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PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934

Filed by the Registrant [ ]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12

VIVUS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

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(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

[X] No fee.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

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it was determined.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
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paid previously. Identify the previous filing by registration statement
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(1) Amount Previously Paid:

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VIVUS, INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON MAY 22, 1997

TO THE STOCKHOLDERS:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of VIVUS,
Inc., a California corporation (the "Company"), will be held on Thursday, May
22, 1997, at 10:00 a.m., local time, at the Stanford Park Hotel, 100 El Camino
Real, Menlo Park, California 94025 for the following purposes:

1. To elect seven directors to serve until the next Annual Meeting of
Stockholders and until their successors are duly elected and qualified.

2. To amend the Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 30,000,000 to 200,000,000 in
order to effect a two-for-one forward split of the Company's Common
Stock.

3. To amend the 1991 Incentive Stock Plan to increase the number of shares
available for issuance from 3,100,000 to 3,900,000.

4. To amend the 1994 Director Option Plan to increase the number of shares
available for issuance from 100,000 to 200,000, to increase the initial
option granted to non-employee directors from 12,500 to 16,000 shares
and to increase the subsequent annual options granted to non-employee
directors from 2,500 to 4,000 shares.

5. To confirm the appointment of Arthur Andersen LLP as independent public
accountants for the fiscal year ending December 31, 1997.

6. 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 March 24, 1997 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
Menlo Park, California
April 9, 1997

IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
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VIVUS, INC.

PROXY STATEMENT FOR 1997

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 Thursday, May 22, 1997,
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 Stanford Park Hotel, 100
El Camino Real, Menlo Park, California 94025. The Company's principal executive
offices are located at 545 Middlefield Road, Suite 200, Menlo Park, California
94025. The Company's telephone number at that address is (415) 325-5511.

These proxy solicitation materials were mailed on or about April 9, 1997 to
all stockholders entitled to vote at the meeting.

RECORD DATE AND SHARE OWNERSHIP

Stockholders of record at the close of business on March 24, 1997 are
entitled to notice of the Annual Meeting of its Stockholders and to vote at the
meeting. At the record date, shares of the Company's Common Stock were
issued and outstanding and held of record by approximately 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 March
1, 1997 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
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executive officers serving in that capacity as of December 31, 1996, and (iv)
all directors and executive officers as a group.

SHARES BENEFICIALLY
OWNED(1)
FIVE PERCENT STOCKHOLDERS, ---------------------
DIRECTORS AND EXECUTIVE OFFICERS NUMBER PERCENT
--------------------------------------------------------- --------- -------

Ardsley Partners(2)...................................... 1,288,500 7.84%
646 Steamboat Road
Greenwich, CT 06830
Forstmann-Leff Associates(3)............................. 1,245,700 7.58%
Park Avenue Plaza
55 East 52nd Street
New York, NY 10055
The TCW Group, Inc.(4)................................... 1,148,900 6.99%
865 South Figueroa St.
Los Angeles, CA 90017
Leland F. Wilson(5)...................................... 991,471 6.04%
545 Middlefield Rd., Suite 200
Menlo Park, CA 94025
Virgil A. Place, M.D.(6)................................. 523,502 3.19%
Samuel D. Colella(7)..................................... 54,693 *
Brian H. Dovey(8)........................................ 11,247 *
David C. Yntema(9)....................................... 92,431 *
Neil Gesundheit, M.D.(10)................................ 51,837 *
Richard L. Casey(11)..................................... 32,716 *
Peter Barton Hutt(12).................................... 31,719 *
All directors and executive officers as a group (15
persons)(13)........................................... 1,893,117 11.13%

- ---------------

* Less than 1%

(1) All share numbers are current and do not take into account the two-for-one
stock split proposed in this Proxy Statement. Applicable percentage
ownership based on 16,424,834 shares of Common Stock as of December 31,
1996 together with applicable options for such stockholder. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission. Shares of Common Stock subject to options or warrants
currently exercisable or exercisable within 60 days after March 1, 1997 are
deemed outstanding for computing the percentage ownership of the person
holding such options or warrants, but are not deemed outstanding for
computing the percentage of any other person.

(2) Consists of shares as reported by Ardsley Partners on a Schedule 13G for
the year ended December 31, 1996.

(3) Consists of shares as reported by Trustees of Forstmann-Leff Associates on
a Schedule 13G for the year ended December 31, 1996.

(4) Consists of shares as reported by Robert Day, an individual who may be
deemed to control The TCW Group, Inc., on a Schedule 13G for the year ended
December 31, 1996.

(5) Includes 500,000 shares held by Leland Wilson as Custodian for the Virgil
A. Place Charitable Lead Annuity Trust, over which Mr. Wilson holds voting
and dispositive power and of which Mr. Wilson disclaims beneficial
ownership, and 296,680 shares subject to options exercisable within 60 days
of March 1, 1997.

(6) Includes 452,729 shares held by Virgil A. Place Trust, Virgil A. Place,
Trustee, 11,400 shares held by Dr. Place as Custodian for V. Aristophanes
Kamehameha A.H. Place under the Hawaii Uniform Transfers to Minors Act, and
59,373 shares subject to options exercisable within 60 days of March 1,
1997.

(7) Includes 37,690 shares owned by Samuel Colella & Nancy Colella TR UA
September 21, 1992 FBO Colella Family Trust, 1,708 shares owned by Samuel
D. Colella and Nancy R. Colella, General Partners

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for the Colella Family Partners, 400 shares held by Samuel Colella as
Custodian for his grandchildren and 14,895 shares subject to options
exercisable within 60 days of March 1, 1997.

(8) Includes 1,277 shares beneficially owned by Mr. Dovey, and 9,970 shares
subject to options exercisable within 60 days of March 1, 1997.

(9) Includes 12,046 shares held by David Yntema under the David C. Yntema Trust
Agreement dated 12/8/95 and 80,385 shares subject to options exercisable
within 60 days of March 1, 1997.

(10) Includes 12,907 shares owned by Neil Gesundheit & Eleanor G. Levin TR UA
March 6, 1994 Levin Gesundheit Trust, 3,213 shares beneficially owned by
Neil Gesundheit and 35,717 shares subject to options exercisable within 60
days of March 1, 1997.

(11) Includes 28,366 shares owned by Dean Witter Reynolds FBO Richard L. Casey,
and 2,500 shares subject to options exercisable within 60 days of March 1,
1997. Also includes 1,850 shares owned by Mr. Casey's son and daughter who
share Mr. Casey's household. Mr. Casey disclaims beneficial ownership of
all shares held by his son/daughter for purposes of Section 16 or any other
purpose.

(12) Includes 26,719 shares owned by Peter B. Hutt, and 5,000 shares subject to
options exercisable within 60 days of March 1, 1997.

(13) Includes 594,719 shares subject to options exercisable within 60 days of
March 1, 1997, held by the Company's directors and executive officers as a
group.

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 retain the services of Georgeson & Company, Inc. 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.

REQUIRED VOTE

With the exception of the election of directors, the affirmative vote of
the Votes Cast will be required for approval of each proposal presented in this
Proxy Statement. Directors shall be elected by a plurality of the Votes Cast.
"Votes Cast" are defined under Delaware law to be the shares of the Company's
Common Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote on the subject matter or the election of directors. Votes that
are cast against a proposal and abstentions will be counted for purposes of
determining both (i) the presence or absence of a quorum for the transaction of
business and (ii) the total number of Votes Cast with respect to the proposal.
Broker non-votes will be counted for purposes of determining the presence or
absence of a quorum for the transaction of business. However, broker non-votes
will not be counted for purposes of determining the number of Votes Cast with
respect to the particular propsals on which the broker has expressly not voted.

DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS

Proposals of stockholders of the Company that are intended to be presented
by such stockholders at the Company's 1998 Annual Meeting of Stockholders must
be received by the Company no later than December 22, 1997 in order that they
may be considered for inclusion in the proxy statement and form of proxy
relating to that meeting.

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PROPOSAL ONE:

ELECTION OF DIRECTORS

NOMINEES

A board of seven directors is to be elected at the Annual Meeting of
Stockholders. 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 March 1, 1997, are
set forth below.

