<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Vivus, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
VIVUS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 31, 2000
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of VIVUS,
Inc., a Delaware corporation (the "Company"), will be held on Wednesday, May 31,
2000, at 10:00 a.m., local time, at the Crowne Plaza Palo Alto, 4290 El Camino
Real, Palo Alto, CA 94306 for the following purposes:
1. To elect six directors to serve until the next Annual Meeting of
Stockholders and until their successors are duly elected and qualified.
2. To amend the 1994 Employee Stock Purchase Plan by increasing the
shares reserved for issuance under the plan by an aggregate of 400,000.
3. To confirm the appointment of Arthur Andersen LLP as independent
public accountants for the fiscal year ending December 31, 2000.
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
These items of business are more fully described in the Proxy Statement
accompanying this notice.
Only stockholders of record at the close of business on April 10, 2000 are
entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to sign and
return the enclosed Proxy as promptly as possible in the postage-prepaid
envelope enclosed for that purpose. Any stockholder attending the meeting may
vote in person even if the stockholder has returned a proxy.
By order of the Board of Directors
Leland F. Wilson
President and Chief Executive Officer
Mountain View, California
April 20, 2000
- --------------------------------------------------------------------------------
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE
AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
- --------------------------------------------------------------------------------
<PAGE> 3
VIVUS, INC.
PROXY STATEMENT FOR THE 2000
ANNUAL MEETING OF STOCKHOLDERS
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors (the
"Board") of VIVUS, Inc., a Delaware corporation (the "Company" or "VIVUS"), for
use at the Annual Meeting of Stockholders to be held on Wednesday, May 31, 2000,
at 10:00 a.m., local time, or at any adjournment thereof, for the purposes set
forth in this Proxy Statement and in the accompanying Notice of Annual Meeting
of Stockholders. The Annual Meeting will be held at the Crowne Plaza Palo Alto,
4290 El Camino Real, Palo Alto, CA 94306.
These proxy solicitation materials were mailed on or about April 20, 2000
to all stockholders entitled to vote at the meeting.
RECORD DATE AND SHARE OWNERSHIP
Stockholders of record at the close of business on April 10, 2000 are
entitled to notice of the Annual Meeting of its Stockholders and to vote at the
meeting. At the record date, 32,246,413 shares of the Company's Common Stock
were issued and outstanding and held of record by approximately 735
stockholders.
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock as of April
1, 2000 by (i) each stockholder known by the Company to be the beneficial owner
of more than 5% of the Company's Common Stock; (ii) each director; (iii) the
Company's Chief Executive Officer and the Company's four other most highly
compensated executive officers serving in that capacity as of December 31, 1999;
and (iv) all directors and executive officers as a group.
<TABLE>
<CAPTION>
BENEFICIALLY OWNED STOCK(1)
FIVE PERCENT STOCKHOLDERS, ------------------------------------------
DIRECTORS AND EXECUTIVE OFFICERS NUMBER OF SHARES ACQUIRABLE(2) PERCENT
-------------------------------- ---------------- ------------- -------
<S> <C> <C> <C>
Leland F. Wilson(3)............................... 422,797 935,080 4.09%
Virgil A. Place, M.D.(4).......................... 708,395 17,291 2.25%
Mark B. Logan..................................... 0 8,000 *
Mario M. Rosati................................... 5,891 8,000 *
Linda M. Shortliffe, M.D.......................... 0 8,000 *
Joseph E. Smith................................... 0 42,666 *
Neil Gesundheit, M.D.............................. 113,324 149,712 *
Carol D. Karp..................................... 4,499 59,854 *
Terry M. Nida..................................... 22,864 210,078 *
Richard Walliser.................................. 10,015 41,562 *
All directors and executive officers as a group
(10 persons).................................... 1,287,785 1,472,243 8.19%
</TABLE>
- ---------------
* Less than 1%
(1) Applicable percentage ownership based on 32,246,413 shares of Common Stock
as of April 1, 2000. Beneficial ownership is determined in accordance with
the rules of the Securities and Exchange Commission.
(2) Shares of Common Stock subject to options currently exercisable or
exercisable within 60 days after April 1, 2000 are deemed outstanding for
computing the percentage ownership of the person holding such options, but
are not deemed outstanding for computing the percentage of any other person.
1
<PAGE> 4
(3) Includes 25,000 shares held by the Leland F. Wilson Living Trust
(4) Includes 29,100 shares held by Dr. Place as Custodian for V. Aristophanes
Kamehameha A.H. Place under the Hawaii Uniform Transfers to Minors Act, and
70,000 shares held by "The Virgil A. Place Arboretum & Botanical Garden,
Inc.," of which Dr. Place is the beneficial owner.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or by attending the meeting and voting in person.
VOTING AND SOLICITATION
Each share of Common Stock outstanding on the record date is entitled to
one vote.
The cost of soliciting proxies will be borne by the Company. The Company
may elect to retain the services of an outside company to solicit proxies, for
which the Company estimates that it would pay a fee not to exceed $5,000. The
Company expects to reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
materials to such beneficial owners. Proxies may be solicited by certain of the
Company's directors, officers and regular employees, without additional
compensation, in person or by telephone or facsimile.
RECORD DATE; QUORUM; REQUIRED VOTE
The holders of Common Stock of record at the close of business on April 10,
2000 are entitled to vote at the Annual Meeting. As of April 10, 2000,
32,246,413 shares of Common Stock were issued and outstanding. Each share of
Common Stock is entitled to one vote. Stockholders will not be entitled to
cumulate their votes in the election of directors.
The presence, in person or by proxy, of stockholders entitled to vote at
least a majority of the shares of Common Stock issued and outstanding as of
April 10, 2000 constitutes a quorum for adopting the proposals at the Annual
Meeting. A plurality of the shares present, in person or represented by proxy,
at the Annual Meeting and entitled to vote on the election of directors is
required for the election of directors. In the other proposals, the affirmative
vote of the majority of the shares present, in person or represented by proxy,
at the Annual Meeting and entitled to vote on the proposals is required for
approval.
Under the Delaware General Corporation Law, abstentions and broker
"non-votes" are treated as shares that are entitled to vote and are, therefore,
included for purposes of determining whether a quorum of shares is present at
the Annual Meeting. A broker "non-vote" occurs when a nominee holding shares for
a beneficial owner does not vote on a particular proposal because the nominee
does not have discretionary voting power with respect to that proposal or has
not received voting instructions from the beneficial owner.
