Document:

Exhibit 10.63

 

VIVUS, INC.

 

LELAND F. WILSON EMPLOYMENT AGREEMENT

 

 

This Employment Agreement
(the “Agreement”) is entered into as of December 20, 2007, by and between
Vivus, Inc. (the “Company”) and Leland F. Wilson (“Executive”).

 

1.                                       Duties and Scope of Employment.

 

(a)                                  Positions and Duties. 
As of June 1, 2007 (the “Effective Date”), Executive will continue
to serve as the Company’s President and Chief Executive Officer reporting to
the Company’s Board of Directors (the “Board”). 
As of the Effective Date, Executive will render such business and
professional services in the performance of his duties, consistent with
Executive’s position within the Company, as will reasonably be assigned to him
by the Board.  The period Executive is
employed by the Company under this Agreement is referred to herein as the “Employment
Term”.

 

(b)                                 Board Membership. 
Executive will continue to serve as a member of the Board as of the
Effective Date.  Thereafter, at each
annual meeting of the Company’s stockholders during the Employment Term, the
Company will nominate Executive to serve as a member of the Board.  Executive’s service as a member of the Board
will be subject to any required stockholder approval.  Upon the termination of Executive’s
employment for any reason (other than a termination pursuant to Section 8(d) of
the Agreement), and unless otherwise requested by the Board, Executive will be
deemed to have resigned from the Board (and all other positions held at the
Company and its affiliates) voluntarily, without any further required action by
Executive, as of the end of Executive’s employment and Executive, at the Board’s
request, will execute any documents necessary to reflect his resignation.

 

(c)                                  Obligations. 
During the Employment Term, Executive will devote Executive’s full
business efforts and time to the Company and will use good faith efforts to
discharge Executive’s obligations under this Agreement to the best of Executive’s
ability and in accordance with each of the Company’s corporate guidance and
ethics guidelines, conflict of interests policies and code of conduct.  For the duration of the Employment Term,
Executive agrees not to actively engage in any other employment, occupation, or
consulting activity for any direct or indirect remuneration without the prior
approval of the Board (which approval will not be unreasonably withheld);
provided, however, that Executive may, without the approval of the Board, serve
in any capacity with any civic, educational, or charitable organization,
provided such services do not interfere with Executive’s obligations to the
Company.

 

(i)                                     Executive hereby represents and warrants
to the Company that Executive is not party to any contract, understanding,
agreement or policy, written or otherwise, that would be breached by Executive’s
entering into, or performing services under, this Agreement.  Executive further represents that he has
disclosed to the Company in writing all threatened, pending, or actual claims
that are unresolved and still outstanding as of the Effective Date, in each
case, against Executive of which he is aware, if any, as a result of his
employment with his current employer (or any other previous employer) or his
membership on any boards of directors.

 

 

 

(d)                                 Other Entities. 
Executive agrees to serve and will be appointed, without additional
compensation, as an officer and director for each of the Company’s
subsidiaries, partnerships, joint ventures, limited liability companies and
other affiliates, including entities in which the Company has a significant investment
as determined by the Company.  As used in
this Agreement, the term “affiliates” will include any entity controlled by,
controlling, or under common control of the Company.

 

2.                                       At-Will Employment. 
Executive and the Company agree that Executive’s employment with the
Company constitutes “at-will” employment. 
Executive and the Company acknowledge that this employment relationship
may be terminated at any time, upon written notice to the other party, with or
without good cause or for any or no cause, at the option either of the Company
or Executive.  However, as described in
this Agreement, Executive may be entitled to severance benefits depending upon
the circumstances of Executive’s termination of employment.

 

3.                                       Term of
Agreement.  This
Agreement will have an initial term of two (2) years commencing on the
Effective Date (the “Initial Term”).  On
the second anniversary of the Effective Date, this Agreement will renew for an
additional one (1) year term (the “Additional Term”) unless either party
provides the other party with written notice of non-renewal at least ninety
(90) days prior to the date of automatic renewal.  If the Company provides Executive with a
notice of non-renewal, and such non-renewal is for reasons other than Cause,
Executive will be entitled to the amounts and benefits specified in Section 8
of the Agreement.

 

4.                                       Compensation.

 

(a)                                  Base Salary. 
As of the Effective Date, the Company will pay Executive an annual
salary of $515,000 as compensation for his services (such annual salary, as is
then effective, to be referred to herein as “Base Salary”).  The Base Salary will be subject to annual
review by the Board or the Compensation Committee of the Board (the “Committee”)
and will be paid periodically in accordance with the Company’s normal payroll
practices and be subject to the usual, required withholdings.  The Base Salary will be increased annually
during the Employment Term at the same time each year that the Board or
Committee reviews and adjusts salaries of other senior management (which has
historically occurred on or around February of each year) by an amount no
less than the percentage increase in the overall Consumer Price Index for the
San Francisco/Oakland/San Jose Metropolitan Area (“CPI”) by comparing the CPI
as of December of the then current year to the CPI as of December of
the immediately prior year.

 

(b)                                 Annual Incentive. 
Executive will be eligible to receive an annual cash incentive payable
upon the achievement of performance goals established by the Board or by the
Committee.  During the Employment Term,
Executive’s target annual incentive (“Target Annual Incentive”) will be not
less than 45% of Executive’s Base Salary. 
The actual earned annual cash incentive, if any, payable to Executive
for any performance period will depend upon the extent to which the applicable
performance goal(s) specified by the Board or the Committee are achieved
or exceeded and will be adjusted for under- or over-performance (the “Earned
Annual Incentive”).

 

 

 

 

(c)                                  Stock Options. 
Executive will be eligible to receive annual performance grants under
the Company’s stock option performance program. 
Any determinations relating to such grants will be made in the sole
discretion of the Board or the Committee.