DIRECTOR
NAME OF NOMINEE AGE POSITION SINCE
- ------------------------- --- ----------------------------------- --------

Virgil A. Place, M.D. 72 Chairman of the Board and Chief 1991
Scientific Officer
Leland F. Wilson 52 President and Chief Executive 1991
Officer
Richard L. Casey(1) 50 Director 1992
Samuel D. Colella(2)(3) 57 Director 1991
Brian H. Dovey(2)(3) 56 Director 1991
Elizabeth A. Fetter(1) 37 Director 1996
Linda Jenckes(2) 49 Director 1996

- ---------------

(1) Member of Compensation Committee

(2) Member of Audit 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 worked at ALZA Corporation ("Alza")
from 1969 to 1993. At Alza, Dr. Place was Principal Scientist and held a variety
of executive positions including Vice President of Medical and Regulatory
Affairs. 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 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.

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RICHARD L. CASEY has been a director of VIVUS since March 1992. Since 1987,
Mr. Casey has been Chairman and Chief Executive Officer of Scios Inc., a
biotechnology company. Prior to joining Scios Inc., Mr. Casey was Executive Vice
President of Alza and President of Alza Pharmaceuticals Division. Mr. Casey is a
director of Guilford Pharmaceuticals, Inc. He received a B.S. in Chemistry and
an M.B.A. from Stanford University.

SAMUEL D. COLELLA has been a director of VIVUS since November 1991. Mr.
Colella has been a general partner at Institutional Venture Partners, a venture
capital firm, since 1984. Mr. Colella is a director of Biosys, Inc., Endosonics
Corp. and Genta Incorporated. He received a B.S. in Business and Engineering
from the University of Pittsburgh and an M.B.A. from Stanford University.

BRIAN H. DOVEY has been a director of VIVUS since November 1991. Mr. Dovey
has been a general partner of Domain Associates, a venture capital firm, since
1988. Mr. Dovey is a director of Univax Biologics, Inc., Creative BioMolecules,
Inc., Athena Neurosciences, Inc. and ReSound Corporation. He received a B.A.
from Colgate University and an M.B.A. from Harvard Business School.

ELIZABETH A. FETTER has been a director of VIVUS since May 1996. Ms. Fetter
has been President of Industry Markets at Pacific Bell since 1995. Previously
she held various positions at Pacific Bell since 1991, which included Vice
President of Industry Market, Vice President Marketing Services, Area Vice
President, Executive Director Financial Strategy & Strategic Planning. She
received a B.A. from Pennsylvania State University and a M.S. from
Carnegie-Mellon University.

LINDA JENCKES has been a director of VIVUS since October 1996. Ms. Jenckes
has been President of Linda Jenckes and Associates, a consulting firm since
February 1995. From January 1982 to January 1995 she was Senior Vice President
of Health Insurance Association of America. She received a B.A. from Arizona
State University.

REQUIRED VOTE

The seven nominees receiving the highest number of the affirmative votes of
the shares present or represented and entitled to be voted for them 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 six meetings and took action by written consent a total of
seven times during fiscal 1996. The Compensation Committee held six meetings and
the Audit Committee held one meeting during fiscal 1996. All directors attended
at least 75% of the meetings of the Board and Committees of which they were
members during fiscal 1996 with the exception of Peter Barton Hutt (who attended
three of the six board meetings held) and Brian H. Dovey (who attended four of
the six board meetings held). Stockholders of the Company who would like to
nominate members for election to the Board at the next Annual Meeting of
Stockholders should submit such nominations to the Company in writing no later
than December 22, 1997, and shall comply in all respects with the relevant rules
promulgated under the Securities Exchange Act of 1934.

The Board has a Compensation Committee (consisting of directors Casey,
Fetter and Hutt) that makes recommendations concerning salaries and incentive
compensation for employees of the Company, an Audit Committee (consisting of
directors Colella, Dovey and Jenckes) that reviews the results and scope of the
audit and other services provided by the Company's independent auditors, and a
Nominating Committee (consisting of directors Colella and Dovey) that makes
recommendations on membership and composition of the Board.

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The directors are reimbursed for travel and related expenses incurred by
them in attending meetings. Effective May 1997, 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 for attending each board meeting.

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 12,500 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
2,500 shares on the date of each Annual Meeting of Stockholders, provided such
director is reelected. 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. As of March 1, 1997, Outside Directors held options exercisable for
33,928 shares of Common Stock at a weighted average exercise price of $14.89. As
part of Proposal Four to this Proxy Statement, the Company is seeking to
increase the initial grant of options and the automatic annual grants of options
to Outside Directors.

EXECUTIVE OFFICERS

The executive officers of the Company and certain information about them as
of March 1, 1997 are listed below:

NAME AGE POSITION
- ------------------------------ ---- --------------------------------------

Virgil A. Place, M.D. 72 Chairman of the Board and Chief
Scientific Officer
Leland F. Wilson 52 President, Chief Executive Officer and
Director
Paul C. Doherty, Ph.D. 47 Vice President, Research
Julian S. Gangolli 39 Vice President, Marketing
Neil Gesundheit, M.D. 44 Vice President, Clinical and
Regulatory Affairs
Terry M. Nida 48 Vice President, Europe
Clair W. Sater 55 Vice President, Corporate Development
William L. Smith, Ph.D. 56 Vice President, Research and
Development
David C. Yntema 52 Vice President, Finance and Chief
Financial Officer

Mr. Wilson's and Dr. Place's backgrounds are summarized previously under
"Election of Directors".

PAUL C. DOHERTY, PH.D. has been Vice President, Research of VIVUS since
September 1996. From February 1994 to September 1996, Dr. Doherty was Vice
President, Research and Development. Prior to joining VIVUS, he was Senior
Scientist working in erectile dysfunction research for Lilly Research
Laboratories, Eli Lilly and Company from 1990 to 1994. He was Assistant
Professor, Department of Anatomy at Northeastern Ohio University College of
Medicine from 1984 to 1990. He received a B.S. in Biology from Boston College, a
Ph.D. in Anatomy from the University of Texas Health Science Center and has
completed postgraduate work in Behavioral Endocrinology at the Massachusetts
Institute of Technology.

JULIAN S. GANGOLLI has been Vice President, Marketing since October 1996.
Mr. Gangolli previously served as Senior Director, Marketing from October 1994
to October 1996. Prior to joining VIVUS, he was Group Product Director, Product
planning Division at Syntex Laboratories, Inc. from October 1991 to October
1994. He held various other positions at Syntex, including International
Marketing, Market Planning Division, Syntex Laboratories, Inc. from 1990-1991,
Group Product Manager, Syntex Pharmaceuticals, Ltd., Maidenhead Berkshire,
England. He received his B.S., Applied Chemistry (Honors) from Kingston
University, Kingston, Surrey, England.

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NEIL GESUNDHEIT, M.D., M.P.H. has been Vice President, Clinical and
Regulatory Affairs for VIVUS since February 1994. Prior to joining VIVUS, Dr.
Gesundheit was Associate Director of Clinical Research (Endocrinology) at
Genentech, Inc. from 1989 to 1993. He received an A.B. from Harvard University,
an M.P.H. from the University of California at Berkeley, and an M.D. from the
University of California at San Francisco. Dr. Gesundheit is Board Certified in
Internal Medicine and in the subspecialty of Endocrinology and Metabolism.

TERRY M. NIDA has been Vice President, Europe for VIVUS since November 1995
and effective March 28, 1996 was appointed an executive officer. Prior to
joining VIVUS, Mr. Nida was Vice President for 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 his B.A. in English and
Masters in Administration of Justice from Wichita State University.

CLAIR W. SATER has been Vice President, Corporate Development for VIVUS
since January 1995. From January 1993 to January 1995, Mr. Sater was Vice
President, Marketing and Business Development. Prior to joining VIVUS, Mr. Sater
was Executive Vice President for Cholestech Corporation from 1990 to 1991. Mr.
Sater was Vice President of Marketing and Vice President of International for
LifeScan, a Johnson & Johnson company, from 1982 to 1990. Mr. Sater received a
B.S. and an M.S. in Engineering from Iowa State University and an M.B.A. from
Stanford University.

WILLIAM L. SMITH, PH.D. has been Vice President, Research and Development
since September 1996. Prior to joining VIVUS, Dr. Smith served as Vice
President, Operations for Chiron Technologies, from 1995 to September 1996. He
was Vice President, Program Management teams at Syntex Research from 1993-1995.
He held various other positions at Syntex Research, including Vice President,
Director of Drug Evaluation Project teams from 1992-1993, Director, Drug
Evaluation Programs 1991-1992, Director, Systemic Pharmacology from 1990-1991
and Department Head, Gastrointestinal Pharmacology from 1988-1990. He received
his B.S., Biology from Lynchburg College and his Ph.D., Pharmacology from
Medical College of Virginia.