Abstentions are treated as shares that are present at the Annual Meeting,
but not as an affirmative vote on any matter submitted to the stockholders for a
vote. Thus, abstentions are included in the tabulation of the voting results on
election of directors and on the proposals requiring an affirmative vote of a
majority of the shares present at the Annual Meeting and, therefore, have the
effect of votes in opposition. On the contrary, broker "non-votes" are not
treated as shares that are present at the Annual Meeting. Thus, broker
"non-votes" are not included in the tabulation of the voting results on election
of directors and on the proposals requiring an affirmative vote of a majority of
the shares present at the Annual Meeting and, therefore, do not have the effect
of votes in opposition in such tabulations.
Any proxy which is returned using the form of proxy enclosed and which is
not marked as to a particular item will be voted FOR the election of directors,
FOR the amendment of 1994 Employee Stock Purchase Plan, FOR the ratification of
the appointment of Arthur Anderson LLP as the designated independent accountants
and, as the proxy holders deem advisable, on other matters that may come before
the meeting.
2
<PAGE> 5
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Stockholders who intend to present a proposal for inclusion in the
Company's proxy materials for the 2001 Annual Meeting of Stockholders must
submit the proposal to the Company no later than December 31, 2000. Stockholders
who intend to present a proposal at the 2001 Annual Meeting of Stockholders
without inclusion of such proposal in the Company's proxy materials for the 2001
Annual Meeting are required to provide notice of such proposal to the Company no
later than thirty-five (35) days nor more than sixty (60) days prior to the 2001
Annual Meeting of Stockholders. The Company reserves the right to reject, rule
out of order, or take other appropriate action with respect to any proposal that
does not comply with these and other applicable requirements.
3
<PAGE> 6
PROPOSAL ONE:
ELECTION OF DIRECTORS
NOMINEES
A board of six directors is to be elected at the Annual Meeting of
Stockholders. The Company's Bylaws authorize a board of six directors. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's nominees named below. In the event that any nominee of the
Company is unable or declines to serve as a director at the time of the Annual
Meeting of Stockholders, the proxies will be voted for any nominee who shall be
designated by the present Board to fill the vacancy. It is not expected that any
nominee will be unable or will decline to serve as a director. In the event that
additional persons are nominated for election as directors, the proxy holders
intend to vote all proxies received by them in such a manner as will assure the
election of as many of the nominees listed below as possible.
The nominees, and certain information about them as of April 1, 2000, are
set forth below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE POSITION SINCE
--------------- --- -------- --------
<S> <C> <C> <C>
Virgil A. Place, M.D......... 75 Chairman of the Board, Chief Scientific Officer 1991
Leland F. Wilson............. 55 President and Chief Executive Officer 1991
Joseph E. Smith(1)(3)........ 61 Director 1997
Mario M. Rosati(2)........... 53 Secretary and Director 1999
Mark B. Logan(2)............. 61 Director 1999
Linda M. Shortliffe, M.D. 51 Director 1999
(1)........................
</TABLE>
- ---------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
(3) Member of Nominating Committee
All directors hold office until the next Annual Meeting of Stockholders or
until their successors have been elected and qualified. Officers serve at the
discretion of the Board. There are no family relationships between any of the
directors or executive officers of the Company.
VIRGIL A. PLACE, M.D. is the founder of VIVUS and has been its Chief
Scientific Officer and Chairman of the Board since the Company was formed in
April 1991. Before joining VIVUS, Dr. Place was Principal Scientist and held a
variety of executive positions including Vice President of Medical and
Regulatory Affairs at ALZA Corporation ("Alza") from 1969 to 1993. In addition,
Dr. Place served nine years on the Alza Board of Directors. He received a B.A.
in Chemistry from Indiana University and an M.D. from Johns Hopkins University.
He is Board Certified in Internal Medicine, with specialty training at the Mayo
Clinic.
LELAND F. WILSON has been President and a director of VIVUS since April
1991 and Chief Executive Officer since November 1991. Prior to joining VIVUS,
Mr. Wilson was Vice President of Marketing and Corporate Development of Genelabs
Technologies, Inc. from 1989 to 1991. Mr. Wilson was Group Product Director,
later promoted to Director of Marketing, at LifeScan, a Johnson & Johnson
company, from 1986 to 1989. From 1973 to 1986, Mr. Wilson served in several
research, marketing and sales positions for Syntex Research and Syntex
Laboratories, Inc. Mr. Wilson received a B.S. and an M.S. from Pennsylvania
State University.
JOSEPH E. SMITH has been a director of VIVUS since June 1997. Mr. Smith
served as Corporate Vice President with Warner-Lambert Company from March 1989
until he retired in September 1997. His responsibilities at Warner-Lambert
included President of Pharmaceuticals and President of Shaving Products. Mr.
Smith is a director of Boren, Lepore, Inc., a company that provides promotional,
marketing and educational services to the pharmaceutical industry; Penederm,
Inc., a pharmaceutical company; and Sensus Corp., a privately-held biotechnology
company. Mr. Smith earned his MBA degree from the Wharton School of the
University of Pennsylvania.
4
<PAGE> 7
MARIO M. ROSATI has served as one of our directors since March 1999. Mr.
Rosati has been with the Palo Alto, California law firm of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, since 1971, first as an associate
and then as a member since 1975. Mr. Rosati also serves as a director of Aehr
Test Systems, Genus, Inc., MyPoints.com, Inc., Ross Systems, Inc., Sanmina
Corporation, Symyx and The Management Network Group. Mr. Rosati holds a B.A.
from the University of California, Los Angeles and a J.D. from the University of
California, Berkeley, Boalt Hall School of Law.
MARK B. LOGAN has been a director of VIVUS since March 1999. Since August
1997, Mr. Logan has served as a director of Abgenix, Inc., a biopharmaceutical
company. Mr. Logan has also served as the Chairman of the Board, President and
Chief Executive Officer of VISX Incorporated, a medical device company, since
1994. From January 1992 to October 1994, he was Chairman of the Board and Chief
Executive Officer of INSMED Pharmaceuticals, Inc., a pharmaceutical company.
Previously, Mr. Logan held several senior management positions at Baush & Lomb,
Inc., a medical products company, including Senior Vice President, Healthcare
and Consumer Group, and also served as member of its Board of Directors. Mr.
