Document:

<PAGE>   1
                                                                   EXHIBIT 10.41

                        DISTRIBUTION AND SUPPLY AGREEMENT

      This Agreement is made as of this 20th day of November, 2000, by and
between Paladin Labs Inc., 6111 Royalmount Avenue, Suite 102, Montreal, Quebec,
Canada H4P 2T4 ("Paladin") and VIVUS International, Ltd., a company organized
under the laws of Bermuda, with its principal offices at Clarendon House, Church
Street, Hamilton, Bermuda. ("VIVUS").

                                    RECITALS

      WHEREAS, VIVUS has developed MUSE(R), a non-injectable product for the
treatment of erectile dysfunction consisting of a microsuppository of
alprostadil for local delivery to the male urethra; and

      WHEREAS, Paladin is interested in obtaining a license relating to such
product; and VIVUS is interested in granting such license to Paladin; and

      NOW, THEREFORE, in consideration of the mutual obligations and promises as
set forth herein, the parties do hereby agree as follows:

ARTICLE 1 - DEFINITIONS

      For purposes of this Agreement, the following terms shall have the
following respective meanings:

      1.1   Affiliate means any corporation, firm, partnership or other entity,
            whether de jure or de facto, that directly or indirectly owns, is
            owned by or is under common ownership with a party to the extent of
            in excess of fifty percent (50%) of the outstanding securities or
            assets having the power to vote on or direct the affairs of the
            entity.

      1.2   Confidential Information means any information, data or business
            plans relating to the Product or otherwise to the subject of this
            Agreement, which a party discloses to the other party, except any
            portion thereof which:

            (i)   is known to the receiving party at the time of disclosure and
                  documented by written records made prior to the date of this
                  Agreement;

            (ii)  is disclosed to the receiving party by a third person who has
                  a right to make such disclosure;

            (iii) becomes patented, published or otherwise part of the public
                  domain through no fault of the receiving party; or

            (iv)  is independently developed by the receiving party as evidenced
                  by its written records.

      1.3   Effective Date means the date of this Agreement first written above.

                                       1
<PAGE>   2

      1.4   First Commercial Sale means the first sale of Product (as defined
            below) in the Territory by Paladin or any Paladin Affiliate or
            sublicensee to any unaffiliated third party.

      1.5   Patents means all patents and patent applications (including without
            limitation, continuations, continuations-in-part, divisionals,
            patents of addition, substitutions, extensions, reissues,
            re-examinations, renewals, or SPCs), owned by or licensed (with the
            right to sublicense) to VIVUS or VIVUS, INC. or its or their
            Affiliates during the term of this Agreement, and generically or
            specifically claiming a Product, a process for manufacturing a
            Product, an intermediate used in such process, or a use of a
            Product. With respect to such patents or applications that VIVUS or
            VIVUS INC. or its or their Affiliates licenses or acquires or has
            licensed or acquired from a third party, the same shall be included
            within "Patents" hereunder to the extent that VIVUS or VIVUS INC. or
            its or their Affiliates has the right to license or sublicense the
            same hereunder. A list of current and applicable Patents is attached
            as Exhibit 1.5.

      1.6   Marketing Authorization means all governmental approvals and
            authorizations necessary for the commercial marketing and sale of
            the Product in the Territory, excluding any pricing approval and
            pricing reimbursement.

      1.7   Net Sales means the gross sales of the Product shipped by Paladin
            and/or its Affiliates or sub licensee to third parties in the
            Territory (as defined below) less deductions allowed to the final
            buyer against invoiced amounts for:

            a.    trade discounts earned or granted;

            b.    cash discounts actually allowed;

            c.    transportation charges (including insurance costs), handling
                  charges, sales taxes, excise, turnover, inventory, value added
                  and similar taxes, duties and charges invoiced to customers;

            d.    retroactive price reductions imposed by government
                  authorities;

            e.    wholesaler charge backs earned or granted;

            f.    rebates and management fees earned by or granted to third
                  parties; and

            g.    actual bad debts incurred to a maximum of one-half of one
                  percent (.05%) of Net Sales in any Sales Year.

      1.8   Product means (1) the product for the transurethral delivery of
            alprostadil and which VIVUS and/or VIVUS INC. sells outside the
            Territory, as of the Effective Date, under the trademark MUSE
            ("Product") and (2) any and all improvements to the Product which
            are sold under the MUSE trademark outside the Territory.

                                       2
<PAGE>   3

      1.9   Regulatory Approval means all governmental approvals and
            authorizations necessary for the commercial sale of the Product in a
            country in the Territory, including but not limited to Marketing
            Authorization, pricing approval and pricing reimbursement.

      1.10  Sales Quarter means for the first Quarter, the period commencing on
            the date of Paladin's First Commercial Sale and ending on the last
            day of that calendar quarter; and for subsequent Sales Quarters, the
            successive calendar quarters thereafter.

      1.11  Sales Year means for the first Sales Year, the period commencing on
            the date of Paladin's First Commercial Sale and ending on December
            31st of that year; and for subsequent Sales Years, the successive
            calendar years thereafter.

      1.12  Specifications means the manufacturing release specifications and
            stability specifications for the Product in the Territory.

      1.13  SPC means a right based upon a Licensed Patent to exclude others
            from making, using or selling a Product, such as a Supplementary
            Protection Certificate.

      1.14  Supply Price means the price as set forth in Article 4.2 below.

      1.15  Trademark means the trademark MUSE. The MUSE(R) Trademark is
            registered or has pending registration applications in the Territory
            as of the Effective Date.

      1.16  Territory means Canada.

ARTICLE 2 - GRANT OF RIGHTS

      2.1   Appointment. VIVUS hereby grants to Paladin an exclusive license
            (exclusive even as to VIVUS) to use and sell the Product in the
            Territory. Paladin may sublicense any one or more of its Affiliates
            at Paladin's sole discretion, and may sublicense third parties with
            VIVUS's prior written consent, such consent not to be unreasonably
            withheld. This exclusive license is granted to Paladin as to all
            uses, forms, indications, packages and strengths for the Product.

ARTICLE 3 - LICENSE FEES

      3.1   Subject to Articles 9.2 and 9.3, Paladin shall pay VIVUS the
            following one-time, non-creditable and non-cumulative license fees
            within thirty (30) days after the event specified:

            a.    (***), upon the first occasion on which Paladin achieves
                  annual Net Sales of the Product in a Sales Year of (***) in
                  the Territory; and

            b.    (***), upon the first occasion on which Paladin achieves
                  annual Net Sales of the Product in a Sales Year of (***) in
                  the Territory.

                                       3
<PAGE>   4

ARTICLE 4 - PURCHASE AND SALE

      4.1   Purchases and Sale of Product. Subject to the terms and conditions
            of this Agreement, VIVUS shall sell Product exclusively to Paladin
            in the Territory and Paladin shall purchase its requirements of
            Product exclusively from VIVUS, at the Supply Price.

      4.2   Supply Price. Subject to Article 4.3, the Supply Price shall equal
            (***) of Paladin's Net Sales of the Product in the Territory,
            calculated as provided in Article 4.2(b) below.

            a.    In order to enable the parties to sell and purchase the
                  Product prior to the time in which Paladin's Net Sales for a
                  Sales Quarter are determined, Paladin shall pay for Product
                  ordered, delivered and accepted pursuant to Article 5 below
                  based upon an interim "Transfer Price," which shall be equal
                  to (***) of Paladin's estimated average net selling price per
                  unit for the Product in the Territory. Paladin shall advise
                  VIVUS no later than forty-five (45) days prior to the start of
                  each Sales Year during the term of this Agreement of Paladin's
                  estimated average net selling price per unit of Product in the
                  Territory for the coming Sales Year, and the Transfer Price
                  for that Sales Year shall be based upon such price, subject to
                  any adjustment required under Article 4.2(b) below.

            b.    The parties shall conduct a reconciliation no later than
                  forty-five (45) days after the end of each Sales Quarter, in
                  order to determine whether one party owes the other party any
                  amount in connection with the sale and purchase of the Product
                  in that Sales Quarter, based upon the difference (if any)
                  between the respective Transfer Price and the Supply Price for
                  that Sales Quarter. For the purposes of such reconciliation,
                  Paladin shall provide to VIVUS a statement of Paladin's sales
                  in units in the Territory, and of Paladin's Net Sales in the
                  Territory and in local currency as well as in U.S. dollars,
                  converted pursuant to Article 4.6 below. In the event that one
                  party owes the other party any amount in accordance with this
                  Article 4.2(b), the owing party shall pay such amount within
                  thirty (30) days of the date upon which the parties have
                  agreed in writing upon the reconciliation calculation. In the
                  event that the Supply Price is greater than one hundred ten
                  percent (110%) or less than ninety percent (90%) of the
                  Transfer Price for two (2) consecutive Sales Quarters, the
                  Transfer Price established in Article 4.2(a) above shall be
                  changed for the remainder of that Sales Year to the Supply
                  Price applicable to the most recent Sales Quarter.

      4.3   Minimum Supply Price. Starting after the first Sales Year, the
            Supply Price for the Product shall in no event be less than the
            Minimum Supply Price as set forth in Exhibit 4 attached to this
            Agreement.

                                       4
<PAGE>   5

      4.4   Samples. VIVUS shall sell a quantity of Product to Paladin for use
            as samples, at "Sample Prices" as set forth in Exhibit 4 attached to
            this Agreement. Paladin may purchase such samples in quantities not
            to exceed the following percentages of Paladin's total unit
            purchases of Product in the Territory:

            a.    Ten percent (10%) in each of the first two (2) Sales Years;

            b.    Seven percent (7%) in each of the third and fourth Sales
                  Years; and

            c.    Five percent (5%) in each Sales Year thereafter.

      4.5   Records. Paladin and/or its Affiliates shall keep and maintain
            records of sales made pursuant to the license granted hereunder so
            that Paladin's Net Sales and the calculation of the Transfer Price
            and the Supply Price may be verified. Such records shall be open to
            inspection upon prior written notice at any reasonable time during
            business hours, not more than once per calendar year, and each
            inspection shall cover no more than the two (2) calendar years
            preceding such notice of inspection. The inspection shall be
            conducted at VIVUS's expense by a nationally recognized independent
            certified public accountant who is not VIVUS's auditor of record and
            who is selected by VIVUS and approved by Paladin, which approval
            shall not be unreasonably withheld, and shall then have the right to
            examine the records kept pursuant to this Agreement and report to
            VIVUS the findings (but not the underlying data) of the inspection
            as are necessary to evidence that the records were or were not
            maintained and used in accordance with this Agreement. A copy of any
            report provided to VIVUS by the accountant shall be given
            concurrently to Paladin. If the inspection of records reveals more
            than five percent (5%) underpayment by Paladin for the purchase of
            the Product (calculated as a percentage of all such payments made in
            connection with a Sales Year), then the expenses for the accountant
            shall be borne by Paladin and Paladin shall promptly repay to VIVUS
            the amount of such underpayment, plus interest calculated at the
            U.S. prime rate of interest as published in the Wall Street Journal
            for the date upon which such underpayment was made. For the purposes
            of this Article 4.5, an "underpayment" shall not include any amount
            that the parties determine is owed to VIVUS pursuant to the
            reconciliation procedure set forth in Article 4.2(b) above. If the
            inspection of records reveals an overpayment by Paladin for the
            purchase of the Product (calculated as a percentage of all such
            payments made in connection with a Sales Year), then the expenses
            for the accountant shall be borne by VIVUS and VIVUS shall promptly
            repay to Paladin the amount of such overpayment.

                                       5
<PAGE>   6

      4.6   Payments. Any payments due VIVUS or Paladin under this Agreement
            shall be made by remitting to the bank account designated by the
            party to whom payment is to be made. Any such payments shall be made
            in U.S. Dollars and, in the case of quarterly payments based upon
            Paladin Net Sales in currencies other than U.S. Dollars, such
            quarterly payments shall be the sum of payments due for the three
            (3) months of the applicable quarter calculated for each such month
            using the beginning and ending month's published exchange rate, set
            one business day prior to month end, by Reuters divided by two (if a
            Reuters exchange rate is not available, an exchange rate established
            by a recognized third party will be used.) Any payment which is more
            than ten (10) days overdue shall bear interest from the original due
            date at the U.S. prime rate of interest as published in the Wall
            Street Journal for the due date.

      4.7   Taxes. Where any sum due to be paid to VIVUS hereunder is subject to
            any withholding or similar tax, the parties shall use their best
            efforts to do all such acts and things and to sign all such
            documents as will enable them to take advantage of any applicable
            double taxation agreement or treaty. In the event there is no
            applicable double taxation agreement or treaty, or if an applicable
            double taxation agreement or treaty reduces but does not eliminate
            such withholding or similar tax, Paladin shall pay such withholding
            or similar tax to the appropriate government authority, deduct the
            amount paid from the amount due VIVUS and secure and send to VIVUS
            the best available evidence of such payment.

ARTICLE 5 - FORECASTS, ORDERS, INVOICES AND TITLE

      5.1   Initial Forecast. Within thirty (30) days of the Effective Date,
            Paladin shall give VIVUS its then current best forecast of the
            quantity of Product that Paladin will require from VIVUS prior to
            and during the first four Sales Quarters. Paladin shall break down
            the forecast for the period prior to the first Sales Quarter and for
            the first two Sales Quarters of such forecast by month and by Stock
            Keeping Unit ("SKU") per Product.

      5.2   Rolling Forecasts. No later than ninety (90) days prior to the first
            day of each Sales Quarter after the initial Sales Quarter, Paladin
            shall give VIVUS its then current best forecast of the quantity of
            Product that Paladin will require from VIVUS during each of the next
            four (4) Sales Quarters. Paladin shall break down the forecast for
            the first two such Sales Quarters of the forecast by month and by
            SKU per Product.

                                       6
<PAGE>   7

      5.3   Order and Acceptance. The forecast for the first Sales Quarter in
            each of Paladin's rolling forecasts made pursuant to Article 5.2
            above shall constitute Paladin's firm order for that Sales Quarter,
            and all firm orders shall specify delivery date(s) no less than
            ninety (90) days from the date of such firm order. Paladin shall not
            increase or decrease its forecast (by SKU and in total), for the
            second Sales Quarter in each of Paladin's rolling forecasts made
            pursuant to Article 5.2 above, by more than twenty percent (20%).
            VIVUS shall accept all firm orders from Paladin for quantities of
            Product up to and including one hundred twenty percent (120%) of the
            quantity (by SKU and in total) of Product previously forecasted by
            Paladin for such Sales Quarter, and shall use its best efforts to
            accept all firm orders from Paladin for quantities of Product in
            excess of that quantity of Product. Paladin shall not increase or
            decrease its forecast, for the third Sales Quarter in each of
            Paladin's rolling forecasts made pursuant to Article 5.2 above, by
            more than fifty percent (50%). VIVUS shall accept all firm orders
            from Paladin for quantities of Product up to and including one
            hundred fifty percent (150%) of the quantity of Product previously
            forecasted by Paladin for such Sales Quarter, and shall use its best
            efforts to accept all firm orders from Paladin for quantities of
            Product in excess of that quantity of Product. Once an order has
            been accepted by VIVUS, then VIVUS shall be obligated to sell, and
            Paladin shall be obligated to purchase, the ordered Product. It is
            understood and agreed that VIVUS' obligations to supply Product will
            be in full lot quantities and that VIVUS will not split lots for
            supply of Product to Paladin in the Territory.

      5.4   Invoices. VIVUS shall invoice Paladin for the Transfer Price in
            United States dollars for the Product shipped on the day of
            shipment. Paladin shall pay VIVUS such invoiced amount within thirty
            (30) days from the date of the receipt of the Product.

      5.5   Delivery. VIVUS shall deliver the Product to Paladin, FOB at VIVUS's
            facilities located in Lakewood, New Jersey, USA. All shipping costs,
            liability, ownership and logistics of Product beyond the Lakewood
            facility's loading dock are the responsibility of Paladin.

      5.6   Conflicting Terms and Conditions. Except as otherwise provided in
            this Agreement, the terms and conditions of this Agreement shall
            govern, notwithstanding any additional or inconsistent terms or
            conditions in Paladin's form of purchase order or similar document
            or in VIVUS's acknowledgment, invoice, or similar documents.

ARTICLE 6 - SAMPLING, TESTING AND ANALYSIS

      6.1   Certificate of Analysis. VIVUS shall test or cause to be tested each
            lot of the Product pursuant to the Specifications before delivery to
            Paladin. Each test shall set forth the items tested, specifications
            and test results in a certificate of analysis for each lot
            delivered. VIVUS shall send or cause to be sent such certificates to
            Paladin along with delivery of the Product. Paladin is entitled to
            rely on such certificates for all purposes of this Agreement.
            Paladin will perform, at its own expense, any testing upon entry of
            the Product into the Territory that is necessary for the sale or
            distribution of such Product in the Territory.

                                       7
<PAGE>   8

      6.2   Defective Product. Paladin shall notify VIVUS in writing of any
            claim relating to damaged, defective or nonconforming Product or any
            shortage in quantity of any shipment of the Product within thirty
            (30) days of receipt of such Product or, if the defect is not
            readily apparent based upon a reasonable inspection (a "Hidden
            Defect"), within thirty (30) days after which the Hidden Defect
            becomes known to Paladin. A Hidden Defect is defined as a defect
            that existed at the time Product is delivered and, for avoidance of
            doubt, a Hidden Defect does not include any defect that might be
            caused in storage or transportation of the Product. If Paladin fails
            to give such written claim notice to VIVUS within said thirty (30)
            day period, the Product shipped shall be deemed to be conforming,
            not damaged nor defective at the time of delivery and shall be
            deemed to be sufficient in quantity. If Paladin gives such written
            claim notice to VIVUS within said thirty (30) day period, then
            Paladin and VIVUS shall, in an appropriate manner to be agreed,
            jointly inspect the Product to see if claimed nonconformity, damage
            or defect actually exists in the Product shipped. If existence of
            claimed nonconformity, damage, defect or shortage is reasonably
            verified through such inspection, VIVUS shall replace the rejected
            Product or make up the shortage as soon as practicable but no later
            than ninety (90) days after such verification, at no extra cost to
            Paladin, and shall make arrangements with Paladin for the
            destruction of any rejected Product, at VIVUS's expense.

      6.3   Specifications. The Specifications may be modified in accordance
            with regulatory requirements by written agreement of the parties
            without the necessity of amending this Agreement.

      6.4   Technical Agreement. Within ninety (90) days of the Effective Date,
            VIVUS and Paladin shall enter into a separate technical agreement,
            in a format suitable for submission to the regulatory authorities in
            the Territory, recording the Specifications and Manufacturing
            Standards and measures to ensure compliance with applicable
            regulations relating to production, storage, transportation and
            release of the Product.

ARTICLE 7 - PATENTS

      7.1   Patent Prosecution and Maintenance. To the extent it has the right
            to do so, VIVUS shall, at its sole cost and expense, maintain any
            patent applications and patents and shall diligently prosecute any
            such patent applications and obtain all available patent term
            extensions in the Territory; provided that VIVUS may decide not to
            prosecute certain Patents, or to cause or permit certain of the
            Patents to lapse or become abandoned in the Territory if, in VIVUS's
            reasonable commercial judgment, such decision would not adversely
            affect Paladin's ability to exercise its rights and perform its
            obligations under this Agreement.

                                       8
<PAGE>   9

ARTICLE 8 - DEVELOPMENT AND REGULATORY ISSUES

      8.1   VIVUS Responsibilities. VIVUS shall be responsible for, and shall
            bear all costs of the following:

            a.    Promptly after the Effective Date, VIVUS shall arrange for the
                  transfer to Paladin of all Marketing Authorizations in the
                  Territory for the Product as expeditiously as possible.

            b.    VIVUS shall provide to Paladin, as expeditiously as possible,
                  appropriate assistance, information and/or materials in
                  VIVUS's possession or control in order to enable or facilitate
                  Paladin to market and sell the Product in the Territory.

            c.    In fulfilling its obligations under this Agreement, VIVUS
                  shall use its best efforts to ensure that the Product is
                  entitled to and receives the maximum available benefit of any
                  regulatory market exclusivity periods or other safeguards or
                  extensions of proprietary status, which are or may be
                  applicable in the Territory.

            d.    VIVUS shall be responsible for filing trademark applications
                  for, and for the maintenance and upkeep of, the Trademark in
                  the Territory.