 

5.                                       Employee Benefits.

 

(a)                                  Generally.  Executive
will be eligible to participate in accordance with the terms of all Company
employee benefit plans, policies and arrangements that are applicable to other
senior managers of the Company, as such plans, policies and arrangements may
exist from time to time.

 

(b)                                 Vacation and
Sick Leave.  Executive
will be entitled to receive paid annual vacation and sick leave in accordance
with Company policy for other senior managers. 
In no event will Executive receive less than four (4) weeks of paid
vacation time per calendar year, pursuant to the Company’s policies relating to
vacation accrual and use.

 

6.                                       Expenses.  The Company
will reimburse Executive for reasonable travel, entertainment and other
expenses incurred by Executive in the furtherance of the performance of
Executive’s duties hereunder, in accordance with the Company’s expense
reimbursement policy as in effect from time to time.

 

7.                                       Termination of Employment. 
In the event Executive’s employment with the Company terminates for any
reason, Executive will be entitled to any (a) unpaid Base Salary accrued
up to the effective date of termination; (b) unpaid, but earned and
accrued annual incentive for any completed fiscal year as of his termination of
employment; (c) pay for accrued but unused vacation; (d) benefits or
compensation as provided under the terms of any employee benefit and
compensation agreements or plans applicable to Executive; (e) unreimbursed
business expenses required to be reimbursed to Executive; and (f) rights
to indemnification Executive may have under the Company’s Articles of
Incorporation, Bylaws, the Agreement, or separate indemnification agreement, as
applicable.  In addition, if the
termination is by the Company without Cause, is due to Executive’s Retirement,
or if Executive resigns for Good Reason, Executive will be entitled to the
amounts and benefits specified in Section 8.

 

8.                                       Severance.

 

(a)                                  Termination Following Notice of
Non-Renewal.  If the Company notifies Executive that it
will not renew the Agreement for the Additional Term, and such non-renewal is
for reasons other than Cause, then, Subject to Section 9 and Section 10,
Executive will receive: (i) a lump sum payment (less applicable tax
withholdings) equal to fifteen (15) months of Executive’s Base Salary, as is in
effect at the time of Executive’s Termination, to be paid in accordance with
the Company’s normal payroll policies, but no later than thirty (30) days
following Executive’s termination date; (ii) a lump sum payment (less
applicable tax withholdings) equal to the pro-rated amount of Executive’s
Earned Annual Incentive for the fiscal year in which the termination occurs,
with such pro-rated amount to be calculated by multiplying Executive’s Earned
Annual Incentive by a fraction with a numerator equal to the number of
completed months inclusive between the start of the current fiscal year in
which Executive was employed by the Company (or a successor corporation) and
the date of termination and a denominator equal to 12, to be paid in accordance
with 

 

 

 

 

 

the Company’s normal
payroll policies within five (5) days of the date bonuses would otherwise
be payable for such year (but in no event paid later than the 15th day of the
third month following the end of the calendar year in which the termination
occurs); (iii) reimbursement for premiums paid for continued health
benefits for Executive (and any eligible dependents) under the Company’s health
plans until the earlier of (A) twelve (12) months, payable when such
premiums are due (provided Executive validly elects to continue coverage under
the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), or (B)  the
date upon which Executive and Executive’s eligible dependents become covered
under similar plans, and (iv) full vesting with respect to Executive’s
then outstanding unvested equity awards with a post-termination exercise period
equal to the later of  twelve (12) months from the date of Executive’s
termination of employment or from the date of Executive’s termination of
service from the Board (as applicable), but in no event later than the
scheduled expiration date of such awards as set forth in the applicable award
agreement.  Notwithstanding the
foregoing, the timing of the payment of the severance payments specified in
this Section 8(a) will be subject to the provisions of Section 10
of this Agreement.  In the event of a
Change of Control that occurs during the period commencing on the date that the
Company notifies Executive that it will not renew the Agreement for the
Additional Term and ending on Executive’s termination date, then, in lieu of
the benefits provided in this Section 8(a), Executive will be entitled to
receive the benefits set forth in Section 8(c).

 

(b)                                 Termination Without Cause or Resignation
for Good Reason Not in Connection with a Change of Control. 
If Executive’s employment is terminated by the Company without Cause or
is terminated by Executive for Good Reason, and such termination is not in
Connection with a Change of Control, then, subject to Section 9 and Section 10,
Executive will receive: (i) a
lump sum payment (less applicable tax withholdings) equal to fifteen (15)
months of Executive’s Base Salary, as is in effect at the time of Executive’s
Termination, to be paid in accordance with the Company’s normal
payroll policies, but no later than thirty (30) days following Executive’s
termination date;  (ii) a lump sum payment (less applicable tax
withholdings) equal to the pro-rated amount of Executive’s Earned Annual
Incentive for the fiscal year in which the termination occurs, with such
pro-rated amount to be calculated by multiplying Executive’s Earned Annual
Incentive by a fraction with a numerator equal to the number of completed
months inclusive between the start of the current fiscal year in which
Executive was employed by the Company (or a successor corporation) and the date
of termination and a denominator equal to 12, to be paid in accordance with the
Company’s normal payroll policies within five (5) days of the date bonuses
would otherwise be payable for such year (but in no event paid later than the
15th day of the third month following the end of
the calendar year in which the termination occurs); (iii) reimbursement
for premiums paid for continued health benefits for Executive (and any eligible
dependents) under the Company’s health plans until the earlier of (A) twelve
(12) months, payable when such premiums are due (provided Executive validly
elects to continue coverage under COBRA), or (B)  the date upon which Executive and
Executive’s eligible dependents become covered under similar plans, and (iv) full
vesting with respect to Executive’s then outstanding unvested equity awards
with a post-termination exercise period equal to the later of  twelve (12) months from
the date of Executive’s termination of employment, or from the date of
Executive’s termination of service from the Board (as applicable), but in no
event later than the scheduled expiration date of such awards as set forth
in the applicable award agreement. 
Notwithstanding the foregoing, the timing of the payment of the
severance payments or benefits specified in this Section 8(b) will be
subject to the provisions of Section 10 of this Agreement.