DAVID C. YNTEMA has been Vice President, Finance and Chief Financial
Officer for VIVUS since May 1994. Prior to joining VIVUS, he served as Chief
Financial Officer of EO, Inc., a hand-held personal computer company, from 1993
to 1994, MasPar Computer Corporation, a supercomputer company, from 1990 to
1993, and System Industries, Inc., a storage sub-system company, from 1988 to
1990. He received a B.A. from Hope College and an M.B.A. from the University of
Michigan and is a Certified Public Accountant.

CERTAIN TRANSACTIONS AND REPORTS

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, 1998, the Company issued an
additional 200,000 shares of Common Stock to Alza in May 1996.

In connection with the private placement of its Series D Preferred Stock in
June and July of 1993, the Company issued, in payment of the placement fee for
the Series D Preferred Stock offering, warrants to acquire 264,300 shares of
Common Stock (the "Warrants") at an exercise price of $8.63 per share to Invemed
Associates, Inc. and Frazier Investment Securities, L.P., the two placement
agents for the offering. Invemed Associates, Inc., and an affiliate, received
Warrants for 92,505 shares of Common Stock. In addition, Invemed Associates,
Inc. has an indirect equity ownership in Frazier Investment Securities, L.P. The
Warrants were originally exercisable for shares of Series D Preferred Stock and
became exercisable for Common Stock upon

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the closing of the Company's initial public offering. The Warrants may be
exercised at any time and expire in July 1999. The Warrants may not be
transferred to any person except to affiliates or general or limited partners of
the original recipient. In fiscal 1995, with the Company's consent, Frazier
Investment Securities, L.P. transferred Warrants to acquire 171,795 shares of
Common Stock, representing all Warrants held in its name, to two non-affiliates.
Shares of Common Stock issued upon the exercise of the Warrants will be
restricted stock and will not be transferable until the expiration of the
holding period under Rule 144. The holders of the Warrants are parties to the
registration rights agreement entered into between the Company and the
purchasers of Series D Preferred Stock entitling them to certain rights with
respect to the registration of such shares under the Securities Act. Invemed
Associates, Inc. and certain affiliates also purchased shares of Series D
Preferred Stock in the Series D Preferred Stock offering.

The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions, including loans, between
the Company and its officers, directors, principal stockholders and affiliates
will be approved by a majority of the Board including a majority of the
independent and disinterested outside directors on the Board.

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 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, 1996 to December 31, 1996, its executive
officers, directors and ten percent stockholders filed all required Section
16(a) reports on a timely basis with the exception of director Richard L. Casey
who failed to timely file two Forms 4 and one Form 5 disclosing two covered
transactions and Clair W. Sater who failed to timely file one Form 4 and one
Form 5 disclosing two covered transactions.

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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, 1996, 1995 and
1994 to the Chief Executive Officer and its four other most highly compensated
executive officers:

SUMMARY COMPENSATION TABLE

LONG-TERM
ANNUAL COMPENSATION
COMPENSATION ------------
FISCAL --------------------- AWARDS OF ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#)(1) COMPENSATION($)(2)
- ------------------------------- ------ -------- -------- ------------ ------------------

Leland F. Wilson 1996 $282,983 -- 105,000 $5,540
President and 1995 252,945 -- 60,000 7,128
Chief Executive Officer 1994 219,468 -- 125,000 6,367

Neil Gesundheit, M.D 1996 $192,352 -- 45,000 $7,210
Vice President, Clinical and 1995 168,710 -- 30,000 6,898
Regulatory Affairs 1994 149,665 -- -- 7,370

Virgil A. Place, M.D. 1996 $214,778 -- -- $5,863
Chief Scientific Officer 1995 206,090 -- -- 5,717
1994 202,272 -- 75,000 6,208

William L. Smith, Ph.D. 1996 $ 55,722(3) $ 80,000 60,000 $1,594
Vice President, Research 1995 -- -- -- --
and Development 1994 -- -- -- --

David C. Yntema 1996 $176,749 -- 38,000 $3,574
Vice President, Finance and 1995 158,393 -- 16,500 3,691
Chief Financial Officer 1994 103,077 -- 100,000 2,625

- ---------------

(1) Long-term compensation awards of options reports the number of options
granted prior to the two-for-one stock split contemplated by Proposal Two of
this Proxy Statement.

(2) Includes premium payments for term life and health insurance.

(3) Includes salary from September 30, 1996 upon commencement of employment. Mr.
Smith's 1996 annualized compensation was $220,000.

(4) As of January 1, 1997, the annual base salary of Messrs. Wilson, Gesundheit,
Place, Smith and Yntema was increased to $310,000, $209,777, $220,000,
$225,500 and $184,758, respectively.

Employment Agreements. There are no employment agreements between the
Company and any of its executive officers, except that Messrs. Wilson and
Doherty are entitled to severance pay of four and three months salary,
respectively, in the event of termination of employment without cause.

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STOCK OPTION INFORMATION

Option Grants in Last Fiscal Year. The following table sets forth certain
information for the year ended December 31, 1996, with respect to each grant of
stock options to the individuals named in the Summary Compensation Table:

OPTION GRANTS IN 1996

POTENTIAL
REALIZABLE VALUE
INDIVIDUAL GRANTS AT ASSUMED
---------------------------------------------------- ANNUAL RATES OF
% OF TOTAL STOCK PRICE
NUMBER OF OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION -----------------------
NAME GRANTED(2) FISCAL YEAR(3) SHARES(5) DATE 5% 10%
- ----------------------------- ---------- -------------- --------- ---------- ---------- ----------

Leland F. Wilson............. 60,000 8.3% 30.00 01/02/06 $1,132,010 $2,868,736
45,000 6.2% 33.50 12/11/06 691,508 1,994,052
Neil Gesundheit, M.D......... 25,000 3.5% 30.00 01/02/06 471,671 1,195,307
20,000 2.8% 33.50 12/11/06 421,359 1,067,807
Virgil A. Place, M.D......... -- -- -- -- -- --
William L. Smith, Ph.D....... 50,000 6.9% 38.00 09/30/06 943,342 2,390,614
10,000 1.4% 33.50 12/11/06 210,680 533,904
David C. Yntema.............. 23,000 3.2% 30.00 01/02/06 433,937 1,099,682
15,000 2.1% 33.50 12/11/06 316,020 800,856

- ---------------

(1) In accordance with the rules of the SEC, shown are the gains or "option
spreads" that would exist for the respective options granted. These gains
are based on the assumed rates of annual compound stock price appreciation
of 5% and 10% from the date the option was granted over the full option
term. These assumed annual compound rates of stock price appreciation are
mandated by the rules of the SEC and do not represent the Company's estimate
or projection of future Common Stock prices.

(2) All stock options granted in 1996 are exercisable starting one year after
the date of grant, with 25% of the shares covered thereby becoming
exercisable at that time and with an additional 1/48 of the total number of
option shares becoming exercisable at the end of each month thereafter, with
full vesting occurring on the fourth anniversary of the date of grant. The
number of options granted is reported prior to the two-for-one stock split
contemplated by Proposal Two of this Proxy Statement.

(3) Based on an aggregate of 722,373 options granted in 1996, including options
granted to the individuals named in the Summary Compensation Table above.

(4) Options are granted at an exercise price equal to the closing market per
share price on the date of grant.

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, 1996 and the value of unexercised stock
options held by such individuals at the end of the year.

AGGREGATE OPTION EXERCISES IN 1996 AND 1996 YEAR-END VALUES(1)

NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF VALUE OPTIONS AT IN-THE-MONEY OPTIONS
SHARES REALIZED DECEMBER 31, 1996 AT DECEMBER 31, 1996(2)
ACQUIRED ON UPON --------------------------- ---------------------------
NAME EXERCISE EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- -------- ----------- ------------- ----------- -------------

Leland F. Wilson............ -- -- 281,166 181,836 $ 8,179,298 $ 2,672,058
Neil Gesundheit, M.D. ...... 12,907 $326,131 33,017 64,376 $ 801,924 $ 939,161
Virgil A. Place, M.D. ...... -- -- 57,810 17,190 1,662,038 494,213
William L. Smith, Ph.D. .... -- -- 0 59,999 -- --
David C. Yntema............. 4,000 $ 51,000 80,385 65,115 1,678,215 906,910

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- ---------------

(1) All option data is reported prior to the two-for-one stock split
contemplated by Proposal Two of this Proxy Statement.

(2) Based upon an assumed fair market value of $36.25 per share as of December
31, 1996 less the exercise price per share.