Logan received a B.A. from Hiram College and a P.M.D. from Harvard Business
School.
LINDA M. DAIRIKI SHORTLIFFE, M.D. has been a director of VIVUS since June
1999. Dr. Shortliffe has been Professor of Urology at Stanford University School
of Medicine since 1993 and Chair of the Department of Urology since 1995. She
has also been Chief of Pediatric Urology of Lucile Salter Packard Children's
Hospital at Stanford since 1991. She is a Fellow of the American College of
Surgeons and the American Academy of Pediatrics. Dr. Shortliffe has also served
as a member of the Special Grants Chartered Review Committee for the National
Institute of Diabetes, Digestive, and Kidney Diseases of the National Institute
of Health and several other national committees. She has authored numerous
publications and her works appear in prominent medical journals and books. Dr.
Shortliffe received an A.B. from Radcliffe/Harvard College and an M.D. from
Stanford University.
REQUIRED VOTE
The six nominees receiving the highest number of the affirmative votes of
the Votes Cast will be elected as directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ELECTION OF THE NOMINEES.
BOARD MEETINGS, COMMITTEES AND DIRECTOR COMPENSATION
The Board held seven meetings and acted by unanimous written consent three
times during fiscal 1999. The Compensation Committee held five meetings during
fiscal 1999. The Audit Committee held four meetings during fiscal 1999. No
nominee who was a director during fiscal 1999 attended fewer than 75% of the
meetings of the Board and Committees of which he or she was a member.
The Board has a Compensation Committee that makes recommendations
concerning salaries and incentive compensation for employees of the Company.
From March 5, 1999 through the end of fiscal 1999, the Compensation Committee
consisted of Directors Rosati and Logan (prior to March 5, 1999, the
Compensation Committee consisted of Richard L. Casey and Elizabeth A. Fetter).
The Board has an Audit Committee that reviews the results and scope of the audit
and other services provided by the Company's independent auditors. From January
1, 1999 through June 8, 1999, the Audit Committee consisted of Brian Dovey,
Joseph W. Smith and Linda Jenkes. From June 8, 1999 through December 31, 1999,
the Audit Committed consisted of Directors Smith and Shortliffe. The Company
also has a Nominating Committee that makes recommendations on membership and
composition of the Board. During fiscal 1999, the Nominating Committee consisted
of Director Smith.
The directors are reimbursed for travel and related expenses incurred by
them in attending meetings. Directors who are not employees of the Company
("Outside Directors") will be paid an annual retainer of $10,000 and a fee of
$1,000 per quarter for attending board meetings.
5
<PAGE> 8
The Company's 1994 Director Option Plan provides that each new Outside
Director that joins the Board will automatically be granted an option at fair
market value to purchase 32,000 shares of Common Stock upon the date on which
such person first becomes an Outside Director. These options vest at a rate of
25% per year following the date of grant so long as the optionee remains a
director of the Company. It also provides for the grant of options to Outside
Directors pursuant to a nondiscretionary, automatic grant mechanism, whereby
each Outside Director is granted an option at fair market value to purchase
8,000 shares on the date of each Annual Meeting of Stockholders, provided such
director is re-elected. These shares vest at the rate of 12.5% per month
following the date of grant so long as the optionee remains a director of the
Company.
EXECUTIVE OFFICERS
The executive officers of the Company and certain information about them as
of April 1, 2000 are listed below:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Virgil A. Place, 75
M.D. ................. Chairman of the Board, Chief Scientific Officer
Leland F. Wilson........ 55 President, Chief Executive Officer and Director
Neil Gesundheit, 47
M.D. ................. Vice President, Clinical Research
Carol D. Karp........... 47 Vice President, Regulatory Affairs and Project Management
Terry M. Nida........... 51 Vice President, Worldwide Marketing and Corporate
Development
Richard Walliser........ 56 Vice President, Finance and Chief Financial Officer
</TABLE>
MR. WILSON'S and DR. PLACE'S backgrounds are summarized previously under
"Election of Directors."
NEIL GESUNDHEIT, M.D., M.P.H. has been Vice President, Clinical Research
since January 1994. In August 1999, Dr. Gesundheit transitioned to part-time
status to assume the position of Associate Dean for Medical Education at the
Stanford University School of Medicine. Dr. Gesundheit previously served VIVUS
as Vice President, Clinical and Regulatory Affairs from January 1994 to
September 1997 and as Chief Medical Officer from August 1998 to August 1999.
From 1989 to 1993 Dr. Gesundheit was Associate Director of Clinical Research at
Genentech, Inc. He holds an A.B. degree from Harvard College, an M.D. from the
University of California, San Francisco, and an M.P.H. from the University of
California, Berkeley. Dr. Gesundheit is board certified in internal medicine and
in the subspecialty of endocrinology and metabolism.
CAROL D. KARP has been Vice President, Regulatory Affairs and Project
Management for VIVUS since July 1999. From September 1997 to July 1999, Ms. Karp
was Vice President, Regulatory Affairs. Prior to joining VIVUS, Ms. Karp served
as Executive Director, Regulatory Affairs for Cygnus, Inc. from June 1994 to
August 1997. From February 1993 to August 1994, Ms. Karp served as Director,
Regulatory Affairs for Cygnus Therapeutic Systems. Ms. Karp held various
positions in regulatory affairs at Janssen Pharmaceutica, a Johnson & Johnson
company, from 1979 to 1989. She received a B.A. in Biology from the University
of Rochester and has completed postgraduate studies in Biochemistry at New York
University.
TERRY M. NIDA has been Vice President, Worldwide Marketing and Corporate
Development for VIVUS since August 1998. From November 1995 to August 1998, Mr.
Nida was Vice President, Europe and effective March 28, 1996 was appointed an
executive officer. Prior to joining VIVUS, Mr. Nida was Vice President, Sales,
Marketing and Business Development at Carrington Laboratories, with
responsibility for all sales, marketing and business development activities. Mr.
Nida was Senior Director, Worldwide Sales, Marketing and Business Development
for Centocor, Inc. from 1993 to 1994, and Director of Sales and Marketing in
Europe for Centocor, Inc. from 1990 to 1993. He received a B.A. in English and a
Masters in Administration of Justice from Wichita State University.