      8.2   Paladin Responsibilities. During the term of this Agreement, Paladin
            shall be responsible for, and shall bear all cost of, the following:

            a.    Paladin shall, at its own expense, be responsible for

                  (i)   maintaining all Marketing Authorizations for the Product
                        in the Territory;

                  (ii)  obtaining all pricing and reimbursement approvals in
                        Paladin's name for the Product in the Territory; and

                  (iii) obtaining and maintaining all Regulatory Approvals in
                        Paladin's name.

            b.    Paladin shall own all registrations and Regulatory Approvals
                  for the Product in the Territory.

            c.    In fulfilling its obligations under this Agreement, Paladin
                  shall use its best efforts to ensure that the Product is
                  entitled to and receives the maximum available benefit of any
                  regulatory market exclusivity periods or other safeguards or
                  extensions of proprietary status, which are or may be
                  applicable in the Territory.

                                       9
<PAGE>   10

      8.3   Pharmacovigilance. Promptly after the Effective Date and prior to
            Product distribution by Paladin, the respective pharmacovigilance
            groups of VIVUS and Paladin shall enter into a separate agreement
            covering adverse event information exchange relating to the Product.
            Such agreement will permit the inclusion of the respective
            pharmacovigilance groups of other third parties to whom VIVUS has
            granted or will grant (during the term of this Agreement) a license
            under the VIVUS Technology to make, have made, use and sell the
            Product outside the Territory.

      8.4   Regulatory Communications. Paladin and VIVUS shall promptly inform
            each other of any material communications to or from governmental
            authorities or agencies relating to the Product that affect
            marketing and/or sale of Product in the Territory. With the
            exception of product recalls, which are to be handled pursuant to
            Article 10 below, and adverse event reporting, which is to be
            handled pursuant to Article 8.3 above, the parties shall consult
            with each other regarding any issues raised in such communications,
            and shall attempt in good faith to agree upon any action to be taken
            or response to be made in connection with such communications. If
            the parties are unable to agree within a reasonable time prior to
            when the action is to be taken or the response is to be made the
            party receiving the material communication for the Product shall
            decide what action to take or response to make.

      8.5   Expiration Dating. The Product has approved expiration dating of
            twenty-four (24) months in the Territory as of the Effective Date of
            this Agreement. At Paladin's request, VIVUS shall cooperate with and
            provide all reasonable assistance, including providing appropriate
            supporting stability data, if any, to extend the expiration date for
            the Product in the Territory beyond twenty-four (24) months. Paladin
            shall bear all costs associated with gaining regulatory approval for
            such an extension.

ARTICLE 9 - MARKETING AND SALES

      9.1   Paladin Diligence. In addition to the items set forth in Article 3.1
            above, Paladin shall use its diligent efforts to market and/or sell
            the Product in the Territory, consistent with the efforts that
            Paladin expends on pursuing commercialization of other products
            Paladin markets in the Territory of similar market potential,
            including but not limited to product for the treatment of erectile
            dysfunction, taking into consideration the proprietary or
            non-proprietary status of the Product.

      9.2   License Fees. In the event that the license fee provided in Article
            3.1(a) above does not become payable by the end of the fourth Sales
            Year, or that the license fee provided in Article 3.1(b) above does
            not become payable by the end of the sixth Sales Year, then VIVUS
            may terminate this Agreement upon thirty (30) days written notice;
            provided that in either event, Paladin may, at its option, avoid
            termination by paying to VIVUS an amount equal to the license fee
            otherwise applicable under Article 3.1(a) or (b) (as the case may
            be). If Paladin makes such payment within thirty (30) days of the
            date of VIVUS's notice of termination, then such notice shall become
            null and void, and this Agreement shall remain in full force and
            effect.

                                       10
<PAGE>   11

      9.3   Adjustment to License Fee. The license fee payment contemplated in
            Article 3.1 (a) and Article 3.1 (b) shall be adjusted according to
            the following schedule in the event that Paladin's gross margin
            falls below (***) during the twelve (12) month period prior to the
            license fee being payable to VIVUS in Article 9.2. Gross Margin
            shall be defined as Net Sales less the Supply Price actually paid
            pursuant to Articles 4.2 and 4.3 above.

            Adjustment Schedule to License Fee
<TABLE>
<CAPTION>
<S>                                          <C>
            -------------------------------- -----------------------------------
            Gross Margin                     Adjusted License Fee
            -------------------------------- -----------------------------------
            (***)                            (***) as per Articles 3.1(a) & (b)
            -------------------------------- -----------------------------------
            (***)                            (***)
            -------------------------------- -----------------------------------
            (***)                            (***)
            -------------------------------- -----------------------------------
            (***)                            (***)
            -------------------------------- -----------------------------------
            (***)                            (***)
            -------------------------------- -----------------------------------
</TABLE>

ARTICLE 10 - PRODUCT RECALL

      10.1  Recall in the Territory. In the event that in the Territory (i) any
            government authority issues a request, directive or order that the
            Product be recalled, or (ii) a court of competent jurisdiction
            orders such a recall, or (iii) Paladin and VIVUS jointly determine
            that the Product should be recalled, Paladin shall take all
            appropriate corrective actions. If such recall results from any
            cause or event attributable solely to VIVUS's negligence or fault,
            VIVUS shall be responsible for the direct expenses of the recall. If
            such recall results from any cause or event attributable solely to
            Paladin's negligence or fault, Paladin shall be responsible for the
            direct expenses of the recall. If such recall results from any other
            cause or event (including attribution to the negligence or fault of
            both VIVUS and Paladin), the parties shall share equally the direct
            expenses of the recall. For the purposes of this Agreement, the
            direct expenses of recall shall include, without limitation, the
            expenses of notification and return of the recalled Product and
            Paladin's costs for the Product, and shall not include the cost of
            any re-launch by Paladin of the Product in the Territory subsequent
            to a recall.

      10.2  Recall Outside the Territory. In the event that outside the
            Territory (i) any government authority issues a request, directive
            or order that the Product be recalled, or (ii) a court of competent
            jurisdiction orders such a recall, or (iii) VIVUS (or its Affiliates
            or sublicensees, as the case may be) decides that the Product should
            be recalled, VIVUS shall notify Paladin as expeditiously as possible
            and shall provide Paladin with all information and assistance as
            Paladin may reasonably request in order to enable Paladin to
            determine any appropriate actions relating to the Product in the
            Territory arising from such recall.

                                       11
<PAGE>   12

ARTICLE 11 - REPRESENTATIONS AND WARRANTIES

      Each party hereby represents and warrants for itself as follows:

      11.1  Organized. It is a corporation duly organized, validly existing and
            is in good standing under the laws of the jurisdiction of its
            incorporation, is qualified to do business and is in good standing
            as a foreign corporation in each jurisdiction in which the conduct
            of its business or the ownership of its properties requires such
            qualification and failure to have such would prevent it from
            performing its obligations under this Agreement and has all
            requisite corporate power and authority to conduct its business as
            now being conducted, to own, lease and operate its properties and to
            execute, deliver and perform this Agreement.

      11.2  Due Execution. The execution, delivery and performance by it of this
            Agreement have been duly authorized by all necessary corporate
            action and do not and will not (i) require any consent or approval
            of its stockholders; (ii) violate any provision of any law, rule,
            regulation, order, writ, judgment, injunction, decree, determination
            or award presently in effect having applicability to it or any
            provision of its charter or by-laws; or (iii) result in a breach of
            or constitute a default under any material agreement, mortgage,
            lease, license (including any license from a third party which is
            necessary for the full performance of this Agreement), permit or
            other instrument or obligation to which it is a party or by which it
            or its properties may be bound or affected.

      11.3  No Third Party Approval. No authorization, consent, approval,
            license, exemption of, or filing or registration with, any court or
            governmental authority or regulatory body (other than health
            regulatory authorities) is required for the due execution, delivery
            or performance by it of this Agreement, except as provided herein.

      11.4  Binding Agreement. This Agreement is a legal, valid and binding
            obligation of such party, enforceable against it in accordance with
            its terms and conditions. It is not under any obligation to any
            person, contractual or otherwise, that is in conflict with the terms
            of this Agreement.

      11.5  Full Disclosure. Each Party has disclosed to the other in good faith
            all material information relevant to the subject matter of this
            Agreement and to such party's ability to observe and perform its
            obligations hereunder.

ARTICLE 12 - COVENANTS, REPRESENTATIONS AND WARRANTIES OF VIVUS

      VIVUS covenants, represents and warrants to Paladin that:

      12.1  VIVUS Rights. VIVUS has the right to grant the rights granted in
            this Agreement and no provision in any third party agreement to
            which VIVUS is a party will prevent VIVUS from performing its
            obligations under this Agreement.

                                       12
<PAGE>   13

      12.2  Specifications. All quantities of the Product will comply with, and
            VIVUS shall only release Product for shipment to Paladin which
            comply with (i) all specifications of the Product in the Marketing
            Authorization applications approved by the regulatory authorities in
            the Territory; (ii) all Specifications; and (iii) all applicable
            legal and regulatory requirements relating to the manufacture of the
            Product for sale in the Territory, including but not limited to Good
            Manufacturing Practices.

      12.3  Quality of Starting Materials and Packing Materials. All starting
            materials and packaging materials used in the manufacture of the
            Product shall comply with the applicable Specifications and the
            Manufacturing Standards (as defined below).

      12.4  Current Good Manufacturing Practices ("cGMP")/Regulatory
            Requirements. All manufacturing and quality control methods utilized
            by VIVUS in the manufacture of the Product shall be carried out and
            in accordance with all applicable rules governing medicinal product
            and/or medical devices in the Good Manufacturing Practice for
            medicinal product and/or medical devices and regulations issued by
            the health regulatory authorities in the Territory for which such
            Product is to be sold as in effect at the time and the applicable
            standards in effect at the time (collectively, the "Manufacturing
            Standards").

      12.5  Documentation. VIVUS shall keep and maintain, for the approved shelf
            life of the Product plus two (2) years, (i) reference samples and
            quality control records for each batch of starting materials and
            packaging material used in the manufacture of the Product, and (ii)
            manufacturing and quality control records for each batch of the
            Product. Each shipment of the Product shall be accompanied by the
            following written documentation:

            a.    the date of manufacture;

            b.    delivered amount of Product units; and

            c.    a certificate of analysis pursuant to Article 6.

      12.6  Paladin Right of Inspection. VIVUS shall, upon written request of
            Paladin, permit Paladin's authorized third-party representative to
            inspect the following records related to Product manufactured for
            sale by Paladin in the Territory: (i) all manufacturing and quality
            control records for all manufacture of the Product, and (ii) quality
            control records of all starting materials used in the manufacture of
            each of the Product. Such inspection to take place at VIVUS's
            facilities in Lakewood, New Jersey, during normal business hours.

      12.7  Shelf Life. At the time of delivery to Paladin, each lot of the
            Product delivered pursuant to this Agreement shall be no more than
            five (5) months past its manufacturing date. Notwithstanding the
            above, Paladin shall be under no obligation to purchase Product that
            has, on receipt at Paladin, under 18 months of shelf life remaining.

                                       13
<PAGE>   14

      12.8  Product Liability Insurance. The Parties shall maintain product
            liability insurance consistent with their normal business practices
            from time to time to cover risks related to the Product and, upon
            either Party's request, to provide the other Party with certificates
            of insurance attesting to the existence of such insurance.

      12.9  Coverage. During the Term and for a period of two (2) years
            thereafter, each Party shall obtain and maintain insurance coverage
            from a reputable arm's-length insurer in respect of its respective
            obligations under Article 12.8 and in respect of third-Person
            liability in an amount of not less than Three Million United States
            Dollars ($3,000,000). Each Party shall add the other Party as a
            co-insured under its respective insurance policy.

ARTICLE 13 - FORCE MAJEURE

      Upon occurrence of an event of force majeure, the party affected shall
promptly notify the other party in writing, setting forth the details of the
occurrence, its expected duration and how that party's performance of its
obligations under this Agreement is affected. The affected party shall resume
the performance of its obligations as soon as practicable after the force
majeure event ceases. If a party's performance of any obligation under this
Agreement is significantly hindered or is prevented by an event of force majeure
for more than six (6) months, whether or not consecutive, in any twelve (12)
month period, then the other party may terminate this Agreement upon thirty (30)
days' notice.

ARTICLE 14 - ALLOCATION OF SUPPLY

      14.1  Allocation of Supply. In the event of VIVUS's inability to supply
            the Product ordered by Paladin, VIVUS shall allocate its available
            supply between Paladin, VIVUS and VIVUS's licensee(s) outside the
            Territory on a fair and equitable basis based on a pro-rata share of
            worldwide Product sales for the six (6) months preceding and the
            forecasted worldwide Product sales for the next six (6) months
            following such allocation. SUCH ALLOCATION SHALL BE PALADIN'S SOLE
            REMEDY FOR VIVUS'S FAILURE TO SUPPLY PALADIN QUANTITIES OF PRODUCT
            VIVUS IS OTHERWISE OBLIGATED TO SUPPLY UNDER ARTICLE 5 OF THIS
            AGREEMENT.

ARTICLE 15 - TRADEMARKS

      15.1  Trademark Rights. VIVUS hereby grants to Paladin the exclusive
            right, exclusive even as to VIVUS, to use the Trademarks in
            connection with the Product in the Territory during the term of this
            Agreement. Paladin acknowledges that such Trademarks shall be and
            are the sole property of VIVUS.

      15.2  Electronic Address. VIVUS hereby grants to Paladin a non-exclusive
            right to use VIVUS's registered electronic address, www.vivus.com,
            for the purpose of linking electronic users with Paladin's relevant
            web pages, web sites or other electronic addresses relating to the
            Product in the Territory. Paladin hereby grants to VIVUS a
            non-exclusive right to use Paladin's registered electronic address,
            www.paladin-labs.com, for the purpose of linking electronic users
            with VIVUS's relevant web pages, web sites or other electronic
            addresses relating to the Product.

                                       14
<PAGE>   15

ARTICLE 16 - INFRINGEMENT

      16.1  Third Party Infringement. Each party will notify the other party if
            it becomes aware of the activities of any third party that are
            believed to infringe any of the Patents or Trademarks. The parties
            shall consult as to potential strategies against the alleged
            infringer, including but not limited to litigation strategy.

      16.2  Litigation.

            a.    If the efforts of the parties are not successful in abating
                  the alleged infringement, then VIVUS shall have the right, but
                  not the obligation, to bring an appropriate suit or action
                  against such infringement, at its own expense. Paladin agrees
                  to cooperate in any such infringement action and agrees to
                  execute all papers and perform such other acts as may be
                  reasonably requested by VIVUS at Paladin's expense. VIVUS
                  shall consult with Paladin and take into account Paladin's
                  recommendations regarding the conduct of such action, provided
                  that VIVUS shall have full right and authority to determine
                  the strategy and tactics for such action and to settle,
                  consent to judgment, or otherwise resolve any such action or
                  suit. The provisions of the foregoing notwithstanding, no such
                  resolution shall be binding on Paladin without its prior
                  written consent (which consent shall not be unreasonably
                  withheld) unless such resolution does not (i) impose any
                  liability, loss, cost or obligation upon Paladin and (ii)
                  adversely affect Paladin's rights under this Agreement.

            b.    If VIVUS does not elect to bring suit against the alleged
                  infringer, Paladin shall have the right, but not the
                  obligation, to bring an appropriate suit or action against
                  such infringer in the Territory, at Paladin's own expense.
                  VIVUS agrees to cooperate in any such infringement action and
                  agrees to execute all papers and perform such other acts as
                  may be reasonably requested by Paladin (including but not
                  limited to consent to be joined as a nominal party plaintiff
                  in such action), at VIVUS's expense. Paladin shall consult
                  with VIVUS and take into account VIVUS's recommendations
                  regarding the conduct of such action, provided that Paladin
                  shall have full right and authority to determine the strategy
                  and tactics for such action and to settle, consent to
                  judgment, or otherwise resolve any such action or suit. The
                  provisions of the foregoing notwithstanding, no such
                  resolution shall be binding on VIVUS without its prior written
                  consent (which consent shall not be unreasonably withheld)
                  unless such resolution does not (i) impose any liability,
                  loss, cost or obligation upon VIVUS and (ii) adversely affect
                  VIVUS's rights under this Agreement.

            c.    If VIVUS or Paladin brings an infringement action pursuant to
                  this Article 16, any amount recovered in any action or suit
                  against a third party infringer shall be allocated as follows:
                  first, to the party bringing such action in order to reimburse
                  such party for the costs and expenses of such action; second,
                  with respect to any remaining amount, (***) of that portion of
                  such amount resulting from

                                       15
<PAGE>   16

                  infringement within the Territory to Paladin, and the rest of
                  any remaining amount to VIVUS.

                                       16
<PAGE>   17

ARTICLE 17 - TERM AND TERMINATION

      17.1  Term. The term of this Agreement shall commence on the Effective
            Date and shall, unless earlier terminated pursuant to this Article
            17 or other express termination provisions in this Agreement, expire
            on the tenth (10th) anniversary of the First Commercial Sale of
            Product.

      17.2  Breach. Either party may, in addition to any other remedies
            available to it by law or in equity, terminate this Agreement upon
            sixty (60) days' written notice in the event that the other party
            commits a material breach of this Agreement and fails to cure such
            breach within sixty (60) days of notice of the breach. The party
            giving notice of breach may withhold any payments otherwise due and
            owing to the breaching party, to be used as a setoff against any
            loss or damage arising from the breach, and said withholding shall
            not constitute breach of this Agreement. Any amounts so withheld
            shall be deposited by the withholding party into an interest-bearing
            escrow account. If the breaching party cures the breach within the
            sixty (60) day cure period and this Agreement is not terminated,
            then the withholding party shall promptly pay to the other party the
            withheld amount, less that portion of such amount which was applied
            as a setoff. Notwithstanding the foregoing provision, if Paladin
            gives notice of breach to VIVUS, Paladin may withhold other payments
            pursuant to this Article 17.2 but shall not be entitled to withhold
            payment for Product actually ordered by and delivered to Paladin
            pursuant to Article 5 of this Agreement.

      17.3  Insolvency or Bankruptcy. Either party may, in addition to any other
            remedies available to it by law or in equity, terminate this
            Agreement, upon thirty (30) days' written notice to the other party
            in the event the other party shall have become insolvent or
            bankrupt, or shall have made an assignment for the benefit of its
            creditors, or there shall have been appointed a trustee or receiver
            of the other party or for all or a substantial part of its property,
            or any case or proceeding shall have been commenced or other action
            taken by or against the other party in bankruptcy or seeking
            reorganization, liquidation, dissolution, winding-up, arrangement,
            composition or readjustment of its debts or any relief under any
            bankruptcy, insolvency, reorganization or other similar act or law
            of any jurisdiction now or hereinafter in effect.

      17.4  Serious Events. Should there occur serious and unexpected events
            which, from a reasonable pharmaceutical company's point of view,
            would make it impossible or impracticable to pursue the
            commercialization of the Product, including but not limited to a
            serious adverse event associated with the Product, either party may,
            with full consultation with the other party, terminate this
            Agreement upon thirty (30) days' written notice. Termination by a
            party in good faith pursuant to this Article 17.4 shall not, in
            itself, constitute a basis for any claim for compensation or other
            remedies by the other party. In the event of termination by VIVUS
            under this Article 17.4, VIVUS shall be restricted from
            commericializing the Product, either directly or indirectly, for a
            period of two (2) years in the Territory.

                                       17
<PAGE>   18

      17.5  Change of Control or Ownership. Either party may terminate this
            Agreement upon thirty (30) days' written notice if the ownership or
            control of at least fifty percent (50%) of the assets or voting
            securities of the other party are transferred and, in the
            non-changing party's reasonable judgment, the other party's new
            owner or controlling entity is a competitor of the non-changing
            party in the field of erectile dysfunction in the Territory.

      17.6  Survival of Liability. Except as expressly provided otherwise in
            this Agreement, termination, expiration, cancellation or abandonment
            of this Agreement through any means and for any reason shall not
            relieve the parties of any obligation accruing prior thereto and
            shall be without prejudice to the rights and remedies of either
            party with respect to any antecedent breach of any provision of this
            Agreement.

      17.7  Remaining Inventory. Paladin shall maintain a normal level of
            inventory of the Product prior to expiration or termination of this
            Agreement, and shall have a period of six (6) months from the date
            of termination of this Agreement during which it may sell its
            remaining inventory of Product, provided it sell such inventory in a
            manner substantially similar to the manner in which it was selling
            Product prior to the termination.

      17.8  Survival. Upon expiration or termination of this Agreement, all
            rights and obligations of the parties under this Agreement shall
            terminate except those rights and obligations described in Articles
            1, 4.5, 10.1, 12.5, 17, 18, 19 and 20.