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 non-employee Directors. The Committee recommends to the
full Board an 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

In fiscal 1996 the Company's cash- and equity-based compensation program
focused on attracting key employees to work in a rapidly developing public
company. The hiring and compensation of key employees in fiscal 1996 focused on
commercialization of VIVUS' technology through continued clinical development,
progression through the regulatory process, scale-up of manufacturing, market
expansion and research and development of new pharmacologic agents. Consistent
with this long-term orientation and in an effort to align compensation
incentives with stockholder goals, the Company's compensation packages have
included salaries competitive with comparable positions in the market and
significant stock option grants.

Cash Compensation. Before making compensation recommendations to the Board
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.
In recommending the CEO's fiscal 1997 base salary, the Committee used the same
criteria it applies to other officers. The Committee recognized the achievement
of a number of goals by the Company in fiscal 1996, including submitting a New
Drug Application in March 1996 and receiving FDA approval in November 1996. The
Board or the Committee may award cash bonuses for exceptional contributions to
the Company's success. No cash bonuses were awarded in fiscal 1996 with the
exception of a $80,000 cash signing bonus paid to William L. Smith, Ph.D.

Stock Option Program. The Committee grants options as an incentive to
employees who are expected to contribute materially 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 four-year vesting periods to encourage employees to
continue in the Company's employ. In fiscal 1996 the Company continued its
policy of granting stock options to all new employees, and granted additional
stock options to employees who had made exceptional contributions to the
Company's development.

The Committee approved initial stock option grants for all officers in
connection with commencement of the officer's employment. These stock option
grants were based primarily on the scope of the officer's responsibilities at
VIVUS, the cash compensation that the officer had received in his prior
employment and the cash compensation proposed to be paid by the Company. With
the Board's approval, additional options

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were granted in some cases in light of the individual's achievement of specific
goals set jointly by the officer and the CEO, and the individual's level of
vested and unvested options.

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
evolve over time as the Company attempts to achieve the many short-term goals it
faces while maintaining its focus on building long-term stockholder value
through technological leadership and development and expansion of the market for
the Company's products.

Respectfully submitted,

Richard L. Casey
Elizabeth A. Fetter
Peter Barton Hutt

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. The Committee also administers various incentive compensation and
benefit plans. In fiscal year 1996, the Committee consisted of directors Casey
(Chairman), Fetter and Hutt. 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.

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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, 1996 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 -- U.S. & FOREIGN

NASDAQ PHARMA-
MEASUREMENT PERIOD THE NASDAQ STOCK CEUTICAL STOCKS -
(FISCAL YEAR COVERED) VIVUS, INC. MARKET - U.S. U. S. & FOREIGN

4/7/94 100.000 100.000 100.000
6/30/94 94.915 93.811 87.259
9/30/94 88.136 101.578 98.300
12/30/94 103.390 100.420 92.270
3/31/95 116.949 109.427 99.613
6/30/95 101.685 125.168 115.614
9/29/95 139.864 140.233 144.258
12/29/95 211.864 141.902 168.535
3/29/96 201.695 148.630 175.635
6/28/96 222.034 160.761 170.683
9/30/96 257.627 166.486 174.509
12/31/96 245.763 174.668 168.961

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PROPOSAL TWO:

AMENDMENT TO THE CERTIFICATE OF INCORPORATION
PROPOSAL

The Board of Directors has determined that it is in the best interests of
the Company and its stockholders to amend the Company's Certificate of
Incorporation and to increase the number of authorized shares of the Company's
Common Stock from 30,000,000 shares to 200,000,000 shares (after giving effect
to the proposed stock split) in order to effect a two-for-one split of the
Company's Common Stock (the "Stock Split"). Accordingly, the Board of Directors
has unanimously approved the proposed Amended and Restated Certificate of
Incorporation, in substantially the form attached hereto as Exhibit A (the
"Amended and Restated Certificate"), and hereby solicits the approval of the
Company's stockholders of the Amended and Restated Certificate.

If the stockholders approve the Amended and Restated Certificate, the Board
of Directors currently intends to file the Amended and Restated Certificate with
the Secretary of State of the State of Delaware as soon as practicable following
such stockholder approval. In connection with the Stock Split, the numbers of
shares of Common Stock subject to outstanding options and reserved for issuance
under the Company's various stock option and stock purchase plans would be
proportionately adjusted pursuant to the terms of such plans to reflect the
Stock Split described above, and the exercise prices of outstanding options
thereunder would be proportionately reduced.

PURPOSE OF THE PROPOSED AMENDMENT

The objectives of the increase in the authorized number of shares of Common
Stock from 30,000,000 shares to 200,000,000 shares (after giving effect to the
stock split) are to ensure that there is a sufficient number of authorized
shares to effect the Stock Split and to have sufficient shares available for
future issuances. The objectives of the Stock Split are to lower the market
price of the Company's Common Stock and to increase its trading activity, each
of which is expected to broaden the marketability of the Company's Common Stock.
For these reasons, the Board of Directors believes that the Stock Split and the
corresponding increase in the authorized number of shares of Common Stock are in
the best interests of the Company and its stockholders.

The Board of Directors believes that it is prudent to increase the
authorized number of shares of Common Stock to the proposed level in order to
provide (after giving effect to the Stock Split) a reserve of shares available
for issuance to meet business needs as the arise. Such future activities may
include, without limitation, financings, establishing strategic relationships
with corporate partners, providing equity incentives to employees, officers or
directors, or effecting future stock splits or dividends. The additional shares
of Common Stock authorized but not required to effect the Stock Split may also
be used to acquire or invest in complementary businesses or products or to
obtain the right to use complementary technologies. The Company has no present
obligation to issue additional shares of Common Stock except pursuant to
employee and director stock plans.

The additional Common Stock issuable upon the Stock Split would have rights
identical to the currently outstanding Common Stock of the Company. Adoption of
the proposed Amended and Restated Certificate would not affect the rights of the
holders of currently outstanding Common Stock of the Company, except for effects
incidental to increasing the number of shares of the Company's Common Stock
outstanding.

POSSIBLE EFFECTS OF THE PROPOSED AMENDMENT

If the stockholders approve the proposed Amended and Restated Certificate,
the Board of Directors may cause the issuance of additional shares of Common
Stock without further vote of the stockholders of the Company, except as
provided under Delaware corporate law or under the rules of any national
securities exchange on which shares of Common Stock of the Company are then
listed. Current holders of Common Stock have no preemptive rights, which means
that current stockholders do not have a prior right to purchase any new issue of
capital stock of the Company in order to maintain their appropriate ownership
thereof. The

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issuance of additional shares of Common Stock would decrease the proportionate
equity interest of the Company's current stockholders and, depending upon the
price paid for such additional shares, could result in dilution to the Company's
current stockholders.

In addition, the Board of Directors could use authorized but unissued
shares to create impediments to a takeover or a transfer of control of the
Company. Accordingly, the increase in the number of authorized shares of Common
Stock may deter a future takeover attempt which holders of Common Stock may deem
to be in their best interest or in which holders of Common Stock may be offered
a premium for their shares over the market price. The Board of Directors is not
currently aware of any attempt to take over or acquire the Company. While it may
be deemed to have potential anti-takeover effects, the proposed amendment to
increase the authorized Common Stock is not prompted by any specific effort or
takeover threat currently perceived by management.

REQUIRED VOTE; RECOMMENDATION OF THE BOARD OF DIRECTORS

Approval of the amendment to the Certificate of Incorporation 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.

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PROPOSAL THREE:

AMENDMENT TO THE 1991 INCENTIVE STOCK PLAN TO
INCREASE THE NUMBER OF SHARES AVAILABLE FOR ISSUANCE
PROPOSAL

The Board of Directors of the Company amended the Company's 1991 Incentive
Stock Plan (the "Stock Plan") in February 1997, subject to stockholder approval,
to increase the number of shares reserved for issuance under the plan by an
aggregate of 800,000 shares to a new total of 3,900,000 shares. The number of
shares discussed in this proposal are "pre-split" shares and do not take into
account the two-for-one stock split contemplated by Proposal Two of this Proxy
Statement.

SUMMARY OF PLAN

Purpose. The purposes of the Incentive Plan are to attract and retain the
best available personnel, to provide additional incentive to employees and
directors of the Company and to promote the success of the Company's business.

Status of Shares. Of the 3,100,000 shares authorized prior to the amendment
described above, 2,574,409 shares had been granted as of March 1, 1997, and
677,571 shares remained available for future grant as of such date.

