UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
December 19, 2007
Date of Report (date of earliest event reported)
VIVUS, INC.
(Exact name of registrant as specified in charter)
Delaware |
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0-23490 |
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94-3136179 |
(State or other jurisdiction of |
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(Commission File Number) |
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(I. R. S. Employer Identification |
1172 Castro Street, Mountain View, California 94040
(Address of principal executive offices)
Registrants telephone number, including area code: (650) 934-5200
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
Employment Agreement
On December 19, 2007, the Compensation Committee of the Board of Directors (the Compensation Committee) of VIVUS, Inc. (the Company) approved an employment agreement (the Employment Agreement) with Leland F. Wilson, the Companys President and Chief Executive Officer. The Employment Agreement replaces the original letter of employment and the Change of Control Agreement entered into between the Company and Mr. Wilson on June 14, 1991 and May 12, 2000, respectively. The Employment Agreement was entered into in part to ensure compliance with recently issued regulations on Deferred Compensation Separation Benefits as mandated by Section 409A of the Internal Revenue Code. The terms of the Employment Agreement include:
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A base salary of $515,000 per year; |
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Eligibility to receive an annual cash incentive payment for the achievement of performance goals established by the Board of Directors or the Compensation Committee, with an incentive target of not less than 45% of Mr. Wilsons base salary; |
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Eligibility to receive annual performance grants under the Companys stock option performance program, with any determinations relating to such grants to be made in the sole discretion of the Board of Directors or the Compensation Committee; |
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In the event that the Employment Agreement is not renewed, or if Mr. Wilsons employment with the Company is terminated without cause or if Mr. Wilson resigns for good reason (as those terms are defined in the Employment Agreement), other than as a result of a change of control (as defined in the Employment Agreement), and subject to Mr. Wilson signing a release of claims in favor of the Company, the payment of (i) a lump sum payment equal to 15 months of Mr. Wilsons base salary, as in effect at the time of termination; (ii) a lump sum payment equal to the pro-rated amount of Mr. Wilsons target annual incentive for the year in which termination occurs; (iii) up to 12 months of reimbursement for premiums paid for COBRA coverage and (iv) full acceleration with respect to Mr. Wilsons outstanding unvested equity awards with an exercise period equal to the later of 12 months from termination of employment or 12 months from termination of service from the Board of Directors; |
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In the event that Mr. Wilsons employment with the Company is terminated without cause or resignation for good reason in connection with a change of control, and subject to Mr. Wilson signing a release of claims in favor of the Company, the payment of (i) a lump sum payment equal to 24 months of Mr. Wilsons base salary, as in effect at the time of termination; (ii) a lump sum payment equal to 200% of Mr. Wilsons target annual incentive for the year in which termination occurs; (iii) up to 24 months of reimbursement for premiums paid for COBRA coverage; (iv) outplacement services with a total value not to exceed $20,000 and (v) full acceleration with respect to Mr. Wilsons outstanding unvested equity awards with an exercise period equal to the later of 12 months from termination of employment or 12 months from termination of service from the Board of Directors; |
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In the event that Mr. Wilsons employment with the Company is terminated voluntarily by Mr. Wilson due to his retirement, and subject to Mr. Wilson signing a release of claims in favor of the Company, the payment of (i) a lump sum payment equal to 21 months of Mr. Wilsons base salary, as in effect at the time of retirement; (ii) a lump sum payment equal to 100% of the average annual incentive received by Mr. Wilson over the three year period prior to his retirement; (iii) up to 12 months of reimbursement for premiums paid for COBRA coverage and (iv) full acceleration with respect to Mr. Wilsons outstanding unvested equity awards with an exercise period equal to the later of 12 months from termination of employment or 12 months from termination of service from the Board of Directors; |
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An agreement by Mr. Wilson not to solicit for employment any employee of the Company other than with the Company, not to compete with the Company and not to disparage the Company, in each case during the term of his employment with the Company or until such time as he is no longer receiving payments with respect to his base salary from the Company; and |
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The reimbursement by the Company of reasonable and actual legal expenses incurred by Mr. Wilson in connection with the negotiation, preparation and execution of the Employment Agreement. |
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This brief description of the Employment Agreement is qualified in its entirety by reference to the provisions of the Employment Agreement attached as Exhibit 10.63 to this current report on Form 8-K.
Change of Control Agreements
On December 19, 2007, the Compensation Committee approved change of control and severance agreements (each a Change of Control Agreement) for Timothy E. Morris, the Companys Vice President, Finance and Chief Financial Officer; Peter Y. Tam, the Companys Senior Vice President, Product and Corporate Development; Wesley W. Day, Ph.D., the Companys Vice President, Clinical Development; Lee B. Perry, the Companys Vice President and Chief Accounting Officer; Guy P. Marsh, the Companys Vice President, U.S. Operations and General Manager; and Changjin Wang, Ph.D., the Companys Vice President, Business Development (each an Executive). The new agreements replace existing change of control agreements with each Executive. The Change of Control Agreements were approved in part to ensure compliance with recently issued regulations on Deferred Compensation Separation Benefits as mandated by Section 409A of the Internal Revenue Code.
