Document:

Exhibit
10.1

 

SECURITIES
PURCHASE AGREEMENT

 

This SECURITIES PURCHASE
AGREEMENT (this “Agreement”), dated as of April 3, 2008, is by and
among VIVUS, Inc., a Delaware corporation (the “Company”), Deerfield
Private Design Fund L.P. (“DFPDF”), Deerfield Private Design
International, L.P. (collectively with DFPDF, the “Investors”) and
Deerfield Management Company, L.P. (“Deerfield”).

 

WITNESSETH

 

WHEREAS, the Company has
filed with the Securities and Exchange Commission (the “Commission”) the
Registration Statement (as defined below) relating to the offer and sale from
time to time of the Company’s securities, including shares of its Common Stock,
$0.001 value (“Common Stock”);

 

WHEREAS, the Company is
offering for sale shares of Common Stock (the “Offered Shares”) pursuant
to the Registration Statement; and

 

WHEREAS, the Investor
desires to purchase from the Company Offered Shares on the terms and conditions
set forth herein.

 

NOW, THEREFORE, in
consideration of the recitals (which are deemed to be a part of this
Agreement), mutual covenants, representations, warranties and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

 

1.                                       Definitions.  As used herein, the following
terms have the meanings indicated:

 

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

 

“Person” shall
mean any individual, partnership, limited liability company, joint venture,
firm, corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.

 

“Prospectus” shall
have the meaning set forth in Section 4(b)(6) hereof.

 

“Prospectus Supplement”
shall mean the prospectus supplement filed with the Commission pursuant to Rule 424(b) promulgated
under the Securities Act and deemed to be part of the Registration Statement at
the time of effectiveness.

 

“Registration
Statement” shall mean the registration statement on Form S-3 (File No. 333-135793),
including a prospectus, and including all amendments and supplements thereto
(including the Prospectus Supplement), relating to the offer and sale of
certain of the Company’s Common Stock, including the Investor Shares.  References herein to the term “Registration
Statement” as of any date shall mean such effective registration statement, as
amended or supplemented to such date, including all information and documents
incorporated by reference therein as of such date.

 

 

“Securities Act”
shall mean the Securities Act of 1933, as amended.

 

2.                                       Purchase of Common Stock.  Subject
and pursuant to the terms and conditions set forth in this Agreement, the
Company agrees that it will issue and sell to the Investor and the Investor
agrees that it will purchase from the Company the number of Offered Shares set
forth on Schedule I attached hereto (the “Investor Shares”).  The aggregate purchase price for the Investor
Shares (the “Aggregate Purchase Price”) and the purchase price per
Investor Share is set forth on Schedule I hereto.  The closing of the purchase and sale of the
Investor Shares will take place on or before the fifteenth (15th)
Business Day following the date of this Agreement, or such other date or time
as the parties may agree upon in writing (the “Closing”).

 

3.                                       Deliveries at Closing.

 

(a)          Deliveries by the
Investor.  At the Closing, each
Investor shall deliver to the Company the Aggregate Purchase Price by wire transfer
of immediately available funds to an account designated by the Company as set
forth on Schedule I hereto, which funds will be delivered to the
Company in consideration of the Investor Shares issued at the Closing.

 

(b)         Deliveries by the
Company.  At the Closing, the Company
shall deliver to each Investor the Investor Shares through The Depository Trust
Company DWAC system to the account that the Investor has specified in writing
to the Company.

 

4.                                       Representations, Warranties, Covenants and
Agreements.

 

(a)          Investor
Representations, Warranties and Covenants. 
Each Investor represents, warrants, covenants and agrees as follows:

 

(1)                                  Investor
has received and reviewed copies of the Registration Statement and the
Prospectus, including all documents and information incorporated by reference
therein and amendments thereto, and understands that no Person has been
authorized to give any information or to make any representations that were not
contained in the Registration Statement and the Prospectus, and Investor has
not relied on any such other information or representations in making a
decision to purchase the Investor Shares. 
Investor hereby consents to receiving delivery of the Registration
Statement and the Prospectus, including all documents and information
incorporated by reference therein and amendments thereto, by electronic
mail.  Investor understands that an
investment in the Company involves a high degree of risk for the reasons, among
others, set forth under the captions “RISK FACTORS” in the Prospectus.

 

(2)                                  Investor
acknowledges that it has sole responsibility for its own due diligence
investigation and its own investment decision, and that in connection with its
investigation of the accuracy of the information contained or incorporated by
reference in the Registration Statement and the Prospectus and its investment
decision, Investor has not relied on any representation or information, as the
case may be, not set forth in this Agreement, the Registration Statement or the
Prospectus, or any Person affiliated with the Company or on the fact that any
other Person has decided to invest in the Offered Shares.

 

(3)                                  The
execution and delivery of this Agreement by Investor and the performance of
this Agreement and the consummation by Investor of the transactions
contemplated hereby have been duly authorized by all necessary (corporate,
partnership or limited liability in the case of a corporation, partnership or
limited liability company) action of Investor, and this 

 

 

Agreement, when duly
executed and delivered by Investor, will constitute a valid and legally binding
instrument, enforceable in accordance with its terms against Investor, except
as enforcement hereof may be limited by the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws or court decisions
affecting enforcement of creditors’ rights generally and except as enforcement
hereof is subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law).

 

(4)                                  No
state, federal or foreign regulatory approvals, permits, licenses or consents
or other contractual or legal obligations are required for Investor to enter
into this Agreement or purchase the Investor Shares.

 

(b)         Company
Representations, Warranties and Covenants. 
The Company hereby represents, warrants, covenants and agrees as
follows:

 

(1)                                  The
Company has been duly incorporated and has a valid existence and the
authorization to transact business as a corporation under the laws of the State
of Delaware, with corporate power and authority to own its properties and
conduct its business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in which it owns or
leases properties or conducts any business so as to require such qualification,
except for such jurisdictions wherein the failure to be so qualified and in
good standing would not individually or in the aggregate have a material
adverse effect on the business, results of operations or financial condition of
the Company and its subsidiaries taken as a whole (a “Material Adverse
Effect”).