Administration. The Incentive Plan is administered by the Board of
Directors of the Company or by a committee appointed by the Board of Directors
and consisting of at least two members of the Board. The Board or its committee
has sole discretion to interpret any provision of the Incentive Plan. This
determination is final and conclusive. Members of the Board are elected by the
stockholders for terms of approximately one year and could be removed from
office upon a sufficient vote of stockholders. Members of the Board or committee
receive no additional compensation for administering the plans. The President
and Chief Executive Officer and the Chief Scientific Officer of the Company are
members of the Board.

Eligibility. The Incentive Plan provides that options and stock purchase
rights may be granted to employees and consultants of the Company and its
majority-owned subsidiaries. Only employees may be granted "incentive stock
options" as defined in Section 422 of the Code. Only employees or consultants
may be granted "stock purchase rights." The Board of Directors or its committee
selects the optionees and determines the number of shares to be subject to each
option.

Exercise Price. The exercise price of options granted under the Incentive
Plan is determined by the Board of Directors or its committee. The exercise
price of incentive stock options may not be less than 100% of the fair market
value of the Common Stock on the date the option is granted. However, the
exercise price of options granted to an optionee who owns more than 10% of the
voting power or value of all classes of stock of the Company must not be less
than 110% of the fair market value on the date of grant. The Common Stock is
currently traded on The Nasdaq Stock Market. While the Company's stock is traded
on The Nasdaq Stock Market, the fair market value is the reported closing price.

Performance-Based Compensation Limitations. No employee shall be granted in
any fiscal year of the Company options to acquire in the aggregate 500,000
shares of Common Stock. The foregoing limitation, which shall adjust
proportionately in connection with any change in the Company's capitalization
(including the proposed two-for-one stock split), is intended to satisfy the
requirements applicable to options intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Internal Revenue Code.
In the event that the Committee determines that such limitation is not required
to qualify options as performance-based compensation, the Committee may modify
or eliminate such limitation.

Exercisability. Options granted to new optionees under the Stock Plan
generally become exercisable starting one year after the date of grant with 25%
of the shares covered thereby becoming exercisable at that time and with an
additional 1/48 of the total number of option shares becoming exercisable at the
end of each month thereafter, with full vesting occurring on the fourth
anniversary of the date of grant. The term of an option may not exceed ten
years. No option may be transferred by the optionee other than by will or the
laws

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of descent or distribution. Each option may be exercised, during the lifetime of
the optionee, only by such optionee.

Stock Purchase Rights. The Stock Plan permits the Company to grant rights
to purchase Common Stock. After the Board or Committee determines that it will
offer stock purchase rights under the Stock Plan, it shall advise the offeree in
writing or electronically of the terms, conditions and restrictions related to
the offer, including the number of shares that the offeree shall be entitled to
purchase, and the time within which the offeree must accept such offer. The
offer shall be accepted by execution of a stock purchase agreement or a stock
bonus agreement in the form determined by the Board or Committee.

Unless the Board or Committee determines otherwise, the stock purchase
agreement or a stock bonus agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment with the Company for any reason. The purchase price for shares
repurchased pursuant to the stock purchase agreement or a stock bonus agreement
shall be the original price paid by the purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The repurchase
option shall lapse at such rate as the Board or Committee may determine.

Amendment and Termination. The Board may at any time amend or terminate the
Incentive Plan without approval of the stockholders; provided, however, that the
Company will obtain stockholder approval of any amendment to the Incentive Plan
to the extent necessary to comply with Rule 16b-3 under the Securities Exchange
Act of 1934 (the "Exchange Act"), with Section 422 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 Incentive Plan
is subject to the rights of optionees under agreements entered into prior to
such amendment or termination. The Incentive Plan will terminate by its own
terms in 2001.

CERTAIN FEDERAL TAX INFORMATION

The Code provides to the optionee favorable federal income tax treatment of
stock options which qualify as "incentive stock options." If an option granted
under the Incentive Plan is treated as an incentive stock option, the optionee
will recognize no income upon grant of the option and will recognize no income
upon exercise of the option. The Company will not be allowed a deduction for
federal tax purposes in connection with the exercise of an incentive stock
option.

Upon the sale of the shares at least two years after the grant of the
option and one year after exercise of the option (the "statutory holding
periods"), any gain will be taxed to the optionee as long-term capital gain. The
tax on long-term capital gains is currently capped at 28%. If the statutory
holding periods are not satisfied (i.e., the optionee makes a "disqualifying
disposition"), the optionee will recognize compensation income equal to the
difference between the exercise price and the lower of (i) the fair market value
of the stock at the date of the option exercise or (ii) the sale price of the
stock, and the Company will be entitled to a deduction in the same amount. Any
additional gain or loss recognized on a disqualifying disposition of the shares
will be characterized as capital gain or loss.

Different rules may apply if shares are purchased by an optionee who is
subject to Section 16(b) of the Exchange Act and the optionee subsequently
disposes of such shares prior to the expiration of statutory holding periods.

An incentive stock option must be exercised while the optionee is an
employee of the Company or a subsidiary of the Company, or no more than three
months after the optionee ceases to be an employee. The following additional
conditions must be satisfied for an option to obtain incentive stock option
treatment: (i) the option must be exercisable only within ten years after the
date of grant; (ii) the exercise price must not be less than the fair market
value of the shares at the time the option is granted; (iii) the option must be
granted pursuant to a written plan that sets forth the maximum number of shares
that may be issued under the plan, states the class of employees eligible to
receive options, and is approved by a majority of the stockholders of the
Company within 12 months of the plan's adoption by the Board of Directors; (iv)
the option must be nontransferable other than by death and must be exercisable
during the optionee's lifetime only by him; (v) if the optionee owns more than
10% of the total combined voting power of all classes of the Company's stock

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immediately before the option is granted, the exercise price must be at least
110% of the fair market value of the shares and the option must be exercisable
only within five years of the date of grant; and (vi) to the extent that the
aggregate fair market value of stock with respect to which incentive stock
options are exercisable for the first time by the optionee during any calendar
year (under all plans of the Company) exceeds $100,000 (determined in accordance
with Section 422(d) of the Code), such options will be treated as nonstatutory
options.

Upon the death of an optionee who has not exercised an incentive stock
option, the value of such option (determined under applicable Treasury
regulations) will be includable in the optionee's estate for federal estate tax
purposes. Upon the exercise of such option, the holder's basis in the option
shares will include the value of the option included in the estate plus the
price paid for the option shares. Different rules apply if the option shares are
sold before the expiration of the one-year and two-year holding periods
described above.

Incentive stock options granted under the Incentive Plan will be afforded
the tax treatment summarized above. All other options ("nonstatutory options")
will not qualify for any special tax benefits to the optionee. An optionee will
not recognize any taxable income at the time he is granted a nonstatutory
option. Upon exercise of the option, the optionee will generally recognize
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. However, if
shares subject to a repurchase option of the Company are purchased upon exercise
of a nonstatutory option, no tax will be imposed at the time of exercise with
respect to such non-vested shares (and the optionee's long-term capital gain
holding period will not begin at such time) unless the optionee files an
election with the Internal Revenue Service pursuant to Section 83(b) of the Code
within 30 days after the date of exercise. In the absence of such election, the
optionee is taxed (and the long-term capital gain holding period begins) at the
time at which the shares vest (i.e., the time at which the repurchase option
lapses with respect to such shares), and the optionee recognizes compensation
income in the amount of the difference between the value of the shares at that
time and the option exercise price. If a Section 83(b) election is timely filed,
the non-vested shares will be treated for federal income tax purposes as if they
had been vested at the time of exercise. Taxation may also be deferred (unless a
Section 83(b) election is filed) when shares are purchased by an optionee who is
subject to Section 16(b) of the Exchange Act.

Upon the surrender of shares of the Company's Common Stock in connection
with the exercise of a nonstatutory stock option, the optionee will recognize
compensation income as described above. A number of the acquired shares, equal
in number to the surrendered shares, will have a basis equal to the optionee's
basis in the surrendered shares. Any additional shares acquired in the exchange
will have a zero basis, increased by any compensation income recognized with
respect to the exercise of the nonstatutory option.

The compensation income recognized by the optionee who is also an employee
will be treated as wages and will be subject to tax withholding by the Company
out of the current compensation paid to the optionee. If such current
compensation is insufficient to pay the withholding tax, the optionee will be
required to make direct payment to the Company for the tax liability.

Upon a resale of such shares by the optionee, any difference between the
sales price and the fair market value of the shares on the date of exercise of
the nonstatutory option (or the fair market value of the shares on the date they
become vested, if a Section 83(b) election has not been timely filed) will be
treated as capital gain or loss. If after exercise the shares are held for more
than one year before resale, any gain will be long-term capital gain. Tax on
longterm capital gains is currently capped at 28%. Capital losses are allowed in
full against capital gains plus $3,000 of other income.