 

 

 

 

(c)                                  Termination Without Cause or Resignation
for Good Reason in Connection with a Change of Control. 
If Executive’s employment is terminated by the Company without Cause or
is terminated by Executive for Good Reason, and such termination is in
Connection with a Change of Control, then, subject to Section 9 and Section 10,
Executive will be entitled to receive the following benefits: (i) a lump
sum payment (less applicable tax withholdings) equal to twenty-four (24) months
of Executive’s Base Salary, as is in effect at the time of Executive’s
termination, to be paid in accordance with the Company’s normal
payroll policies, but no later than thirty (30) days following Executive’s
termination date; (ii) a lump sum payment (less applicable tax withholdings) equal to 200% of
Executive’s Target Annual Incentive, as is in effect at the time of Executive’s
termination, to be paid in accordance with the Company’s normal
payroll policies, but no later than thirty (30) days following Executive’s
termination date; (iii) reimbursement for premiums paid for continued
health benefits for Executive (and any eligible dependents) under the Company’s
health plans until the earlier of (A) twenty-four (24) months, payable
when such premiums are due (provided Executive validly elects to continue
coverage under COBRA), or (B)  the date upon which Executive and Executive’s
eligible dependents become covered under similar plans; (iv) outplacement
services with a total value not to exceed $20,000; and (v) full
vesting with respect to Executive’s then outstanding unvested equity awards with a post-termination exercise period
equal to the later of twelve (12) months from the date of Executive’s
termination of employment, or from the date of Executive’s termination of
service from the Board (as applicable), but in no event later than the
scheduled expiration date of such awards as set forth in the applicable award
agreement.  Notwithstanding the foregoing, the timing of
the payment of the severance payments or benefits specified in this Section 8(c) will
be subject to the provisions of Section 10 of this Agreement.

 

(d)                                 Termination due to Executive’s Retirement. 
If Executive terminates his employment voluntarily due to his Retirement
and such termination is without Cause, and provided Executive provides the
Company with written notice of his Retirement at least ninety (90) days prior
to his Retirement, then, subject to Section 8(d)(1), Section 9 and Section 10,
Executive will be entitled to receive the following benefits: (i) a lump
sum payment (less applicable tax withholdings) equal to twenty-one (21) months
of Executive’s Base Salary, as is in effect at the time of Executive’s
Retirement, to be paid in accordance with the Company’s normal
payroll policies, but no later than thirty (30) days following Executive’s
termination date; (ii) a lump sum payment (less applicable tax withholdings) equal to 100% of
the average annual incentive Executive has received over the three (3) year
period prior to his termination, to be paid in accordance
with the Company’s normal payroll policies, but no later than thirty (30) days
following Executive’s termination date;  (iii) reimbursement for premiums paid
for continued health benefits for Executive (and any eligible dependents) under
the Company’s health plans until the earlier of (A) twelve (12) months, payable
when such premiums are due (provided Executive validly elects to continue
coverage under COBRA), or (B)  the date upon which Executive and Executive’s
eligible dependents become covered under similar plans, and (iv) full
vesting with respect to Executive’s then outstanding unvested equity awards with a post-termination exercise period
equal to the later of  twelve (12) months from the date of Executive’s
termination of employment, or from the date of Executive’s termination of
service from the Board (as applicable), but in no event later than the
scheduled expiration date of such awards as set forth in the applicable award
agreement.  Notwithstanding the foregoing, the timing of
the payment of the severance payments or benefits specified in this Section 8(d) will
be subject to the provisions of Section 10 of this Agreement.  In the event of a Change of Control that
occurs during the period commencing on the date that Executive provides the
Company with written notice of his Retirement and ending on Executive’s
termination date, then, in lieu of the benefits provided in this Section 8(d),
Executive will be entitled to receive the benefits set forth in Section 8(c).  Payments under this Section 8(d) will
be in lieu of any other payments or benefits under Sections 8(a), 8(b), or
8(c).

 

 

 

 

(1)                                  Executive’s Assistance with Transition. 
The Company’s obligation to provide Executive the benefits set forth in Section 8(d) is
conditioned on (A) an appropriate successor to Executive having been
identified, and (B) the Board’s determination that the transition to the
successor identified in Section 8(d)(1)(A) has been successfully
accomplished.  The determinations with
respect to Section 8(d)(1)(A) and 8(d)(1)(B) will be made in the
sole discretion of the Board; provided, however, that such determination will
be made in good faith by the Board and will be based solely on Executive’s
efforts to ensure a successful transition. 
Any dispute relating to the provisions of this Section 8(d)(1) (as
with any and all disputes arising out of the terms of this Agreement) will be
subject to binding arbitration as described in Section 18 of this
Agreement.

 

(e)                                  Termination due to Executive’s Death or
Disability.  If the Company terminates Executive’s
employment as a result of Executive’s death or Disability, then Executive,
subject to Section 9 and Section 10 (as applicable), or the personal
representative of Executive’s estate (which shall be Executive’s living trust,
or if there is none, his probate estate) will receive: (i) full vesting
with respect to Executive’s then outstanding unvested equity awards with a
post-termination exercise period equal to the later of (A) twelve (12) months from the date
of Executive’s termination of employment, or from the date of Executive’s
termination of service from the Board (as applicable), but in no event later
than the scheduled expiration date of such awards as set forth in the
applicable award agreement; (ii) a lump sum payment (less applicable tax withholdings)
equal to the current year’s annual cash incentive pro-rated to the date of
termination, with such pro-rated amount to be calculated by multiplying the
annual cash incentive (with such annual cash incentive amount to be determined
in the sole discretion of the Board or the Committee based upon the
achievement, as of the termination date, of the performance goals established
by the Board or by the Committee) by a fraction with a numerator equal to the
number of days inclusive between the start of the current calendar year and the
date of termination and a denominator equal to 365, and (iii) reimbursement
for premiums paid for continued health benefits for Executive (and any eligible
dependents) under the Company’s health plans until the earlier of (A) twelve
(12) months, payable when such premiums are due (provided Executive validly
elects to continue coverage under COBRA), or (B)  the date upon which Executive and
Executive’s eligible dependents become covered under similar plans.