ARTICLE 18 - INDEMNITY

      18.1  Indemnification by Paladin. Paladin shall defend, indemnify and hold
            harmless VIVUS, its officers, directors, shareholders, employees,
            successor and assigns from any loss, damage, or liability, including
            reasonable attorney's fees, resulting from any claim, complaint,
            suit, proceeding or cause of action by a Third Party against any of
            them alleging physical injury or death or otherwise arising out of
            the administration, utilization and/or ingestion of Product, sold or
            otherwise provided to the injured party by or under authority of
            Paladin (or its permitted subdistributor or contractor); or
            otherwise with respect to Product supplied to, or sold or
            distributed by, Paladin (or its permitted subdistributor or
            contractor), provided:

            a.    Paladin shall not be obligated under this Section 18.1 if it
                  is shown by evidence acceptable in a court of law having
                  jurisdiction over the subject matter and meeting the
                  appropriate degree of proof of such action, that the injury
                  was the result of (i) gross negligence or willful misconduct
                  of any employee or agent of VIVUS, or (ii) a breach by VIVUS
                  of its obligations or warranties hereunder, including the
                  supply by VIVUS of Product that fails to meet applicable
                  Specifications;

                                       18
<PAGE>   19

            b.    Paladin shall have no obligation under this Section 18.1
                  unless VIVUS (i) gives Paladin prompt written notice of any
                  claim or lawsuit or other action for which it seeks to be
                  indemnified by this Agreement; (ii) Paladin is granted full
                  authority and control over the defense, including settlement,
                  against such claim or lawsuit or other action; and (iii) VIVUS
                  cooperates fully with Paladin and its agents in defense of the
                  claims or lawsuit or other action; and

            c.    VIVUS shall have the right to participate in the defense of
                  any such claim, complaint, suit, proceeding or cause of action
                  referred to in this Section 18.1 utilizing attorneys of its
                  choice, at its own expense, provided, however, that Paladin
                  shall have full authority and control to handle any such
                  claim, complaint, suit, proceeding or cause of action,
                  including any settlement or other disposition thereof, to the
                  extent VIVUS seeks indemnification under this Section 18.1.

      18.2  Indemnification by VIVUS. VIVUS shall defend, indemnify, and hold
            harmless Paladin, its officers, directors, shareholders, employees,
            successors or assigns from any loss, damage, or liability, including
            reasonable attorney's fees, resulting from any claim, complaint,
            suit, proceeding or cause of action by a Third Party against any of
            them alleging physical injury or death or otherwise arising out of
            (i) the administration, utilization and/or ingestion of Product,
            sold or otherwise provided to the injured party by VIVUS (or its
            permitted subdistributor or contractor other than by or under
            authority of Paladin); or (ii) the supply of VIVUS of Product that
            fails to meet applicable Specifications, provided:

            a.    VIVUS shall not be obligated under this Section 18.2 if it is
                  shown by evidence acceptable in a court of law having
                  jurisdiction over the subject matter and meeting the
                  appropriate degree of proof for such action, that the injury
                  was the result of (i) the gross negligence or willful
                  misconduct of any employee or agent of Paladin; or (ii) a
                  breach by Paladin of its obligations or warranties hereunder,
                  including the transportation, storage and distribution of
                  Product in the Territory.

            b.    VIVUS shall have no obligation under this Section 18.2 unless
                  Paladin (i) gives VIVUS prompt written notice of any claim or
                  lawsuit or other action for which is seeks to be indemnified
                  under this Agreement; (ii) VIVUS is granted full authority and
                  control over the defense, including settlement, against such
                  claim or lawsuit or other action; and (iii) Paladin cooperates
                  fully with VIVUS and its agents in defense of the claims or
                  lawsuit or other action; and

            c.    Paladin shall have the right to participate in the defense of
                  any such claim, complaint, suit, proceeding or cause of action
                  referred to in this Section 18.2 utilizing attorneys of its
                  choice, at its own expense, provided, however, that VIVUS
                  shall have full authority and control to handle any such
                  claim, complaint, suit, proceeding or cause of action,
                  including any settlement or other disposition thereof, to the
                  extent Paladin seeks indemnification under this Section 18.2.

                                       19
<PAGE>   20

            d.    VIVUS shall defend, indemnify, and hold harmless Paladin, its
                  officers, directors, shareholders, employees, successors or
                  assigns from any loss, damage, or liability, including
                  reasonable attorney's fees, resulting from any claim,
                  complaint, suit, proceeding or cause of action by a Third
                  Party against any of them alleging that the price for the
                  Product in the Territory was excessive prior to the Effective
                  Date of this Agreement.

ARTICLE 19 - CONFIDENTIALITY AND DISCLOSURE

      19.1  Confidentiality. Neither party shall use or disclose any
            Confidential Information received by it pursuant to this Agreement
            without the prior written consent of the other. This obligation
            shall continue for a period of seven (7) years after expiration or
            termination of this Agreement.

      19.2  Disclosure. Nothing contained in this Article 19 shall be construed
            to restrict the parties from disclosing Confidential Information as
            required: (i) for regulatory, tax, securities or customs reasons,
            (ii) by court or other government order, (iii) for confidential
            audit purposes; or (iv) from using such Confidential Information as
            is reasonably necessary to perform acts permitted by this Agreement,
            including the registration, marketing, sale or use of the Product.

ARTICLE 20 - MISCELLANEOUS

      20.1  Assignment. This Agreement may not be assigned or otherwise
            transferred, nor, except as expressly provided hereunder, may any
            right or obligation hereunder be assigned or transferred by either
            party without the prior written consent of the other party;
            provided, however, that either VIVUS or Paladin may, without such
            consent, assign this Agreement and its rights and obligations
            hereunder in connection with the transfer or sale of all or
            substantially all of its assets, its merger or consolidation or any
            similar transaction, and that Paladin may, without such consent,
            assign this Agreement and its rights and obligations hereunder to
            one or more of its Affiliates. Any permitted assignee shall assume
            all obligations of its assignor under this Agreement.

      20.2  Sublicensees. In the event that Paladin grants sublicenses under
            Article 2, Paladin shall ensure that such sublicensees abide by all
            the obligations of Paladin contained in this Agreement to the extent
            that such obligations are relevant to and applicable to such
            sublicensees.

      20.3  Damages. Notwithstanding any provision in this Agreement to the
            contrary, in no event shall a party hereto be liable to the other
            party for any indirect or consequential damages, including but not
            limited to loss of profits or business opportunity.

                                       20
<PAGE>   21

      20.4  Severability. Each party intends not to violate any public policy,
            statutory or common law, rule, regulation, treaty or decision of any
            government agency or executive body thereof of any country or
            community or association of countries. If any term or provision of
            this Agreement is held to be invalid, illegal or unenforceable by a
            court or other governmental authority of competent jurisdiction,
            such invalidity, illegality or unenforceability shall not affect any
            other term or provision of this Agreement, which shall remain in
            full force and effect. The holding of a term or provision to be
            invalid, illegal or unenforceable in a jurisdiction shall not have
            any effect on the application of the term or provision in any other
            jurisdiction.

      20.5  Notices. Any consent or notice required or permitted to be given or
            made under this Agreement by one party to the other shall be in
            writing, delivered personally or by facsimile (and promptly
            confirmed by personal delivery, first-class mail or courier),
            first-class mail or courier, postage prepaid (where applicable),
            addressed to the other party as shown below or to such other address
            as the addressee shall have last furnished in writing to the
            addresser and (except as otherwise provided in this Agreement) shall
            be effective upon receipt by the addressee.

               If to VIVUS:   VIVUS International Limited
                              c/o VIVUS, Inc.
                              1172 Castro Street
                              Mountain View, CA  94040
                              Attention:  Legal Department
                              Fax:   (650-934-5389)

               If to Paladin: Paladin Labs Inc.
                              6111 Royalmount Avenue, Suite 102
                              Montreal, Quebec, Canada H4P 2Y4
                              Attention: (Jonathan Goodman)
                              Fax:  (514-344-4675)

      20.6  Applicable Law. This Agreement shall be governed by and construed in
            accordance with the laws of the State of Delaware, excluding its
            conflict of laws provision. Application of the United Nations
            Convention On Contracts For The International Sale Of Goods is
            hereby excluded.

      20.7  Entire Agreement. This Agreement contains the entire understanding
            of the parties with respect to the subject matter hereof. All
            express or implied agreements and understandings, either oral or
            written, heretofore made are superseded by this Agreement. Except as
            expressly provided elsewhere in this Agreement, this Agreement may
            be amended, or any term hereof modified, only by a written
            instrument duly executed by both parties hereto.

      20.8  Headings. The captions to the Articles hereof are not a part of this
            Agreement, but are merely guides or labels to assist in locating and
            reading the Articles hereof.

                                       21
<PAGE>   22

      20.9  Independent Contractors. It is expressly understood and agreed that
            VIVUS and Paladin are independent contractors and that the
            relationship between the two parties shall not constitute a
            partnership, joint venture or agency. Neither VIVUS nor Paladin
            shall have the authority to make any statement, representations or
            commitments of any kind, or to take any action, which shall be
            binding on the other, without the prior written consent of the party
            to do so.

      20.10 Waiver. The waiver by either party of any right hereunder or of a
            failure to perform or breach by the other party shall not be deemed
            a waiver of any other right hereunder or of any other failure or
            breach whether of a similar nature or otherwise.

      20.11 Alternative Dispute Resolution. The parties agree that any dispute
            that arises in connection with this Agreement that cannot be
            amicably resolved by the parties shall be resolved by Alternative
            Dispute Resolution ("ADR") pursuant to the procedure set forth in
            Exhibit 20.11 attached hereto.

      20.12 Counterparts. This Agreement may be executed in two or more
            counterparts, each of which shall be deemed an original, but all of
            which together shall constitute one and the same instrument.

      THEREFORE, the parties hereto have executed this Agreement as of the first
day above written.

PALADIN LABS, INC.                        VIVUS INTERNATIONAL, LTD.

By: /s/ Jonathan Goodman                  By:  /s/ Leland Wilson

Title:  President                         Title:   President & CEO

Date:   November 20, 2000                 Date:    November 20, 2000

                                       22
<PAGE>   23

EXHIBIT 1.5 - PATENTS

<TABLE>
<CAPTION>
<S>        <C>               <C>                          <C>
---------- ----------------- ---------------------------- ----------------------
REF. NO.   TITLE/INVENTORS   COUNTRY; FILING/PUBLISHING   STATUS AND DEADLINES
                             INFO; SUMMARY
---------- ----------------- ---------------------------- ----------------------
(***)      (***)             (***)                        (***)
---------- ----------------- ---------------------------- ----------------------
(***)      (***)             (***)                        (***)
---------- ----------------- ---------------------------- ----------------------
</TABLE>

                                       23
<PAGE>   24

                                                                       EXHIBIT 4

PRICES (In United States Dollars)

<TABLE>
<CAPTION>
<S>         <C>           <C>           <C>           <C>           <C>
----------- ------------- ------------- ------------- ------------- -------------
            VIVUS         VIVUS         VIVUS         VIVUS         VIVUS
            produces up   produces      produces      produces      produces
            to            (***) up to   (***) up to   (***) up to   > (***) units
            (***) units   (***) units   (***) units   (***) units   of Product*
            of Product*   of Product*   of Product*   of Product*
----------- ------------- ------------- ------------- ------------- -------------
Sample      (***)         (***)         (***)         (***)         (***)
Price per
unit of
Product
----------- ------------- ------------- ------------- ------------- -------------
Minimum     (***)         (***)         (***)         (***)         (***)
Supply
Price per
unit of
Product **
----------- ------------- ------------- ------------- ------------- -------------
</TABLE>

* Total VIVUS worldwide unit production of saleable finished Product in a
calendar year (not only VIVUS finished Product produced for Paladin). VIVUS
shall provide a certificate, signed by an officer of VIVUS, attesting to the
unit production of saleable finished Product, with thirty (30) days of the end
of each calendar year.

** No Minimum Supply Price applies until after the first anniversary of the
First Commercial Sale in the Territory.

                                       24
<PAGE>   25

                                                                   EXHIBIT 20.11

                         ALTERNATIVE DISPUTE RESOLUTION

      The parties recognize that bona fide disputes as to certain matters may
arise from time to time during the term of this Agreement which relate to either
party's rights and/or obligations. To have such a dispute resolved by this
Alternative Dispute Resolution ("ADR") provision, a party first must send
written notice of the dispute to the other party for attempted resolution by
good faith negotiations between their respective presidents (or their designees)
of the affected subsidiaries, divisions, or business units within twenty-eight
(28) days after such notice is received (all references to "days" in this ADR
provision are to calendar days).

      If the matter has not been resolved within twenty-eight (28) days of the
notice of dispute, or if the parties fail to meet within such twenty-eight (28)
days, either party may initiate an ADR proceeding as provided herein. The
parties shall have the right to be represented by counsel in such a proceeding.

      1.    To begin an ADR proceeding, a party shall provide written notice to
            the other party of the issues to be resolved by ADR. Within fourteen
            (14) days after its receipt of such notice, the other party may, by
            written notice to the party initiating the ADR, add additional
            issues to be resolved within the same ADR.

      2.    Within twenty-one (21) days following receipt of the original ADR
            notice, the parties shall select a mutually acceptable neutral to
            preside in the resolution of any disputes in this ADR proceeding. If
            the parties are unable to agree on a mutually acceptable neutral
            within such period, either party may request the President of the
            CPR Institute for Dispute Resolution ("CPR"), 366 Madison Avenue,
            14th Floor, New York, New York 10017, to select a neutral pursuant
            to the following procedures:

            (a)   The CPR shall submit to the parties a list of not less than
                  five (5) candidates within fourteen (14) days after receipt of
                  the request, along with a Curriculum Vitae for each candidate.
                  No candidate shall be an employee, director, or shareholder of
                  either party or any of their subsidiaries or affiliates.

            (b)   Such list shall include a statement of disclosure by each
                  candidate of any circumstances likely to affect his or her
                  impartiality.

            (c)   Each party shall number the candidates in order of preference
                  (with the number one (1) signifying the greatest preference)
                  and shall deliver the list to the CPR within seven (7) days
                  following receipt of the list of candidates. If a party
                  believes a conflict of interest exists regarding any of the
                  candidates, that party shall provide a written explanation of
                  the conflict to the CPR along with its list showing its order
                  of preference for the candidates. Any party failing to return
                  a list of preferences on time shall be deemed to have no order
                  of preference.

                                       25
<PAGE>   26

            (d)   If the parties collectively have identified fewer than three
                  (3) candidates deemed to have conflicts, the CPR immediately
                  shall designate as the neutral the candidate for whom the
                  parties collectively have indicated the greatest preference.
                  If a tie should result between two candidates, the CPR may
                  designate either candidate. If the parties collectively have
                  identified three (3) or more candidates deemed to have
                  conflicts, the CPR shall review the explanations regarding
                  conflicts and, in its sole discretion, may either (i)
                  immediately designate as the neutral the candidate for whom
                  the parties collectively have indicated the greatest
                  preference, or (ii) issue a new list of not less than five (5)
                  candidates, in which case the procedures set forth in
                  subparagraphs 2(a) - 2(d) shall be repeated.

      3.    No earlier than twenty-eight (28) days or later than fifty-six (56)
            days after selection, the neutral shall hold a hearing to resolve
            each of the issues identified by the parties. The ADR proceeding
            shall take place at a location agreed upon by the parties. If the
            parties cannot agree, the neutral shall designate a location other
            than the principal place of business of either party or any of their
            subsidiaries or affiliates.

      4.    At least seven (7) days prior to the hearing, each party shall
            submit the following to the other party and the neutral:

            (a)   a copy of all exhibits on which such party intends to rely in
                  any oral or written presentation to the neutral;

            (b)   a list of any witnesses such party intends to call at the
                  hearing, and a short summary of the anticipated testimony of
                  each witness;

            (c)   a proposed ruling on each issue to be resolved, together with
                  a request for a specific damage award or other remedy for each
                  issue. The proposed rulings and remedies shall not contain any
                  recitation of the facts or any legal arguments and shall not
                  exceed one (1) page per issue.

            (d)   a brief in support of such party's proposed rulings and
                  remedies, provided that the brief shall not exceed twenty (20)
                  pages. This page limitation shall apply regardless of the
                  number of issues raised in the ADR proceeding.

      Except as expressly set forth in subparagraphs 4(a) - 4(d), no discovery
shall be required or permitted by any means, including depositions,
interrogatories, requests for admissions, or production of documents.

      5.    The hearing shall be conducted on two (2) consecutive days and shall
            be governed by the following rules:

            (a)   Each party shall be entitled to five (5) hours of hearing time
                  to present its case. The neutral shall determine whether each
                  party has had the five (5) hours to which it is entitled.

                                       26
<PAGE>   27

            (b)   Each party shall be entitled, but not required, to make an
                  opening statement, to present regular and rebuttal testimony,
                  documents or other evidence, to cross-examine witnesses, and
                  to make a closing argument. Cross-examination of witnesses
                  shall occur immediately after their direct testimony, and
                  cross-examination time shall be charged against the party
                  conducting the cross-examination.

            (c)   The party initiating the ADR shall begin the hearing and, if
                  it chooses to make an opening statement, shall address not
                  only issues it raised but also any issues raised by the
                  responding party. The responding party, if it chooses to make
                  an opening statement, also shall address all issues raised in
                  the ADR. Thereafter, the presentation of regular and rebuttal
                  testimony and documents, other evidence, and closing arguments
                  shall proceed in the same sequence.

            (d)   Except when testifying, witnesses shall be excluded from the
                  hearing until closing arguments.

            (e)   Settlement negotiations, including any statements made
                  therein, shall not be admissible under any circumstances.
                  Affidavits prepared for purposes of the ADR hearing also shall
                  not be admissible. As to all other matters, the neutral shall
                  have sole discretion regarding the admissibility of any
                  evidence.

      6.    Within seven (7) days following completion of the hearing, each
            party may submit to the other party and the neutral a post-hearing
            brief in support of its proposed rulings and remedies, provided that
            such brief shall not contain or discuss any new evidence and shall
            not exceed ten (10) pages. This page limitation shall apply
            regardless of the number of issues raised in the ADR proceeding.

      7.    The neutral shall rule on each disputed issue within fourteen (14)
            days following completion of the hearing. Such ruling shall adopt in
            its entirety the proposed ruling and remedy of one of the parties on
            each disputed issue but may adopt one party's proposed rulings and
            remedies on some issues and the other party's proposed rulings and
            remedies on other issues. The neutral shall not issue any written
            opinion or otherwise explain the basis of the ruling.

      8.    The neutral shall be paid a reasonable fee plus expenses. These fees
            and expenses, along with the reasonable legal fees and expenses of
            the prevailing party (including all expert witness fees and
            expenses), the fees and expenses of a court reporter, and any
            expenses for a hearing room, shall be paid as follows:

            (a)   If the neutral rules in favor of one party on all disputed
                  issues in the ADR, the losing party shall pay 100% of such
                  fees and expenses.

                                       27
<PAGE>   28

            (b)   If the neutral rules in favor of one party on some issues and
                  the other party on other issues, the neutral shall issue with
                  the rulings a written determination as to how such fees and
                  expenses shall be allocated between the parties. The neutral
                  shall allocate fees and expenses in a way that bears a
                  reasonable relationship to the outcome of the ADR, with the
                  party prevailing on more issues, or on issues of greater value
                  or gravity, recovering a relatively larger share of its legal
                  fees and expenses.

      9.    The rulings of the neutral and the allocation of fees and expenses
            shall be binding, non-reviewable, and non-appealable, and may be
            entered as a final judgment in any court having jurisdiction.

      10.   Except as provided in paragraph 9 or as required by law, the
            existence of the dispute, any settlement negotiations, the ADR
            hearing, any submissions (including exhibits, testimony, proposed
            rulings, and briefs), and the rulings shall be deemed Confidential
            Information. The neutral shall have the authority to impose
            sanctions for unauthorized disclosure of Confidential Information.

                                       28<PAGE>   1
                                                                   EXHIBIT 10.42

                                    AGREEMENT

This Agreement made as of this 28th day of December, 2000 (hereinafter referred
to as "EFFECTIVE DATE"), between TANABE SEIYAKU CO., LTD., a Japanese
corporation having its principal office at 2-10 Dosho-machi 3-chome, Chuo-ku,
Osaka, Japan (hereinafter referred to as "TANABE") and VIVUS, INC., a
corporation having its principal office at 1172 Castro Street, Mountain View, CA
94040, USA (hereinafter referred to as "VIVUS"). TANABE and VIVUS are sometimes
referred to herein individually as a "Party" or collectively as "Parties".