 

(2)                                  Each
subsidiary of the Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of its jurisdiction of
incorporation, with corporate power and authority to own its properties and
conduct its business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of business and is in
good standing under the laws of each other jurisdiction in which it owns or
leases properties or conducts any business so as to require such qualification,
except for such jurisdictions wherein the failure to be so qualified and in
good standing would not individually or in the aggregate have a Material
Adverse Effect.  All subsidiaries and
their respective jurisdictions of incorporation are identified on Schedule
II hereto.  Except as disclosed in Schedule
II, all of the outstanding capital stock or other voting securities of each
subsidiary is owned by the Company, directly or indirectly, free and clear of
any lien and free of any other limitation or restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other voting securities).  There
are no outstanding (i) securities of the Company or any of the
subsidiaries of the Company which are convertible into or exchangeable for
shares of capital stock or voting securities of any subsidiary of the Company
or (ii) options or other rights to acquire from the Company or any
subsidiary of the Company, or other obligation of the Company or any subsidiary
of the Company to issue, any capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities of any subsidiary
of the Company (collectively, the “Subsidiary Securities”).  There are no outstanding obligations of the
Company or any subsidiary of the Company to repurchase, redeem or otherwise
acquire any outstanding Subsidiary Securities.

 

(3)                                  The
execution, delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby are within the corporate
powers of the Company and have been duly authorized by all necessary corporate
action on the part of the Company and this Agreement, when duly executed and
delivered by the parties hereto, will 

 

 

constitute a valid and
legally binding instrument of the Company enforceable in accordance with its
terms, except as enforcement hereof may be limited by the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws or court
decisions affecting enforcement of creditors’ rights generally and except as
enforcement hereof is subject to general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at law).

 

(4)                                  The
Investor Shares have been duly authorized by the Company, and when issued and
delivered by the Company against payment therefor as contemplated by this
Agreement, the Investor Shares will be validly issued, fully paid and
nonassessable, and will conform to the description of the Common Stock
contained in the Prospectus.

 

(5)                                  The
execution and delivery of this Agreement do not, and the compliance by the
Company with the terms hereof will not, (i) violate the Certificate of
Incorporation (as amended to date) of the Company or the By-Laws (as amended to
date) of the Company, (ii) result in a breach or violation of any of the terms
or provisions of, or constitute a default under, any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which the Company
or any of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of their properties or assets are
subject, or (iii) result in a violation of, or failure to be in compliance
with, any applicable statute or any order, judgment, decree, rule or
regulation of any court or governmental, regulatory or self-regulatory agency
or body having jurisdiction over the Company or any of its subsidiaries or any
of their properties or assets, except where such breach, violation, default or
the failure to be in compliance would not individually or in the aggregate have
a Material Adverse Effect or adversely affect the ability of the Company to
issue and sell the Investor Shares; and no consent, approval, authorization,
order, registration, filing or qualification of or with any such court or
governmental, regulatory or self-regulatory agency or body is required for the
valid authorization, execution, delivery and performance by the Company of this
Agreement or the issuance of the Investor Shares, except for the filing of the
Prospectus Supplement and for such consents, approvals, authorizations,
registrations, filings or qualifications as may be required under state
securities or “blue sky” laws.

 

(6)                                  The
Company meets the requirements for use of Form S-3 under the Securities
Act.  The Registration Statement, which
covers the Investor Shares, including a form of prospectus and such amendments
or supplements to such Registration Statement as may have been required prior
to the date of this Agreement, has been prepared by the Company under the
provisions of the Securities Act, has been filed with the Commission, has
become effective and filed with the Commission and incorporates by reference
documents which the Company has filed in accordance with the provisions of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”).  The Company has prepared a Prospectus
Supplement, to the prospectus included in the Registration Statement referred
to above and the documents incorporated by reference therein, setting forth the
terms of the offering, sale and plan of distribution of the Investor Shares and
additional information concerning the Company and its business and will
promptly file the Prospectus Supplement with the Commission pursuant to Rule 424(b).  No stop order suspending the effectiveness of
the Registration Statement or any post-effective amendment thereto, or any part
thereof, has been issued and served on the Company, and no proceedings for that
purpose are pending or, to the knowledge of the Company, threatened by the
Commission.  Copies of such Registration Statement
and prospectus, any such amendment or supplement and all documents incorporated
by reference therein that were filed with the Commission on or prior to the
date of this Agreement have been delivered to the Investor.  The final form of prospectus included in the
Registration Statement, as amended or supplemented from time to time (including
the Prospectus Supplement), is referred to herein as the 

 

 

“Prospectus.” 
Any reference herein to the Registration Statement, the Prospectus or
any amendment or supplement thereto shall be deemed to refer to and include the
documents incorporated (or deemed to be incorporated) by reference therein, and
any reference herein to the terms “amend,” “amendment” or “supplement” with
respect to the Registration Statement or Prospectus shall be deemed to refer to
and include the filing after the execution hereof of any document with the
Commission deemed to be incorporated by reference therein.  As of the close of business on April 3,
2008, at least a number of shares of Common Stock equal to the number of
Investor Shares were available for issuance pursuant to the Registration
Statement, which permits the sale of the Investor Shares in the manner
contemplated by this Agreement.

 

Each part of the Registration Statement, when such
part became or becomes effective, and the Prospectus and any amendment or
supplement thereto, on the date of filing thereof with the Commission and at
the date hereof and the date of the Closing, did or will in all material
respects comply with all applicable provisions of the Securities Act and the
Exchange Act. Each part of the Registration Statement, when such part became or
becomes effective, did not or will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading.  The Prospectus and any amendment or
supplement thereto, on the date of filing thereof with the Commission, did not
or will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and any statutes,
regulations, contracts or other documents that are required to be described in
the Registration Statement or the Prospectus or to be filed as exhibits to the
Registration Statement have been so described or filed.  The foregoing representations and warranties
in this Section 4(b)(6) do not apply to any statements or omissions
made in reliance on and in conformity with information relating to the
Investors furnished in writing to the Company by the Investors specifically for
inclusion in the Registration Statement or Prospectus or any amendment or
supplement thereto.

 

The documents which are incorporated by reference in
the Registration Statement or the Prospectus, or any amendment or supplement
thereto, or from which information is so incorporated by reference, when they
became effective or were filed with the Commission, as the case may be,
complied in all material respects with the requirements of the Securities Act
or the Exchange Act, as applicable, and none of such documents contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading or omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading and any further documents so filed and incorporated by
reference shall, when they become effective under the Securities Act or when
they are filed with the Commission, conform in all material respects with the
requirements of the Securities Act or the Exchange Act, as applicable, and will
not contain an untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.

 

(7)                                  The
consolidated financial statements and financial schedules of the Company
included or incorporated by reference in the Registration Statement and the
Prospectus have been prepared in conformity with generally accepted accounting
principles (except, with respect to the unaudited consolidated financial
statements, for the footnotes and subject to customary audit adjustments)
applied on a consistent basis, are consistent in all material respects with the
books and records of the Company, and accurately present in all material respects
the consolidated 

 

 

financial position,
results of operations and cash flow of the Company and its subsidiaries as of
and for the periods covered thereby.