The Company will be entitled to a tax deduction in the amount and at the
time that the optionee recognizes ordinary income with respect to shares
acquired upon exercise of a nonstatutory option.

Upon the death of an optionee who has not exercised his or her nonstatutory
option, the value of such option (determined under applicable Treasury
regulations) will be includable in the optionee's estate for federal estate tax
purposes. Upon the exercise of such option, the holder will recognize
compensation income as described above, and will be allowed a deduction based
upon any estate tax paid with respect to the value of such option.

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Stock purchase rights receive the same tax treatment as nonstatutory
options.

REQUIRED VOTE; RECOMMENDATION OF THE BOARD OF DIRECTORS

Approval of the amendment to the Stock 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.

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PROPOSAL FOUR:

AMENDMENT TO THE 1994 DIRECTOR OPTION PLAN

PROPOSAL

The Board of Directors of the Company amended the Company's 1994 Director
Option Plan (the "Director Plan") in February 1997, subject to stockholder
approval, to increase the number of shares reserved for issuance under the plan
by an aggregate of 100,000 shares to a new total of 200,000 shares, to increase
the initial option granted to non-employee directors ("Outside Directors") from
12,500 to 16,000 shares and to increase the subsequent options granted to
Outside Directors from 2,500 to 4,000 shares. The number of shares discussed in
this proposal are "pre-split" shares and do not take into account the
two-for-one stock split contemplated by Proposal Two of this Proxy Statement.

SUMMARY OF PLAN

Purpose. The purpose of the Director Plan is to attract and retain the best
available personnel for service as Outside Directors of the Company, to provide
additional incentive to the Outside Directors of the Company to serve as
directors, and to encourage their continued service on the Board.

Status of Shares. Of the 100,000 shares authorized prior to the amendment
described above, 47,500 shares had been granted as of March 1, 1997, and 52,500
shares remained available for future grant as of such date.

Administration. All grants of options to Outside Directors under the
Director Plan are automatic and nondiscretionary and are made in accordance with
the following provisions: (i) each Outside Director who becomes a director
following the date of approval of the Director Plan by the Board shall be
automatically granted an option to purchase 12,500 Shares (which this proposal
would to 16,000) on the date on which such person first becomes a director,
whether through election by the stockholders of the Company or appointment by
the Board to fill a vacancy; and (ii) each Outside Director shall be
automatically granted an option to purchase 2,500 Shares (which this proposal
would increase to 4,000) on the date of the Company's Annual Meeting of
Stockholders upon such Outside Director's reelection, if on such date, he or she
has served on the Board for at least six (6) months.

Eligibility. The Director Plan provides that options may be granted only to
Outside Directors and that all options granted under the Director Plan shall be
nonstatutory options. All options are automatically granted in accordance with
the Director Plan.

Exercise Price. The exercise price of options granted under the Director
Plan shall be 100% of the fair market value of the Common Stock on the date the
option is granted. The Common Stock is currently traded on The Nasdaq Stock
Market. While the Company's stock is traded on The Nasdaq Stock Market, the fair
market value is the reported closing price.

Exercisability. Options granted under the Director Plan become exercisable
in accordance with one of the following two schedules (i) 25% of the shares
subject to the First Option become exercisable on each anniversary of the date
of grant, with full vesting occurring on the fourth anniversary of the date of
grant or (ii) 12 1/2% of the shares subject to the Subsequent Option become
exercisable on the first day of each month following the date of grant, with
full vesting occurring eight months after the date of grant.

An option granted under the Director Plan is exercised by giving written
notice of exercise to the Company, specifying the number of full shares of
Common Stock to be purchased and tendering full payment of the purchase price to
the Company. Payment for shares issued upon exercise of an option shall consist
of cash or check. An option is not transferable by the optionee, other than by
will or the laws of descent and distribution. During the optionee's lifetime,
only the optionee may exercise the option. Options granted under the Director
Plan have a term of ten years from the date of grant. No option may be exercised
by any person after the expiration of its term.

20
23

Amendment and Termination. The Board may at any time amend or terminate the
Director Plan without approval of the stockholders; provided, however, that the
Company will obtain stockholder approval of any amendment to the Director Plan
to the extent necessary to comply with Rule 16b-3 under the Securities Exchange
Act of 1934 (the "Exchange Act"), with Section 422 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 Director Plan is
subject to the rights of optionees under agreements entered into prior to such
amendment or termination. The Director Plan will terminate by its own terms in
2004.

CERTAIN FEDERAL TAX INFORMATION

An optionee will not recognize any taxable income at the time he or she is
granted a nonstatutory option. Upon exercise of the option, the optionee will
generally recognize 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. However, if shares subject to a repurchase option of the Company are
purchased upon exercise of a nonstatutory option, no tax will be imposed at the
time of exercise with respect to such non-vested shares (and the optionee's
long-term capital gain holding period will not begin at such time) unless the
optionee files an election with the Internal Revenue Service pursuant to Section
83(b) of the Code within 30 days after the date of exercise. In the absence of
such election, the optionee is taxed (and the long-term capital gain holding
period begins) at the time at which the shares vest (i.e., the time at which the
repurchase option lapses with respect to such shares), and the optionee
recognizes compensation income in the amount of the difference between the value
of the shares at that time and the option exercise price. If a Section 83(b)
election is timely filed, the non-vested shares will be treated for federal
income tax purposes as if they had been vested at the time of exercise. Taxation
may also be deferred (unless a Section 83(b) election is filed) when shares are
purchased by an optionee who is subject to Section 16(b) of the Exchange Act.

The Company will be entitled to a tax deduction in the amount and at the
time that the optionee recognizes ordinary income with respect to shares
acquired upon exercise of a nonstatutory option.

REQUIRED VOTE; RECOMMENDATION OF THE BOARD OF DIRECTORS

Approval of the amendment to the Director 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.

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24

PROPOSAL FIVE:

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, 1997 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 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.

22
25

EXHIBIT A

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF VIVUS, INC.

VIVUS, INC., a corporation organized and existing under the laws of the
State of Delaware, hereby certifies that the following Amended and Restated
Certificate of Incorporation (i) has been duly adopted in accordance with the
provisions of Section 245 of the General Corporation Law, (ii) restates the
provisions of the Certificate of Incorporation of VIVUS, Inc. filed with the
Secretary of State of the State of Delaware on May 20, 1996 and (iii) supersedes
the original Certificate of Incorporation in its entirety.

ARTICLE I

The name of the corporation is VIVUS, Inc. (the "Corporation").

ARTICLE II

The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801.
The name of its registered agent at such address is The Corporation Trust
Company.

ARTICLE III

The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.

ARTICLE IV

The Corporation is authorized to issue two classes of shares of stock to be
designated, respectively, Common Stock, $0.001 par value, and Preferred Stock,
$0.001 par value. The total number of shares that the Corporation is authorized
to issue is 205,000,000 shares. The number of shares of Common Stock authorized
is 200,000,000. The number of shares of Preferred Stock authorized is 5,000,000.

Upon the filing of this Certificate of Amendment of Certificate of
Incorporation, each one outstanding share of Common Stock shall be subdivided
and converted into two shares of Common Stock.

The Preferred Stock may be issued from time to time in one or more series
pursuant to a resolution or resolutions providing for such issue duly adopted by
the board of directors (authority to do so being hereby expressly vested in the
board). The board of directors is further authorized to determine or alter the
rights, preferences, privileges and restrictions granted to or imposed upon any
wholly unissued series of Preferred Stock and to fix the number of shares of any
series of Preferred Stock and the designation of any such series of Preferred
Stock. The board of directors, within the limits and restrictions stated in any
resolution or resolutions of the board of directors originally fixing the number
of shares constituting any series, may increase or decrease (but not below the
number of shares in any such series then outstanding) the number of shares of
any series subsequent to the issue of shares of that series.

