanding of the Parties hereto in
respect of the subject matter hereof. 
This Agreement supersedes all prior agreements, understandings,
promises, representations and statements between the Parties and their
representatives with respect to the transactions contemplated by this
Agreement.


 


[The remainder of this page is left blank intentionally.]


 


30

















 


IN WITNESS WHEREOF, the Parties have executed this Option and
Put Agreement as of the date first written above.


 


 


	
   

  	
  VIVUS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy E. Morris

  
	
   

  	
   

  	
  Name:

  	
  Timothy E. Morris

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DEERFIELD ED CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeffery R. Kaplan

  
	
   

  	
   

  	
  Name:

  	
  Jeffery R. Kaplan

  
	
   

  	
   

  	
  Title:

  	
  Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DEERFIELD PRIVATE DESIGN FUND, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James E. Flynn

  
	
   

  	
   

  	
  Name:

  	
  James E. Flynn

  
	
   

  	
   

  	
  Title:

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DEERFIELD PRIVATE DESIGN INTERNATIONAL, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James E. Flynn

  
	
   

  	
   

  	
  Name:

  	
  James E. Flynn

  
	
   

  	
   

  	
  Title:

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DEERFIELD PDI FINANCING, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James E. Flynn

  
	
   

  	
   

  	
  Name:

  	
  James E. Flynn

  
	
   

  	
   

  	
  Title:

  	
  General Partner

  



 


 


Signature Page to Option
and Put Agreement


 

















 


EXHIBIT 1


 


Stockholders


 


Stockholders


 


Deerfield Private Design International, L.P.,
a British Virgin Islands limited partnership


 


Deerfield Private Design Fund, L.P., a
Delaware limited partnership


 

















 


EXHIBIT 2


 


ALLOCATIONS


 


	
  Name

  	
   

  	
  Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Deerfield Private Design International, L.P.

  	
   

  	
  $

  	
  1,234,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Deerfield Private Design Fund, L.P.

  	
   

  	
  $

  	
  766,000

  	
   

  



 

















 


EXHIBIT 3


 


OPTION EXERCISE NOTICE


 


Deerfield ED Corporation


c/o Deerfield Capital, L.P.


780 Third Avenue


New York, New York  10017


Attention:  James E. Flynn


 


Dear Mr. Flynn:


 


Reference is made to that certain Amended and
Restated Option and Put Agreement dated as of March 16, 2009 (the “Agreement”),
between VIVUS, Inc., a Delaware corporation (the “Company”),
Deerfield ED Corporation, a Delaware corporation (“ED”), the
Stockholders of ED and Deerfield PDI Financing L.P., a British Virgin Islands
limited partnership.  Capitalized terms
used herein and not otherwise defined herein shall have the meanings assigned
to them in the Agreement.


 


Pursuant to Section 2.4 of the Agreement,
the Company hereby provides notice of its exercise of the Option.  The Company will purchase all of the Shares
from the Stockholders on
                    ,
20     or, if applicable, such other date as shall
constitute the Option Closing Date pursuant to Section 3.1B(a) of
this Agreement,  in accordance with and
subject to the terms and conditions set forth in the Agreement.


 


IN WITNESS WHEREOF, the Company has caused
this Option Exercise Notice to be given by its duly authorized representative
as of the date written above:


 


	
   

  	
  VIVUS INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 

















 


EXHIBIT 4


 


Security Agreement