 

(8)                                  There
are no material liabilities of the Company or any subsidiary of the Company of
any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, and there is no existing condition, situation or set
of circumstances which could reasonably be expected to result in such a
liability, other than liabilities disclosed in the consolidated financial
statements and financial schedules of the Company, and other undisclosed
liabilities which, individually or in the aggregate, are not material to the
Company and any of its subsidiaries, taken as a whole.

 

(9)                                  Neither
the Company nor any of its subsidiaries has sustained since the respective
dates of the latest audited financial statements included in the Registration
Statement and Prospectus any material loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, otherwise than as disclosed in or contemplated by the Registration
Statement and Prospectus; and, since the respective dates as of which
information is given in the Registration Statement and Prospectus, there has
not been any material change in the capital stock or long-term debt of the
Company or any of its subsidiaries, the Company and its subsidiaries have not
incurred any material liabilities or obligations, direct or contingent, nor
entered into any material transactions not in the ordinary course of business
and there has not been any material adverse change in or affecting the general
affairs, management, financial position, stockholders’ equity or results of
operations of the Company and its subsidiaries considered as a whole, otherwise
than as disclosed in or contemplated by the Registration Statement and
Prospectus.

 

(10)                            Other
than as disclosed in the Prospectus, there are no legal, governmental or
regulatory proceedings pending to which the Company or any of its subsidiaries
is a party or of which any material property of the Company or any of its
subsidiaries is the subject which, taking into account the likelihood of the
outcome, the damages or other relief sought and other relevant factors, would
individually or in the aggregate reasonably be expected to have a Material
Adverse Effect or adversely affect the ability of the Company to issue and sell
the Investor Shares; to the best of the Company’s knowledge, no such
proceedings are threatened or contemplated by governmental or regulatory
authorities or threatened by others.

 

(11)                            The
Company and each of its subsidiaries have good and marketable title to all the
real property and owns all other properties and assets, reflected as owned in
the financial statements included in the Registration Statement and the
Prospectus, subject to no lien, mortgage, pledge, charge or encumbrance of any
kind except those, if any, reflected in such financial statements or which are
not material to the Company and its subsidiaries taken as a whole.  The Company and each of its subsidiaries hold
their respective leased real and personal properties under valid and binding
leases, except where the failure to do so would not reasonably be expected to
individually or in the aggregate have a Material Adverse Effect.

 

(12)                            The
Company has filed all necessary federal and state income and franchise tax
returns and has paid all taxes shown as due thereon or has filed all necessary
extensions, and there is no tax deficiency that has been, or to the knowledge
of the Company might be, asserted against the Company or any of its properties
or assets that would in the aggregate or individually reasonably be expected to
have a Material Adverse Affect.

 

 

(13)                            There
are no holders of securities of the Company having preemptive rights to
purchase Common Stock.  There are no
holders or beneficial owners of securities of the Company having rights to
registration thereof whose securities have not been previously registered or
who have not waived such rights with respect to the registration of the Company’s
securities on the Registration Statement, except where the failure to obtain
such waiver would not individually or in the aggregate reasonably be expected
to have a Material Adverse Effect.

 

(14)                            The
Company has not taken and will not take any action that constitutes or is
designed to cause or result, or which might reasonably be expected to cause or
result, under the Exchange Act or otherwise, in stabilization or manipulation
of the price of any security of the Company to facilitate the sale or resale of
the Offered Shares.

 

(15)                            Other
than as disclosed in the Prospectus, to the Company’s knowledge, the Company together
with its subsidiaries owns and possesses all right, title and interest in and
to, or has duly licensed from third parties, all patents, patent rights, trade
secrets, inventions, know-how, trademarks, trade names, copyrights, service
marks and other proprietary rights (“Intellectual Property”) necessary
to the business of the Company and each of its subsidiaries taken as a whole as
currently conducted.  To the Company’s
knowledge and except as would not individually or in the aggregate have a
Material Adverse Effect, there is no infringement or other violation by third
parties of any of the Intellectual Property of the Company.  Neither the Company nor any of its
subsidiaries has received any notice of infringement or misappropriation from
any third party that has not been resolved or disposed of and, to the Company’s
knowledge, neither the Company nor any of its subsidiaries has infringed or
misappropriated the Intellectual Property of any third party, which
infringement or misappropriation would individually or in the aggregate have a
Material Adverse Effect.  Further, there
is no pending or, to the Company’s knowledge and except as would not
individually or in the aggregate have a Material Adverse Effect, threatened
action, suit, proceeding or claim by governmental authorities or others that
the Company is infringing a patent, and there is no pending or, to the Company’s
knowledge and except as would not individually or in the aggregate have a
Material Adverse Effect, threatened legal or administrative proceeding relating
to patents and patent applications of the Company, other than proceedings
initiated by the Company before the United States Patent and Trademark Office
and the patent offices of certain foreign jurisdictions which are in the ordinary
course of patent prosecution.  To the
Company’s knowledge, the patent applications of the Company presently on file
disclose patentable subject matter, and the Company is not aware of any
inventorship challenges, any interference which has been declared or provoked,
or any other material fact that would preclude the issuance of patents with
respect to such applications.

 

(16)                            The
conduct of the business of the Company and each of its subsidiaries is in
compliance in all respects with applicable laws, rules and regulations of
governmental and regulatory bodies, except where the failure to be in
compliance would not individually or in the aggregate have a Material Adverse
Effect.

 

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

 

(18)                            All
offers and sales of the Company’s capital stock prior to the date hereof were
at all relevant times registered pursuant to the Securities Act or exempt from
the registration requirements of the Securities Act and were duly registered
with or the subject of an 

 

 

available exemption from
the registration requirements of the applicable state securities or blue sky
laws, except where the failure to do so would not individually or in the
aggregate reasonably be expected to have a Material Adverse Effect.

 

(19)                            The
Company has filed with the Nasdaq Global Market a Notification of Listing of
Additional Shares with respect to the Investor Shares within the time period
required by the rules of the Nasdaq Global Market and the Investor Shares
have been approved for listing on the Nasdaq Global Market.

 

(20)                            To the
extent that the Company or any other Person acting on its behalf has provided
the Investor or its agents or counsel with any information that the Company
believes constitutes material, non-public information, any such material,
non-public information will be disclosed by the Company within 48 hours of the
Closing.