 

(f)                                    Voluntary Termination Without Good Reason
or Termination for Cause.  If Executive’s employment is
terminated voluntarily, and such termination is not due to Retirement, death or
Disability, without Good Reason or Executive’s employment is terminated for
Cause by the Company, then, except as provided in Section 7, (i) all
further vesting of Executive’s outstanding equity awards will terminate
immediately; (ii) all payments of compensation by the Company to Executive
hereunder will terminate immediately; and (iii) Executive will be eligible
for severance benefits only in accordance with the Company’s then established
plans.

 

9.                                       Conditions to Receipt of Severance; No
Duty to Mitigate.

 

(a)                                  Separation Agreement and Release of
Claims.  The receipt of any severance or other
benefits pursuant to Section 8 will be subject to Executive signing and
not revoking a separation agreement and release of claims in a form acceptable
to the Company.  No severance or other
benefits will be paid or provided until the separation agreement and release
agreement becomes effective.

 

 

 

 

(b)                                 Non-solicitation and Non-competition.  The receipt of
any severance or
other benefits pursuant to Section 8 will be subject to
Executive agreeing that during the Employment Term and Continuance Period, Executive will not (i) solicit
any employee of the Company (other than Executive’s personal assistant) for
employment other than at the Company, or (ii) directly or indirectly engage in, have any
ownership interest in or participate in any entity that as of the date of
termination, competes with the Company in any substantial business of the
Company or any business reasonably expected to become a substantial business of
the Company.  Executive’s passive
ownership of not more than 1% of any publicly traded company and/or 5%
ownership of any privately held company will not constitute a breach of this Section 9(b).

 

(c)                                  Nondisparagement. 
During the Employment Term and Continuance Period, Executive and the
Company in its official communications will not knowingly and materially
disparage, criticize, or otherwise make any derogatory statements regarding the
other.  The Company will instruct its
officers and directors to not knowingly and materially disparage, criticize, or
otherwise make any derogatory statements regarding Executive.  Notwithstanding the foregoing, nothing
contained in this agreement will be deemed to restrict Executive, the Company
or any of the Company’s current or former officers and/or directors from
providing factual information to any governmental or regulatory agency (or in
any way limit the content of any such information) to the extent they are
requested or required to provide such information pursuant to applicable law or
regulation.

 

(d)                                 Other Requirements. 
Executive’s receipt of continued severance payments will be subject to
Executive continuing to comply with the terms of the Confidential Information
Agreement and the provisions of this Section 9.

 

(e)                                  No Duty to
Mitigate.  Executive
will not be required to mitigate the amount of any payment contemplated by this
Agreement, nor will any earnings that Executive may receive from any other
source reduce any such payment.

 

10.                                 Code Section 409A.  Notwithstanding
anything to the contrary in this Agreement solely with respect to the timing of
the payment of any severance payments or benefits other than payment on account
of Executive’s termination due to Executive’s death, if Executive is a “specified
employee” within the meaning of Section 409A of the Internal Revenue Code
of 1986, as amended (the “Code”) (as it has been and may be amended from time
to time) and any regulations and guidance promulgated thereunder (“Section 409A”) at the time of
Executive’s termination, then to the extent any severance payments payable to
Executive pursuant to this Agreement, and any other severance payments or
separation benefits are a plan or part of a plan providing for the “deferral of
compensation” under Section 409A (together, the “Deferred Compensation
Separation Benefits”) otherwise due to Executive on or within the six (6) month
period following Executive’s termination will accrue during such six (6) month
period and will become payable in a lump sum payment on the date six (6) months
and one (1) day following the date of Executive’s termination of
employment, unless Executive dies following the termination of his employment,
in which case, the Deferred Compensation Separation Benefits will be paid to
the personal representative of Executive’s estate (which shall be Executive’s
living trust, or if there is none, his probate estate) as soon as practicable 

 

 

 

 

following
his death.  All subsequent Deferred
Compensation Separation Benefits, if any, will be payable in accordance with
the payment schedule applicable to each payment or benefit.  It is the intent of this Agreement to comply
with the requirements of Section 409A so that none of the severance payments
and benefits to be provided hereunder will be subject to the additional tax
imposed under Section 409A, and any ambiguities herein will be interpreted
to so comply.

 

11.                                 Limitation on Payments. 
In the event that the severance and other benefits provided for in this
Agreement or otherwise payable to Executive (a) constitute “parachute
payments” within the meaning of Section 280G of the Code and (b) but
for this Section 11, would be subject to the excise tax imposed by Section 4999
of the Code, then Executive’s severance benefits under Section 8 will be
either (i) delivered in full, or (ii) delivered as to such lesser
extent which would result in no portion of such severance benefits being
subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts,
taking into account the applicable federal, state and local income taxes and
the excise tax imposed by Section 4999, results in the receipt by
Executive on an after-tax basis, of the greatest amount of severance benefits,
notwithstanding that all or some portion of such severance benefits may be
taxable under Section 4999 of the Code. 
Unless the Company and Executive otherwise agree in writing, any
determination required under this Section 11 will be made in writing by
the Company’s independent public accountants immediately prior to the Change of
Control (the “Accountants”), whose determination will be conclusive and binding
upon Executive and the Company for all purposes.  For purposes of making the calculations
required by this Section 11, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and may rely on
reasonable, good faith interpretations concerning the application of Sections
280G and 4999 of the Code.  The Company
and Executive will furnish to the Accountants such information and documents as
the Accountants may reasonably request in order to make a determination under
this Section.  The Company will bear all
costs the Accountants may reasonably incur in connection with any calculations
contemplated by this Section 11.