                                   WITNESSETH:

WHEREAS, TANABE is the owner of all right, title and interest in certain patents
and know-how relating to a selective phosphodiesterase type-5 inhibitor compound
referred to by TANABE as "T-1790", and TANABE desires a collaborator to develop
and market such compound;

WHEREAS, VIVUS has extensive capabilities in the development, manufacture and
marketing of pharmaceutical products in the USA;

WHEREAS, TANABE and VIVUS have entered into the Secrecy Agreement effective as
of the 19th day of June, 2000 (hereinafter referred to as "SECRECY Agreement"),
under which TANABE has disclosed to VIVUS data and information relating to the
aforesaid compound;

WHEREAS, after reviewing and taking into consideration aforesaid information,
VIVUS desires to obtain the right to develop and to market the product
containing the aforesaid compound; and

WHEREAS, TANABE is willing to grant the desired right to VIVUS subject to the
terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the covenants and obligations expressed
herein, and intending to be legally bound, the Parties agree as follows:

1.    Definitions.

      1.1   "ADVERSE DRUG REACTION" means any adverse drug reaction as defined
            in the then current edition of ICH Guidelines and any other relevant
            regulatory guidelines, whether the ADVERSE DRUG REACTION occurs in
            the conduct of clinical trials or is reported during post-marketing
            surveillance or any other means.

      1.2   "AFFILIATE" means any corporation or other business entity which
            directly or

                                      -1-
<PAGE>   2

            indirectly controls, or is controlled by, or under common control
            with a Party hereto. For the purpose of this definition, "control"
            means that an entity owns or controls other entity by means of fifty
            percent (50%) or more of the equity conferring voting rights, or
            otherwise has the ability to direct the business affairs of other
            entity.

      1.3   "BULK DRUG TABLETS" means formulated tablets containing COMPOUND in
            bulk form which if appropriately packaged and labeled would
            constitute PRODUCT, and which shall be supplied by TANABE pursuant
            to Section 7.1, and which excludes RAPIDLY DISINTEGRATED TABLET
            unless otherwise agreed by the Parties.

      1.4   "BULK DRUG SUBSTANCE" means COMPOUND in bulk form which, if
            appropriately formulated and finished, would constitute PRODUCT, and
            which shall be supplied by TANABE pursuant to Section 7.1.

      1.5   "CALENDAR QUARTER" means the respective period of three (3)
            consecutive calendar months as used by VIVUS for financial reporting
            ending on or about March 31, June 30, September 30 and December 31.

      1.6   "CALENDAR YEAR" means the respective period of about a year as used
            by VIVUS for financial reporting commencing on January 1 and ending
            on December 31.

      1.7   "CLINICAL STUDIES" means PHASE I CLINICAL STUDIES, PHASE II CLINICAL
            STUDIES and PHASE III CLINICAL STUDIES.

      1.8   "COMPOUND" means all the compounds which are selective
            phosphodiesterase type-5 inhibitor, which compounds are contained
            within a claim of any unexpired TANABE PATENT no matter when filed
            or in a claim of a pending application for a TANABE PATENT no matter
            when filed which is being prosecuted in good faith by or on behalf
            of TANABE or its AFFILIATE, including without limitation the
            compound coded as T-1790 by TANABE, chemically known as (***).

      1.9   "CONTROL" or "CONTROLLED" means the right to grant a license or
            sublicense to intangible property rights (including patent rights,
            know-how and trade secret INFORMATION), and the right to provide
            access to or cross-reference to regulatory filings, in each case to
            the extent not in violation of the terms of any pre-existing
            agreement or other arrangement with any THIRD PARTY. "CONTROL"
            expressly includes the right of ownership, in whole or in part.

      1.10  "DATE OF FIRST SALE" means the date on which the PRODUCT is first
            sold in a country in the TERRITORY by VIVUS to a THIRD PARTY (other
            than

                                      -2-
<PAGE>   3

            VIVUS' SUBLICENSEES) in a commercial arms length transaction.

      1.11  "DEVELOPMENT PLAN" means the plan for development of the COMPOUND
            into a PRODUCT in the TERRITORY which is established pursuant to
            Section 5.6.

      1.12  "DEVELOPMENT WORK" means all activities relating to obtaining
            REGULATORY APPROVAL, and activities relating to manufacture of the
            BULK DRUG SUBSTANCE and PRODUCTS, including but not limited to
            activities relating to preclinical test, toxicology,
            pharmacokinetics, CLINICAL STUDIES, manufacturing process,
            formulation, quality assurance, quality control and regulatory
            affairs.

      1.13  "DRUG APPROVAL APPLICATION" means an application for product license
            approvals, health registrations, marketing authorizations,
            regulatory submissions, notices of compliance and other licenses and
            permits (NDA and the like) required to be approved before commercial
            sale or use of a PRODUCT as a drug in a regulatory jurisdiction.

      1.14  "EFFECTIVE DATE" means the date first written above.

      1.15  "EMEA" means The European Agency for the Evaluation of Medicinal
            Products or any successor entity.

      1.16  "EUROPEAN UNION" means a part of or all of the countries which are
            then current members of the European Union.

      1.17  "FIELD" means treatment of male erectile dysfunction or female
            sexual dysfunction in humans.

      1.18  "FDA" means the United States Food and Drug Administration or any
            successor entity.

      1.19  "IND" means an Investigational New Drug Application filed with the
            FDA or a corresponding application filed with a regulatory agency
            with respect to development of a COMPOUND into a PRODUCT in the
            FIELD applicable in any country in the TERRITORY.

      1.20  "INFORMATION" means all information, techniques, data, inventions,
            practices, methods, knowledge, know-how, skill, experience, patent
            applications or test data, generally not known to the public,
            relating to the FIELD, which is owned or CONTROLLED by a Party
            relating to the COMPOUND or a PRODUCT which includes (but not
            limited to), pharmacological, toxicological, preclinical and
            clinical test data, analytical and quality control data, packaging,
            marketing, pricing, distribution, sales and manufacturing data or
            descriptions,

                                      -3-
<PAGE>   4

            compositions-of-matter of the COMPOUND, assays and biological
            materials related thereto.

      1.21  "MAJOR EUROPEAN COUNTRY" means the United Kingdom, Germany, France,
            Italy and Spain.

      1.22  "MANUFACTURING COST" shall mean the manufacturing cost of the BULK
            DRUG SUBSTANCE, which is manufactured by or on behalf of TANABE (or
            the PRODUCT manufactured and supplied by or on behalf of VIVUS under
            Section 8.5), and which includes the following:

            (a)   Materials Cost, which means the price paid for raw material
                  components and finished goods which are purchased from outside
                  vendors as well as any freight and duty where applicable.

            (b)   Direct Labor Costs, which means the employment costs
                  attributable to manufacturing the BULK DRUG SUBSTANCE
                  including, without limitation, salary and employee benefits
                  within the relevant manufacturing operating unit.

            (c)   Overhead Costs, which means the cost of specific activities
                  attributable to manufacturing the BULK DRUG SUBSTANCE that are
                  provided by support functions and are performed at a frequency
                  which is in correlation with the production. Overhead Costs
                  includes, expenses associated with quality assurance testing,
                  batch review, equipment maintenance costs, manufacturing
                  utilities, waste removal, management and administrative
                  expenses, general facilities costs, environmental engineering,
                  property taxes and insurance.

            (d)   Equipment Depreciation, which means the amortization of the
                  costs of specific manufacturing facility, machinery or
                  equipment dedicated either solely or partly (on a pro rata
                  basis) to the production, calculated in accordance with the
                  applicable generally accepted accounting practices.

            It is understood and agreed that the definition of MANUFACTURING
            COST shall be consistently applied during the term of the Agreement.

      1.23  "NDA" means a New Drug Application submitted to the FDA in the
            United States for the PRODUCT.

      1.24  "NET SALES" means:

            (a)   with respect to a PRODUCT, the amount invoiced by VIVUS, its
                  AFFILIATES and their SUBLICENSEES for sales of a PRODUCT to a
                  THIRD PARTY in the TERRITORY in a commercial arms length

                                      -4-
<PAGE>   5

                  transaction, less estimates which will be adjusted to actual
                  on a periodic basis of: (i) discounts, including cash
                  discounts, rebates paid, credit accrued or actually taken, and
                  retroactive price reductions or allowances actually allowed or
                  granted from the billed amount, and commercially reasonable
                  and customary fees paid to distributors (other than to a
                  distributor that is an AFFILIATE of VIVUS), (ii) credits or
                  allowances actually granted upon claims, rejections or returns
                  of such sales of PRODUCT, including recalls, regardless of
                  VIVUS requesting such recalls, and (iii) taxes, duties or
                  other governmental charges levied on or measured by the
                  billing amount when included in billing, as adjusted for the
                  items of (i) and (ii) above.

            (b)   It is understood and agreed that sales or transfers of
                  PRODUCTS between VIVUS, its AFFILIATES and their SUBLICENSEES
                  shall not constitute a "NET SALES" unless such party is an
                  end-user of such product.

            (c)   For the avoidance of doubt, even if the NON-ORAL PRODUCT is
                  sold in combination with any other active ingredient than the
                  COMPOUND, full NET SALES for such combination NON-ORAL PRODUCT
                  shall be applicable for the calculation of supply price under
                  Section 11.

      1.25  "NON-ORAL PRODUCT" means the PRODUCT other than the ORAL PRODUCT,
            which NON-ORAL PRODUCT includes, without limitation, the
            transurethral product and the topical product.

      1.26  "ORAL PRODUCT" means the PRODUCT in oral formulation.

      1.27  "PDE5 INHIBITOR" means a phosphodiesterase type-5 inhibitor.

      1.28  "PHASE I CLINICAL STUDIES" means that portion of the clinical
            DEVELOPMENT PLAN or DEVELOPMENT WORK which provides for the first
            introduction into humans of a COMPOUND or PRODUCT including one or
            more small scale clinical studies conducted in normal volunteers or
            patients to get INFORMATION on PRODUCT safety, tolerability,
            pharmacological activity or pharmacokinetics as more fully defined
            in 21 C.F.R. 312.21(a).

      1.29  "PHASE II CLINICAL STUDIES" means that portion of the clinical
            DEVELOPMENT PLAN or DEVELOPMENT WORK, which provides for the
            definitive, well controlled clinical trials of a COMPOUND or PRODUCT
            in patients, including one or more clinical studies conducted in
            patients and designed to indicate clinical efficacy and safety for a
            PRODUCT for one or more indications, as well as to obtain an
            indication of the dosage regimen required, as more fully defined in
            21 C.F.R. 312.21(b).

      1.30  "PHASE III CLINICAL STUDIES" means that portion of the clinical

                                      -5-
<PAGE>   6
            DEVELOPMENT PLAN or DEVELOPMENT WORK which provides for one or more
            large scale clinical studies conducted in a sufficient number of
            patients to establish a PRODUCT's clinical efficacy and safety for
            one or more indications, as more fully defined in 21 C.F.R.
            312.21(c).

      1.31  "POST REGISTRATION STUDIES" means clinical studies which are
            conducted in a particular country after the obtainment of REGULATORY
            APPROVAL from the appropriate regulatory agency in that country,
            which studies are conducted for the purpose of enhancing commercial
            acceptability of a PRODUCT.

      1.32  "PRODUCT" means any product which has been manufactured into a final
            dosage form, packaged and labeled for use in the FIELD, and which
            contains the COMPOUND as an active ingredient.

      1.33  "RAPIDLY DISINTEGRATED TABLET" means the COMPOUND in bulk tablet
            formulation which, if appropriately packaged and finished, would
            constitute the PRODUCT, which has the feature of disintegrating in
            the mouth and can be administered without the use of water.

      1.34  "REGULATORY APPROVAL" means all official approvals by government,
            pricing or health authorities in a country (or supra-national
            organizations, such as the EMEA) which are required for first sale,
            including, importation or manufacture of a PRODUCT in such country
            where required.

      1.35  "SPECIFICATIONS" means the specifications for the supply of the BULK
            DRUG SUBSTANCE and BULK DRUG TABLETS to VIVUS, a draft of which is
            attached hereto as Appendix-E, and which shall be amended from time
            to time as agreed by the Parties and in accordance with the terms of
            this Agreement.

      1.36  "STEERING COMMITTEE" means representatives from TANABE and VIVUS who
            are designated respectively by each Party to review the development
            and marketing of the PRODUCT in the TERRITORY pursuant to Article 4.

      1.37  "SUBLICENSEE" means, with respect to a particular PRODUCT, a THIRD
            PARTY to whom VIVUS or TANABE has granted a license or sublicense
            under any TANABE PATENTS, VIVUS PATENTS or INFORMATION to make and
            sell such PRODUCT.

      1.38  "TANABE KNOW-HOW" means all INFORMATION that TANABE discloses to
            VIVUS under this Agreement and is within the CONTROL of TANABE. It
            is understood and agreed that TANABE KNOW-HOW does not include
            TANABE PATENTS.

      1.39  "TANABE PATENT" means the patent which is attached hereto as
            Appendix A,

                                      -6-
<PAGE>   7

            and any other valid U.S. and foreign patents relating thereto,
            including without limitation, all substitutions, reissues, renewals,
            reexaminations, patents of addition, extensions, registrations,
            confirmations, and all pending patent applications, (including
            provisional applications, continuations, divisionals and
            continuation-in-part), which is owned or CONTROLLED by TANABE or its
            AFFILIATES as of the EFFECTIVE DATE or during the term of this
            Agreement. The "TANABE PATENT" shall include but not be limited to
            patents directed to new uses of the compounds claimed within the
            TANABE PATENT in the FIELD, and patents directed to manufacturing
            and formulation of the compounds claimed within the TANABE PATENT in
            the FIELD unless otherwise set forth herein. Notwithstanding
            anything herein to the contrary, the "TANABE PATENT" shall expressly
            exclude any claims within patents directed to formulations of the
            RAPIDLY DISINTEGRATED TABLET whether made by or on behalf of TANABE
            or its AFFILIATES before or after the EFFECTIVE DATE.

      1.40  "TERRITORY" means all the countries in the world excluding Japan,
            Democratic People's Republic of Korea (North Korea), Republic of
            Korea (South Korea), People's Republic of China (PRC including Hong
            Kong and Macao), Republic of China (Taiwan), Singapore, Indonesia,
            Malaysia, Thailand, Vietnam and the Philippines.

      1.41  "THIRD PARTY" means any entity other than TANABE or VIVUS or their
            respective AFFILIATES.

      1.42  "TRADEMARK" means the trademark which shall be used for the
            marketing of the PRODUCT in the TERRITORY, which trademark may be
            the same or different from the trademark used for the marketing of
            the PRODUCT outside the TERRITORY.

      1.43  "VIVUS KNOW-HOW" means all INFORMATION which VIVUS discloses to
            TANABE under this Agreement and is within the CONTROL of VIVUS. It
            is understood and agreed that VIVUS KNOW-HOW does not include VIVUS
            PATENTS.

      1.44  VIVUS PATENT" means valid U.S. and foreign patents, including
            without limitation, all substitutions, reissues, renewals,
            reexaminations, patents of addition, extensions, registrations,
            confirmations, and all pending patent applications, (including
            provisional applications, continuations, divisionals and
            continuation-in-part), which, absent rights thereunder, would be
            infringed by the research, development, manufacture, use,
            importation, sale or offer for sale of a COMPOUND or a PRODUCT in
            the FIELD, and is owned or CONTROLLED by VIVUS or its AFFILIATE as
            of the EFFECTIVE DATE or during the term of this Agreement. The
            "VIVUS PATENT" shall include but not limited to patents directed to
            new uses of the COMPOUND or PRODUCT in the FIELD, and

                                      -7-
<PAGE>   8

            patents directed to formulating the PRODUCT in the FIELD.

2.    Grant of Right.

      2.1   Grant of License under TANABE PATENT and TANABE KNOW-HOW. TANABE
            hereby grants to VIVUS, and VIVUS hereby accepts, an exclusive
            license, with the right to grant and authorize sublicenses pursuant
            to Section 2.3, to develop, manufacture, have manufactured, use,
            import, sell, offer to sell, register and market the PRODUCT (or the
            COMPOUND where applicable) in the FIELD in the TERRITORY under the
            TANABE PATENT and the TANABE KNOW-HOW. However, it is expressly
            understood between the Parties that VIVUS shall not have the right
            to manufacture the BULK DRUG SUBSTANCE or BULK DRUG TABLETS unless
            otherwise agreed.

      2.2   Extension of the License to AFFILIATE. VIVUS shall have the right to
            extend its rights under the license granted hereunder to one or more
            of its AFFILIATES, provided, that VIVUS shall (i) notify TANABE the
            names of such AFFILIATE reasonably prior to such extension, (ii)
            retain control over that portion of DEVELOPMENT WORK which such
            AFFILIATE is performing and (iii) remain responsible to TANABE for
            such AFFILIATE's compliance with all obligations under this
            Agreement which apply to such AFFILIATE.

      2.3   Sublicense. VIVUS may grant sublicenses under the license granted
            under Section 2.1 to one or more THIRD PARTIES; provided, VIVUS: (i)
            notifies and consults with TANABE with respect to the selection of
            SUBLICENSEES, (ii) uses its reasonable efforts to sublicense to a
            THIRD PARTY that will maximize the sale of PRODUCTS, and (iii) uses
            its best efforts to include in any such sublicense the obligation
            that such SUBLICENSEE not develop or commercialize or in-license
            another PDE5 INHIBITOR compound for a period of five (5) years
            following the effective date of such sublicense agreement. VIVUS
            shall (i) retain control over that portion of DEVELOPMENT WORK which
            such SUBLICENSEE is performing, if any, and (ii) remain responsible
            to TANABE for such SUBLICENSEE's compliance with all obligations
            under this Agreement which apply to such SUBLICENSEE. In case of
            sublicense to a THIRD PARTY, the performance of the obligations of
            any such SUBLICENSEE shall be deemed guaranteed by VIVUS.

      2.4   Tanabe's Co-Promotion Right. Notwithstanding the foregoing Section
            2.1, TANABE shall have the option to obtain the right to co-promote
            with VIVUS or its SUBLICENSEE up to (***) of the promotional efforts
            in the TERRITORY for the ORAL PRODUCT, such option to be exercised
            and negotiated within five (5) months following VIVUS' disclosure to
            TANABE of the data and report for such ORAL PRODUCT following
            completion of the first successful PHASE II CLINICAL STUDY for such
            ORAL PRODUCT. The terms of such agreement shall be negotiated in
            good faith and reasonably agreed by both parties. The promotional
            efforts of each Party shall be determined by

                                      -8-
<PAGE>   9

            market potential as well as the marketing strength of each Party and
            its AFFILIATES (or SUBLICENSEE in case of VIVUS) in that country or
            region.

      2.5   License under VIVUS PATENT and VIVUS KNOW-HOW to TANABE for PRODUCT.
            VIVUS hereby grants to TANABE the following right under VIVUS PATENT
            and VIVUS KNOW-HOW:

            (a)   for the term of this Agreement and thereafter, an exclusive
                  and royalty-free license to develop, make, have made, use,
                  import, sell, offer to sell, register and market any ORAL
                  PRODUCT being developed or sold hereunder by VIVUS, with a
                  right to sublicense, solely outside the TERRITORY in the
                  FIELD.

            (b)   during the term of this Agreement, an exclusive option to
                  obtain an exclusive license to develop, use, import, sell,
                  offer to sell, register and market any NON-ORAL PRODUCT being
                  developed or sold hereunder by VIVUS, with a right to
                  sublicense, outside the TERRITORY in the FIELD for the term of
                  this Agreement and thereafter. The terms and conditions of
                  such license shall be negotiated in good faith and shall be
                  based on reasonable terms common in the pharmaceutical
                  industry, including a reasonable royalty payable to VIVUS for
                  using the VIVUS PATENT and VIVUS KNOW-HOW relating to such
                  NON-ORAL PRODUCT.

            (c)   during the term of this Agreement and thereafter, a
                  semi-exclusive and royalty-free license to use, import, sell,
                  offer to sell, register and co-promote any COMPOUND or PRODUCT
                  being developed or sold hereunder by VIVUS in the TERRITORY,
                  solely to the extent that TANABE elects and is granted the
                  right to perform co-promotion of such PRODUCT pursuant to
                  Section 2.4.

            Should royalties be due to a THIRD PARTY under any sublicense
            granted to TANABE hereunder, TANABE shall be obligated to pay such
            royalties and comply with all terms and conditions of such THIRD
            PARTY license.