 

5.                                       Conditions.

 

(a)          The obligation of each Investor to purchase and acquire the Investor
Shares hereunder shall be subject to the conditions that:

 

(1)                                  All representations and warranties and other statements of the
Company shall be true and correct as of and on each of the date of this
Agreement and the date of the Closing;

 

(2)                                  The Company shall have performed all of its obligations hereunder theretofore to
be performed;

 

(3)                                  The Prospectus shall have been filed with the
Commission pursuant to Rule 424(b) under the Securities Act within
the applicable time period prescribed for such filing, no stop order suspending
the effectiveness of the Registration Statement or any part thereof shall have
been issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission, and the Investor shall have received the
Prospectus in accordance with the federal securities laws;

 

(4)                                  The Company shall have executed and delivered
that certain Funding and Royalty Agreement, by and between the Company and
Deerfield ED Corporation (“ED”), of even date herewith (the “Funding
and Royalty Agreement”); and

 

(5)                                  The
Company shall have shall have executed and delivered that
certain Option and Put Agreement, by and between the Company ED and the
Investors, of even date herewith (the “Option and Put Agreement”).

 

(b)         The obligation of the Company to enter into this Agreement shall be
subject to the conditions that:

 

(1)                                  All representations and warranties and other statements of the
Investors shall be true and correct as of and on each of the date of this
Agreement and the date of the Closing;

 

(2)                                  The Investors shall have performed all of its obligations hereunder theretofore to
be performed;

 

 

(3)                                  ED shall have executed and delivered the
Funding and Royalty Agreement; and

 

(4)                                  The
Investors and ED shall have executed
and delivered the Option and Put Agreement.

 

6.                                       Miscellaneous.

 

(a)          Fees and Expenses.  The
Company will reimburse the Investor for the documented, fees and expenses of
outside legal counsel of up to $250,000 incurred as part of this
transaction.  In addition, provided that
the Aggregate Purchase Price is paid in full by the Investors for the Offered
Shares, the Company will pay a fee equal to 5% of the Aggregate Purchase Price to
Deerfield, simultaneously with the Closing, for arranging the purchase and sale
of the Offered Shares.  Other than the amount listed above, each of
the parties hereto shall be responsible for their own expenses incurred in
connection with the transactions contemplated hereby.

 

(b)         Binding Agreement;
Assignment.  This Agreement shall be
binding upon, and shall inure solely to the benefit of, each of the parties
hereto, and each of their respective heirs, executors, administrators,
successors and permitted assigns, and no other person shall acquire or have any
right under or by virtue of this Agreement. 
The Investors may not assign any of these rights or obligations
hereunder to any other person or entity without the prior written consent of
the Company.

 

(c)          Entire Agreement.  This Agreement, including Schedules I
and II hereto, constitutes the entire understanding between the parties
hereto with respect to the subject matter hereof and may be amended only by
written execution by both parties.  Upon
execution by the Company and the Investors, this Agreement shall be binding on
each of the parties hereto.

 

(d)         Consent To
Jurisdiction.  THIS AGREEMENT SHALL
BE ENFORCED, GOVERNED AND CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH THE LAWS
OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAWS
PRINCIPLES.  FURTHERMORE, THE INVESTOR
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE FEDERAL OR STATE COURTS
LOCATED IN THE STATE OF DELAWARE IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.  EACH OF THE COMPANY AND THE INVESTOR (AND, TO
THE EXTENT PERMITTED BY LAW, ON BEHALF OF ITS AND THEIR EQUITY HOLDERS AND
CREDITORS) HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED UPON, ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY.

 

(e)          Notices.  All notices, requests, consents and other
communication hereunder shall be in writing, shall be mailed by first class
registered or certified mail, or nationally recognized overnight express
courier postage prepaid, and shall be deemed given when so mailed and shall be
delivered as addressed as follows:

 

if to the Company, to:

 

 

VIVUS, Inc.

1172 Castro Street

Mountain View, CA 94040

Attn: Chief Financial Officer

 

with a copy mailed to:

 

Wilson Sonsini Goodrich &
Rosati

650 Page Mill Road

Palo Alto, CA 94304

Attn: Mark Reinstra, Esq.

 

if to Deerfield or the
Investors:

 

c/o Deerfield Capital,
L.P.

780 Third Avenue, 37th Floor

New York, New York  10017

Attention:  James E. Flynn

 

with a copy mailed to:

 

Katten Muchin Rosenman
LLP

575 Madison Avenue

New York, New York  10022

Attention:  Mark I. Fisher

 

or to such other Person
at such other place as the parties shall designate to one another in writing.

 

(f)            Counterparts.  This Agreement maybe executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one in the same agreement.

 

(g)         Restriction on Resale.  The Investors hereby irrevocably agree that,
without the prior written consent of the Company, the Investors will not,
directly or indirectly, (1) offer for sale, sell, pledge, or otherwise
dispose of (or enter into any transaction or device that is designed to, or
could be expected to, result in the disposition by any person at any time in
the future of) any Investor Shares, (2) enter into any swap or other
derivatives transaction that transfers to another, in whole or in part, any of
the economic benefits or risks of ownership of the Investor Shares, whether any
such transaction described in clause (1) or (2) above is to be
settled by delivery of securities, cash or otherwise,  or (3) publicly
disclose the intention to do any of the foregoing, for a period commencing on
the Closing and ending on the 180 day anniversary of the Closing (such 180 day
period, the “Lock-Up Period”). 
The Lock-Up Period shall not apply to bona fide gifts, sales or other
dispositions of the Investor Shares that are made exclusively between and among
the affiliates of the Investors, including its partners (if a partnership) or
members (if a limited liability company), provided that it shall be a condition
to any such transfer that the transferee/donee agrees to be bound by the terms
of this Agreement (including, without limitation, the restrictions set forth in
this Section 6(g)) to the same extent as if the transferee/donee were a
party hereto.  The Company and its
transfer 

 

 

agent are hereby authorized to decline to make any
transfer of securities if such transfer would constitute a violation or breach
of this Section 6(g).

 

 

IN WITNESS WHEREOF,
the parties have executed this Securities Purchase Agreement as of the date
first written above.

 

 

	
   

  	
  VIVUS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy E. Morris

  
	
   

  	
  Name:

  	
  Timothy E. Morris

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DEERFIELD MANAGEMENT COMPANY,
  L.P.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James Flynn

  
	
   

  	
  Name:

  	
  James Flynn

  
	
   

  	
  Title:

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DEERFIELD PRIVATE DESIGN FUND,
  L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James Flynn

  
	
   

  	
  Name:

  	
  James Flynn

  
	
   

  	
  Title:

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DEERFIELD PRIVATE DESIGN

  
	
   

  	
  INTERNATIONAL, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James Flynn

  
	
   

  	
  Name:

  	
  James Flynn

  
	
   

  	
  Title:

  	
  General Partner

  
									

 

Signature Page to
Securities Purchase Agreement

 

 

SCHEDULE
I

to

Securities Purchase Agreement

 

	
  Name of Investors

  	
   

  	
  Aggregate

  Purchase Price

  	
   

  	
  Number of

  Offered Shares

  to be

  Purchased by Investor

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Deerfield
  Private Design Fund, L.P.