 

12.                                 Definitions.

 

(a)                                  Cause.  For purposes
of this Agreement, “Cause” will mean:

 

(i)                                     Executive’s gross negligence or willful
misconduct in the performance of the Employee’s duties to the Company where
such gross negligence or willful misconduct has resulted or is likely to result
in substantial and material damage to the Company or its subsidiaries;

 

(ii)                                  Repeated unexcused absences from the
Company;

 

(iii)                               Commission of any act of fraud with
respect to the Company;

 

(iv)                              Conviction of a
felony or a crime involving moral turpitude and causing material harm to the
standing and reputation of the Company, in each case as determined in good
faith by the Board;

 

(v)                                 Executive’s failure to identify to the
Board (with such identification to be made in writing to the Board) an
appropriate individual to serve as President of the Company and as a successor
to Executive (the “Successor”) by January 31, 2009 (with any determination
relating to the appropriateness of the Successor identified by Executive to be
made in writing by the Board and in the sole discretion of the Board in good
faith); or

 

 

 

 

(vi)                              The Board’s determination that the
transition to the Successor has not been successfully accomplished within one
hundred and eighty (180) days of the first day of Successor’s employment with
the Company as President.  The determination with respect
to this Section 12(a)(vi) will be made in the sole discretion of the
Board; provided, however, that such determination will be made in good faith by
the Board and will be based solely on Executive’s efforts to ensure a
successful transition.  Any dispute
relating to the provisions of Sections 12(a)(v) and 12(a)(vi) (as
with any and all disputes arising out of the terms of this Agreement) will be
subject to binding arbitration as provided in Section 18 of this
Agreement.

 

(b)                                 Change of Control. 
For purposes of this Agreement, “Change of Control” will mean the
occurrence of any of the following events:

 

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

 

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

 

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

 

(c)                                  Continuance Period. 
For purposes of this Agreement, “Continuance Period” will mean the
period commencing upon the termination of Executive’s employment and ending
twelve (12) months later.

 

(d)                                 Disability.  “Disability” will mean Executive’s total and permanent
disability as defined in Section 22(e)(3) of the Code unless the
Company maintains a long-term disability plan at the time of Executive’s
termination, in which case the determination of disability under such plan will
be considered the definition of “Disability” for purposes of this Agreement.

 

 

 

 

(e)                                  Good Reason.  “Good
Reason” will mean Executive’s termination of employment within ninety (90) days
following the end of the Cure Period (as defined below) as a result of the
occurrence of any of the following without the Executive’s consent:

 

(i)                                     A material diminution of Executive’s
authority, duties, or responsibilities, relative to Executive’s authority,
duties, or responsibilities in effect immediately prior to such reduction;

 

(ii)                                  A material diminution by the Company in
the Base Salary of Executive as in effect immediately prior to such reduction,
other than pursuant to a reduction that also is applied to substantially all
other employees of the Company;

 

(iii)                               The relocation of Executive to a facility
or a location more than thirty (30) miles from Executive’s then present
location; provided, however, that Executive must provide written notice to the
Board of the condition that could constitute a “Good Reason” event within
ninety (90) days of the initial existence of such condition and such condition
must not have been remedied by the Company within thirty (30) days (the “Cure
Period”) of such written notice.

 

(f)                                    In Connection with a Change of Control. 
For purposes of this Agreement, a termination of Executive’s employment
with the Company is “in Connection with a Change of Control” if Executive’s
employment is terminated within twenty-four (24) months following a Change of
Control.

 

(g)                                 Retirement.  For purposes
of this Agreement, “Retirement” will mean Executive’s voluntary
termination at any time following the date that is thirty (30) months from the
Effective Date, provided Executive has given the Company ninety (90) days
notice of his intent to terminate his employment due to his Retirement and the
Company has consented to such termination.

 

13.                                 Indemnification. 
Subject to applicable law, Executive will be provided indemnification to
the maximum extent permitted by the Company’s Articles of Incorporation or
Bylaws, including, if applicable, any directors and officers insurance
policies, with such indemnification to be on terms determined by the Board or
any of its committees, but on terms no less favorable than provided to any
other Company executive officer or director and subject to the terms of any
separate written indemnification agreement.

 

14.                                 Confidential Information. 
Executive will execute the Company’s standard form of employment,
confidential information, invention assignment, and arbitration agreement appended
hereto as Exhibit A (the “Confidential Information Agreement”).

 

15.                                 Assignment.  This
Agreement will be binding upon and inure to the benefit of (a) the heirs,
executors and legal representatives of Executive upon Executive’s death, and (b) any
successor of the Company.  Any such
successor of the Company will be deemed substituted for the Company under the
terms of this Agreement for all purposes. 
For this purpose, “successor” means any person, firm, corporation, or
other business entity which at any time, whether by purchase, merger, or
otherwise, directly or indirectly acquires all or substantially all of the
assets or business of the Company.  None
of the rights of Executive to receive any form of compensation payable pursuant
to this Agreement may be assigned or transferred except by will or the laws of
descent and distribution.  Any other
attempted assignment, transfer, conveyance, or other disposition of Executive’s
right to compensation or other benefits will be null and void.

 

 

 

 

16.                                 Notices.  All notices,
requests, demands and other communications called for hereunder will be in
writing and will be deemed given (a) on the date of delivery if delivered
personally; (b) one (1) day after being sent overnight by a
well-established commercial overnight service; or (c) four (4) days
after being mailed by registered or certified mail, return receipt requested,
prepaid and addressed to the parties or their successors at the following
addresses, or at such other addresses as the parties may later designate in
writing:

 

If to the Company:

 

Attn: Chairman of the Compensation Committee

c/o Corporate Secretary

1172 Castro Street

Mountain View, CA  94040

 

If to Executive:

 

at the last residential
address known by the Company.

