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EXHIBIT 10.36
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (the "Agreement") is made and entered
into effective as of _______________, by and between _______________ (the
"Employee") and Vivus, Inc., a Delaware corporation (the "Company").
RECITALS
A. It is expected that another company or other entity may from time to
time consider the possibility of acquiring the Company or that a change in
control may otherwise occur, with or without the approval of the Company's Board
of Directors (the "Board"). The Board recognizes that such consideration can be
a distraction to the Employee and may cause the Employee to consider alternative
employment opportunities. The Board has determined that it is in the best
interests of the Company and its shareholders to assure that the Company will
have the continued dedication and objectivity of the Employee, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined below)
of the Company.
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 benefits upon a Hostile Takeover and, under certain circumstances, upon
termination of the Employee's employment in connection with a Change of Control,
which benefits are intended to provide the Employee with financial security and
provide sufficient income and encouragement to the Employee to remain with the
Company notwithstanding the possibility of a Change of Control.
D. To accomplish the foregoing objectives, the Board of Directors has
directed the Company, upon execution of this Agreement by the Employee, to agree
to the terms provided in this Agreement.
E. Certain capitalized terms used in the Agreement are defined in
Section 4 below.
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Employee by the Company, the
parties agree as follows:
1. At-Will Employment. The Company and the Employee acknowledge that the
Employee's employment is and shall continue to be at-will, as defined under
applicable law. If the Employee's employment terminates for any reason,
including (without limitation) any termination prior to a Change of Control, the
Employee shall not be entitled to any payments or benefits, other than as
provided by this Agreement. The terms of this Agreement shall terminate upon the
earlier of (i) the date on which Employee ceases to be employed by the Company,
(ii) the date that all obligations of the parties hereunder have been satisfied,
or (iii) twenty-four (24) months after a Change of Control. A termination of the
terms of this Agreement pursuant to the preceding sentence
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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. Change of Control.
(a) Termination Following A Change of Control. Subject to Section
4 below, if the Employee's employment with the Company is terminated at any time
within twenty-four (24) months after a Change of Control, then the Employee
shall be entitled to receive severance benefits as follows:
(i) Voluntary Resignation; Termination For Cause. If the
Employee voluntarily resigns from the Company (other than as an Involuntary
Termination (as defined below)) or if the Company terminates the Employee's
employment for Cause (as defined below), then the Employee shall not be entitled
to receive severance payments. The Employee's benefits will be terminated under
the Company's then existing benefit plans and policies in accordance with such
plans and policies in effect on the date of termination or as otherwise
determined by the Board of Directors of the Company.
(ii) Involuntary Termination. If the Employee's employment
is terminated as a result of an Involuntary Termination other than for Cause,
the Employee shall be entitled to receive the following benefits: (i) monthly
severance payments during the period from the date of the Employee's termination
until the date twenty-four (24) months after the effective date of the
termination (the "Severance Period") equal to the monthly salary which the
Employee was receiving immediately prior to the Change of Control; (ii) monthly
severance payments during the Severance Period equal to 1/12th of the Employee's
"target bonus" (as defined herein) for the fiscal year in which the termination
occurs for each month in which severance payments are made to the Employee
pursuant to subsection (i) above (iii) the pro-rated amount of the Employee's
"target bonus" for the fiscal year in which the termination occurs, calculated
based on the number of months during such fiscal year in which the Employee was
employed by the Company (or a successor corporation) with such payment being
made on the termination date (iv) continuation of benefits through the end of
the Severance Period substantially identical to those to which the Employee was
entitled immediately prior to the Change of Control; and (v) outplacement
services with a total value not to exceed Twenty Thousand Dollars ($20,000). The
severance payments described in subsections (i) and (ii) above shall be paid
during the Severance Period in accordance with the Company's standard payroll
practices.
(b) Termination Apart from A Change of Control. In the event the
Employee's employment terminates for any reason, either prior to the occurrence
of a Change of Control or after the twenty-four (24) month period following the
effective date of a Change of Control, then the Employee shall not be entitled
to receive any severance payments under this Agreement. The Employee's benefits
will be terminated under the terms of the Offer Letter and the Company's then
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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.
3. Definition of Terms. The following terms referred to in this
Agreement shall have the following meanings:
(a) Change of Control. "Change of Control" shall mean the
occurrence of any of the following events:
(i) Ownership. Any "Person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is
or becomes the "Beneficial Owner" (as defined in Rule l3d-3 under said Act),
directly or indirectly, of securities of the Company representing fifteen
percent (15%) or more of the total voting power represented by the Company's
then outstanding voting securities without the approval of the Board of
Directors of the Company; or
(ii) Merger/Sale of Assets. A merger or consolidation of the
Company whether or not approved by the Board of Directors of the Company, other
than a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the shareholders
of the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or substantially all
of the Company's assets.