  	
   

  	
  $

  	
  3,830,004.75

  	
   

  	
  622,765

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Deerfield
  Private Design International, L.P.

  	
   

  	
  $

  	
  6,169,999.80

  	
   

  	
  1,003,252

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total:

  	
   

  	
  $

  	
  10,000,004.55

  	
   

  	
   

  	
   

  

 

 

SCHEDULE II

to

Securities Purchase Agreement

 

	
  List of Subsidiaries

  	
   

  	
  Percent Owned

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ·                  VIVUS UK Limited
  (United Kingdom)

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  ·                  VIVUS BV (Netherlands)

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  ·                  VIVUS Real Estate, LLC (New Jersey)

  	
   

  	
  100

  	
  %Exhibit 10.2

 

FUNDING
AND ROYALTY AGREEMENT

 

This FUNDING AND ROYALTY AGREEMENT (this “Agreement”),
dated April 3, 2008, is made by and between Deerfield ED Corporation, a
Delaware corporation (“ED”) and VIVUS, Inc., a Delaware corporation
(“VIVUS”).

 

Background
Statement

 

VIVUS is a pharmaceutical company engaged in
the development, manufacturing and sale of pharmaceutical products. VIVUS owns
the approved new drug application number 20-700 for a product indicated for
treatment of erectile dysfunction and sold in association with the trademark “MUSE.”  VIVUS is developing a new pharmaceutical
product, referred to as “Avanafil.” 
Avanafil is from a class of compounds the mechanism of action of which
is believed to be inhibition of the phosphodiesterase type 5 enzyme, also known
as PDE5 inhibitors or PDE5i’s. This Agreement sets forth the terms under which
ED will provide funds to VIVUS in consideration of the payment by VIVUS of a
royalty on future sales of the MUSE and Avanafil products.

 

Statement
of Agreement

 

The Parties agree as follows:

 

1.                                       Definitions.
The following terms have the meanings set forth below:

 

“Adverse Event” shall mean any adverse
event associated with the use of a drug product in humans, whether or not
considered drug-related, including (i) an adverse event occurring in the
course of the use of a drug product in professional practice; (ii) an
adverse event occurring from an overdose, whether accidental or intentional,
related to a drug product; (iii) an adverse event occurring from drug abuse
related to a drug product; (iv) an adverse event occurring from withdrawal
of a drug product; and (v) any failure of expected pharmacological action
of a drug product.

 

“Affiliate” means with respect to any
Person, each other Person that directly or indirectly, through one or more
intermediaries, owns or controls, is controlled by or is under common control
with, such Person. For the purpose of this Agreement, “control” means
the possession, directly or indirectly, of the power to direct or cause the direction
of management and policies, whether through the ownership of voting securities,
by contract or otherwise.

 

“Agreement” has the meaning set forth
in the introductory paragraph.

 

“Avanafil” means all drug products
developed pursuant to the Avanafil IND that may be approved for marketing.

 

“Avanafil IND” means the
investigational new drug application number 51,235, as such investigational new
drug application may be supplemented and amended from time to time.

 

1

 

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

 

“Collateral” has the meaning given
such term in the Security Agreement.

 

“Design Funds” means Deerfield Private
Design International Fund, L.P., a British Virgin Islands limited partnership,
and Deerfield Private Design Fund, L.P., a Delaware limited partnership, which
Persons are the sole stockholders of ED.

 

“Earnings Report” for a Quarter means
the Form 10-Q filed by VIVUS following each of the first three Quarters of
its fiscal year and the Form 10-K filed by VIVUS following the fourth
Quarter of its fiscal year.

 

“ED” has the meaning set forth in the
introductory paragraph.

 

“Estimated Royalty Payment” has the
meaning set forth in Section 2(b).

 

“FDA” means the United States Food and
Drug Administration and any successor agency

 

“Fourth Quarter Earnings Date” means
the date on which VIVUS publicly issues its Earnings Report for the fourth
Quarter of its fiscal year.

 

“Funding Payments” has the meaning set
forth in Section 2(a).

 

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

 

“Legal Requirement” means any statute,
law, treaty, rule, regulation, guidance, approval, order, decree, writ,
injunction or determination of any Governmental Authority, court or arbitrator
of competent jurisdiction; and, with respect to any Person, includes all such
Legal Requirements applicable or binding upon such Person, its business or the
ownership or use of any of its assets.

 

“Lien” means any reservations of
title, mortgage, claim, lien, security interest, pledge, hypothecation, escrow,
charge, option or other restriction or encumbrance of any kind.

 

“MUSE” means all drug products that
are now or may hereafter be approved for marketing under the MUSE NDA.

 

“MUSE NDA” means new drug application
number 20-700, as such new drug application may be supplemented and amended
from time to time.

 

“Net Sales” means, with respect to
Royalty Products, the gross amount invoiced by or on behalf of VIVUS or any of
its Affiliates (or a direct or indirect assignee or licensee of VIVUS or any
such Affiliate) for Royalty Products sold to third parties in bona fide, 

 

2

 

arm’s length transactions, less customary
deductions determined without duplication in accordance with VIVUS’ (or, as
applicable, any such Affiliate’s, assignee’s or licensee’s) standard accounting
methods as generally and consistently applied for: (i) applicable sales
credits (as described below), (ii) payments or rebates incurred, or
reserves and allowances, pursuant to programs of any Governmental Authority, (iii) freight
charges, transit insurance and other transportation costs, and (iv) to the
extent included in the gross amount invoiced, sales, use and excise taxes. Applicable
sales credits means credits or discounts, or reserves and allowances, deducted
from the gross amount invoiced for: (A) customer returns, returned goods
allowances, rejected goods and damaged goods not covered by insurance, (B) cash
or terms discounts, (C) direct to customer discount or customer rebate
programs, (D) third party rebates and chargebacks, (E) trade show
discounts and stocking allowances, (F) price adjustments on customer
inventories following price changes, (G) product recalls, (H) discount
card programs, and (I) amounts credited for uncollectible amounts.

 

“Party” means either VIVUS or ED, and “Parties”
means both VIVUS and ED.

 

“Person” means any natural person,
corporation, limited liability company, partnership, association, trust,
organization, Governmental Authority or other legal entity.

 

“Quarter” means a calendar quarter.

 

“Registrations” means all
investigational new drug applications, all new drug applications and all
abbreviated new drug applications, including, without limitation, the Avanafil
IND and the MUSE NDA, and including in each case all supplements and amendments
thereto, and all approvals, codes, permits, authorizations and licenses issued
or approved by any Governmental Authority that are or may hereafter be held by
VIVUS relating to the development, manufacture, warehousing, distribution,
promotion, sale, importing or pricing of the Royalty Products.

 

“Royalty” has the meaning set forth in
Section 3(a).