The authority of the board of directors with respect to each such class or
series shall include, without limitation of the foregoing, the right to
determine and fix:

(a) the distinctive designation of such class or series and the number
of shares to constitute such class or series;

(b) the rate at which dividends on the shares of such class or series
shall be declared and paid, or set aside for payment, whether dividends at
the rate so determined shall be cumulative or accruing, and whether the
shares of such class or series shall be entitled to any participating or
other dividends in addition to dividends at the rate so determined, and if
so, on what terms;

A-1
26

(c) the right or obligation, if any, of the corporation to redeem
shares of the particular class or series of Preferred Stock and, if
redeemable, the price, terms and manner of such redemption;

(d) the special and relative rights and preferences, if any, and the
amount or amounts per share, which the shares of such class or series of
Preferred Stock shall be entitled to receive upon any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation;

(e) the terms and conditions, if any, upon which shares of such class
or series shall be convertible into, or exchangeable for, shares of capital
stock of any other class or series, including the price or prices or the
rate or rates of conversion or exchange and the terms of adjustment, if
any;

(f) the obligation, if any, of the corporation to retire, redeem or
purchase shares of such class or series pursuant to a sinking fund or fund
of a similar nature or otherwise, and the terms and conditions of such
obligation;

(g) voting rights, if any, on the issuance of additional shares of
such class or series or any shares of any other class or series of
Preferred Stock;

(h) limitations, if any, on the issuance of additional shares of such
class or series or any shares of any other class or series of Preferred
Stock; and

(i) such other preferences, powers, qualifications, special or
relative rights and privileges thereof as the board of directors of the
corporation, acting in accordance with this Restated Certificate of
Incorporation, may deem advisable and are not inconsistent with law and the
provisions of this Restated Certificate of Incorporation.

ARTICLE V

The Corporation reserves the right to amend, alter, change, or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon the stockholders
herein are granted subject to this right.

ARTICLE VI

The Corporation is to have perpetual existence.

ARTICLE VII

1. Limitation of Liability. To the fullest extent permitted by the General
Corporation Law of the State of Delaware as the same exists or as may hereafter
be amended, a director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director.

2. Indemnification. The Corporation may indemnify to the fullest extent
permitted by law any person made or threatened to be made a party to an action
or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact that such person or his or her testator or intestate is or
was a director, officer or employee of the Corporation, or any predecessor of
the Corporation, or serves or served at any other enterprise as a director,
officer or employee at the request of the Corporation or any predecessor to the
Corporation.

3. Amendments. Neither any amendment nor repeal of this Article VII, nor
the adoption of any provision of the Corporation's Certificate of Incorporation
inconsistent with this Article VII, shall eliminate or reduce the effect of this
Article VII, in respect of any matter occurring, or any action or proceeding
accruing or arising or that, but for this Article VII, would accrue or arise,
prior to such amendment, repeal, or adoption of an inconsistent provision.

A-2
27

ARTICLE VIII

In the event any shares of Preferred Stock shall be redeemed or converted
pursuant to the terms hereof, the shares so converted or redeemed shall not
revert to the status of authorized but unissued shares, but instead shall be
canceled and shall not be re-issuable by the Corporation.

ARTICLE IX

Holders of stock of any class or series of this corporation shall not be
entitled to cumulate their votes for the election of directors or any other
matter submitted to a vote of the stockholders, unless such cumulative voting is
required pursuant to Sections 2115 and/or 301.5 of the California Corporations
Code, in which event each such holder shall be entitled to as many votes as
shall equal the number of votes which (except for this provision as to
cumulative voting) such holder would be entitled to cast for the election of
directors with respect to his shares of stock multiplied by the number of
directors to be elected by him, and the holder may cast all of such votes for a
single director or may distribute them among the number of directors to be voted
for, or for any two or more of them as such holder may see fit, so long as the
name of the candidate for director shall have been placed in nomination prior to
the voting and the stockholder, or any other holder of the same class or series
of stock, has given notice at the meeting prior to the voting of the intention
to cumulate votes.

ARTICLE X

1. Number of Directors. The number of directors which constitutes the whole
Board of Directors of the corporation shall be designated in the Bylaws of the
corporation.

2. Election of Directors. Elections of directors need not be by written
ballot unless the Bylaws of the corporation shall so provide.

ARTICLE XI

In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Bylaws of the corporation.

ARTICLE XII

No action shall be taken by the stockholders of the corporation except at
an annual or special meeting of the stockholders called in accordance with the
Bylaws of the corporation, and no action shall be taken by the stockholders by
written consent.

ARTICLE XIII

Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.

The foregoing amendment has been duly approved by the stockholders in
accordance with the provisions of section 242 of the General Corporation Law.

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28

IN WITNESS WHEREOF, the corporation has caused this Certificate to be
signed by Leland F. Wilson, its President and Chief Executive Officer, and
attested by Robert D. Brownell, its Assistant Secretary, this day of
, 1997.

VIVUS, INC.

By:
------------------------------------
Leland F. Wilson
President and Chief Executive
Officer

ATTEST:

- --------------------------------------
Robert D. Brownell
Assistant Secretary

A-4
29

APPENDICES
30

THIS PROXY IS SOLICITATED ON BEHALF OF THE BOARD OF DIRECTORS

VIVUS, INC.
------------------------

1997 ANNUAL MEETING OF SHAREHOLDERS -- MAY 22, 1997

The undersigned stockholder of VIVUS, INC., a Delaware corporation, hereby
acknowledges receipt of the Notice of Annual Meeting of Shareholders and Proxy
Statement each dated April 9, 1997, and the 1996 Annual Report to Shareholders
and hereby appoints Leland F. Wilson and David Yntena, 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
1997 Annual Meeting of Shareholders of VIVUS, INC. to be held on May 22, 1997,
at 10:00 a.m., local time, at the Stanford Park Hotel, 100 El Camino Real, Menlo
Park, California 94025, and at any adjournments thereof, and to vote all shares
of Common Stock which 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 AMENDMENT TO THE
CERTIFICATE OF INCORPORATION, FOR THE AMENDMENT OF THE 1991 INCENTIVE STOCK
PLAN, FOR THE AMENDMENT OF THE 1994 DIRECTOR OPTION PLAN, FOR THE RATIFICATION
OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT ACCOUNTANTS, AND AS
SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE
THE MEETING.

1. ELECTION OF DIRECTORS: [ ] FOR all nominees listed below (except as [ ] WITHHOLD
indicated.)

If you wish to withhold authority to vote for any individual nominee,
strike a line through that nominee's name in the list below:

Virgil A. Place, M.D., Leland F. Wilson, Richard L. Casey, Samuel D.
Colella, Brian H. Dovey, Elizabeth A. Fetter and Linda Jenckes.

2. PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO INCREASE THE
AUTHORIZED SHARES OF COMMON STOCK FROM 30,000,000 TO 200,000,000 IN ORDER
TO EFFECT A TWO-FOR-ONE SPLIT OF THE COMPANY'S COMMON STOCK:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
31

3. PROPOSAL TO APPROVE THE AMENDMENT TO THE 1991 INCENTIVE STOCK PLAN TO
INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER BY 800,000
SHARES TO 3,900,000 SHARES:
[ ] FOR [ ] AGAINST [ ] ABSTAIN

4. PROPOSAL TO APPROVE THE AMENDMENT TO THE 1994 DIRECTOR OPTION PLAN TO
INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER BY 100,000
SHARES TO 200,000 SHARES, TO INCREASE THE INITIAL OPTION GRANTED TO
NON-EMPLOYEE DIRECTORS FROM 12,500 TO 16,000 SHARES AND TO INCREASE THE
SUBSEQUENT OPTIONS GRANTED TO NON-EMPLOYEE DIRECTORS FROM 2,500 TO 4,000
SHARES. [ ] FOR [ ] AGAINST [ ] ABSTAIN

5. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE
INDEPENDENT ACCOUNTANTS OF THE COMPANY FOR FISCAL 1997:
[ ] FOR [ ] AGAINST [ ] ABSTAIN

6. TO TRANSACT SUCH OTHER BUSINESS, IN THEIR DISCRETION, AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.

Either of such attorneys or substitutes shall have and may exercise all of
the powers of said attorneys-in-fact hereunder.

Dated: , 1997
-----------------

-----------------------------
Signature

[This Proxy should be marked, dated and signed by the shareholder(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.]
32
VIVUS INC.
1991 INCENTIVE STOCK PLAN

1. Purposes of the Plan. The purposes of this Incentive Stock Plan are:

- to attract and retain the best available personnel for
positions of substantial responsibility,

- to provide additional incentive to Employees and Consultants,
and

- to promote the success of the Company's business.

Options granted under the Plan may be Incentive Stock Options or Nonstatutory
Stock Options, as determined by the Administrator at the time of grant. Stock
Purchase Rights may also be granted under the Plan.

2. Definitions. As used herein, the following definitions shall
apply:

(a) "Administrator" means the Board or any of its
Committees as shall be administering the Plan, in accordance with Section 4 of
the Plan.