      2.6   Non-compete. VIVUS agrees not to develop, market, in-license or
            out-license any PDE5 INHIBITOR compounds other than the COMPOUNDS,
            for use in the FIELD during the term of this Agreement. TANABE shall
            have the right to in-license and/or conduct pre-clinical work on any
            PDE5 INHIBITOR compounds, other than the COMPOUNDS, for use in the
            FIELD (each a "Next Generation Compound"); provided, TANABE shall
            grant to VIVUS an exclusive right of first refusal to conduct
            clinical studies in order to develop and commercialize within the
            TERRITORY such Next Generation Compounds owned or CONTROLLED by
            TANABE. Such right may be exercised by VIVUS within four (4) years
            after first commercial sale of a PRODUCT by VIVUS. The terms of such
            agreement shall be negotiated in good faith and mutually agreeable
            to both Parties; provided, in no event shall VIVUS be required to
            pay any upfront licensing fee and any milestone fees for the rights
            to such Next Generation

                                      -9-
<PAGE>   10

            Compound, which fees it has already paid under the terms of this
            Agreement for the COMPOUND (e.g. if VIVUS elects to license in a
            Next Generation Compound after it has already paid the PHASE II
            CLINICAL STUDY milestone for a COMPOUND, then it shall have no
            obligation to pay a milestone payment upon commencement of PHASE II
            CLINICAL STUDIES for such Next Generation Compound). It is
            understood and agreed that during such period (i.e. four (4) years
            after first commercial sale of a PRODUCT by VIVUS), TANABE and its
            AFFILIATES may not grant a THIRD PARTY the right to conduct clinical
            studies on Next Generation Compounds in any country in the world;
            provided, if VIVUS exercises its right of first refusal to a
            particular Next Generation Compound pursuant to this Section, TANABE
            shall have the right to grant a THIRD PARTY the right to conduct
            clinical studies on such Next Generation Compound solely outside
            TERRITORY.

3.    Disclosure and Exchange of INFORMATION.

      3.1   Disclosure of INFORMATION. Within forty five (45) days following the
            EFFECTIVE DATE, TANABE shall disclose and make available to VIVUS
            without charge, all preclinical, clinical or regulatory INFORMATION,
            including copies of all preclinical and clinical reports, (i) which
            is known by TANABE, (ii) which directly concerns the COMPOUND or the
            PRODUCT and (iii) which TANABE in its commercially reasonable sole
            discretion considers to be useful or necessary for VIVUS to exercise
            the license granted under Article 2. Thereafter, during the term of
            the Agreement, each Party shall disclose and make available to the
            other Party without charge, all relevant INFORMATION, including
            copies of all preclinical and clinical reports, known by such Party
            which in its commercially reasonable sole discretion it considers to
            be useful or necessary for the other Party to exercise the rights
            and licenses expressly granted herein. The exchanges of INFORMATION
            hereunder shall be undertaken in written or oral form as soon as
            reasonably possible after the obtainment thereof, as necessary, and
            through regular meetings. The initial disclosure and the exchanges
            of INFORMATION hereunder shall be (i) made in English, (ii)
            undertaken in written form as soon as reasonably possible after the
            obtainment thereof, (iii) treated as confidential information of the
            Party disclosing such INFORMATION subject to Article 18 and (iv)
            made in the following manner:

            (a)   the Party disclosing the INFORMATION (hereinafter referred to
                  as the "Disclosing Party") shall provide to the other Party
                  (hereinafter referred to as the "Receiving Party") the list of
                  the INFORMATION in English.

            (b)   promptly upon the receipt of such list, the Receiving Party
                  shall indicate to the Disclosing Party, in writing, the items
                  in the list, of which it desires to receive the content from
                  the Disclosing Party, and

            (c)   promptly after the receipt of the notice indicating the items
                  from the Receiving Party, the Disclosing Party shall provide
                  to the Receiving Party

                                      -10-
<PAGE>   11

                  the content of the items which were indicated pursuant to
                  foregoing Section 3.1(b).

            Each Party agrees not to use INFORMATION disclosed by the other
            Party, other than for the rights and licenses expressly granted
            herein. Notwithstanding the foregoing, INFORMATION relating to the
            manufacture of the BULK DRUG SUBSTANCE or BULK DRUG TABLETS need not
            be disclosed by TANABE, except as required for regulatory filings,
            submissions, approvals and/or audits.

      3.2   TANABE INFORMATION Disclosure Prior to the EFFECTIVE DATE. TANABE
            represents and warrants that it has produced or provided access to
            VIVUS prior to the EFFECTIVE DATE all material INFORMATION relating
            to the safety of the COMPOUND or the PRODUCT, including, but not
            limited to, material INFORMATION concerning ADVERSE DRUG REACTION,
            toxicity or sensitivity reactions and incidents and the severity
            thereof with respect to any tests or studies conducted by TANABE or
            its contractors relating to the COMPOUND or the PRODUCT. In
            addition, TANABE represents and warrants that it has provided access
            to VIVUS prior to the EFFECTIVE DATE, all material INFORMATION,
            relating to the efficacy of the COMPOUND and the PRODUCT and
            preclinical and clinical work and studies relating to the COMPOUND
            and the PRODUCT.

      3.3   Disclosure of INFORMATION from THIRD PARTY. In case either Party
            hereto intends to have the research, development, manufacture, use
            or marketing of the COMPOUND or the PRODUCT conducted by any THIRD
            PARTY or otherwise license such right to any THIRD PARTY (to the
            extent permitted under this Agreement), such Party shall include in
            the agreement to be concluded with such THIRD PARTY a provision
            allowing such Party to disclose to and have used by the other Party
            any and all information, techniques, data, inventions, practices,
            methods, knowledge, know-how, skill, experience or test data
            relating to COMPOUND or PRODUCT for use in the FIELD which is
            disclosed to such Party by such THIRD PARTY.

4.    STEERING COMMITTEE.

            The STEERING COMMITTEE shall have the primary role in ensuring the
            success of the PRODUCT, during the development and marketing in the
            TERRITORY. The STEERING COMMITTEE will operate in accordance with
            the STEERING COMMITTEE Guidelines attached hereto as Appendix-C.

5.    Development.

      5.1   DEVELOPMENT WORK. VIVUS shall, at its own cost and expense, conduct
            the DEVELOPMENT WORK to seek REGULATORY APPROVAL of the PRODUCTS in
            the TERRITORY. VIVUS shall not, however, be responsible for
            DEVELOPMENT WORK as it relates to seeking REGULATORY APPROVAL of the
            PRODUCTS outside the TERRITORY or the manufacturing scale-up and

                                      -11-
<PAGE>   12

            production of validation batches of the BULK DRUG TABLETS (or the
            BULK DRUG SUBSTANCE where applicable). Rather, such shall be
            TANABE's responsibility at its own costs and expense. Such work as
            the manufacturing scale-up, production of validation batches and the
            manufacture of the BULK DRUG TABLETS and BULK DRUG SUBSTANCE shall
            be carried out by TANABE using reasonable commercial efforts and in
            a timely manner in accordance with the DEVELOPMENT PLAN so as not to
            delay VIVUS' initiation of CLINICAL STUDIES, filing of DRUG APPROVAL
            APPLICATIONS or launch of the PRODUCTS. It is understood and agreed
            by the Parties that VIVUS may conduct its activities under this
            Article 5 by itself or through its designees, subject to TANABE's
            prior approval, such approval not to be unreasonably withheld.
            TANABE agrees to act promptly in evaluating potential designees and
            in no case shall take more than ten (10) business days to render its
            decision.

      5.2   CLINICAL STUDIES Protocols. VIVUS shall inform TANABE, in writing,
            of the draft protocol for such CLINICAL STUDIES for TANABE's review
            and consideration, before commencement of any CLINICAL STUDIES for
            the COMPOUND or the PRODUCTS conducted by it in the TERRITORY. Once
            so informed, TANABE will have ten (10) business days to review and
            provide comments on the draft protocol. In addition, should TANABE
            request any change or addition to such draft protocol for the
            purpose of using the data generated under the DEVELOPMENT WORK in
            the TERRITORY for TANABE's development outside the TERRITORY, then
            TANABE shall promptly notify VIVUS to such effect, and VIVUS shall
            accommodate such request to the extent such request is reasonably
            acceptable by VIVUS. If such request causes additional costs to
            VIVUS, TANABE shall reimburse such additional costs to VIVUS in
            full.

      5.3   DRUG APPROVAL APPLICATION and REGULATORY APPROVAL. VIVUS shall use
            commercially reasonable efforts to undertake the compilation,
            submission and prosecution, in timely manner, of all necessary data,
            documents and DRUG APPROVAL APPLICATION in a format acceptable to
            the applicable regulatory authorities in the TERRITORY, including
            but not limited to the FDA and the EMEA, required to obtain
            REGULATORY APPROVAL for the PRODUCTS for use in the FIELD. This
            shall include obtaining all necessary labeling for the PRODUCTS. In
            addition, VIVUS shall use commercially reasonable efforts to
            maintain the REGULATORY APPROVAL obtained under this Section 5.3.
            VIVUS shall solely own all such DRUG APPROVAL APPLICATION and
            REGULATORY APPROVAL in the TERRITORY. VIVUS shall collaborate with
            TANABE to the extent legally permitted, in order to enable TANABE to
            prepare, if necessary, DRUG APPROVAL APPLICATION in the FIELD, and
            obtain, if necessary, REGULATORY APPROVALS for the PRODUCTS outside
            the TERRITORY.

                                      -12-
<PAGE>   13

      5.4   Costs and Expense. VIVUS shall be fully responsible for bearing all
            costs and expense associated with undertaking and completing said
            registration activities in the TERRITORY, including but not limited
            to the costs of preparing and prosecuting DRUG APPROVAL APPLICATION
            and fees payable to regulatory agencies in obtaining and maintaining
            REGULATORY APPROVAL. TANABE shall be fully responsible for bearing
            all costs and expense associated with undertaking and completing
            said registration activities outside of the TERRITORY, including but
            not limited to the costs of preparing and prosecuting DRUG APPROVAL
            APPLICATION and fees payable to regulatory agencies in obtaining and
            maintaining REGULATORY APPROVAL.

      5.5   Diligence. VIVUS shall use such diligence as giving the first or top
            priority to the development of the COMPOUND into the PRODUCT and the
            obtainment of its REGULATORY APPROVAL, among those products which
            are then developed by its clinical development team for urinary
            diseases. If TANABE in its reasonable judgment concludes that VIVUS
            has failed with respect to such diligence, it shall notify VIVUS in
            writing and VIVUS shall have ninety (90) days to cure such failure.
            If VIVUS has not cured such failure within such time, and if such
            failure cannot be justified in a commercially reasonable manner
            consistent with the pharmaceutical business and scientific judgment
            (which cause includes but not limited to such case where the result
            of the CLINICAL STUDIES negatively and drastically affects the
            commercial potential of the PRODUCT), such failure may constitute a
            breach of this Agreement and TANABE may terminate this Agreement
            pursuant to the terms of Section 20.2. It is understood and agreed
            that any dispute arising out of the interpretation or enforcement of
            this Section shall be settled by arbitration pursuant to the
            provisions of Article 28.

      5.6   DEVELOPMENT PLAN. VIVUS shall prepare, in consultation with TANABE,
            and provide to the STEERING COMMITTEE, within sixty (60) days after
            the EFFECTIVE DATE , a reasonably detailed DEVELOPMENT PLAN proposal
            pursuant to which the DEVELOPMENT WORK will be performed. The
            STEERING COMMITTEE shall review such proposal and approve an initial
            DEVELOPMENT PLAN, with such changes as the STEERING COMMITTEE agree
            to the plan proposed by VIVUS, no later than thirty (30) days after
            its submission by VIVUS, such initial DEVELOPMENT PLAN to be
            attached hereto as Exhibit B. The STEERING COMMITTEE shall review
            and update the DEVELOPMENT PLAN from time to time as necessary.

      5.7   Development Milestone. If any of the following milestones is in
            jeopardy of not being met in the United States or in any of the
            MAJOR EUROPEAN COUNTRY, the STEERING COMMITTEE shall discuss and
            determine the action plan to catch up with such milestone in
            jeopardy.

<TABLE>
<CAPTION>
<S>                                                <C>
            Milestone                              Timing
            ---------                              ------
</TABLE>

                                      -13-
<PAGE>   14

<TABLE>
<CAPTION>
<S>                                                <C>
           (a) Commencement of the first PHASE     Date, which represents six (6) months
               II CLINICAL STUDIES for any         after the commencement of PHASE II
               PRODUCT.                            CLINICAL STUDIES set forth in the
                                                   initial DEVELOPMENT PLAN, to be
                                                   provided once the DEVELOPMENT PLAN is
                                                   agreed upon pursuant to Section 5.6.

           (b) Commencement of the first PHASE     Date, which represents six (6) months
               III CLINICAL STUDIES for any        after the commencement of PHASE III
               PRODUCT.                            CLINICAL STUDIES set forth in the
                                                   initial DEVELOPMENT PLAN, to be
                                                   provided once the DEVELOPMENT PLAN is
                                                   agreed upon pursuant to Section 5.6.
</TABLE>

      5.8   Submission of the Files relating to the REGULATORY APPROVAL. VIVUS
            shall promptly furnish TANABE with copies of all the files submitted
            to the competent authorities to apply for the REGULATORY APPROVAL,
            copies of the certificates of the REGULATORY APPROVAL obtained, and
            any communications received from or decisions made by the competent
            authorities.

6.    Marketing.

      6.1   Marketing Efforts. VIVUS agrees to use (i) commercially reasonable
            efforts consistent with its normal business practices to maximize
            the market potential of the PRODUCT and (ii) at least the same
            efforts in any and all aspects including without limitation, call
            number, budget and promotional cost, as it uses to market its own
            products. VIVUS agrees to use its best commercial efforts to market
            the PRODUCT within six (6) months of REGULATORY APPROVAL for such
            PRODUCT in each country in the TERRITORY.

            With respect to any country in the TERRITORY, if VIVUS does not
            launch a PRODUCT within three (3) years after the earliest DATE OF
            FIRST SALE of such PRODUCT in the United States or any MAJOR
            EUROPEAN COUNTRY, VIVUS agrees that the license granted hereunder in
            such country for such PRODUCT shall revert to TANABE upon request by
            TANABE, unless VIVUS can reasonably justify that, with respect to
            such country in the TERRITORY, (i) the launch of such PRODUCT within
            three (3) years would be detrimental to the global development and
            commercial viability of such PRODUCT or (ii) the launch of the
            PRODUCT within three (3) years has not been achieved due to the
            REGULATORY APPROVAL not being obtained in spite of VIVUS' continuous
            efforts pursuant to Section 5.5 and the foregoing provisions of the
            first paragraph of this Section 6.1, or (iii) the launch of the
            PRODUCT within three (3) years has not been achieved due to other
            governmental constraints and/or controls.

                                      -14-
<PAGE>   15

      6.2   POST-REGISTRATION STUDIES. VIVUS shall have the right to conduct by
            itself or through its designee POST-REGISTRATION STUDIES in the
            TERRITORY for PRODUCTS sold by VIVUS, its AFFILIATES or its
            SUBLICENSEES. If VIVUS decides to conduct POST-REGISTRATION STUDIES,
            VIVUS shall inform TANABE and shall take TANABE's opinion into due
            consideration in conducting such studies. The results of such
            POST-REGISTRATION STUDIES will be fully shared with TANABE. ADVERSE
            DRUG REACTIONS and all other safety INFORMATION occurring in
            POST-REGISTRATION STUDIES will be reported as described in Article
            19.

      6.3   Pricing, Pricing Approvals and PRODUCT Distribution. To the extent
            reasonably possible and beneficial for the marketability of the
            PRODUCT, VIVUS shall use its reasonable efforts to obtain the
            optimum pricing or reimbursement price for PRODUCTS. VIVUS shall set
            all optimum prices for all PRODUCTS in the TERRITORY and shall be
            responsible for distribution of each PRODUCT in the TERRITORY and
            shall record all sales for PRODUCTS in the TERRITORY.

      6.4   Product Recalls. If VIVUS believes that a recall of a PRODUCT sold
            by it is necessary, VIVUS shall promptly undertake such recall
            following notification to TANABE. The decision of VIVUS concerning
            such recall shall be final. Likewise, if TANABE believes that a
            recall of a PRODUCT sold by it outside of the TERRITORY is
            necessary, TANABE may promptly undertake such recall following
            notification to VIVUS. The decision of TANABE concerning such recall
            shall be final.

      6.5   Advertising and Promotion. With respect to printed promotional
            materials (including advertisements appearing in journals or
            internets), printed educational materials, PRODUCT labeling, and
            documentary INFORMATION, TANABE's name shall appear on such
            materials and reference to TANABE shall be in the form that
            references TANABE as the licensor, provided such is permitted by the
            applicable laws and regulations. All promotional and advertising
            materials to be used by VIVUS for the PRODUCT to be sold by it which
            includes but not limited to the materials mentioned above, shall be
            prepared by VIVUS or its designee at their own costs and expense.
            VIVUS shall send to TANABE copies of such materials for the PRODUCT
            to be sold by it prior to its use.

      6.6   Sales Forecast and Marketing Strategies. VIVUS shall inform TANABE,
            six (6) months in advance, of a sales forecast as well as marketing
            strategies for the PRODUCT for each CALENDAR YEAR. TANABE may give
            VIVUS opinions and suggestions to assist VIVUS' activities for
            marketing of the PRODUCT. Such forecasts may be adjusted quarterly
            by VIVUS.

      6.7   Reports on Marketing. VIVUS shall promptly render to TANABE the
            following

                                      -15-
<PAGE>   16

            reports:

            (a)   Semi-annual reports on the sales of the PRODUCT sold by VIVUS
                  in terms of units and value,

            (b)   Semi-annual reports on the quantities of the BULK DRUG
                  SUBSTANCE and the PRODUCT held by VIVUS in their inventories,
                  and

            (c)   Reports, when requested by TANABE, outlining the situation of
                  competitors' products and other market information relating to
                  the PRODUCT in the TERRITORY.

7.    Manufacture and Supply of the BULK DRUG TABLETS and BULK DRUG SUBSTANCE.

      7.1   Manufacture and Supply of the BULK DRUG TABLETS and BULK DRUG
            SUBSTANCE. TANABE shall use its commercially reasonable efforts to
            manufacture and supply to VIVUS, either by itself or by a THIRD
            PARTY manufacturer, BULK DRUG TABLETS for the ORAL PRODUCT and BULK
            DRUG SUBSTANCE for the formulation and manufacturing of NON-ORAL
            PRODUCTS. Detailed conditions for manufacture and supply of the BULK
            DRUG TABLETS and BULK DRUG SUBSTANCE shall be set forth in
            Appendix-D.

      7.2   Supply during CLINICAL STUDIES. TANABE shall supply the BULK DRUG
            SUBSTANCE reasonably needed by VIVUS for pre-clinical studies and
            CLINICAL STUDIES. The BULK DRUG SUBSTANCE shall be supplied, (i)
            free of charge, for all pre-clinical studies, PHASE I CLINICAL
            STUDIES and PHASE II CLINICAL STUDIES, and (ii) at the price of
            (***) per kilogram (***) (FCA place of manufacture, Incoterms 2000)
            for all PHASE III CLINICAL STUDIES, or to the extent necessary,
            validation for manufacture of the PRODUCTS.

      7.3   Manufacture of the BULK DRUG SUBSTANCE and BULK DRUG TABLETS by a
            THIRD PARTY. In the event TANABE fails to supply BULK DRUG SUBSTANCE
            and/or BULK DRUG TABLETS to VIVUS (i) for conducting CLINICAL
            STUDIES, or (ii) that meet the SPECIFICATIONS, or (iii) for
            fulfilling market demand for the PRODUCTS, the Parties shall meet
            and discuss in good faith a remedy for such failure. In the event
            that TANABE is unable to cure such failure within a reasonable
            period of time, VIVUS shall have the right to designate a THIRD
            PARTY manufacturer, reasonably acceptable to TANABE, to manufacture
            and supply the BULK DRUG SUBSTANCE and/or BULK DRUG TABLETS, as
            applicable, to VIVUS. In such event, TANABE shall provide reasonable
            assistance to VIVUS and such THIRD PARTY manufacturer to ensure that
            supply of the BULK DRUG SUBSTANCE and/or BULK DRUG

                                      -16-
<PAGE>   17

            TABLETS to VIVUS is not unreasonably disrupted. TANABE shall
            maintain a commercially reasonable quantity of BULK DRUG SUBSTANCE
            and BULK DRUG TABLETS at two remote locations in order to ensure a
            continuous adequate supply of each to VIVUS.