RICHARD WALLISER has been Vice President, Finance and the Chief Financial
Officer for VIVUS since December 1998, after serving 4 months as the interim
Chief Financial Officer of the Company. Prior to joining VIVUS, Mr. Walliser
served as a consultant for The Brenner Group, a consulting firm specializing in
providing Interim Chief Financial Officers, and as the Chief Financial Officer
at Gyration, Inc, a high
6
<PAGE> 9
technological gyroscope design company for consumer applications. From 1989 to
1999, Mr. Walliser also consulted to several high technology companies including
Federal Technology, Microdyne, Productivity Training, and Advance Micro Devices.
From 1982 to 1989, Mr. Walliser was the Vice President of Finance and
Administration for Novell. He received a B.S. degree in Management from Arizona
State University and a Masters in Business Administration from the University of
Southern California.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In October 1999, the Company and ZZVAX, LLC, a Delaware limited liability
company ("ZZVAX") entered into an Assignment Agreement (the "Assignment
Agreement") whereby the Company assigned all right, title and interest to
certain intellectual property to ZZVAX in exchange for a ten percent (10%)
membership interest in ZZVAX and the right to receive two percent (2%) of the
net sales of any ZZVAX product which utilize this intellectual property. Virgil
A. Place, M.D., the Company's Chairman of the Board and Chief Scientific
Officer, is the inventor of this intellectual property and the President and
Managing Member of ZZVAX. The Company did not seek to utilize the intellectual
property that was assigned to ZZVAX for commercial purposes. The Assignment
Agreement was approved by the outside directors of the Company's Board of
Directors, and the terms of the Assignment Agreement are no less favorable to
the Company than the terms that would have been negotiated with any other third
party. The Company's initial ten percent (10%) ownership interest in ZZVAX is
subject to dilution.
In July 1998, the Board of Directors approved a form of Change of Control
Agreement for all senior executives. The Change of Control Agreement was adopted
immediately following the reorganization and the subsequent downsizing of all
locations where the Company conducts business. The Change of Control Agreement
recognizes that there may be periods where another company or another entity
considers the possibility of acquiring the Company or that a change in the
management of the Company may otherwise occur (collectively, "a Change of
Control"), with or without the approval of the Company's Board of Directors. The
Change of Control Agreement recognizes that such an event may cause a
distraction to employees, which may in turn cause employees to consider
alternative employment opportunities. The Board determined that it was in the
best interest of the Company to give such employees an incentive to continue
their employment during periods where the threat or occurrence of a Change of
Control may exist. The Change of Control Agreements are discussed in more detail
subsequently under "Executive Compensation."
The Company's founding scientist, Chairman of the Board and Chief
Scientific Officer, Virgil A. Place, M.D., invented the Company's transurethral
system for erection (MUSE) while serving as Alza's Executive Director of Medical
and Regulatory Affairs. Dr. Place formed VIVUS in April 1991 to further develop
the MUSE technology. In August 1991, Dr. Place entered into a letter agreement
with Alza covering the MUSE technology. This was superseded by an assignment
agreement between Alza and the Company that was executed on December 31, 1993.
The assignment agreement provides for the assignment by Alza of patent
applications related to the MUSE technology. In consideration of the rights
granted to the Company under the assignment agreement, the Company issued shares
of Common Stock to Alza and is required to pay certain royalties on the sale of
any products for the transurethral treatment of erectile dysfunction. To
maintain exclusive rights beyond December 31, 1999, the Company issued an
additional 200,000 shares of Common Stock to Alza in May 1996.
FILING OF REPORTS BY DIRECTORS AND OFFICERS
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than ten percent
(10%) of a registered class of the Company's equity securities, to file certain
reports of ownership with the SEC and with the National Association of
Securities Dealers. Such officers, directors and stockholders are also required
by SEC rules to provide the Company with copies of all Section 16(a) forms that
they file. Based solely on its review of copies of such forms received by the
Company, or on written representations from certain reporting persons, the
Company believes that during the period from January 1, 1999 to December 31,
1999, its executive officers, directors and ten percent (10%) stockholders filed
all required Section 16(a) reports on a timely basis.
7
<PAGE> 10
EXECUTIVE COMPENSATION
COMPENSATION TABLES
Summary Compensation Table. The following table sets forth the compensation
paid by the Company during the fiscal years ended December 31, 1999, 1998 and
1997 to the Chief Executive Officer and its four other most highly compensated
executive officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION SECURITIES ALL OTHER
NAME AND PRINCIPAL FISCAL ------------------------ UNDERLYING COMPENSATION
POSITION YEAR SALARY($)(1) BONUS($) OPTIONS(#) ($)
------------------ ------ ------------ -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Leland F. Wilson................... 1999 350,005 116,667(10) -- --
President and Chief 1998 319,032 -- 829,998(2) --
Executive Officer 1997 310,000 139,500(3) 100,000 --
Terry M. Nida...................... 1999 191,459 63,313(10) --
Vice President, Worldwide
Marketing 1998 192,938(5) -- 258,750(5) 33,120(6)
and Corporate Development 1997 182,965 46,000(3) 26,250 45,124(6)
Carol D. Karp...................... 1999 171,904 54,933(10) --
Vice President, 1998 164,764(8) -- 115,625(7) --
Regulatory Affairs 1997 52,820 53,200(8) 63,125 --
Neil Gesundheit, M.D............... 1999 129,907 64,843(10) --
Vice President, 1998 212,629 -- 218,936(4) --
Clinical Research 1997 209,777 54,542(3) 35,000 --
Richard Walliser................... 1999 159,994 -- --
Vice President of Finance, 1998 9,230(9) -- 90,000 --
Chief Financial Officer 1997 -- -- -- --
</TABLE>
- ---------------
(1) All named executive officers, except for Mr. Walliser who did not become an
employee until December 8, 1998, elected to defer a portion of their salary
from September 16, 1998 through May 24, 1999. The deferred salary was
returned to the executives on June 4, 1999, after the Company had reported
profitability for two consecutive quarters. Amounts reported under the
"Salary" column for 1998 include amounts earned in 1998 but paid in 1999;
consequently, amounts reported for 1999 do not include amounts received in
1999 that are included in 1998 for deferred salary.
(2) Consists of 150,000 shares underlying an option granted in December 1998
and 679,998 shares underlying options granted prior to 1998 that were
cancelled and re-granted in connection with the repricing -- see "Report of
the Compensation Committee -- stock option repricing."
(3) This bonus was earned in fiscal 1997 and paid in February 1998.