 

17.                                 Severability. 
If any provision hereof becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable, or void, this Agreement will
continue in full force and effect without said provision.

 

18.                                 Arbitration.

 

(a)                                  Arbitration. 
In consideration of Executive’s service to the Company, its promise to
arbitrate all employment related disputes and Executive’s receipt of the
compensation, pay raises and other benefits paid to Executive by the Company,
at present and in the future, Executive agrees that any and all controversies,
claims, or disputes with anyone (including the Company and any employee,
officer, director, shareholder or benefit plan of the Company in their capacity
as such or otherwise) arising out of, relating to, or resulting from Executive’s
service to the Company under this Agreement or otherwise or the termination of
Executive’s service with the Company, including any breach of this Agreement,
will be subject to binding arbitration under the Arbitration Rules set
forth in California Code of Civil Procedure Section 1280 through 1294.2,
including Section 1283.05 (the “Rules”) and pursuant to California
law.  Disputes which Executive agrees to
arbitrate, and thereby agrees to waive any right to a trial by jury, include
any statutory claims under state or federal law, including, but not limited to,
claims under Title VII of the Civil Rights Act of 1964, the Americans with
Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the
Older Workers Benefit Protection Act, the California Fair Employment and
Housing Act, the California Labor Code, claims of harassment, discrimination or
wrongful termination and any statutory claims. 
Executive further understands that this Agreement to arbitrate also
applies to any disputes that the Company may have with Executive.

 

(b)                                 Procedure.  Executive
agrees that any arbitration will be administered by the Judicial Arbitration
and Mediation Services (“JAMS”) and that a neutral arbitrator will be selected
in a manner consistent with its National Rules for the Resolution of
Employment Disputes.  All 

 

 

 

 

arbitration proceedings shall be held in Santa Clara County,
California.  The arbitration proceedings
will allow for discovery according to the rules set forth in the Employment Arbitration Rules and  Procedures
of JAMS (the “JAMS Rules”) or California Code of Civil
Procedure.  Executive agrees
that the arbitrator will have the power to decide any motions brought by any
party to the arbitration, including motions for summary judgment and/or
adjudication and motions to dismiss and demurrers, prior to any arbitration
hearing.  Executive agrees that the
arbitrator will issue a written decision on the merits.  Executive also agrees that the arbitrator
will have the power to award any remedies, including attorneys’ fees and costs,
available under applicable law. 
Executive understands the Company will pay for any administrative or
hearing fees charged by the arbitrator or JAMS except that with respect to any
arbitration Executive initiates, Executive will pay the amount Executive would
have otherwise been required to pay to file a claim in court.  Executive agrees that the arbitrator will
administer and conduct any arbitration in a manner consistent with the Rules and
that to the extent that the JAMS Rules conflict with the Rules, the Rules will
take precedence.

 

(c)                                  Remedy. Except as provided by the Rules, arbitration
will be the sole, exclusive and final remedy for any dispute between Executive
and the Company.  Accordingly, except as
provided for by the Rules, neither Executive nor the Company will be permitted
to pursue court action regarding claims that are subject to arbitration.  Notwithstanding, the arbitrator will not have
the authority to disregard or refuse to enforce any lawful Company policy, and
the arbitrator will not order or require the Company to adopt a policy not
otherwise required by law which the Company has not adopted.  The prevailing party in any arbitration
proceeding shall be entitled to recover from the losing party all costs that it
has incurred as a result of such proceeding, including but not limited to, all
reasonable travel costs and reasonable attorneys’ fees.

 

(d)                                 Availability of
Injunctive Relief.  The parties
hereto expressly reserve their respective rights under the Rules to
petition the court for provisional relief. 
In the event either party seeks injunctive relief, the prevailing party
will be entitled to recover reasonable costs and attorneys’ fees.

 

(e)                                  Administrative Relief. 
Executive understands that this Agreement does not prohibit Executive
from pursuing an administrative claim with a local, state or federal
administrative body such as the Department of Fair Employment and Housing, the
Equal Employment Opportunity Commission or the workers’ compensation
board.  This Agreement does, however,
preclude Executive from pursuing court action regarding any such claim.

 

(f)                                    Voluntary Nature of Agreement. 
Executive acknowledges and agrees that Executive is executing this
Agreement voluntarily and without any duress or undue influence by the Company
or anyone else. Executive further acknowledges and agrees that Executive has
carefully read this Agreement and that Executive has asked any questions needed
for Executive to understand the terms, consequences and binding effect of this
Agreement and fully understands it, including that EXECUTIVE IS
WAIVING EXECUTIVE’S RIGHT TO A JURY TRIAL.  Finally, Executive agrees that Executive has
been provided an opportunity to seek the advice of an attorney of Executive’s
choice before signing this Agreement.

 

19.                                 Legal Expenses. 
The Company will reimburse Executive for reasonable and actual legal
expenses incurred by him in connection with the negotiation, preparation and
execution of this Agreement.

 

 

 

 

20.                                 Integration. 
This Agreement, together with the Confidential Information Agreement and
the standard forms of equity award grant that describe Executive’s outstanding
equity awards, represents the entire agreement and understanding between the
parties as to the subject matter herein and supersedes all prior or
contemporaneous agreements whether written or oral, including, but not limited
to, the Change of Control Agreement entered into between Executive and the
Company, dated May 12, 2000.  No
waiver, alteration, or modification of any of the provisions of this Agreement
will be binding unless in a writing and signed by duly authorized
representatives of the parties hereto. 
In entering into this Agreement, no party has relied on or made any
representation, warranty, inducement, promise, or understanding that is not in
this Agreement.  To the extent
that any provisions of this Agreement conflict with those of any other
agreement to be signed upon Executive’s hire, the terms in this Agreement will
prevail.