8.    Manufacture of the PRODUCT.

   8.1    Manufacture of the PRODUCT. VIVUS shall be responsible for
          manufacturing the PRODUCT using the BULK DRUG SUBSTANCE and BULK DRUG
          TABLETS supplied by TANABE pursuant to Article 7. It is understood and
          agreed that VIVUS' manufacture of the PRODUCT using BULK DRUG TABLETS
          shall be limited to packaging and labeling of such PRODUCTS.

   8.2    Inspection of Samples by TANABE. TANABE shall have the right to be
          provided with reasonable quantities of free of charge samples of the
          PRODUCT in order to inspect the packaging of the PRODUCT, such
          quantities to be mutually agreed by the Parties.

   8.3    Manufacture of the PRODUCT by a THIRD PARTY. In case VIVUS wishes to
          have manufactured the PRODUCT hereunder from the BULK DRUG SUBSTANCE
          or BULK DRUG TABLETS by a THIRD PARTY manufacturer, VIVUS shall inform
          TANABE of the name of such THIRD PARTY. TANABE shall have the right to
          approve or reject within sixty (60) days after receipt of such written
          notification indicating the name of such THIRD PARTY, such approval
          not to be unreasonably withheld, provided that in the event VIVUS does
          not receive a written answer from TANABE indicating its approval or
          rejection of such THIRD PARTY within such sixty (60) days period,
          TANABE shall be deemed to have approved the appointment of such THIRD
          PARTY.

   8.4    Inspection of the Plants. Each Party may upon reasonable notice to the
          other Party inspect the plant and premises used by, and processes and
          records of the packaging or storage employed by a Party (or THIRD
          PARTY manufacturer where applicable) in connection with the BULK DRUG
          SUBSTANCE, BULK DRUG TABLETS, or the PRODUCT, as applicable.

   8.5    Supply of the NON-ORAL PRODUCT to TANABE. If TANABE wishes to purchase
          the NON-ORAL PRODUCT manufactured by or on behalf of VIVUS pursuant to
          Section 8.1 for use in its development, registration, use, sale or
          marketing outside the TERRITORY and in the FIELD, VIVUS shall supply
          TANABE, to the extent possible, with the NON-ORAL PRODUCT on terms to
          be negotiated pursuant to Section 2.5(b) of this Agreement.

9.    Down Payment upon Signing.

          In consideration of the licenses granted by TANABE to VIVUS hereunder,
          VIVUS shall make the following payments to TANABE:

                                      -17-
<PAGE>   18

            (a)   a non-refundable and non-creditable signing down payment to
                  TANABE of (***), within one (1) week after the later effective
                  date of signature of this Agreement by both Parties; and

            (b)   a non-refundable and non-creditable payment to TANABE of
                  (***), by February 28, 2001, subject to VIVUS satisfaction of
                  the results of (i) its due diligence review of the INFORMATION
                  provided by TANABE and (ii) Dr. (***) experiments with T-1790
                  (VIVUS shall provide the results of Dr. (***) experiments with
                  T-1790 to TANABE). If VIVUS is not satisfied with such results
                  or fails to make such payment, this Agreement shall terminate.

10.   Milestone Payments.

            In further consideration of the licenses granted by TANABE to VIVUS
            hereunder, VIVUS shall make the following non-refundable and
            non-creditable milestone payments to TANABE as such milestones are
            achieved:

      (a)   For the ORAL PRODUCT for male erectile dysfunction:

            (1)   (***), upon the enrollment of the first patient in the first
                  PHASE II CLINICAL STUDIES in the TERRITORY.

            (2)   (***), upon the enrollment of the first patient in the first
                  PHASE III CLINICAL STUDIES in the TERRITORY,

            (3)   (***), upon the first submission of a NDA (or any equivalent
                  license in the TERRITORY),

            (4)   (***), upon obtainment of REGULATORY APPROVAL in the United
                  States, and

            (5)   (***) upon obtainment of the first REGULATORY APPROVAL in any
                  MAJOR EUROPEAN COUNTRY.

      (b)   For the NON-ORAL PRODUCT for male erectile dysfunction:

            (1)   (***), upon the enrollment of the first patient in the first
                  PHASE II CLINICAL STUDIES in the TERRITORY,

            (2)   (***), upon the first submission of a NDA (or any equivalent
                  license in the TERRITORY), and

            (3)   (***), upon obtainment of REGULATORY APPROVAL in the United
                  States, and (***) upon obtainment of the first REGULATORY
                  APPROVAL in any MAJOR EUROPEAN COUNTRY.

      (c)   For the ORAL PRODUCT for female sexual dysfunction:

            (1)   (***), upon the first submission of a NDA (or any equivalent
                  license) in the TERRITORY, and

            (2)   (***) upon obtainment of REGULATORY APPROVAL in the United
                  States, and (***), upon obtainment of the first REGULATORY
                  APPROVAL in any MAJOR EUROPEAN COUNTRY.

                                      -18-
<PAGE>   19

      (d)   For the NON-ORAL PRODUCT for female sexual dysfunction:

            (1)   (***), upon the enrollment of the first patient in the first
                  PHASE III CLINICAL STUDIES in the TERRITORY,

            (2)   (***), upon the first submission of a NDA (or any equivalent
                  license) in the TERRITORY, and

            (3)   (***) upon obtainment of REGULATORY APPROVAL in the United
                  States, and (***), upon obtainment of any REGULATORY APPROVAL
                  in any MAJOR EUROPEAN COUNTRY.

      (e)   (***), when the total NET SALES during any CALENDAR YEAR for the
            ORAL PRODUCT sold by VIVUS, its AFFILIATES and its SUBLICENSEES
            exceed (***), the amount of which shall be calculated using the
            currency conversion method consistent with the method set forth in
            Section 12.3.

            VIVUS shall notify TANABE in writing within thirty (30) days upon
            the achievement of each milestone, such notice to be accompanied by
            the appropriate milestone payment. It is understood and agreed that
            each milestone payment in Section 10 (a) through (e) above shall be
            paid only once upon achievement of the particular milestone.

11.   Supply Price.

      11.1  Supply Price for ORAL PRODUCT. The supply price (FCA place of
            manufacture, Incoterms 2000) to be paid to TANABE by VIVUS for its
            commercial use of the BULK DRUG TABLETS for ORAL PRODUCT shall be
            calculated based on a percentage of annual (CALENDAR YEAR basis)
            total NET SALES in the TERRITORY according to the following:

<TABLE>
<CAPTION>
            Annual Total NET SALES in the TERRITORY       Supply Price
            ---------------------------------------       ------------

<S>                                                       <C>
            For the portion up to (***)                   (***) of the NET SALES

            For the portion in excess of (***) and        (***) of the NET SALES
               up to (***)

            For the portion in excess of (***)            (***) of the NET SALES
</TABLE>

      11.2  Supply Price for NON-ORAL PRODUCT. The supply price (FCA place of
            manufacture, Incoterms 2000) to be paid to TANABE by VIVUS for its
            commercial use of the BULK DRUG SUBSTANCE for the formulation and
            manufacture of NON-ORAL PRODUCT shall be calculated based on a
            percentage of annual (CALENDAR YEAR basis) total NET SALES in the

                                      -19-
<PAGE>   20

            TERRITORY according to the following:

<TABLE>
<CAPTION>
            Annual Total NET SALES in the TERRITORY       Supply Price
            ---------------------------------------       ------------
<S>                                                       <C>
            For the portion up to (***)                   (***) of the NET SALES

            For the portion in excess of (***) and        (***) of the NET SALES
               up to (***)

            For the portion in excess of (***)            (***) of the NET SALES
</TABLE>

      11.3  Revision of Supply Price. Notwithstanding the foregoing Section 11.1
            and 11.2, in case either Party cannot obtain a reasonable profit
            from the PRODUCT business, the Parties shall discuss in good faith
            to revise the supply price, taking into consideration (i) their
            MANUFACTURING COST, (ii) NET SALES per one (1) treatment and (iii)
            the balance of the profit of the Parties, provided however that, in
            no event TANABE shall be obliged to supply the BULK DRUG TABLETS or
            the BULK DRUG SUBSTANCE at the price less than their MANUFACTURING
            COST.

      11.4  Retroactive Adjustment. The supply price shall be determined based
            on the average NET SALES of the immediately preceding CALENDAR
            QUARTER; provided, however, that if the actual amount of the NET
            SALES is not available, an estimated NET SALES shall be used for the
            calculation of the supply price and the necessary retroactive
            adjustment shall be made immediately after the actual amount of the
            NET SALES becomes available.

      11.5  Cash Remittance. For all purchases of the BULK DRUG SUBSTANCE from
            TANABE, VIVUS shall pay to TANABE by means of cash remittance (by
            bank transfer) payable within sixty (60) days after the date of
            TANABE's invoice.

12.   Payment of the Down Payment, Milestone Payments and Supply Price Payments.
      The following Sections 12.1 through 12.7 shall apply to the supply price
      payments under Article 11, and the applicable parts of Sections 12.1
      through 12.7 shall apply also to the down payment under Article 9 and
      milestone payments under Article 10:

      12.1  Report of Sales Amount. Within sixty (60) days from the end of each
            CALENDAR QUARTER, VIVUS shall send TANABE the reports of such
            CALENDAR QUARTER describing the invoiced sales amount of the PRODUCT
            and the NET SALES in such CALENDAR QUARTER along with its
            calculation. VIVUS shall keep accurate records in sufficient detail
            to enable any payment payable hereunder to be determined.

                                      -20-
<PAGE>   21

      12.2  Payment Account. All payments including down payment, milestone
            payments and supply price payment shall be made by wire transfer, if
            possible, to an account designated by TANABE from time to time;
            provided, however, that in the event TANABE fails to designate such
            account, VIVUS may remit such payments to TANABE to the address
            applicable for the receipt of notices hereunder; provided, further,
            that any notice by TANABE of such account or change in such account,
            shall not be effective until thirty (30) days after receipt thereof
            by VIVUS, except for the initial down payment under Article 9 which
            shall be notified to VIVUS reasonably prior to or upon the later
            effective date of signature of this Agreement by both Parties;.

      12.3  Currency. The supply price payment shall be made in United States
            Dollars or any successor currency. The method of currency conversion
            from local currency into United States Dollars shall be made by
            using the exchange rate for the purchase of United States Dollars
            reported by the Wall Street Journal on the last business day of the
            CALENDAR QUARTER to which such payments relate.

      12.4  Right to Audit. TANABE shall have the right, upon prior notice to
            VIVUS, not more than once in any CALENDAR YEAR, through an
            independent certified public accountant selected by TANABE and
            acceptable to VIVUS, which acceptance shall not be unreasonably
            refused, to have access during normal business hours to those
            records of VIVUS as may be reasonably necessary to verify the
            accuracy of the reports required to be furnished by VIVUS pursuant
            to Section 12.1. If such independent certified public accountant's
            report correctly shows any underpayment of supply price by VIVUS,
            VIVUS shall remit to TANABE within thirty (30) days after VIVUS'
            receipt of such report:

            (a)   the amount of such underpayment;

            (b)   interest on the underpayment which shall be calculated
                  pursuant to Section 12.5; and

            (c)   the reasonably necessary fees and expenses of such independent
                  certified public accountant performing the audit, if such
                  underpayment exceeds five (5%) percent of the total supply
                  price payment owed for the CALENDAR YEAR then being reviewed.
                  Otherwise, TANABE's accountant's fees and expenses shall be
                  borne by TANABE. Any overpayment of supply price payment shall
                  be fully creditable against future supply price payment
                  payable in any subsequent periods. Upon the expiration of
                  thirty-six (36) months following the end of any CALENDAR YEAR,
                  the calculation of supply price payment payable with respect
                  to such CALENDAR YEAR shall be binding and conclusive on
                  TANABE and VIVUS, unless an audit for such CALENDAR YEAR is
                  initiated before expiration of such thirty-six (36) months.

                                      -21-
<PAGE>   22

            Should VIVUS not agree with the report, VIVUS may submit its own
            report within ninety (90) days of receiving TANABE's report. If the
            two reports differ, the Parties shall meet and discuss how to
            resolve the discrepancy. If the Parties fail to reach agreement, the
            Parties will resolve the dispute as recited in Article 28.

      12.5  Overdue Payment. In the event any payment due hereunder is not made
            when due, the payment shall accrue interest (beginning on the date
            such payment is due) calculated at the rate of one (1%) percent per
            month and such payment when made shall be accompanied by all
            interest so accrued.

      12.6  Record of Sales. Notwithstanding anything herein to the contrary,
            VIVUS shall keep, or cause to be kept, records of the sales of the
            PRODUCT under this Agreement for a period of seven (7) years after
            the expiration of each CALENDAR YEAR. Upon the request by TANABE,
            VIVUS shall supply TANABE with such records which may be submitted
            to the tax authority, and shall give TANABE any reasonable
            assistance in relation thereto.

      12.7  Taxes. TANABE shall pay any and all taxes levied on account of down
            payment, milestone payments and supply price payments it receives
            under this Agreement. If laws or regulations require that taxes be
            withheld, VIVUS will (i) deduct those taxes from the otherwise
            remittable payments, (ii) timely pay the taxes to the proper taxing
            authority, and (iii) give TANABE any reasonable assistance, which
            shall include the provision of such documentation as may be required
            by the tax authority to enable TANABE to claim exemption from or
            obtain a repayment of or reduction of tax.

13.   Inventory.

            VIVUS shall maintain commercially reasonable quantities of the BULK
            DRUG SUBSTANCE and the PRODUCT. Such inventories shall be
            commercially reasonably sufficient to meet the market requirements.

14.   Maintenance and Abandonment of Patent.

            Each Party shall use its reasonable efforts to prosecute and
            maintain its respective patents worldwide (the TANABE PATENTS with
            respect to TANABE and the VIVUS PATENTS with respect to VIVUS);
            provided TANABE shall reimburse VIVUS' patent costs for prosecuting
            and maintaining the VIVUS PATENTS outside the TERRITORY, such
            reimbursement creditable against any payments due by TANABE under
            any license obtained pursuant to Section 2.5(b). TANABE shall
            promptly give notice to VIVUS of the grant, lapse, revocation,
            surrender, invalidation or abandonment of any TANABE PATENT. VIVUS
            shall promptly give notice to TANABE of the grant, lapse,
            revocation, surrender, invalidation or abandonment of any VIVUS
            PATENT. In the event that applicable law in any country of TERRITORY
            provides for the

                                      -22-
<PAGE>   23

            extension of the term of any TANABE PATENT which TANABE is
            prosecuting or maintaining, TANABE shall apply for and use its
            reasonable efforts to obtain such an extension and VIVUS agrees to
            cooperate with TANABE in obtaining such extension. In the event that
            applicable law in any country of TERRITORY provides for the
            extension of the term of any VIVUS PATENT which VIVUS is prosecuting
            or maintaining, VIVUS shall apply for and use its reasonable efforts
            to obtain such an extension and TANABE agrees to cooperate with
            VIVUS in obtaining such extension.

15.   Infringement

      15.1  THIRD PARTY Infringement. If VIVUS or TANABE becomes aware of any
            activity that it believes represents a substantial infringement of
            the TANABE PATENT, the Party obtaining such knowledge shall promptly
            advise the other of all relevant facts and circumstances pertaining
            to the potential infringement. VIVUS and TANABE shall thereafter
            consult and cooperate fully to determine a course of action,
            including but not limited to, the commencement of legal action to
            terminate any infringement of the TANABE PATENT. However, TANABE
            shall have the first right to initiate and prosecute such legal
            proceedings, at its own expense and in the name of TANABE, and to
            control the defense of any declaratory judgment action relating to
            the TANABE PATENT. VIVUS shall cooperate with TANABE in such effort,
            including being joined as a party to such action if necessary.

      15.2  VIVUS Right to Pursue THIRD PARTY Infringers. If TANABE does not
            proceed, within sixty (60) days after receiving notice from VIVUS of
            a potential infringement of TANABE PATENT or within sixty (60) days
            after providing VIVUS with notice of such infringement, either (i)
            in terminating such infringement or (ii) in instituting an action to
            prevent continuation thereof, or if TANABE notifies VIVUS that it
            does not plan to terminate the infringement of TANABE PATENT or to
            institute any such action, then VIVUS shall have the right to do so.
            TANABE shall cooperate with VIVUS in such effort, including being
            joined as a party to such action if necessary.

      15.3  Updating. Each Party shall keep informed of development in any
            action or proceeding relating to the TANABE PATENT or VIVUS PATENT
            including, to the extent permissible by law, the state of any
            settlement negotiations and the terms of any offer related thereto.

      15.4  Damage Award or Settlement Payments. Any damage award or settlement
            payments made in connection with any action relating to infringement
            of TANABE PATENT in the TERRITORY, whether obtained by judgment,
            settlement or otherwise shall belong to the Party which instituted
            the action in accordance with this Article 15; provided, where such
            lawsuit or action was initiated by TANABE and VIVUS has joined and
            actively participated thereto, any recovery from such lawsuit shall
            be used to: (i) first reimburse TANABE for

                                      -23-
<PAGE>   24

            expenses actually incurred by TANABE in connection with such lawsuit
            (including attorneys fees and professionals fees), (ii) then to
            reimburse VIVUS for expenses actually incurred by VIVUS in
            connection with such lawsuit (including attorneys fees and
            professionals fees), and (iii) then the remainder, if any, shall be
            allocated between TANABE and VIVUS on a (***) basis respectively.

      15.5  Defense of THIRD PARTY Claims.

            (a)   If a THIRD PARTY asserts that a patent or other right owned by
                  it is infringed by the development, manufacture, use or sale
                  of any PRODUCT, VIVUS shall be solely responsible for
                  defending against, or at is option settling, any such
                  assertions at its cost and expense (so long as VIVUS has the
                  right to sell such PRODUCT hereunder), excluding any claims
                  subject to TANABE's defense obligations under the following
                  Section 15.5(b).

            (b)   If a THIRD PARTY asserts that a patent or other right owned by
                  it is infringed by (i) the manufacture of any BULK DRUG
                  SUBSTANCE or BULK DRUG TABLETS by or on behalf of TANABE, or
                  (ii) the sale of any PRODUCT sold or transferred by or on
                  behalf of TANABE outside the TERRITORY, TANABE shall be solely
                  responsible for defending against, or at is option settling,
                  any such assertions at its cost and expense, excluding any
                  claims subject to VIVUS' defense obligations under the
                  foregoing Section 15.5(a).

            (c)   With respect to any claim of infringement alleged under this
                  Section, the Parties shall meet and discuss the appropriate
                  action to take to address such claim, including without
                  limitation, (i) replacing or modifying the allegedly
                  infringing PRODUCT, BULK DRUG SUBSTANCE OR COMPOUND or parts
                  thereof, with other suitable and reasonably equivalent
                  technology or parts so that they become non-infringing (ii)
                  defending such action, or (iii) settling such action,
                  including obtaining a license from a THIRD PARTY to
                  manufacture, use or sell, as appropriate, such PRODUCT, BULK
                  DRUG SUBSTANCE, or COMPOUND.

16.   Warranties and Indemnification.

      16.1  Warranties of Each Party. Each Party hereto represents to the other
            that it has the right to enter into this Agreement and to carry out
            all of the provisions hereof.

      16.2  Encumbrances. TANABE expressly warrants and represents that it has
            no outstanding encumbrances or agreements, either written, oral, or
            implied, in connection herewith, and that it has not granted and
            will not grant during the term of this Agreement or any renewal
            hereof, any rights, license, consent or privilege that conflict with
            the rights granted herein. TANABE further represents and warrants,
            to the best of its knowledge as of the EFFECTIVE DATE, that (i) the
            TANABE PATENTS, TANABE KNOW-HOW and

                                      -24-
<PAGE>   25

            INFORMATION are not currently being infringed by a THIRD PARTY, and
            (ii) that other than (***) and (***) and any corresponding patent
            application claiming priority thereto (excluding any new matter
            contained within such corresponding patent application), under which
            the patent owners may allege infringement, the development,
            manufacture, use and/or sale of the BULK DRUG SUBSTANCE, BULK DRUG
            TABLETS, COMPOUND and/or PRODUCT do not infringe any property rights
            of any THIRD PARTY.