(4) Consists of 52,500 shares underlying an option granted in December 1998 and
166,436 shares underlying options granted prior to 1998 that were cancelled
and re-granted in connection with the repricing -- see "Report of the
Compensation Committee -- stock option repricing."
(5) Consists of 52,500 shares underlying an option granted in December 1998 and
206,250 shares underlying options granted prior to 1998 that were cancelled
and re-granted in connection with the repricing -- see "Report of the
Compensation Committee -- stock option repricing."
(6) Amounts received for housing and automobile allowance.
(7) Consists of 52,500 shares underlying an option granted in December 1998 and
63,125 shares underlying options granted prior to 1998 that were cancelled
and re-granted in connection with the repricing -- see "Report of the
Compensation Committee -- stock option repricing."
(8) This bonus was made up of a sign-on bonus of $30,000 and a performance
bonus of $23,200 which was earned in fiscal 1997 but paid in February 1998.
(9) Richard Walliser commenced employment with VIVUS Inc, on December 8, 1998.
8
<PAGE> 11
(10) This is the "Retention Incentive Bonus" offered to all employees as a
result of the restructuring in 1998 and paid on April 15, 1999.
Employment Agreements. There are no employment agreements between the
Company and any of its executive officers, except that Leland F. Wilson is
entitled to severance pay of four months' salary in the event of termination of
employment without cause.
Change of Control Agreements. On July 8, 1998, the Company entered into
Change of Control Agreements with Leland F. Wilson, Neil Gesundheit, Terry M.
Nida and Carol D. Karp and on January 8, 1999, the Company entered into a Change
of Control Agreement with Richard Walliser (collectively, the "Executive
Officers") containing the same terms and conditions. Upon the involuntary
termination of an Executive Officer's employment without cause in connection
with a change of control, the Executive Officer is entitled to receive the
following benefits:
(1) Monthly severance payments for twenty-four (24) months following the
effective date of termination equal to the monthly salary that the
Executive Officer was receiving immediately prior to the change of
control;
(2) Monthly severance payments equal to one-twelfth ( 1/12) of the
Executive Officer's target bonus for the fiscal year in which the
termination occurs;
(3) Pro-rated amount of the Executive Officer's target bonus for the fiscal
year in which the termination occurs, calculated based on the number of
months during such fiscal year that the Executive Officer was employed
by the Company;
(4) Continuation of benefits through the end of the severance period that
are identical to those the Executive Officer was entitled to
immediately prior to the Change of Control; and
(5) Outplacement services not to exceed Twenty Thousand Dollars
($20,000.00).
STOCK OPTION INFORMATION
Option Grants in Last Fiscal Year. During 1999, no Executive Officer was
granted any stock options. Stock options were granted to Executive Officers in
February 2000. The company will report such stock option grants in its 2001
proxy statement.
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End
Values. The following table sets forth certain information concerning the stock
options exercised by the Executive Officers named in the Summary Compensation
Table during the year ended December 31, 1999 and the value of unexercised stock
options held by such individuals at the end of the year.
AGGREGATE OPTION EXERCISES IN 1999 AND 1999 YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF VALUE OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES REALIZED DECEMBER 31, 1999(#) DECEMBER 31, 1999($)(1)
ACQUIRED UPON --------------------------- ---------------------------
NAME ON EXERCISE EXERCISE($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Leland F. Wilson........... -- -- 897,168 187,498 721,394.98 60,929.78
Neil Gesundheit, M.D....... 42,750 66,796.88 151,015 67,921 21,229.96 21,576.35
Virgil A. Place, M.D....... -- -- 13,125 30,000 4,687.00 14,061.00
Terry M. Nida.............. -- -- 198,751 59,999 24,194.66 22,965.53
Carol D. Karp.............. -- -- 47,811 67,814 9,944.60 21,565.20
Richard Walliser........... -- -- 33,750 56,250 15,349.13 26,364.38
</TABLE>
- ---------------
(1) Based upon a fair market value of $3.1562 per share as of December 31, 1999
less the exercise price per share.
9
<PAGE> 12
COMPENSATION COMMITTEE REPORT
The following report is provided to stockholders by the members of the
Compensation Committee of the Board of Directors.
GENERAL
Since VIVUS' initial public offering in April 1994, the Compensation
Committee (the "Committee") of the Board has administered the Company's
management compensation policies and plans. The Committee is a standing
committee comprised of outside Directors. The Committee determines the annual
base salary for each executive officer, including the Chief Executive Officer
("CEO"), and the criteria under which cash incentive bonuses, if any, may be
paid. The Committee also exercises the authority to grant options under the
Company's 1991 Incentive Stock Plan and other equity incentive plans.
COMPENSATION VEHICLES
During the first half of fiscal 1999, the Company's cash and equity-based
compensation program was successful in retaining key employees to return the
Company to a profitable position. During the second half of fiscal 1999, the
Company focused on cash and equity-based compensation programs focused on
ensuring that the organization's cash and equity structure was equitable and
competitive with other companies with similar business focus and structure.
Cash Compensation. Before determining the compensation with respect to
executive officers, the Committee's policy is to review base salaries proposed
by the CEO and evaluate each executive officer's experience and proposed
responsibilities and the salaries of similarly situated executives, including a
comparison to base salaries for comparable positions at other companies. In
determining its recommendations for adjustments to officers' base salaries, the
Committee's policy is to focus primarily on the officers' contributions towards
the Company's success in moving toward its long-term goals during the fiscal
year and the quality of the services rendered by the officers. Recommending the
CEO's fiscal 2000 salary, the Committee used the same criteria it applies to
other officers. Based on the overall performance of the Company during fiscal
1999 and as a result of the reorganization of the Company, the Committee granted
a salary increase and stock option grants in the first quarter of 2000 in
recognition of taking measures designed to make the Company profitable.
Additionally, bonuses were paid in the first quarter of 2000 to all employees in
recognition of attaining certain Company goals driven toward the overall
profitability and success of the Company.
Stock Option Program. The Committee grants options as an incentive to
employees who are expected to contribute to the Company's future success. The
Committee believes stock options encourage the achievement of superior results
over time and align employee and stockholder interests. The option program
incorporates a four-year vesting period to encourage employees to continue in
the Company's employ. In fiscal 1999, the Company continued its policy of
granting stock options to all new employees in conjunction with employee
performance.