 

21.                                 Waiver of Breach. 
The waiver of a breach of any term or provision of this Agreement, which
must be in writing, will not operate as or be construed to be a waiver of any
other previous or subsequent breach of this Agreement.

 

22.                                 Survival.  The
Confidential Information Agreement and the Company’s and Executive’s
responsibilities under Sections 8 and 9 will survive the termination of this
Agreement.

 

23.                                 Headings.  All captions
and Section headings used in this Agreement are for convenient reference
only and do not form a part of this Agreement.

 

24.                                 Tax Withholding. 
All payments made pursuant to this Agreement will be subject to
withholding of applicable taxes.

 

25.                                 Governing Law. 
This Agreement will be governed by the laws of the state of California
without regard to its conflict of laws provisions.

 

26.                                 Acknowledgment. 
Executive acknowledges that he has had the opportunity to discuss this
matter with and obtain advice from his private attorney, has had sufficient
time to, and has carefully read and fully understands all the provisions of
this Agreement, and is knowingly and voluntarily entering into this Agreement.

 

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

 

 

 

 

IN WITNESS WHEREOF, each
of the parties has executed this Agreement, in the case of the Company by a
duly authorized officer, as of the day and year written below.

 

	
  COMPANY:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  VIVUS, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Graham S.
  Strachan

  	
   

  	
  Date:
  December 20, 2007

  
	
  GRAHAM STRACHAN

  	
   

  	
   

  
	
  Chairman of the
  Compensation Committee

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EXECUTIVE:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Leland F.
  Wilson

  	
   

  	
  Date:
  December 20, 2007

  
	
  LELAND F. WILSON

  	
   

  	
   

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[SIGNATURE PAGE TO WILSON EMPLOYMENT AGREEMENT]Exhibit 10.64

 

CHANGE OF CONTROL AND SEVERANCE
AGREEMENT

 

This Change of Control and Severance
Agreement (the “Agreement”) is made and entered into effective as of
                          
2007, by and between                           
(the “Employee”) and VIVUS, Inc., a Delaware corporation (the “Company”).

 

RECITALS

 

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

 

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

 

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

 

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

 

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

 

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

 

                1.             At-Will
Employment.  The Company and the
Employee acknowledge that the Employee’s employment is and shall continue to be
at-will, as defined under applicable law. 
If the Employee’s employment terminates for any reason, the Employee
shall not be entitled to any severance payments or benefits, other than as
provided by this Agreement.  The terms of
this Agreement shall terminate upon the earlier of (i) the date that all
obligations of the parties hereunder have been satisfied, or (ii) twenty-

 

 

 

four (24) months after a Change of
Control.  A termination of the terms of
this Agreement pursuant to the preceding sentence shall be effective for all
purposes, except that such termination shall not affect the payment or
provision of compensation or benefits on account of a termination of employment
occurring prior to the termination of the terms of this Agreement.

 

2.             Severance Benefits.

 

(a)           Termination Following A Change of
Control.  Subject to Sections 4 and 8
below, if the Employee’s employment with the Company is terminated at any time
within twenty-four (24) months after a Change of Control, then the Employee
shall be entitled to receive severance benefits as follows:

 

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

 

 (ii)           Involuntary Termination.  If the Employee’s employment is
terminated  (A) by the Company other
than for Cause or (B) voluntarily by the Employee for Good Reason, then
Employee shall be entitled to receive the following benefits:  (i) monthly severance payments during
the period from the date of the Employee’s termination until the date
twenty-four (24) months after the effective date of the termination (the “Severance
Period”) equal to the monthly salary which the Employee was receiving
immediately prior to the Change of Control; (ii) monthly severance
payments during the Severance Period equal to 1/12th of the Employee’s “target
bonus” (as defined herein) for the fiscal year in which the termination occurs
for each month in which severance payments are made to the Employee pursuant to
subsection (i) above ; (iii) the pro-rated amount of the Employee’s “target
bonus” for the fiscal year in which the termination occurs, calculated based on
the number of months during such fiscal year in which the Employee was employed
by the Company (or a successor corporation) with such payment being made on the
termination date; (iv) reimbursement for premiums paid for continued
health benefits for Employee (and any eligible dependents) under the Company’s
health plans until the earlier of (a) twenty-four (24) months, payable
when such premiums are due (provided Employee validly elects to continue
coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), or
(b)  the date upon which Employee and Employee’s eligible dependents
become covered under similar plans; and (v) outplacement services with a
total value not to exceed Twenty Thousand Dollars ($20,000), to be provided
within the Severance Period.  The
severance payments described in subsections (i) and (ii) above shall
be paid during the Severance Period in accordance with the Company’s standard
payroll practices.

 

 

 

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

 

(b)           Acceleration of
Options.  Upon the closing of a
Change of Control, the vesting and exercisability of each option granted to the
Employee by The Company (the Options) shall automatically vest in full and
become immediately exercisable.

 

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

 

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

 

 (ii)           Involuntary Termination.  If the Employee’s employment is terminated(A) by
the Company other than for Cause, or (B) voluntarily by the Employee for
Good Reason, then the Employee shall be entitled to receive the following
benefits:  (i) monthly severance
payments during the period from the date of the Employee’s termination until
the date three (3) months after the effective date of the termination (the “Severance
Period”) equal to the monthly salary which the Employee was receiving immediately
prior to the termination date; (ii) monthly severance payments during the
Severance Period equal to 1/12th of the
Employee’s “target bonus” (as defined herein) for the fiscal year in which the
termination occurs for each month in which severance payments are made to the
Employee pursuant to subsection (i) above; (iii) the pro-rated amount
of the Employee’s “target bonus” for the fiscal year in which the termination
occurs, calculated based on the number of months during such fiscal year in
which the Employee was employed by the Company (or a successor corporation)
with such payment being made on the termination date; (iv) reimbursement
for premiums paid for continued health benefits for Employee (and any eligible
dependents) under the Company’s health plans until the earlier of (a) the
end of the Severance Period, payable when such premiums are due (provided
Employee validly elects to continue coverage under COBRA, or (b)  the date
upon which Employee and Employee’s eligible dependents become covered under
similar plans; and (v) outplacement services with a total value not to
exceed Twenty Thousand Dollars ($20,000), to be provided within the Severance
Period.  The severance payments described
in subsections (i) and (ii) above shall be paid during the Severance
Period in accordance with the Company’s standard payroll practices.