      16.3  Authorization. Each Party hereby warrants that the execution,
            delivery and performance of this Agreement has been duly approved
            and authorized by all necessary corporate or partnership actions of
            itself; does not require any shareholder or partnership approval
            which has not been obtained or the approval and consent of any
            trustee or the holders of any indebtedness of itself; does not
            contravene any law, regulation, rules or order binding on itself,
            and does not contravene the provisions of or constitute a default
            under any indenture, mortgage, contract or other agreement or
            instrument to which it is a signatory.

      16.4  No Liability for Consequential Damages and Limitation of Liability.
            Neither Party shall be liable to the other for incidental or
            consequential damages arising out of or related to the subject
            matter of this Agreement.

      16.5  Indemnification.

            (a)   Subject to compliance by TANABE or its AFFILIATES with its
                  obligations set forth in Section 16.6, VIVUS shall defend,
                  indemnify, and hold harmless TANABE, its AFFILIATES and their
                  respective directors, officers, employees and agents (each a
                  "TANABE Indemnitee"), from and against any and all THIRD PARTY
                  claims, demands, losses, liabilities, expenses, and damages
                  including reasonable attorneys' fees (collectively, the
                  "Liabilities") which such TANABE Indemnitee may suffer, pay,
                  or incur to the extent resulting from (i) any breach of a
                  representation, warranty, covenant or obligation of VIVUS
                  under this Agreement, (ii) any negligent or more culpable act
                  of VIVUS under this Agreement, or (iii) any and all personal
                  injury (including death) and property damage to the extent
                  caused by development, manufacture, use or marketing of BULK
                  DRUG TABLETS, BULK DRUG SUBSTANCE, COMPOUND, and/or PRODUCT by
                  VIVUS, its AFFILIATES or their SUBLICENSEES, excluding,
                  however, any Liabilities subject to TANABE's indemnification
                  obligation under the following Section 16.5(b). VIVUS'
                  obligations under this Section 16.5(a) shall survive the
                  expiration or termination of this Agreement for any reason.

            (b)   Subject to compliance by VIVUS with its obligations set forth
                  in Section 16.6, TANABE shall defend, indemnify and hold
                  harmless VIVUS, its AFFILIATES and their SUBLICENSEES and
                  their respective directors, officers, employees and agents
                  (each a "VIVUS Indemnitee"), from and

                                      -25-
<PAGE>   26

                  against any and all Liabilities which such VIVUS Indemnitee
                  may suffer, pay or incur to the extent resulting from (i) any
                  breach of a representation, warranty, covenant or obligation
                  of TANABE under this Agreement, (ii) any negligent or more
                  culpable act of TANABE under this Agreement, or (iii) any and
                  all personal injury (including death) and property damage to
                  the extent caused by development, manufacture, use or
                  marketing of BULK DRUG TABLETS, BULK DRUG SUBSTANCE, COMPOUND
                  and/or PRODUCT by TANABE, its AFFILIATES or their
                  SUBLICENSEES, excluding, however, any Liabilities subject to
                  VIVUS' indemnification obligation under Section 16.5(a) above.
                  TANABE's obligations under this Section 16.5(b) shall survive
                  expiration or termination of this Agreement for any reason.

      16.6  Indemnification Procedures. In the event a Party intends to claim
            indemnification under Section 16.5 for itself or its indemnitee (the
            "Indemnitee"), such Party shall promptly notify the other Party (the
            "Indemnitor") in writing of any matter in respect of which the
            Indemnitee intends to claim such indemnification. The Indemnitee
            shall permit the Indemnitor, at its discretion, to settle any such
            matter and agrees to the complete control of such defense or
            settlement by the Indemnitor; provided, however, that such
            settlement does not adversely (i) affect the Indemnitee's rights
            under this Agreement or (ii) impose any material obligations on the
            Indemnitee in addition to those set forth herein in order for
            Indemnitee to exercise rights under this Agreement. No settlement of
            any such matter which materially and adversely affect the
            Indemnitee's rights under this Agreement or impose any material
            obligations on the Indemnitee in addition to those set forth herein
            in order for Indemnitee to exercise rights under this Agreement may
            be made by the Indemnitor without the prior written consent of the
            Indemnitee. The Indemnitee shall not be responsible for any legal
            fees or other costs incurred other than as provided herein. The
            Indemnitee and its directors, officers and employees shall cooperate
            fully with the Indemnitor and its legal representatives in the
            investigation and defense of any matter covered by the applicable
            indemnification. The Indemnitee shall have the right, but not the
            obligation, to be represented by counsel of its own selection and at
            its own expenses in connection with any matter that is subject to
            indemnification. It is understood that only a Party may claim
            indemnity under this Section 16 (on its own behalf or on behalf of
            its Indemnitee), and other TANABE Indemnitees and VIVUS Indemnitees
            may not directly claim indemnity hereunder.

17.   TRADEMARK.

            VIVUS shall be responsible for the selection and registration of all
            TRADEMARKS which it employs in connection with PRODUCT in the
            TERRITORY. VIVUS shall obtain a written consent of TANABE prior to
            the registration of TRADEMARK, which consent shall not be
            unreasonably withheld or delayed. TANABE shall have the right to
            register and use the same

                                      -26-
<PAGE>   27

            TRADEMARK exclusively and free of charge in connection with the
            marketing of the ORAL PRODUCT outside the TERRITORY; provided, such
            TRADEMARK shall be used by TANABE solely with the ORAL PRODUCT and
            not with any other product. It is understood and agreed that
            additional marks may be used with the PRODUCTS, including without
            limitation the VIVUS mark, and that such additional marks shall not
            be subject to the assignment provisions of Sections 21.1 or 21.2.

18.   Confidentiality and Publication.

      18.1  Confidentiality. Each Party hereto shall treat all the information
            received from the other Party in connection with this Agreement
            (including the information disclosed before the execution of this
            Agreement) as confidential, not to be disclosed to any other person,
            company or firm and not to be used for any other purpose than for
            the purpose of this Agreement either before or after the expiration
            or termination of this Agreement except the following information:

            (a)   information which at the time of the disclosure is part of the
                  public knowledge;

            (b)   information which, after the disclosure, becomes part of the
                  public knowledge by publication or otherwise, except through
                  acts or omissions of the receiving Party;

            (d)   information which the receiving Party can establish by
                  competent proof was in the receiving Party's possession at the
                  time of the disclosing Party's disclosure;

            (e)   information which was otherwise developed independently by the
                  receiving Party, as demonstrated by written records kept in
                  the ordinary course of business; and

            (e)   information which the receiving Party lawfully receives from a
                  THIRD PARTY; provided, however, that such information was not
                  obtained by said THIRD PARTY directly or indirectly from
                  disclosing Party under a confidential obligation.

            Notwithstanding the foregoing, each Party, may disclose confidential
            INFORMATION to the governmental or other regulatory authorities to
            the extent that such disclosure (i) is necessary for the filing,
            prosecution and enforcement of patents, or authorizations to conduct
            preclinical studies, CLINICAL STUDIES or POST REGISTRATION STUDIES
            to commercially market PRODUCT, provided such Party is then
            otherwise entitled to engage in such activities in accordance with
            the provisions of this Agreement, or (ii) is legally required.

      18.2  Publication. Each Party shall submit to the other Party any proposed
            scientific

                                      -27-
<PAGE>   28

            publication containing confidential INFORMATION of the other Party
            at least thirty (30) days in advance of submission thereof for the
            public disclosure to allow that Party to review such proposed
            disclosure. The reviewing Party shall promptly review such proposed
            scientific publication and make any objections that it may have to
            the publication of the confidential INFORMATION contained therein.
            Should the reviewing Party make an objection to the publication of
            the confidential INFORMATION, then the Parties will discuss the
            merits of publishing; provided, however, that in any case, no
            publication of confidential INFORMATION shall take place under this
            Section 18.2 without the disclosing Party's prior written approval
            thereof or unless the obligations of confidentiality as to such
            confidential INFORMATION shall be waived pursuant to Section 18.1 or
            disclosure of confidential INFORMATION is authorized under Section
            18.1. Parties agree that review of scientific abstracts will take
            place on an expedited basis, with the reviewing Party having seven
            (7) business days to submit comments and make objections.

      18.3  Publicity. Each Party agrees that the other Party may issue a press
            release concerning the entering into of this Agreement, with the
            content of such releases to be approved by the non-issuing Party
            (which consent shall not be unreasonably withheld or delayed). In
            all other respects, except as required by law, neither Party shall
            publicly use the name of the other Party or any logos or symbols
            associated with the other Party without the prior written approval
            of such other Party. Except as provided above, such as wherein VIVUS
            is permitted to use TANABE's name and logo in connection with the
            PRODUCT neither Party shall publicly disclose the terms of this
            Agreement or issue any publicity release with regard thereto unless
            expressly authorized to do so by the other Party. Once a particular
            disclosure has been approved for disclosure, either Party may make
            disclosures which do not differ materially therefrom without any
            need for further consents.

19.   Reports on ADVERSE DRUG REACTION

            Within one-hundred and eighty (180) days after the EFFECTIVE DATE,
            the STEERING COMMITTEE shall meet and prepare a plan for sharing and
            submitting INFORMATION and filing reports to various governmental
            agencies on PRODUCT under CLINICAL STUDIES and marketed PRODUCT,
            including without limitation safety related information and ADVERSE
            DRUG REACTION information.

20.   Term and Termination

      20.1  Term. On a country-by-country and on a PRODUCT-by-PRODUCT basis, the
            term of this Agreement shall continue until the later of (i) ten
            years after the DATE OF FIRST SALE for a particular PRODUCT, or (ii)
            expiration of the last to expire patents within the TANABE PATENTS
            covering such PRODUCT in such country.

                                      -28-
<PAGE>   29

      20.2  Termination due to Breach. Without prejudice to any remedy or claims
            it may have against the other Party for material breach of this
            Agreement, either Party shall be entitled to terminate this
            Agreement by giving the other Party at least thirty (30) days' prior
            notice in writing if the other Party should materially breach any of
            the provisions or conditions of this Agreement and if after having
            been given a written warning the other Party should fail to
            discontinue or should fail to make good such material breach within
            ninety (90) days after receipt of the warning.

      20.3  Termination due to Insolvency or Bankruptcy. In the event of
            insolvency or bankruptcy of either Party or appointment of a trustee
            or receiver for either Party, it shall immediately notify the other
            Party to that effect. In any such event, the Party so notified shall
            have the right to terminate this Agreement at any time.

      20.4  Permissive Termination. In the event that a PRODUCT is deemed to be
            (i) insufficiently effective or insufficiently safe relative to
            other PDE5 INHIBITOR compounds based on published information, or
            (ii) not economically feasible to develop due to unforeseen
            regulatory hurdles or costs as measured by standards common in the
            pharmaceutical industry for this type of product, VIVUS shall have
            the right to terminate this Agreement with respect to such PRODUCT.

21.   Rights and Duties on Expiration and Termination

      21.1  Rights and Duties on Expiration. Following Sections shall apply to
            the case of expiration of this Agreement, pursuant to Section 20.1:

            (a)   VIVUS agrees to transfer to TANABE, free of charge, its
                  ownership of the TRADEMARK as VIVUS used for the ORAL PRODUCT,
                  provided, however, that the Parties shall, upon request of
                  VIVUS, execute a simple TRADEMARK license agreement under
                  which VIVUS continues to use on an exclusive basis said
                  TRADEMARK for the ORAL PRODUCT in the TERRITORY as long as
                  VIVUS continues the marketing of the ORAL PRODUCT in the
                  TERRITORY. Under such TRADEMARK license agreement, VIVUS shall
                  pay to TANABE a royalty equal to two percent (2%) of the NET
                  SALES of the ORAL PRODUCT marketed with such TRADEMARK for the
                  first three (3) years following expiration of this Agreement,
                  and a royalty equal to one percent (1%) of the NET SALES of
                  the ORAL PRODUCT marketed with such TRADEMARK for two
                  additional years thereafter. Thereafter, VIVUS shall be free
                  to use such TRADEMARK in conjunction with the marketing and
                  sale of ORAL PRODUCTS free of charge.

            (b)   Upon expiration of this Agreement in a particular country,
                  VIVUS shall have a perpetual, irrevocable, fully paid-up
                  license to practice the TANABE KNOW-HOW in such country.

                                      -29-
<PAGE>   30

      21.2  Rights and Duties on Termination. Following Sections shall apply to
            the case of termination of this Agreement pursuant to Sections 20.2
            and 20.3 due to VIVUS' breach or insolvency or to the case of
            termination of this Agreement with respect to a particular PRODUCT
            pursuant to Section 20.4 (except, the following Sections shall only
            apply, as applicable, with respect to such particular PRODUCT and
            not with respect to any other PRODUCT):

            (a)   VIVUS agrees to transfer to TANABE, free of charge, its
                  ownership of the TRADEMARK as VIVUS used for the PRODUCT, and
                  VIVUS shall immediately stop using such TRADEMARK. Thereafter,
                  VIVUS shall not use any trademark which is similar to or
                  confusing with the TRADEMARK.

            (b)   VIVUS shall, upon TANABE's request, if applicable, provide to
                  TANABE or its nominee, free of charge, all the DRUG APPROVAL
                  APPLICATION and REGULATORY APPROVAL for the PRODUCTS (in the
                  event VIVUS has not applied for DRUG APPROVAL APPLICATION or
                  REGULATORY APPROVAL for a particular PRODUCT in a particular
                  country, VIVUS shall provide to TANABE all the INFORMATION
                  VIVUS reasonably would have included in such application or
                  approval). TANABE shall only use the VIVUS INFORMATION
                  contained with such DRUG APPROVAL APPLICATION or REGULATORY
                  APPROVAL for applying for and obtaining regulatory approval
                  for the PRODUCTS, and not for any other use.

            (c)   TANABE or its nominee(s) shall have the optional rights to
                  take over all or any part of the remaining stocks of the BULK
                  DRUG SUBSTANCE and the PRODUCT in the warehouses and factories
                  of VIVUS at such prices as may be agreed between the Parties.
                  VIVUS shall not thereafter market or manufacture any PRODUCT
                  covered by this Agreement. In case TANABE or its nominee(s) do
                  not exercise the optional rights to take over the stocks of
                  the BULK DRUG SUBSTANCE and the PRODUCT pursuant to this
                  Section 21.2(c), VIVUS shall have the right to sell the
                  residual salable or usable stocks of the PRODUCT for the term
                  of six (6) months after the termination of this Agreement,
                  provided that the payment defined in this Agreement for such
                  remaining stocks shall be made accordingly.

      21.3  Rights and Duties on Expiration and Termination. The following
            Sections shall apply to the case of expiration under Section 20.1
            and termination under Sections 20.2, 20.3, and 20.4 of this
            Agreement:

            (a)   Neither Party shall be entitled to claim from the other Party
                  any sum in respect of compensation whether for loss of profits
                  or otherwise for the cessation of the benefits of this
                  Agreement, and either Party expressly waives all rights (if
                  any) which it may have to any such compensation.

                                      -30-
<PAGE>   31

            (b)   Termination of this Agreement for any reason shall not release
                  any Party hereto from any liability which, at the time of such
                  termination, has already accrued to the other Party or which
                  is attributable to a period prior to such termination nor
                  preclude either Party from pursuing any rights and remedies it
                  may have hereunder or at law or in equity with respect to any
                  breach of, or default under, this Agreement. It is understood
                  and agreed that monetary damages may not be a sufficient
                  remedy for any breach of this Agreement and that the
                  non-breaching Party may be entitled to injunctive relief as a
                  remedy for any such breach..

            (c)   Except as required to exercise their respective surviving
                  rights as set forth in Sections 20.4 or 21.3(d), each Party
                  shall surrender to other Party all written INFORMATION of the
                  other Party, except those which have to be retained by such
                  Party according to the laws or regulations, and shall not
                  thereafter use or disclose any confidential INFORMATION of the
                  other Party.

            (d)   Sections 2.5, 12.1, 12.4, 12.5, 12.6, 16.5, and 20.1, and
                  Articles 1, 18, 19, 21, 24, 26, 27, 28, 29, 30, 31, 32 and 33
                  and such provisions hereof as are required for the
                  interpretation or enforcement of those Articles and Sections,
                  shall survive and remain valid thereafter. Except as provided
                  in this Section 21.3 (d) all other provisions of this
                  Agreement shall terminate upon the expiration or termination
                  of this Agreement.

22.   TANABE Change in Control.

            In the event TANABE Change in Control occurs during the term of this
            Agreement, VIVUS shall have the right, exercisable upon written
            notice to TANABE delivered at any time within sixty (60) days after
            the effective date of such TANABE Change in Control, to eliminate
            from this Agreement, TANABE's right to co-promote the PRODUCT in the
            TERRITORY as provided in Section 2.4. For purposes of this
            Agreement, "TANABE Change in Control" shall mean any transaction or
            series of related transactions by which a THIRD PARTY pharmaceutical
            company acquires or becomes the beneficial owner of (i) fifty
            percent (50%) or more of the outstanding voting securities of TANABE
            or the surviving entity, whether by merger, consolidation,
            reorganization, tender offer or other similar means, or (ii) all or
            substantially all of the assets of TANABE.

23.   VIVUS Change in Control

            In the event VIVUS Change in Control occurs during the term of this
            Agreement and the policy, strategy or priority of VIVUS relating to
            the DEVELOPMENT WORK or the marketing of the PRODUCT has been or is
            reasonably expected to materially fail to meet its obligations as
            provided in Article 5 and 6, TANABE shall have the right,
            exercisable upon written notice to VIVUS delivered at any time
            within four (4) months after the effective date of such VIVUS Change
            in Control, to terminate this Agreement. For purposes of this
            Agreement, "VIVUS

                                      -31-
<PAGE>   32

            Change in Control" shall mean any transaction or series of related
            transactions by which a THIRD PARTY pharmaceutical company acquires
            or becomes the beneficial owner of (i) fifty percent (50%) or more
            of the outstanding voting securities of VIVUS or the surviving
            entity, whether by merger, consolidation, reorganization, tender
            offer or other similar means, or (ii) all or substantially all of
            the assets of VIVUS.

24.   Assignment and Transfer

      24.1  Either Party may, at its sole discretion, but with reasonable prior
            notice to the other Party, designate and cause its AFFILIATE to
            perform all or part of its obligations under this Agreement or to
            have the benefit of all or part of its rights under this Agreement.
            In any such event, the name "TANABE" or "VIVUS" appearing herein
            shall be deemed to be the name of such AFFILIATE to the extent
            necessary to carry out the intent of this Section 24.1, and the
            performance of the obligations of such AFFILIATE shall be deemed
            guaranteed by the Party which has made such designation. In addition
            to the foregoing, either Party may assign this Agreement, without
            the consent of the other Party to a party that acquires all or
            substantially all of its business or assets, whether by merger,
            acquisition, sale or otherwise.

      24.2  This Agreement shall be binding upon and inure to the benefit of
            TANABE and VIVUS and their successors or assignees, provided that
            any such successor or assignee shall have acquired all or
            substantially all of the stock or assets of the predecessor by
            merger, purchase, or otherwise. Otherwise, the rights and
            obligations set forth in this Agreement shall be not assignable
            (except to the limited extent provided in the foregoing Section
            24.1) without the prior consent in writing of the other Party
            hereto, such consent not to be unreasonably withheld.

            Any acquiring entity shall provide to the non-assigning party, a
            written commitment that it will use the same efforts, commensurate
            with the assigning party's efforts, to fully perform under this
            Agreement, including without limitation, to adhere to the current
            DEVELOPMENT PLAN (timing, budget and milestones) then in effect.

25.   Force Majeure.

            Neither Party shall be responsible for a failure or delay in
            performance of any of its obligations hereunder due to force majeure
            such as war, insurrection, strikes, acts of God, governmental
            action, or any other contingency beyond its control. However, the
            Party which is affected by any force majeure shall contact the other
            Party for discussion of possible emergency measures.

26.   Notice.

            Any and all notices required to be given under this Agreement shall
            be made by registered airmail and shall be addressed to the Parties
            at their respective offices

                                      -32-
<PAGE>   33

            first above referred to, except that either Party may change such
            office by notice in accordance with this Article 26.

27.   Governing Law.

            This Agreement and any dispute, including without limitation any
            arbitration, arising from performance or breach hereof shall be
            governed by and construed and enforced in accordance with the
            following: (i) if a dispute is filed in court or in arbitration by
            VIVUS, the laws of Japan shall govern such dispute, and (ii) if a
            dispute is filed in court or in arbitration by TANABE, the laws of
            the state of California shall govern such dispute, in each case
            without reference to conflicts of law principles.