POLICY ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), limits the tax deduction to $1 million for compensation paid to its
five most highly compensated executive officers, unless certain requirements are
met. One requirement is that the Committee consist entirely of outside Directors
as defined in the Code, and VIVUS' Committee meets this requirement. Another
requirement is that compensation over $1 million must be based upon Company
attainment of pre-established, objective performance goals. VIVUS believes that
all compensation paid to its five most highly compensated executive officers in
fiscal 1999 is fully deductible. The Committee's present intention is to comply
with the requirements of Section 162(m) unless and until the Committee
determines that compliance would not be in the best interest of VIVUS and its
stockholders.
10
<PAGE> 13
STOCK OPTION REPRICING
On October 5, 1998, the Board of Directors offered all employees (except
the named officers below) and certain consultants holding options to purchase
Common Stock of the Company at exercise prices greater than $4.00 per share the
opportunity to reprice their options to the fair market value of the Company's
Common Stock as of the closing of the stock market on October 19, 1998
($2.9375). On October 5, 1998, the Board of Directors offered Leland F. Wilson,
Neil Gesundheit, Terry M. Nida and Carol D. Karp the option to reprice (i)
one-half of the options to purchase Common Stock of the Company at exercise
prices greater than $4.00 per share to the fair market value of the Company's
Common Stock as of the closing of the stock market on October 19, 1998
($2.9375), and (ii) one-half of the options to purchase Common Stock of the
Company at exercise prices greater than $4.00 per share to one hundred fifty
percent of the fair market value of the Company's Common Stock as of the closing
of the stock market on October 19, 1998 ($4.4063). The stock option repricing
was an acknowledgment of the importance to the Company of its employees and of
the incentive to employees represented by stock options, especially in
considering alternative opportunities. The Board considered such factors as the
competitive environment for obtaining and retaining qualified employees and the
overall benefit to the stockholders from a highly motivated group of employees.
The following table sets forth, as to all executive officers of the
Company, certain information concerning the repricing of all such officers'
options since the Company's inception.
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL
NUMBER OF OPTION TERM
SECURITIES MARKET EXERCISE NEW REMAINING AT
NAME AND UNDERLYING ORIGINAL PRICE AT PRICE AT TIME EXERCISE DATE OF
PRINCIPAL POSITION OPTIONS GRANT DATE REPRICING OF REPRICING PRICE REPRICING
------------------ ----------- ---------- --------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
Leland F. Wilson, 125,000 10/13/94 $2.9375 $ 6.5625 $2.9375 5.98 Yrs.
President, Chief
Executive 125,000 10/13/94 $2.9375 $ 6.5625 $4.4063 5.98 Yrs.
Officer and Director 60,000 1/17/95 $2.9375 $ 6.7500 $2.9375 6.24 Yrs.
60,000 1/17/95 $2.9375 $ 6.7500 $4.4063 6.24 Yrs.
60,000 1/2/96 $2.9375 $15.0000 $2.9375 7.20 Yrs.
60,000 1/2/96 $2.9375 $15.0000 $4.4063 7.20 Yrs.
44,999 12/11/96 $2.9375 $16.7500 $2.9375 8.15 Yrs.
44,999 12/11/96 $2.9375 $16.7500 $4.4063 8.15 Yrs.
50,000 12/8/97 $2.9375 $21.6250 $2.9375 9.14 Yrs.
50,000 12/8/97 $2.9375 $21.6250 $4.4063 9.14 Yrs.
-------
679,998
Neil Gesundheit, M.D., 20,718 1/17/95 $2.9375 $ 6.7500 $2.9375 6.24 Yrs.
Vice President, 20,718 1/17/95 $2.9375 $ 6.7500 $4.4063 6.24 Yrs.
Clinical Research 25,000 1/2/96 $2.9375 $15.0000 $2.9375 7.20 Yrs.
25,000 1/2/96 $2.9375 $15.0000 $4.4063 7.20 Yrs.
20,000 12/11/96 $2.9375 $16.7500 $2.9375 8.15 Yrs.
20,000 12/11/96 $2.9375 $16.7500 $4.4063 8.15 Yrs.
17,500 12/8/97 $2.9375 $21.6250 $2.9375 9.14 Yrs.
17,500 12/8/97 $2.9375 $21.6250 $4.4063 9.14 Yrs.
-------
166,436
Terry M. Nida, 46,875 12/1/95 $2.9375 $11.8750 $2.9375 7.12 Yrs.
Vice President, 103,125 12/1/95 $2.9375 $11.8750 $4.4063 7.12 Yrs.
Worldwide Marketing
and 30,000 12/11/96 $2.9375 $16.7500 $2.9375 8.15 Yrs.
Corporate Development 26,250 12/8/97 $2.9375 $21.6250 $2.9375 9.14 Yrs.
-------
206,250
Carol D. Karp, 25,000 9/2/97 $2.9375 $28.2500 $2.9375 8.87 Yrs.
Vice President, 25,000 9/2/97 $2.9375 $28.2500 $4.4063 8.87 Yrs.
Regulatory Affairs and 6,562 12/8/97 $2.9375 $21.6250 $2.9375 9.14 Yrs.
Project Management 6,563 12/8/97 $2.9375 $21.6250 $4.4063 9.14 Yrs.
-------
63,125
</TABLE>
11
<PAGE> 14
SUMMARY
The Committee believes that the Company's compensation policy as practiced
to date by the Committee and the Board has been successful in attracting and
retaining qualified employees and in tying compensation directly to corporate
performance relative to corporate goals. The Company's compensation policy will
continue to evolve over time as the Company matures while continuing its focus
on building long-term stockholder value.
Respectfully submitted,
The Compensation Committee
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Committee is responsible for determining salaries, incentives and other
forms of compensation for directors, officers and other employees of the Company
(see page 8 for committee members). The Committee also administers various
incentive compensation and benefit plans. In fiscal year 1999, the Committee
consisted of Directors Rosati and Logan (prior to March 5, 1999, the
Compensation Committee consisted of Richard L. Casey and Elizabeth A. Fetter).
Mr. Wilson, who is President and Chief Executive Officer of the Company,
participates in all discussions and decisions regarding salaries and incentive
compensation for all employees and consultants to the Company, except that Mr.
Wilson is excluded from discussions regarding his own salary and incentive
compensation.