 

“Royalty Products” means MUSE and
Avanafil.

 

“Security Agreement” means that
certain security agreement between VIVUS and ED entered into pursuant to Section 5 and attached hereto as Exhibit A.

 

“VIVUS” has the meaning set forth in
the introductory paragraph.

 

“VIVUS’ Knowledge” means the actual
knowledge of any officer or director of VIVUS.

 

2.                                       Funding
Payments by ED.

 

(a)                                  Schedule for
Funding Payments. Subject to the terms of this Agreement, ED shall pay
Twenty Million Dollars ($20,000,000) to VIVUS in accordance with the following
funding schedule:

 

3

 

(i)                                     $3,333,333
on or before the fifteen (15th) Business Day following the execution
of this Agreement, provided that ED shall use its best efforts to make such
payment at the earliest practicable date;

 

(ii)                                  $3,333,333
within two (2) Business Days after each of the following dates: August 29,
2008, November 29, 2008, the Fourth Quarter Earnings Date with respect to
VIVUS’ 2008 fiscal year and May 30, 2009; and

 

(iii)                               $3,333,335 within two (2) Business
Days after August 29, 2009.

 

Such payments (the “Funding Payments”) shall be made by wire
transfer of immediately available funds to the account set forth on Exhibit B attached hereto, or to such other account as
VIVUS may notify ED of in writing not less than three (3) Business Days
prior to the date of payment.

 

(b)                                 Offset. If
VIVUS does not pay any Royalty payment when due pursuant to Section 3(b), then ED may defer the next Funding
Payment for up to ten (10) days. If VIVUS does not pay such Royalty within
such ten (10) day period then ED shall promptly pay such deferred Funding
Payment and may offset from the amount of such Funding Payment the amount of
such unpaid Royalty. For purposes of such offset, the amount of the unpaid
Royalty shall be deemed to be an amount equal to [***](1)% of the Net Sales of
Royalty Products during the corresponding Quarter of the prior year (the “Estimated
Royalty Payment”), and upon making the next Royalty payment pursuant to Section 3(b), VIVUS shall, as applicable, (i) also
pay the amount by which such Estimated Royalty Payment was less than the
corresponding actual Royalty payment due or (ii) receive a credit for the
amount by which such Estimated Royalty Payment exceeded the corresponding
actual Royalty payment due.

 

(c)                                  Allocation of
Funding Payments. [***](2) percent ([***](3)%) of each Funding Payment
shall be deemed paid in consideration of the Royalty attributable to Net Sales
of MUSE, and [***](4) percent ([***](5)%) of each Funding Payment shall be
deemed paid in consideration of the Royalty attributable to Net Sales of
Avanafil.

 

3.                                       Royalty.

 

(a)                                  Rate.
In consideration of the Funding Payments made by ED, from the date hereof
through the tenth (10th) anniversary of such date, VIVUS shall pay to ED a
royalty of [***](6) percent ([***](7)%) of Net Sales of Royalty Products
made on or after the date of this Agreement (the “Royalty”). The Royalty
shall be determined for each Quarter for all Net Sales of Royalty Products made
during such Quarter; provided, that (i) only Net Sales occurring on
or 

 

(1) *** Indicates that confidential treatment has been sought for
this information.

(2) *** Indicates that confidential treatment has been sought for
this information.

(3) *** Indicates that confidential treatment has been sought for
this information.

(4) *** Indicates that confidential treatment has been sought for
this information.

(5) *** Indicates that confidential treatment has been sought for
this information.

(6) *** Indicates that
confidential treatment has been sought for this information.

(7) *** Indicates that
confidential treatment has been sought for this information.

 

4

 

after the date of this
Agreement shall be considered in determining the Royalty for the initial
Quarter for which the Royalty is due and (ii) only Net Sales occurring on
or before the tenth (10th) anniversary of date of this Agreement shall be
considered in determining the Royalty for the final Quarter for which the
Royalty is due. In addition, notwithstanding anything herein to the contrary,
the Royalty for any Quarter during which any Funding Payment hereunder is
overdue shall be decreased on a pro rata basis in proportion to the number of
days such Funding Payment is overdue. The Royalty payable for any Quarter to be
prorated shall be calculated by multiplying [***](8) percent ([***](9)%)
of the Net Sales of Royalty Products for such Quarter by the ratio of the
number of days for which the Royalty is due in such Quarter to the total number
of days in such Quarter.

 

(b)                                 Payment. No
later than sixty (60) days following the end of each Quarter, or no later than
the Fourth Quarter Earnings Date in the case of the fourth Quarter of VIVUS’
fiscal year, VIVUS shall make a Royalty payment equal to [***](10)% of the Net
Sales of Royalty Products during such Quarter. For the initial and final
Quarters for which the Royalty is due, the Royalty payment shall be pro-rated
for the portion of such Quarter during which the royalty is payable pursuant to
Section 3(a). At the time of any
Royalty payment made pursuant to this Section 3(b),
VIVUS shall deliver to ED a written statement showing all Net Sales of Royalty
Products during such Quarter and VIVUS’ computation of the Royalty due on such
Net Sales. All payments of the Royalty shall be made by wire transfer of
immediately available funds to an account designated by the recipient.

 

(c)                                  Audit
Right. Upon not less than fourteen (14) days written notice, ED shall have
the right to audit the books and records of VIVUS relating to sales of Royalty
Products for the purpose of determining the correctness of VIVUS’ computation
and payment of the Royalty. Such audit may not be conducted more than once in
any calendar year and shall be conducted during normal business hours by an
accounting firm engaged by ED at its cost, provided that such accounting firm
enters into a reasonable confidentiality agreement prior to commencing any such
audit. VIVUS shall provide ED, its officers, agents and accountants with access
to all pertinent books and records and shall reasonably cooperate with ED’s
efforts to conduct such audits. If such audit discloses an underpayment of the
Royalty by VIVUS of more than $35,000, VIVUS shall reimburse ED for the
reasonable out-of-pocket costs (including the accountants’ fees) incurred by ED
in performing such audit. In the event ED claims that any such audit reveals an
underpayment of the Royalty, ED will make its audit papers for the relevant
period available to VIVUS upon VIVUS’ request.

 

4.                                       Assignment
or Sublicense. VIVUS shall continue to pay, or cause to be paid, the
Royalty on all Net Sales of Royalty Products by any direct or indirect licensee
or assignee of VIVUS.

 

5.                                       Security
Interest. In order to secure the full and punctual payment of the Royalty
in accordance with the terms of this Agreement, VIVUS shall execute and deliver
to ED a security agreement in the form attached hereto as Exhibit A.

 

(8) *** Indicates that
confidential treatment has been sought for this information.