The Change of Control Agreements provide that if an Executives employment with the Company is terminated by the Company without cause or by the Executive for good reason within 24 months after a change of control (as such term is defined in the Change of Control Agreement) of the Company, the Executive will receive, subject to signing a release of claims in favor of the Company, (i) monthly severance payments during the period from the date of the Executives termination until the date 24 months after the effective date of the termination (for purposes of this paragraph only, the Severance Period) equal to the monthly salary the Executive was receiving immediately prior to the change of control; (ii) monthly severance payments during the Severance Period equal to 1/12th of the Executives target bonus (as such term is defined in the Change of Control Agreement) for the fiscal year in which the termination occurs for each month in which severance payments are made to the Executive pursuant to (i) above; (iii) an additional pro-rated portion of the Executives target bonus; (iv) up to 24 months of reimbursement for premiums paid for COBRA coverage and (v) outplacement services with a total value not to exceed $20,000.
The Change of Control Agreements also provide that if an Executives employment with the Company is terminated without cause (other than within 24 months after a change of control of the Company), the Executive will receive, subject to signing a release of claims in favor of the Company, (i) monthly severance payments during the period from the date of the Executives termination until the date that is 3 months after the effective date of termination (for purposes of this paragraph only, the Severance Period), equal to the monthly salary the Executive was receiving immediately prior to the termination date; (ii) monthly severance payments during the Severance Period equal to 1/12th of the Executives target bonus for the fiscal year in which the termination occurs for each month in which severance payments are made to the Executive pursuant to (i) above; (iii) an additional pro-rated portion of the Executives target bonus; (iv) up to 3 months of reimbursement for premiums paid for COBRA coverage and (v) outplacement services with a total value not to exceed $20,000, to be provided during the Severance Period.
The Change of Control Agreements also provide for the automatic vesting in full of all outstanding stock options held by the Executives upon the close of a change of control.
This brief description of the Change of Control Agreements is qualified in its entirety by reference to the provisions of the Change of Control Agreements, the Form of which is attached as Exhibit 10.64 to this current report on Form 8-K.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Vesting of Non-Employee Directors Equity Awards
On December 19, 2007, the Compensation Committee approved a resolution pursuant to which non-employee members of the Board of Directors shall be entitled, upon termination of service from the Board of Directors, to an exercise period equal to 12 months from termination of service from the Board of Directors for such directors then-outstanding equity awards.
Employment and Change of Control Agreements
See descriptions under Item 1.01 above.
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Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. |
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Description |
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10.63 |
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Employment Agreement dated December 20, 2007 by and between the registrant and Leland F. Wilson.* |
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10.64 |
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Form of Change of Control and Severance Agreement dated December 19, 2007 by and between the registrant and certain of its executive officers.* |
* Indicates a management contract or compensatory plan.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: December 21, 2007 |
VIVUS, INC. |
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/s/ Lee B. Perry |
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Lee B. Perry |
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EXHIBIT INDEX
Exhibit No. |
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Description |
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10.63 |
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Employment Agreement dated December 20, 2007 between the Company and Leland F. Wilson.* |
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10.64 |
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Form of Change of Control and Severance Agreement dated December 19, 2007 by and between the registrant and certain of its executive officers.* |
* Indicates a management contract or compensatory plan.
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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).
(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 Executives 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.
the Companys 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 Companys 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 Executives eligible dependents become covered under similar plans, and (iv) full vesting with respect to Executives then outstanding unvested equity awards with a post-termination exercise period equal to the later of twelve (12) months from the date of Executives termination of employment or from the date of Executives 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 Executives 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).
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.
(i) Executives gross negligence or willful misconduct in the performance of the Employees 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) Executives 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 Boards determination that the transition to the Successor has not been successfully accomplished within one hundred and eighty (180) days of the first day of Successors 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 Executives 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.
(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 Companys 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 Companys 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).
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.
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.
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VIVUS, INC. |
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/s/ Graham S. Strachan |
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Date: December 20, 2007 |
GRAHAM STRACHAN |
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Chairman of the Compensation Committee |
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EXECUTIVE: |
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/s/ Leland F. Wilson |
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Date: December 20, 2007 |
LELAND F. WILSON |
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[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 Companys 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 Employees 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 Employees 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 Employees employment is and shall continue to be at-will, as defined under applicable law. If the Employees 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 Employees 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 Employees employment for Cause (as defined below), then the Employee shall not be entitled to receive severance payments. The Employees benefits will be terminated under the Companys 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 Employees 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 Employees 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 Employees 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 Employees 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 Companys 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 Employees 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 Companys standard payroll practices.
(iii) Disability; Death. If the Company terminates Employees employment as a result of Employees disability, or Executives 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 Companys 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 Employees 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 Employees employment for Cause (as defined below), then the Employee shall not be entitled to receive severance payments. The Employees benefits will be terminated under the Companys 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 Employees 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 Employees 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 Employees 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 Employees 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 Companys 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 Employees 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 Companys standard payroll practices.
(iii) Disability; Death. If the Company terminates Employees employment as a result of Employees disability, or Executives 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 Companys 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 Companys 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 Companys 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 Employees 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 Employees 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 Employees 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 Employees position with the Company and the Employees prior duties, responsibilities and requirements; (ii) a material reduction of the Employees base compensation; or (iii) the Employees refusal to relocate to a facility or location more than 30 miles from the Companys 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 Employees intent to terminate employment pursuant to this Section.
(e) Target Bonus. Target bonus shall mean that percentage of the Employees 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.
(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 Companys 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 Companys 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 Employees rights hereunder shall inure to the benefit of, and be enforceable by, the Employees 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 arbitrators 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 creditors 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 Employees 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 Employees 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 Employees 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 Employees 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) Employees annualized compensation based upon the annual rate of pay paid to Employee during the Companys taxable year preceding the Companys taxable year of Employees 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 Employees 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. |
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Timothy E. Morris |
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Name: |
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Chief Financial Officer |
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