28.   Arbitration.

            All disputes, controversies, or differences which may arise between
            the Parties, out of or in relation to or in connection with this
            Agreement or the breach thereof, shall be finally settled by
            arbitration pursuant to the then obtaining Rule of Arbitration of
            the International Chamber of Commerce, by which each Party hereto
            agrees to be bound. Such arbitration shall be held in Osaka, Japan,
            if initiated by VIVUS, and in Palo Alto, California if initiated by
            TANABE. The Parties shall, however, attempt in good faith to
            amicably settle the disputes, controversies or differences by
            negotiations before having recourse to the arbitration procedure. It
            is understood and agreed that the filing by a Party of an action
            that is subject to this Section, whether in court or in arbitration,
            shall constitute an "initiation" of arbitration. Each Party agrees
            that any such action filed in court shall be stayed pending the
            outcome of the related arbitration.

            Notwithstanding the then obtaining Rule of Arbitration of the
            International Chamber of Commerce, any arbitration shall be
            conducted by a panel of three arbitrators (the "Panel"). Each Party
            shall have the right to appoint one (1) member to the Panel, with
            the third member of the Panel to be mutually agreed to by the two
            Panel members appointed by the Parties. All Panel members shall be
            selected from a pool of independent arbitrators. Each Party shall
            make its appointment within thirty (30) days of receipt of a written
            request by a Party to initiate arbitration, and the third Panel
            member shall be selected by the two Panel members with thirty (30)
            days of the selection of the first two Panel members. All
            arbitration proceedings, including without limitation the filing of
            any documents, papers, and/or motions relating thereto, shall be
            made in the English language. In the event of any dispute concerning
            the construction or meaning of such documents, papers and/or
            motions, reference shall be made only to such documents, papers
            and/or motions as written in English and not to any translation into
            any other language.

29.   Authentic Text.

            This Agreement is entered into in the English language. In the event
            of any dispute concerning the construction or meaning of this
            Agreement, reference

                                      -33-
<PAGE>   34

            shall be made only to this Agreement as written in English and not
            to any translation into any other language.

30.   Interpretation.

            Unless expressly set forth, the use of the singular form of terms
            herein shall include the plural and the use of the plural form of
            terms herein shall include the singular. Headings are for reference
            only and shall not be used to interpret this Agreement.

31.   No Waiver.

            The failure of either Party to enforce any provision of this
            Agreement at any time shall not be construed as a present or future
            waiver of such or any other provision of this Agreement. The express
            waiver by either Party of any provision or requirement hereunder
            shall neither be deemed nor operate as a future waiver of such or
            any other provision or requirement.

32.   Entire Agreement.

            This Agreement represents the entire agreement and understanding, as
            of the EFFECTIVE DATE, between the Parties with respect to the
            subject matter hereof and shall supersede all prior agreements,
            negotiations, understanding, representations, statements, and
            writings between the Parties relating thereto. No modification,
            alteration, waiver or change in any term or provision of this
            Agreement shall be valid or binding upon the Parties unless made in
            writing and duly executed by each of the Parties.

33.   Severability.

            Any provision of this Agreement which is invalid or unenforceable
            shall be invalid or unenforceable only to the extent of such
            invalidity or unenforceability, and the validity or enforceability
            of any other provision of this Agreement shall not be affected. The
            Parties shall replace such invalidated or unenforceable provision by
            valid and enforceable provision which will achieve, to the extent
            possible, the economic, business and other purposes of the replaced
            provision.

34.   Injunctive Relief.

            Each Party acknowledges and agrees that without resorting to prior
            mediation or arbitration, either Party, in addition to any other
            remedies that may be available in law, in equity or otherwise, shall
            be entitled to seek temporary and permanent injunctive relief in
            order to enforce its rights under this Agreement, without the
            necessity of proving actual damages or the posting of any bond.

IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
by their respective officers as of the EFFECTIVE DATE.

                                      -34-
<PAGE>   35

TANABE SEIYAKU CO., LTD.                  VIVUS, INC.

  /s/  Toshio Tanaka                        /s/  Leland F. Wilson
--------------------------------------    -------------------------------------
By:    Toshio Tanaka                      By:    Leland F. Wilson
Title: President and Chief                Title: President and Chief Executive
       Executive Officer                         Officer
       Representative Director
Date:  January 21, 2001                   Date:  January 21, 2001

Attachment:
Appendix-A = List of the TANABE PATENT which covers the COMPOUND as of the
             EFFECTIVE DATE
Appendix-B = DEVELOPMENT PLAN
Appendix-C = STEERING COMMITTEE Guidelines
Appendix-D = Manufacture of the BULK DRUG SUBSTANCE
Appendix-E = Draft SPECIFICATIONS

                                      -35-
<PAGE>   36

                                   APPENDIX-A

                            LIST OF THE TANABE PATENT
               WHICH COVERS THE COMPOUND AS OF THE EFFECTIVE DATE

                                      (***)

                                      -36-
<PAGE>   37

                                   APPENDIX-B

                                DEVELOPMENT PLAN
                              [TO BE ATTACHED HERE]

                                      -37-
<PAGE>   38

                                   APPENDIX-C
                          STEERING COMMITTEE GUIDELINES

STEERING COMMITTEE shall be responsible for managing all aspects of the
relationship between the Parties to the extent not set forth in this Agreement,
including but not limited to: (i) reviewing study protocols and making decisions
on any proposed changes to the agreed DEVELOPMENT PLAN; (ii) monitoring and
assisting progress of DEVELOPMENT WORK according to the agreed DEVELOPMENT PLAN;
(iii) assessing the results of the CLINICAL STUDIES and non-clinical studies,
(iv) discussing and resolving any drug supply and regulatory issue and (v)
monitoring and supervising marketing, publications and publicity strategies and
plans, in the TERRITORY. The STEERING COMMITTEE may adopt and revise policies
under which VIVUS shall manage the agreed DEVELOPMENT PLAN.

1.    Composition.

Within one (1) month of the EFFECTIVE DATE, each Party shall, by notice
hereunder to the other, appoint one (1) chief representative and one (1) project
manager to serve on the STEERING COMMITTEE to the extent it has not already done
so. Each chief representative shall represent each Party and be responsible for
performing the objectives of the STEERING COMMITTEE. Each project manager shall
maintain regular communications between the Parties, serving as each Party's
liaison and shall be responsible for organizing a development sub-committee and
a marketing sub-committee (collectively, "Sub-Committees"). Subject to the
requirements of the preceding sentence, at any time during the term of this
Agreement, either Party may, by notice hereunder to the other, change or replace
any of its chief representative or project manager on the STEERING COMMITTEE as
it sees fit. Each Party's Sub-Committees shall have that Party's scientific,
technical and regulatory expertise relating to the DEVELOPMENT WORK, and
marketing and business development expertise relating to the PRODUCT. In
addition, the STEERING COMMITTEE may invite either Party's or outside non-voting
experts as the need arises.

2.    Meetings.

The STEERING COMMITTEE shall hold its first official meeting within one (1)
month of the EFFECTIVE DATE unless otherwise agreed by the Parties. At this
first (1st) meeting, the STEERING COMMITTEE shall decide the scheduling of
meetings. The STEERING COMMITTEE shall meet at least two (2) times per year, at
places and on dates selected by each Party in turn.

3.    Voting.

Each Party shall have one (1) vote on the STEERING COMMITTEE. Upon unanimous
vote (except as provided in Section 4 below) all decisions of the STEERING
COMMITTEE shall be binding on the Parties.

                                      -38-
<PAGE>   39

4.    Dispute Resolution.

Both TANABE and VIVUS are mutually responsible for ensuring the success of this
Agreement in accordance herewith. Therefore, TANABE and VIVUS hereby agree to
frankly discuss and attempt to resolve in good faith any conflicts which arise
in ways which will promote the continuing goodwill between the Parties. If the
members of the STEERING COMMITTEE cannot resolve any disagreement after good
faith attempts to resolve such disagreement in a commercially reasonable
fashion, then either of the Parties may refer the disagreement to a personal
face-to-face meeting between the head of Research and Development of TANABE (or
nearest equivalent) and the head of Research and Development of VIVUS (or
nearest equivalent). If such persons cannot resolve the disagreement within one
(1) month after such personal face-to-face meeting, then VIVUS will cast the
deciding vote taking due consideration of TANABE's opinion.

                                      -39-
<PAGE>   40

                                   APPENDIX-D
                          MANUFACTURE AND SUPPLY OF THE
                    BULK DRUG SUBSTANCE AND BULK DRUG TABLETS

1.    General Supply Terms.

      The following terms are applicable to both supplies for development and
      commercial use. It is understood and agreed that for this Appendix D, the
      use of the term BULK DRUG SUBSTANCE shall mean the BULK DRUG SUBSTANCE
      and/or BULK DRUG TABLETS, as applicable.:

      1.1   Order Forecast. At least eight (8) months prior to the beginning of
            each month, VIVUS shall provide to TANABE an order forecast for the
            supply during such month of the BULK DRUG SUBSTANCE.

      1.2   Firm Order. VIVUS shall place with TANABE a firm order at least
            one-hundred and twenty (120) days before the desired shipping date.
            Such firm order shall fall within the range from ninety percent
            (90%) to one hundred and twenty percent (120%) of such order
            forecast. TANABE shall accept all such orders.

      1.3   Form of Order. VIVUS' orders shall be made in writing and shall
            provide for shipment in accordance with reasonable delivery
            schedules. No terms contained in any firm order, order
            acknowledgment or similar standardized form shall be construed to
            amend or modify the terms of this Agreement and in event of a
            conflict, this Agreement shall control unless otherwise expressly
            agreed in writing.

      1.4   Delivery. TANABE agrees to ship quantities of the BULK DRUG
            SUBSTANCE ordered in accordance with Paragraph 1.2 on or about (but
            not later than seven (7) business days after the specified date) the
            dates specified in VIVUS' firm orders. The BULK DRUG SUBSTANCE shall
            be delivered to a carrier designated by VIVUS (FCA Place of
            Manufacture, Incoterms 2000). The packaging for shipment shall be
            sufficiently protective toward the BULK DRUG SUBSTANCE.

      1.5   Invoice. TANABE shall send a single invoice upon delivery of each
            lot of the BULK DRUG SUBSTANCE to VIVUS at the address to be
            specified by it in writing on its firm order.

      1.6   Duty. Any duty incurred, imposed or levied after the shipping point
            of the BULK DRUG SUBSTANCE shall be borne solely by VIVUS. TANABE
            shall use reasonable efforts to cooperate with VIVUS in eliminating
            all duties.

      1.7   Quality Control. In order to ensure the quality of the PRODUCTS,
            including maximizing the PRODUCT shelf life, the Parties shall meet
            and agree upon when BULK DRUG SUBSTANCE shall be delivered to VIVUS
            after their manufacture by TANABE.

                                      -40-
<PAGE>   41

      1.8   Acceptance or Rejection of the BULK DRUG SUBSTANCE

            (a)   VIVUS shall examine each lot of the BULK DRUG SUBSTANCE for
                  compliance with SPECIFICATIONS and any damage, defects or
                  shortage, not later than thirty (30) days of receipt thereof.
                  If VIVUS believes that any of such lot does not comply with
                  the SPECIFICATIONS or is defective or damaged, VIVUS shall
                  promptly, but not later than said thirty (30) days after
                  receipt of such lot, notify TANABE and, if appropriate, send a
                  sample of such lot to TANABE. Failure of VIVUS to reject a lot
                  of the BULK DRUG SUBSTANCE in the manner set forth above shall
                  constitute acceptance thereof.

            (b)   Any claim notified by VIVUS pursuant to preceding Paragraph
                  1.8(a) shall be accompanied by a report of analysis, including
                  an adequate sample of such lot of the BULK DRUG SUBSTANCE
                  analyzed, and shall be handled as hereafter set forth in this
                  Paragraph 1.8.

            (c)   Should VIVUS reject any lot of the BULK DRUG SUBSTANCE under
                  Paragraph 1.8(a) and TANABE agrees that such rejection is
                  justified, TANABE shall promptly reimburse VIVUS for the
                  supply price payment invoiced and paid for such lot of the
                  BULK DRUG SUBSTANCE or cancel the invoice (if not yet paid)
                  and replace the shipment or remedy the deficiency promptly.

            (d)   Should VIVUS reject any lot pursuant to Paragraph 1.8(a), and
                  TANABE and VIVUS, after good faith negotiation, fail to agree
                  that such rejection is justified, the Parties shall mutually
                  agree on an independent THIRD PARTY to evaluate all
                  documentation relating to such lot of the BULK DRUG SUBSTANCE,
                  which include but not limited to, certificate of analysis,
                  certificate of compliance and report of analysis, and other
                  relevant INFORMATION developed by either or both of the
                  Parties relating thereto to ascertain whether the rejection is
                  justified. If the THIRD PARTY determines that VIVUS' rejection
                  is justified, TANABE shall pay for the costs of the
                  independent THIRD PARTY's review, and the rejected BULK DRUG
                  SUBSTANCE shall be handled as described in preceding Paragraph
                  1.8(c). If the THIRD PARTY determines that VIVUS' rejection is
                  not justified, VIVUS shall pay for the costs of the
                  independent THIRD PARTY's review, and the rejected BULK DRUG
                  SUBSTANCE shall be accepted by VIVUS.

      1.9   Hidden Defect.

            If a defect is found in any lot of the BULK DRUG SUBSTANCE shipped
            by TANABE, which could not reasonably be expected to have been found
            by diligent and adequate inspection by VIVUS pursuant to its
            obligations under the Paragraph 1.8(a), such as stability, and if
            such defect is claimed to TANABE within six (6) months from the date
            of the receipt thereof, any such claim by VIVUS shall be

                                      -41-
<PAGE>   42

            handled pursuant to the Paragraphs 1.8(b), (c) and (d).

2.    Manufacture.

      2.1   SPECIFICATIONS. TANABE shall manufacture and package the BULK DRUG
            SUBSTANCE which conform to the SPECIFICATIONS. A draft of
            SPECIFICATIONS shall be attached to the Agreement as Appendix-E and
            may be modified from time to time by prior written agreement between
            TANABE and VIVUS.

      2.2   CGMP Manufacture. TANABE shall carry out all manufacturing,
            packaging and quality control operations in accordance with the
            current requirements of United States and European Good
            Manufacturing Practice (the "CGMP"). TANABE shall maintain an
            appropriate manufacturing authorization and thus maintain adequate
            premises, equipment, knowledge, and experienced and competent
            personnel to perform the work in compliance with the CGMP applicable
            to the particular country within the TERRITORY. TANABE shall refrain
            from any activity which adversely affects the quality of the BULK
            DRUG SUBSTANCE.

      2.3   Manufacturing Records. TANABE shall keep full and complete records
            of every production lot in accordance with generally accepted
            industry practices including, but not limited to, the lot production
            records for each lot supplied (hereinafter referred to as
            "Records").

      2.4   Audit. VIVUS may, at periodic intervals, audit the TANABE operation
            to ensure that the principles of CGMP continue to be followed.
            TANABE shall inform VIVUS from time to time and whenever requested
            by VIVUS, of the location of the Records, and shall permit VIVUS'
            representatives, for the purpose of quality audit, to have all
            reasonable access to the Records, TANABE's manufacturing,
            warehousing, packaging and laboratory areas, during normal business
            hours, to the extent VIVUS notifies TANABE in writing reasonably
            prior to the audit. Should VIVUS, after its audit, notify TANABE of
            any deficiencies, TANABE shall provide VIVUS with a response with
            proposed corrective actions within thirty (30) days of such notice
            and then promptly thereafter rectify any deficiencies noted during
            the course of audit by VIVUS, provided TANABE agrees with VIVUS'
            comments, which agreement shall not be unreasonably withheld or
            delayed. In addition, VIVUS shall have the right to audit TANABE's
            Records and documentation as it relates to the manufacture of the
            BULK DRUG SUBSTANCE, during normal business hours, to the extent
            such audit is needed to comply with CGMP and any applicable
            regulatory requirements.

      2.5.  THIRD PARTY Manufacture. TANABE may sub-contract any work relating
            to the manufacture of the BULK DRUG SUBSTANCE, provided, however,
            the manufacturing so sub-contracted shall be subject to the same
            terms and conditions as recited herein including but not limited to
            the right to audit the Records and inspect facilities. VIVUS shall
            have the right to approve such sub-contractor prior

                                      -42-
<PAGE>   43

            to the selection, in case such sub-contracting is related to the
            final stage of the manufacture of the BULK DRUG SUBSTANCE, which
            approval shall not be unreasonably withheld or delayed.

      2.6.  Regulatory Inspections. In case TANABE receives advance notice of
            any proposed inspection by regulatory agencies such as the FDA or
            EMEA of its facility involving the BULK DRUG SUBSTANCE, TANABE shall
            promptly notify VIVUS to that effect. In case the inspections
            conducted by such regulatory agencies involve the BULK DRUG
            SUBSTANCE, TANABE shall inform VIVUS of the summary of such results.
            At VIVUS' request, TANABE shall cooperate in the investigation of
            any query or complaint concerning the BULK DRUG SUBSTANCE, and
            TANABE agrees to permit VIVUS to review and comment upon any
            response to the inspection that TANABE shall submit prior to the
            response to the regulatory agencies. VIVUS' review and comment shall
            be made promptly upon the receipt of TANABE's informing the content
            of the response.

      2.7.  Testing. TANABE shall test or cause to be tested each lot of the
            BULK DRUG SUBSTANCE before delivery to VIVUS. Each test shall set
            forth the items tested, SPECIFICATIONS and test results in a
            certificate of analysis for each lot delivered to VIVUS under this
            Agreement. TANABE shall send such certificate of analysis together
            with a certificate of compliance along with the delivery of the BULK
            DRUG SUBSTANCE. TANABE warrants that such tests are conducted
            diligently, the level of which is no less strict than the standard
            used for other goods or products which are manufactured and sold by
            TANABE itself.

      2.8.  Packing and Marking. Each lot of the BULK DRUG SUBSTANCE shall be
            shipped in accordance with TANABE's standard operating procedure and
            in accordance with instructions and specifications provided by VIVUS
            and accepted by TANABE which acceptance shall not be unreasonably
            withheld or delayed. All shipments shall be accompanied by a packing
            slip which describes the articles, states the order number and shows
            the shipment destination. TANABE agrees to promptly forward the
            original bill of lading or other shipping receipt for each shipment
            of the BULK DRUG SUBSTANCE in accordance with VIVUS' instructions to
            the extent such instructions are reasonable.

      2.9.  Qualification/Validation. TANABE shall be responsible for ensuring
            that an appropriate qualification/validation data is generated for
            any changes in processes, test methods and SPECIFICATIONS. TANABE
            shall supply VIVUS with the proposed protocols for
            qualification/validation, in advance of work conducted, for VIVUS'
            approval which shall not be reasonably withheld or delayed. TANABE
            shall supply VIVUS with a copy of the qualification/validation
            report.

      2.10. Compliance with Laws. TANABE shall observe and comply with all laws,
            ordinances, codes and regulations of government agencies which are
            applicable to the place where the manufacture of the BULK DRUG
            SUBSTANCE is carried

                                      -43-
<PAGE>   44

            out. In no event, shall TANABE be forced to maintain its facility or
            manufacture the BULK DRUG SUBSTANCE in a manner which violates the
            applicable laws and regulations.

3.    Representation and Warranties

      3.1   Manufacturing Warranty. TANABE represents and warrants that the BULK
            DRUG SUBSTANCE manufactured by TANABE for VIVUS pursuant to the
            Agreement shall be manufactured in accordance with any applicable
            regulations pertaining to the CGMP.

      3.2   No Warranty by TANABE. Except for the express warranty set forth in
            Paragraph 3.1 or otherwise set forth in the Agreement, TANABE grants
            no other warranties, express or implied, by statute or otherwise,
            regarding the BULK DRUG SUBSTANCE including their merchantability
            and their fitness for any use, and VIVUS shall defend, indemnify and
            hold harmless TANABE, its AFFILIATE's and their respective
            directors, officers, employees and agents, from any THIRD PARTY
            loss, claim, action, damage, expense or liability, including defense
            costs and attorneys' fees arising out of or related to the handling,
            possession or use of the BULK DRUG SUBSTANCE by VIVUS.

                                      -44-
<PAGE>   45

                                   APPENDIX-E
                              DRAFT SPECIFICATIONS

TENTATIVE SPECIFICATION AND TESTING METHODS OF BULK DRUG SUBSTANCE

                                      (***)

TENTATIVE SPECIFICATION AND TESTING METHODS OF BULK DRUG TABLETS

                                      (***)

                                      -45-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00021-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00021-of-00352.parquet"}]]