 

 

 

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

 

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

 

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

 

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

 

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

 

 (iii)          Change in Board Composition.  A change in the composition of the Board of
Directors of the Company, as a result of which fewer than a majority of the
directors are Incumbent Directors.  “Incumbent
Directors” shall mean directors who either (A) are directors of the
Company as of July 1, 2007 or (B) are elected, or nominated for
election, to the Board of Directors of the Company with the affirmative votes
of at least a majority of the Incumbent Directors at the time of such election
or nomination (but shall not include an individual whose election or nomination
is in connection with an actual or threatened Proxy contest relating to the
election of directors to the Company).

 

(b)           Cause.  “Cause”
shall mean (i) gross negligence or willful misconduct in the performance
of the Employee’s duties to the Company where such gross negligence or willful
misconduct has resulted or is likely to result in substantial and material
damage to the Company or its subsidiaries, (ii) repeated unexcused
absences from the Company, (iii) commission of any act of fraud 

 

 

 

with
respect to the Company, or (v) conviction of a felony or a crime involving
moral turpitude and causing material harm to the standing and reputation of the
Company, in each case as determined in good faith by the Board of Directors of
the Company.

 

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

 

(d)           Good Reason.  “Good Reason” shall mean the Employee’s
voluntary termination, upon 30 days prior written notice to the Company, after
any one of the following events: (i) a material reduction or change in job
duties, responsibilities and requirements inconsistent with the Employee’s
position with the Company and the Employee’s prior duties, responsibilities and
requirements; (ii) a material reduction of the Employee’s base
compensation; or (iii) the Employee’s refusal to relocate to a facility or
location more than 30 miles from the Company’s current location; provided,
however, that a voluntary termination of Employee for any events listed under
this Section (c)(i) through (c)(iii) shall not constitute “Good
Reason” if such event or events are cured by the Company within thirty (30)
days after receipt of written notice from the Employee of Employee’s intent to
terminate employment pursuant to this Section.

 

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

 

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

 

(a)           delivered in full; or

 

(b)           delivered as to
such lesser extent which would result in no portion of such severance benefits
being subject to excise tax under Section 4999 of the Code, whichever of
the foregoing amounts, taking into account the applicable federal, state and
local income taxes and the excise tax imposed by Section 4999, results in
the receipt by Employee on an after-tax basis, of the greatest amount of
severance benefits, notwithstanding that all or some portion of such severance
benefits may be taxable under Section 4999 of the Code.  Unless the Company and Employee otherwise
agree in writing, any determination required under this Section 4 will be
made in writing by the Company’s independent public accountants immediately
prior to a Change of Control (the “Accountants”), whose determination will be
conclusive and binding upon Employee and the Company

 

 

 

 

 

for
all purposes.  For purposes of making the
calculations required by this Section 4, the Accountants may make
reasonable assumptions and approximations concerning applicable taxes and may
rely on reasonable, good faith interpretations concerning the application of
Sections 280G and 4999 of the Code.  The
Company and Employee will furnish to the Accountants such information and
documents as the Accountants may reasonably request in order to make a
determination under this Section.  The
Company will bear all costs the Accountants may incur in connection with any
calculations contemplated by this Section 4.

 

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

 

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

 

7.             Conditions to
Receipt of Severance.  The receipt of
severance and any other benefits pursuant to Section 2 will be subject to
Employee signing and not revoking a separation agreement and release of claims
in a form acceptable to the Company.  No
severance or other benefits will be paid or provided until the separation agreement
and release agreement becomes effective.

 

8.             Miscellaneous
Provisions.

 

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

 

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

 

 

 

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

 

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

 

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

 

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

 

(g)           Legal Fees and Expenses.  The parties shall each bear their own
expenses, legal fees and other fees incurred in connection with this Agreement.

 

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

 

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

 

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

 

 

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

 

9.             Section 409A.  Notwithstanding anything to the contrary in
this Agreement, if Employee is a “specified employee” within the meaning of Section 409A
of the Code and any final regulations and guidance promulgated thereunder
(collectively “Section 409A”) at the time of Employee’s termination, and
the severance payable to Employee, if any, pursuant to this Agreement, when
considered together with any other severance payments or separation benefits
may be considered deferred compensation under Section 409A (together, the “Deferred
Compensation Separation Benefits”), then only that portion of the Deferred
Compensation Separation Benefits which do not exceed the Section 409A
Limit (as defined herein) may be made within the first six (6) months
following Employee’s termination of employment in accordance with the payment
schedule applicable to each payment or benefit. 
Any portion of the Deferred Compensation Separation Benefits in excess
of the Section 409A Limit otherwise due to Employee on or within the six (6) month
period following Employee’s termination will accrue during such six (6) month
period and will become payable in a lump sum payment on the date six (6) months
and one (1) day following the date of Employee’s termination of
employment.  All subsequent Deferred
Compensation Separation Benefits, if any, will be payable in accordance with
the payment schedule applicable to each payment or benefit.  It is the intent of this Agreement to comply
with the requirements of Section 409A so that none of the severance
payments and benefits to be provided hereunder will be subject to the
additional tax imposed under Section 409A, and any ambiguities herein will
be interpreted to so comply.

 

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

 

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

 

	
  VIVUS, Inc.

  	
   

  	
  Employee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  Timothy E. Morris

  	
   

  	
  Name:

  	
   

  
	
  Title:

  	
  Chief Financial Officer

  	
   

  	
  Title:

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

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