(iii) Change in Board Composition. A change in the
composition of the Board of Directors of the Company, as a result of which fewer
than a majority of the directors are Incumbent Directors. "Incumbent Directors"
shall mean directors who either (A) are directors of the Company as of July 1,
1998 or (B) are elected, or nominated for election, to the Board of Directors of
the Company with the affirmative votes of at least a majority of the Incumbent
Directors at the time of such election or nomination (but shall not include an
individual whose election or nomination is in connection with an actual or
threatened Proxy contest relating to the election of directors to the Company).
(b) Cause. "Cause" shall mean (i) gross negligence or willful
misconduct in the performance of the Employee's duties to the Company where such
gross negligence or willful misconduct has resulted or is likely to result in
substantial and material damage to the Company or its subsidiaries, (ii)
repeated unexcused absences from the Company, (iii) commission of any act of
fraud with respect to the Company, or (v) conviction of a felony or a crime
involving moral turpitude and causing material harm to the standing and
reputation of the Company, in each case as determined in good faith by the Board
of Directors of the Company.
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(c) Involuntary Termination. "Involuntary Termination" shall
include any termination by the Company other than for Cause and/or the
Employee's voluntary termination, upon 30 days prior written notice to the
Company, after any one of the following events: (i) a material reduction or
change in job duties, responsibilities and requirements inconsistent with the
Employee's position with the Company and the Employee's prior duties,
responsibilities and requirements; (ii) any reduction of the Employee's base
compensation (other than in connection with a general decrease in base salaries
to become in sync with employees of the acquirer); or (iii) the Employee's
refusal to relocate to a facility or location more than 30 miles from the
Company's current location.
"Target bonus" shall mean that percentage of the Employee's base
salary that is prescribed by the Company under its Management Bonus Program as
the percentage of such base salary payable to the Company as a bonus if the
Company pays bonuses at one-hundred percent (100%) of its operating plan.
4. Limitation on Payments. In the event that the severance and other
benefits provided for in this Agreement to the Employee constitute "parachute
payments" within the meaning of Section 28OG of the Internal Revenue Code of
1986, as amended (the "Code") and, but for this Section 4, would be subject to
the excise tax imposed by Section 4999 of the Code, the Company shall reduce the
aggregate amount of such payments and benefits such that the present value
thereof (as determined under the Code and the applicable regulations) is equal
to 2.99 times the Employee's "base amount" as defined in Section 28OG(b)(3) of
the Code.
5. Certain Business Combinations. In the event it is determined by the
Board, upon receipt of a written opinion of the Company's independent auditors,
that the enforcement of any Section of this Agreement, would preclude accounting
for any proposed business combination of the Company involving a Change of
Control as a pooling of interests, and the Board otherwise desires to approve
such a proposed business transaction which requires as a condition to the
closing of such transaction that it be accounted for as a pooling of interests,
then any such Section of this Agreement shall be null and void. For purposes of
this Section, the Board's determination shall require the unanimous approval of
the non-employee Board members.
6. Successors. Any successor to the Company (whether direct or indirect
and whether by purchase, lease, merger, consolidation, liquidation or otherwise)
to all or substantially all of the Company's business and/or assets shall assume
the obligations under this Agreement and agree expressly to perform the
obligations under this Agreement in the same manner and to the same extent as
the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of the Employee's rights
hereunder shall inure to the benefit of, and be enforceable by, the Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
7. 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
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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.
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.
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(f) Arbitration. Any dispute or controversy arising under or in
connection with this Agreement may be settled at the option of either party by
binding arbitration in the County of Santa Clara, California, in accordance with
the rules of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrator's award in any court having jurisdiction.
(g) Legal Fees and Expenses. The parties shall each bear their
own expenses, legal fees and other fees incurred in connection with this
Agreement.
(h) No Assignment of Benefits. The rights of any person to
payments or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this subsection (h) shall be
void.
(i) Employment Taxes. All payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment
taxes.
(j) Assignment by Company. The Company may assign its rights
under this Agreement to an affiliate, and an affiliate may assign its rights
under this Agreement to another affiliate of the Company or to the Company;
provided, however, that no assignment shall be made if the net worth of the
assignee is less than the net worth of the Company at the time of assignment. In
the case of any such assignment, the term "Company" when used in a section of
this Agreement shall mean the corporation that actually employs the Employee.
(k) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
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. (Name of Employee)
___________________________________ ________________________________________
Xxxxxx X. Xxxxxx
President & Chief Executive Officer
Date:______________________________ Date:___________________________________
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