(9) *** Indicates that confidential treatment has
been sought for this information.

(10) *** Indicates that
confidential treatment has been sought for this information.

 

5

 

6.                                       Covenants
of VIVUS.

 

(a)                                  Maintenance
of Registrations and Other Rights. VIVUS shall use commercially reasonable
efforts to take appropriate actions, at its sole cost and expense, to maintain
the Registrations and all other regulatory rights and all patents, trademarks
and other intellectual property rights necessary for VIVUS to develop,
manufacture, distribute, promote, offer for sale and sell the Royalty Products
throughout the United States.

 

(b)                                 Promotion
of MUSE. From the date hereof through the eighth (8th)
anniversary of such date, VIVUS shall (i) manufacture or have
manufactured, promote and sell MUSE throughout the United States using a
similar level of commercial effort as employed by VIVUS immediately prior to
the date hereof; provided, however, that this clause (i) shall
not require VIVUS to maintain any particular spending levels, and (ii) not
manufacture, have manufactured, promote or sell any product that competes with
MUSE in the United States other than Avanafil.

 

(c)                                  Development
and Promotion of Avanafil. VIVUS shall use commercially reasonable efforts
to obtain FDA approval of Avanafil. From the date on which the FDA approves a
new drug application for Avanafil through the eighth (8th)
anniversary of this Agreement, VIVUS shall (i) manufacture or have
manufactured, promote and sell Avanavil throughout the United States using
commercially reasonable efforts similar to those efforts employed by VIVUS for
its other approved drug products; provided, however, that this
clause (ii) shall not require VIVUS to maintain any particular spending
levels, and (ii) not manufacture, have manufactured, promote or sell any
product that competes with Avanafil in the United States other than MUSE.

 

7.                                       Representations
and Warranties of VIVUS. Except as set forth in that certain disclosure
letter of even date herewith delivered by VIVUS to ED, VIVUS represents and
warrants to ED that:

 

(a)                                  Organization. VIVUS
is a corporation duly organized, validly existing and in good standing under
the laws of the state of its incorporation. VIVUS has all requisite corporate
power and authority to own, lease and operate its properties and to carry on
its business as is now being conducted.

 

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

 

(c)                                  No Violation. The
signing, delivery and performance of this Agreement by VIVUS is not prohibited
or limited by, and will not result in the breach of or a default under, any
provision of the certificate of incorporation, bylaws or other formation
documents of VIVUS, any material agreement or instrument binding on VIVUS, or
any Legal Requirement applicable 

 

6

 

to VIVUS, except for such
prohibitions, limitations, defaults or Legal Requirements as would not prevent
consummation by VIVUS of the transactions contemplated hereby or the
performance by VIVUS of its obligations hereunder. The execution, delivery and
performance of this Agreement by VIVUS, and VIVUS’ compliance with the terms
and provisions hereof, do not and will not conflict with or result in a breach
of any of the terms and provisions of or constitute a default, with or without
the passage of time and the giving of notice, under any material contract or
other instrument or obligation binding or affecting VIVUS or the Royalty
Products.

 

(d)                                 Financial Condition.
No insolvency proceeding of any character, including, without limitation,
bankruptcy, receivership, reorganization, composition or arrangement with
creditors, voluntary or involuntary, has been commenced by or against VIVUS or
any of its assets or properties, nor has any such proceeding been threatened. VIVUS
does not contemplate and has not taken any action in contemplation of the
institution of any such proceeding.

 

(e)                                  Regulatory Rights
and Intellectual Property. VIVUS (i) owns the Registrations, (ii) owns
or holds a valid license to use all patents and trademarks required to develop,
manufacture, distribute and sell the Royalty Products, and (iii) owns or
holds a valid license to use all trades secrets and other intellectual property
rights required to develop, manufacture, have manufactured, promote, distribute
and sell the Royalty Products, in each case throughout the United States. VIVUS’
development, manufacture, promotion, distribution and sale of the Royalty
Products does not infringe the intellectual property rights of any Person.

 

(f)                                    Registrations.
The Registrations are in full force and effect, and no Governmental Authority
has initiated, or to VIVUS’ Knowledge intends to or is contemplating, any
action to terminate or suspend any of the Registrations. As of the date hereof,
VIVUS is in compliance in all material respects with all Legal Requirements
applicable to the development, manufacture, promotion, distribution and sale of
the Royalty Products. VIVUS has timely filed all annual and other reports
required to be filed with any Governmental Authority in order to maintain the
Registrations and satisfy all Legal Requirements relating to the Registrations
and the Royalty Products.

 

(g)                                 Royalty Products.

 

(i)                                     VIVUS
has not received notification from any Governmental Authority alleging that any
marketed quantities of MUSE have been misbranded or adulterated, or contesting
the marketing approval, labeling or promotion of MUSE. There has been no recall
of any quantities of MUSE. No Adverse Events caused by use of MUSE have been
reported in writing to VIVUS that are not disclosed in the package insert for
MUSE or that have not been reported by VIVUS to the FDA.

 

(ii)                                  MUSE
is covered by the claims of United States patents that will expire not sooner
than March 23, 2016. VIVUS has not received a written claim from any
Person, and to VIVUS’ Knowledge no Person has asserted any claim, that any of
the claims of any United States patent covering MUSE are invalid or
unenforceable.

 

(iii)                               Avanafil is covered by
the claims of United States patents that will expire not sooner than September 13,
2020. VIVUS has not received a written claim from any 

 

7

 

Person, and to VIVUS’ Knowledge no Person has asserted any claim, that
any of the claims of any United States patent covering Avanafil are invalid or
unenforceable.

 

(iv)                              To
VIVUS’ Knowledge, no Person has filed, or has stated in writing that it intends
to file, an abbreviated new drug application seeking approval to market a
generic version of any of the Royalty Products.

 

(v)                                 To
VIVUS’ Knowledge, there are no facts or circumstances (including the
announcements or actions of any Governmental Authority) as of the date of this
Agreement that would reasonably be expected to result in a material decline in
the level of sales or pricing for MUSE in the United States prior to the date
set forth in Section 7(g)(ii).

 

8.                                       Representations
and Warranties of ED; Covenants of ED. ED represents and warrants to VIVUS
that:

 

(a)                                  Organization. ED
is a corporation duly organized, validly existing and in good standing under
the laws of the state of its incorporation. ED has all requisite corporate
power and authority to own, lease and operate its properties and to carry on
its business as is now being conducted. The directors, officers and employer
identification number of ED are as set forth on Exhibit C
attached hereto.