12
<PAGE> 15
CORPORATE PERFORMANCE GRAPH
The following graph shows a comparison of total stockholder return for
holders of the Company's Common Stock from April 7, 1994, the date of the
Company's initial public offering, through December 31, 1999 compared with The
NASDAQ Stock Market and NASDAQ Pharmaceutical Stocks. This graph is presented
pursuant to SEC rules. The Company believes that while total stockholder return
can be an important indicator of corporate performance, the stock prices of
medical technology stocks like VIVUS are subject to a number of market-related
factors other than company performance, such as competitive announcements,
mergers and acquisitions in the industry, the general state of the economy, and
the performance of other medical technology stocks.
COMPARISON OF TOTAL RETURNS OF VIVUS, INC., THE NASDAQ STOCK MARKET AND
NASDAQ PHARMACEUTICAL STOCKS
<TABLE>
<CAPTION>
THE NASDAQ STOCK MARKET NASDAQ PHARMACEUTICAL
VIVUS, INC. -U.S. STOCKS - U.S. & FOREIGN
----------- ----------------------- -----------------------
<S> <C> <C> <C>
04/07/94 100.000 100.000 100.000
04/29/94 103.390 97.133 95.947
05/31/94 94.915 97.371 94.650
06/30/94 94.915 93.812 87.257
07/29/94 93.220 95.739 89.897
08/31/94 93.220 101.839 99.651
09/30/94 88.136 101.579 98.276
10/31/94 89.831 103.561 94.918
11/30/94 89.831 100.128 95.337
12/30/94 103.390 100.439 92.247
01/31/95 89.831 100.969 97.633
02/28/95 101.695 106.274 101.322
03/31/95 116.949 109.429 99.873
04/28/95 88.136 112.875 102.679
05/31/95 77.153 115.795 103.973
06/30/95 101.695 125.170 116.155
07/31/95 103.390 134.363 126.156
08/31/95 162.712 137.090 141.077
09/29/95 139.837 140.248 145.136
10/31/95 137.288 139.440 139.651
11/30/95 176.271 142.711 146.664
12/29/95 211.864 141.956 169.192
01/31/96 191.105 142.666 183.997
02/29/96 170.346 148.104 180.441
03/29/96 210.169 148.602 176.044
04/30/96 205.085 160.912 185.145
05/31/96 200.854 168.295 191.413
06/28/96 222.034 160.709 171.014
07/31/96 247.458 146.402 152.471
08/30/96 237.288 154.614 163.520
09/30/96 257.627 166.433 174.940
10/31/96 227.119 164.590 167.044
11/29/96 233.058 174.802 164.662
12/31/96 245.763 174.656 169.719
01/31/97 413.559 187.051 183.991
02/28/97 374.576 176.705 185.180
03/31/97 271.186 165.186 161.185
04/30/97 250.427 170.327 151.630
05/30/97 277.125 189.621 174.478
06/30/97 322.888 195.445 174.008
07/31/97 405.085 216.043 178.958
08/29/97 362.712 215.731 176.831
09/30/97 508.475 228.521 195.187
10/31/97 357.627 216.614 185.251
11/28/97 303.390 217.762 179.489
12/31/97 144.068 214.010 175.249
01/31/98 200.854 220.784 173.578
02/28/98 157.627 241.543 179.258
03/31/98 159.322 250.461 192.645
04/30/98 144.068 254.681 187.871
05/31/98 125.424 240.544 181.307
06/30/98 81.776 257.340 178.277
07/31/98 89.831 254.326 179.673
08/31/98 40.678 204.045 137.731
09/30/98 47.037 232.363 168.189
10/31/98 38.563 242.395 179.480
11/30/98 41.098 266.889 188.271
12/31/98 35.173 301.503 223.195
01/31/99 35.173 345.056 243.689
02/28/99 35.173 314.389 228.467
03/31/99 54.237 337.496 244.950
04/30/99 64.407 346.941 225.224
05/31/99 58.047 339.079 239.810
06/30/99 35.593 369.078 249.212
07/31/99 44.068 363.332 277.880
08/31/99 44.068 377.656 302.075
09/30/99 40.678 377.618 284.924
10/31/99 31.783 405.550 288.570
11/30/99 30.508 449.391 323.903
12/31/99 42.793 548.071 415.378
</TABLE>
13
<PAGE> 16
PROPOSAL TWO:
AMENDMENT TO THE 1994 EMPLOYEE STOCK PURCHASE PLAN
PROPOSAL
The Board of Directors of the Company approved an amendment to the
Company's 1994 Employee Stock Purchase Plan (the "Plan") in March 2000, subject
to stockholder approval, to increase the number of shares reserved for issuance
under the plan by an aggregate of 400,000 shares to a new total of 800,000
shares, of which 269,172 shares have been issued.
SUMMARY OF PLAN
Purpose. The purpose of the Plan is to provide employees of the Company and
its designated subsidiaries with an opportunity to purchase Common Stock of the
Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of
the Plan, accordingly, shall be construed so as to exceed and limit
participation in a manner consistent with the requirements of that section of
the Code.
Status of Shares. The Company expects to issue approximately 60,000 shares
to Plan participants on May 1, 2000, leaving a balance of approximately 71,000
shares authorized and not issued prior to the amendment described above, or
471,000 including the shares provided for in this amendment.
Offering Periods. The Plan is implemented by consecutive Offering Periods
with a new Offering Period commencing on the first Trading Day on or after May 1
and November 1 each year, or on such other date as the Board shall determine,
and continuing thereafter until terminated in accordance with Plan Amendment and
Termination rules. The Board has the power to change the duration of Offering
Periods (including commencement dates thereof) with respect to future offerings
without shareholder approval if such change is announced at least fifteen (15)
days prior to the scheduled beginning of the first Offering Period to be
affected thereafter.
Eligibility. The Employee Stock Purchase Plan provides that any employee
who is employed by the Company on a given enrollment date shall be eligible to
participate in the Plan. An Employee is defined as any individual whose
customary employment with the Company is at least twenty (20) hours per week and
more than five (5) months in any calendar year
No Employee shall be granted an option under this plan (i) to the extent,
immediately after the grant, such Employee would own capital stock of the
Company and/or hold outstanding options to purchase such stock possessing five
percent (5%) or more of the total combined voting power, or (ii) to the extent
the Employee accrues through payroll deduction at a rate that exceeds
Twenty-Five Thousand Dollars ($25,000) worth of stock for each calendar year in
which such option is outstanding at any time.