 

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

 

(c)                                  No Violation. The
signing, delivery and performance of this Agreement by ED is not prohibited or
limited by, and will not result in the breach of or a default under, any
provision of the certificate of incorporation, bylaws or other formation
documents of ED, or of any material agreement or instrument binding on ED, or
of any Legal Requirement applicable to ED, except for such prohibitions,
limitations, defaults or Legal Requirements as would not prevent consummation
by ED of the transactions contemplated hereby or the performance by ED of its
obligations hereunder. The execution, delivery and performance of this
Agreement by ED, and ED’s compliance with the terms and provisions hereof, do
not and will not conflict with or result in a breach of any of the terms and
provisions of or constitute a default, with or without the passage of time and
the giving of notice, under any material contract or other instrument or
obligation binding or affecting ED.

 

(d)                                 Subscription
Agreements. ED has entered into subscription agreements of even date
herewith with Deerfield Private Design International, L.P. and Deerfield
Private Design Fund, L.P. (the “Subscription Agreements”), whereby ED
will receive an aggregate of $20,000,000 in exchange for 20,000 shares of its
common stock. ED further warrants that 

 

8

 

VIVUS is a third party
beneficiary under the Subscription Agreements with full rights of enforcement
as if a party to the Subscription Agreements.

 

(e)                                  Financial
Information. Within fourteen (14) days following the end of each Quarter, ED will provide to VIVUS
financial statements of ED, including a balance sheet, operating statement and
cash flow for such Quarter and year to date prepared in accordance with U.S.
generally accepted accounting principles. Also, if requested by VIVUS, in a
timely manner ED will provide additional detail as to the amounts in such
quarterly and year to date financial statements. Upon not less than fourteen
(14) days written notice, VIVUS will have the right to examine the financial books and records of
ED. ED shall provide
VIVUS and its officers, agents and accountants with access to all
pertinent books and records and shall reasonably cooperate with VIVUS’ efforts
to conduct such examination.

 

9.                                       General
Provisions.

 

(a)                                  Independent
Contracting Parties. The Parties are not joint venturers, partners,
principal and agent, master and servant, or employer and employee, and have no
relationship other than as independent contracting parties. Neither Party shall
be a legal representative of the other or have the power to bind or obligate
the other in any manner.

 

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

 

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

 

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

 

	
  If to ED, to:

  	
  c/o Deerfield Capital, L.P.

  
	
   

  	
  780 Third Avenue, 37th Floor

  
	
   

  	
  New York, New York 10017

  
	
   

  	
  Attention:
  James E. Flynn

  
	
   

  	
  Facsimile:
  (212) 573-8111

  

 

9

 

	
  Copy to:

  	
  Robinson, Bradshaw & Hinson, P.A.

  
	
   

  	
  101 North Tryon Street, Suite 1900

  
	
   

  	
  Charlotte, North Carolina 28246

  
	
   

  	
  Attention: David J. Clark

  
	
   

  	
  Facsimile: (704) 373-3990

  
	
   

  	
   

  
	
  If to VIVUS, to:

  	
  VIVUS, Inc.

  
	
   

  	
  1172 Castro Street

  
	
   

  	
  Mountain View, California 94040

  
	
   

  	
  Attention: Leland F. Wilson

  
	
   

  	
  Facsimile: (650) 934-5389

  
	
   

  	
   

  
	
  Copy to:

  	
  Wilson Sonsini Goodrich & Rosati

  
	
   

  	
  650 Page Mill Road

  
	
   

  	
  Palo Alto, CA 94304

  
	
   

  	
  Attention: Ian B. Edvalson

  
	
   

  	
  Facsimile: (650) 493-6811

  

 

Each such notice or other communication shall be deemed to have been
duly given and to be effective (x) if delivered by hand, immediately upon
delivery if delivered on a Business Day during normal business hours and, if
otherwise, on the next Business Day; (y) if sent by facsimile
transmission, immediately upon confirmation that such transmission has been
successfully transmitted on a Business Day before or during normal business
hours and, if otherwise, on the Business Day following such confirmation, or (z) if
sent by certified mail or a nationally recognized overnight delivery service,
on the day of delivery if delivered during normal business hours on a Business
Day and, if otherwise, on the first Business Day after delivery. Notices and
other communications sent via facsimile must be followed by notice delivered by
hand or by certified mail or overnight delivery service as set forth herein
within five (5) Business Days.

 

(e)                                  Publicity. Neither
Party shall issue any press release or any other form of public disclosure
regarding the existence of this Agreement or the terms hereof, or use the name
of the other Party hereto in any press release or other public disclosure,
without the prior written consent of the other Party, except (i) for those
disclosures and notifications contemplated by this Agreement and (ii) as
required by any Legal Requirement and solely to the extent necessary to satisfy
such Legal Requirement. Prior to making any press release that describes this
Agreement or the transactions contemplated hereby, VIVUS shall provide ED with
a copy of, and an opportunity to comment on, such press release.

 

(f)                                    No Assignment.
This Agreement shall be binding upon and inure to the benefit of the Parties
and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned or delegated by a Party without the prior written consent of the other
Party, except that VIVUS may assign this Agreement without such consent to any
successor to all or substantially all of VIVUS’ assets or business to which
this Agreement relates (whether by stock purchase, asset purchase, merger,
operation of law or otherwise); provided, however, that any such
assignment shall be effective 

 

10

 

only if the assignee shall have
assumed all of the obligations of VIVUS under this Agreement and under the
Security Agreement.

 

(g)                                 Governing Law. The
execution, interpretation and performance of this Agreement, and any disputes
with respect to the transactions contemplated by this Agreement, shall be
governed by the internal laws and judicial decisions of the State of Delaware
applicable to contracts made and to be performed entirely within the State of
Delaware.

 

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

 

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

 

(j)                                     Counterparts.
This Agreement may be executed in multiple counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument. This Agreement may be executed on signature pages exchanged by
facsimile, in which event each Party shall promptly deliver to the other such
number of original executed copies as the other Party may reasonably request.

 

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

 

[Signature Page Follows]

 

11

 

IN WITNESS WHEREOF,
the Parties have caused this Funding and Royalty Agreement to be executed by
their duly authorized representatives as of the date first set forth above.

 

 

	
   

  	
  DEERFIELD
  ED CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeff
  Kaplan

  
	
   

  	
  Name: Jeff
  Kaplan

  
	
   

  	
  Title:
  Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VIVUS,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Timothy
  E. Morris

  
	
   

  	
  Name:
  Timothy E. Morris

  
	
   

  	
  Title: Chief
  Financial Officer

  

 

12

 

EXHIBIT A

 

Security Agreement

 

 

EXHIBIT B

 

Bank:

 

Address:

 

Account Name:

 

Account Number:

 

ABA Number:

 

E-mail confirmation to:

 

 

EXHIBIT C

 

Directors:

 

Officers:

 

EIN:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00140-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00140-of-00352.parquet"}]]