Participation. A Plan Participant may elect to have payroll deductions on
each pay day during the Offering Period in an amount not exceeding ten percent
(10%) of the Compensation the Participant receives on each pay day during the
Offering Period. A Participant may not make additional payments into such
account.
Grant of Option. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on the Exercise Date of such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by applicable Purchase Price. The exercise price of shares
purchased under the Employee Stock Purchase Plan shall be 85% of the lowest fair
market value of the Common Stock on either the beginning of the Plan Enrollment
Date or the Ending of the Plan Enrollment Date, as reported on the NASDAQ Stock
Market.
14
<PAGE> 17
Exercisability. Unless a participant withdraws from the Plan, the
Participant's option to purchase the shares will be exercised automatically on
the Exercise Date, and the maximum number of full shares subject to option shall
be purchased for such participant at the applicable Purchase Price with the
accumulated payroll deductions in participant's account. No fractional shares
are purchased; any payroll deductions accumulated in a participant's account
that are not sufficient to purchase a full share shall be retained in the
participant's account for the subsequent Offering Period.
During a participant's lifetime, a participant's option to purchase shares
under the Plan is exercisable only by the participant.
Stock. The maximum number of shares of the Company's Common Stock, which
shall be made available for sale under the Plan as amended, shall be 800,000
shares, subject to adjustment upon changes in capitalization of the Company. If
on a given Exercise Date the number of shares with respect to which options are
to be exercised exceeds the number of shares then available under the Plan, the
Company shall make a pro rata allocation of the shares remaining available for
purchase in as uniform a manner as shall be practicable and as it shall
determine to be equitable.
Participants will have no interest or voting right in shares covered by
said option until such option has been exercised.
Administrative Body. The Plan is administered by the Board or a committee
of members of the Board appointed by the Board. The Board or its committee has
full and exclusive discretionary authority to construe, interpret and apply the
terms of the Plan, to determine eligibility and to adjudicate all disputed
claims filed under the Plan. Every finding, decision and determination made by
the Board or its committee shall, to the full extent permitted by law, be final
and binding upon all parties.
Amendment and Termination. The Board may at any time amend or terminate the
Employee Stock Purchase Plan without approval of the stockholders; provided,
however, that the Company will obtain stockholder approval of any amendment to
the Employee Stock Purchase Plan to the extent necessary to comply with Rule
16b-3 under the Securities Exchange Act of 1934 (the "Exchange Act"), with
Section 423 of the Code, or with any other applicable law or regulation,
including requirements of the NASD or any established stock exchange. Any
amendment or termination of the Employee Stock Purchase Plan is subject to the
rights of optionees under agreements entered into prior to such amendment or
termination. The Employee Stock Purchase Plan will terminate by its own terms in
2004.
CERTAIN FEDERAL TAX INFORMATION
An Employee will not recognize any taxable income at the time of the grant
or purchase. Upon exercise of the option, the Employee generally recognizes
compensation income for federal tax purposes measured by the excess, if any, of
the then fair market value of the shares over the exercise price.
REQUIRED VOTE; RECOMMENDATION OF THE BOARD OF DIRECTORS
Approval of the amendment to the Employee Stock Purchase Plan requires the
affirmative vote of the Votes Cast.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS
PROPOSAL. THE EFFECT OF AN ABSTENTION IS THE SAME AS THAT OF A VOTE AGAINST THE
PROPOSAL.
15
<PAGE> 18
PROPOSAL THREE:
CONFIRMATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
PROPOSAL
The Board has selected Arthur Andersen LLP to audit the consolidated
financial statements of the Company for the year ending December 31, 2000 and
recommends that the stockholders confirm the selection. In the event of a
negative vote, the Board will reconsider its selection. Representatives of
Arthur Andersen LLP are expected to be present at the meeting, will have the
opportunity to make a statement if they so desire, and are expected to be
available to respond to appropriate questions.
REQUIRED VOTE; RECOMMENDATION OF THE BOARD OF DIRECTORS
Confirmation of the appointment of Arthur Andersen LLP as the Company's
independent public accountants requires the affirmative vote of a majority of
the Votes Cast.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS
PROPOSAL. THE EFFECT OF AN ABSTENTION IS THE SAME AS THAT OF A VOTE AGAINST THE
PROPOSAL.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Board may recommend.
It is important that your stock be represented at the meeting, regardless
of he number of shares that you hold. You are, therefore, urged to execute and
return the accompanying proxy in the enclosed envelope at your earliest
convenience.
16
<PAGE> 19
PROXY PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
VIVUS, INC.
2000 ANNUAL MEETING OF STOCKHOLDERS - MAY 31, 2000
The undersigned stockholder of VIVUS, INC., a Delaware corporation, hereby
acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy
Statement, each dated April 20, 2000, and the 1999 Annual Report to Stockholders
and hereby appoints Leland F. Wilson and Richard Walliser, and each of them,
proxies and attorneys-in-fact, with full power to each of substitution, on
behalf and in the name of the undersigned, to represent the undersigned at the
2000 Annual Meeting of Stockholders of VIVUS, INC. to be held on May 31, 2000,
at 10:00 a.m. local time, at the Crowne Plaza Palo Alto, 4290 El Camino Real,
Palo Alto, CA 94306 and at any adjournments thereof, and to vote all shares of
Common Stock that the undersigned would be entitled to vote if then and there
personally present, on the matters set forth below.
THIS PROXY WILL BE VOTED, AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE RATIFICATION OF
THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS, AND AS
SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE
THE MEETING.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS 2. Proposal to ratify the appointment of Arthur If you
wish to withhold authority Andersen LLP as the independent Public to vote
for any individual nonimee, Accountants of the Company for fiscal 2000;
strike a line through that nominee's name in the list below.
Virgil A. Place, M.D.; Leland F. Wilson; 3. To transact such other business, in their discretion,
Mark B. Logan; Linda M. Shortliffe, M.D.; as may properly come before the Meeting or any
Mario M. Rosato; and Joseph E.Smith adjournments thereof.
Either of such attorneys or substitutes shall
have and may exercise all of the powers of said
attorneys-in-fact hereunder.
Dated: , 2000
---------------------
-----------------------------------------------------
Signature
-----------------------------------------------------
Signature
</TABLE>
This Proxy should be marked, dated and signed by the stockholder(s) exactly as
his, her or its name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If shares
are held by joint tenants or as community property, both should sign.