(b) "Applicable Laws" means the legal requirements relating to
the administration of stock option plans under state corporate and securities
laws and the Code.

(d) "Code" means the Internal Revenue Code of 1986, as
amended.

(e) "Committee" means a Committee appointed by the Board
in accordance with Section 4 of the Plan.

(f) "Common Stock" means the Common Stock of the Company.

(g) "Company" means Vivus, Inc., a California
corporation.

(h) "Consultant" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services and who is
compensated for such services, provided that the term "Consultant" shall not
include Directors who are paid only a director's fee by the Company or who are
not compensated by the Company for their services as Directors.

-1-

(i) "Continuous Status as an Employee or Consultant" means
that the employment or consulting relationship with the Company or any Parent or
Subsidiary is not interrupted or terminated. Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of: (i) any leave of
absence approved by the Company, including sick leave, military leave, or any
other personal leave; provided, however, that for purposes of Incentive Stock
Options, no such leave may exceed ninety (90) days, unless reemployment upon the
expiration of such leave is guaranteed by contract (including certain Company
policies) or statute; provided, further, that on the ninety-first (91st) day of
any such leave (where reemployment is not guaranteed by contract or statute) the
Optionee's Incentive Stock Option shall cease to be treated as an Incentive
Stock Option and will be treated for tax purposes as a Nonstatutory Stock
Option; or (ii) transfers between locations of the Company or between the
Company, its Parent, its Subsidiaries or its successor.

(j) "Director" means a member of the Board.

(k) "Disability" means total and permanent disability as
defined in Section 22(e)(3) of the Code.

(l) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.

(m) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.

(n) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:

(i) if the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") System, the Fair Market Value of a
Share of Common Stock shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such system or exchange (or
the exchange with the greatest volume of trading in Common Stock) on the last
market trading day prior to the day of determination, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable;

(ii) If the Common Stock is quoted on the NASDAQ
System (but not on the National Market System thereof) or is regularly quoted by
a recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;

(iii) In the absence of an established market for
the Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.

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34
(o) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.

(p) "Nonstatutory Stock Option" means an Option not
intended to qualify as an Incentive Stock Option.

(q) "Notice of Grant" means a written notice evidencing
certain terms and conditions of an individual Option or Stock Purchase Right
grant. The Notice of Grant is part of the Option Agreement.

(r) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

(s) "Option" means a stock option granted pursuant to the
Plan.

(t) "Option Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.

(u) "Option Exchange Program" means a program whereby
outstanding options are surrendered in exchange for options with a lower
exercise price.

(v) "Optioned Stock" means the Common Stock subject to an
Option or Stock Purchase Right.

(w) "Optionee" means an Employee or Consultant who holds an
outstanding Option or Stock Purchase right.

(x) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.

(y) "Plan" means this 1991 Incentive Stock Plan.

(z) "Restricted Stock" means share of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 below.

(aa) "Restricted Stock Purchase Agreement" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.

(bb) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or
any successor to Rule 16b-3, as in effect when discretion is being exercised
with respect to the Plan.

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35
(cc) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.

(dd) "Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.

(ee) "Subsidiary" means a "subsidiary corporation," whether
now or hereafter existing, as defined in Section 424(f) of the Code.

3. Stock Subject to the Plan. Subject to the provisions of Section 13
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 3,100,000 Shares. The Shares may be authorized, but
unissued, or reacquired Common Stock. However, should the Company reacquire
Shares which were issued pursuant to the exercise of an Option or Stock Purchase
right, such Shares shall not become available for future grant under the Plan.

If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated); provided, however, that Shares have had actually been issued
under the Plan, whether upon exercise of an Option or Right, shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if Shares of Restricted Stock are repurchased by the
Company at their original purchase price, and the original purchaser of such
Shares did not receive any benefits of ownership of such Shares, such Shares
shall become available for future grant under the Plan. For purposes of the
preceding sentence, voting rights shall not be considered a benefit of Shares
ownership.

4. Administration of the Plan.

(a) Procedure.

(i) Multiple Administrative Bodies. If
permitted by Rule 16-3, the Plan may be administered by different bodies with
respect to Directors, Officers who are not Directors, and Employees who are
neither Directors nor Officers.

(ii) Administration With Respect to Directors
and Officers Subject to Section 16(b). With respect to Option or Stock Purchase
Right grants made to Employees who are also Officers or Directors subject to
Section 16(b) of the Exchange Act, the Plan shall be administered by (A) the
Board, if the Board may administer the Plan in compliance with the rules
governing a plan intended to qualify as a discretionary plan under Rule 16b-3,
or (B) a committee designated by the Board to administer the Plan, which
committee shall be constituted to comply with the rules governing a plan
intended to quality as a discretionary plan under Rule 16b-3. Once appointed,
such Committee shall continue to serve in its designated capacity until
otherwise directed by the Board. From time to time the Board may increase the
size of the Committee and appoint additional members, remove members (with or
without cause) and substitute new members, fill

-4-

36
vacancies (however caused), and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by the
rules governing a plan intended to qualify as a discretionary plan under Rule
16b-3.

(iii) Administration With Respect to Other
Persons. With respect to Option or Stock Purchase Right grants made to Employees
or Consultants who are neither Directors nor Officers of the Company, the Plan
shall be administered by (A) the Board or (B) a committee designated by the
Board, which committee shall be constituted to satisfy Applicable Laws. Once
appointed, such Committee shall serve in its designated capacity until otherwise
directed by the Board. The Board may increase the size of the Committee and
appoint additional members, remove members (with or without cause) and
substitute new members, fill vacancies (however caused), and remove all members
of the Committee and thereafter directly administer the Plan, all to the extent
permitted by Applicable Laws.

(b) Powers of the Administrator. Subject to the provisions of
the Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:

(i) to determine the Fair Market Value of the
Common Stock, in accordance with Section 2(n) of the Plan;

(ii) to select the Consultants and Employees to
whom Options and Stock Purchase Rights may be granted hereunder;

(iii) to determine whether and to what extent
Options and Stock Purchase Rights or any combination thereof, are granted
hereunder;

(iv) to determine the number of shares of Common
Stock to be covered by each Option and Stock Purchase Right granted hereunder;

(v) to approve forms of agreement for use under
the Plan;

(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder. Such
terms and conditions include, but are not limited to, the exercise price, the
time or times when Options or Stock Purchase Rights may be exercised (which may
be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions and any restriction or limitation regarding any Option
or Stock Purchase Right or the shares of Common Stock relating thereto, based in
each case on such factors as the Administrator, in its sole discretion, shall
determine;

(vii) to reduce the exercise price of any Option
or Stock Purchase Right to the then current Fair Market Value if the Fair Market
Value of the Common Stock covered by such Option or Stock Purchase Right shall
have declined since the date the Option or Stock Purchase Right was granted;

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37
(viii) to construe and interpret the terms of the
Plan and awards granted pursuant to the Plan;

(ix) to prescribe, amend and rescind rules and
regulations relating to the plan;

(x) to modify and amend each Option or Stock
Purchase Right (subject to Section 15(c) of the Plan);

(xi) to authorize any person to execute on behalf
of the Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;

(xii) to institute an Option Exchange Program;

(xiii) to determine the terms and restrictions
applicable to Options and Stock Purchase Rights and any Restricted Stock; and

(xiv) to make all other determinations deemed
necessary or advisable for administering the Plan.

(c) Effect of Administrator's Decision. The
Administrator's decisions, determinations and interpretations shall be final and
binding on all Optionees and any other holders of Options or Stock Purchase
Rights.

5. Eligibility. Nonstatutory Stock Options and Stock Purchase
Rights may be granted to Employees and Consultants. Incentive Stock Options may
be granted only to Employees. If otherwise eligible, an Employee or Consultant
who has been granted an Option or Stock Purchase Right may be granted additional
Options or Stock Purchase Rights.

6. Limitations.

(a) Each Option shall be designated in the Notice of Grant as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value:

(i) of Shares subject to an Optionee's incentive
stock options granted by the Company, any Parent or Subsidiary, which (ii)
become exercisable for the first time during any calendar year (under all plans
of the Company or any Parent or Subsidiary)

exceeds $100,000, such excess Options shall be treated as Nonstatutory Stock
Options. For purposes of this Section 6(a), incentive stock options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time of grant.

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38
(b) neither the Plan or any Option or Stock Purchase Right
shall confer upon an Optionee any right with respect to continuing the
Optionee's employment or consulting relationship with the Company, nor shall
they interfere in any way with the Optionee's right or the Company's right to
terminate such employment or consulting relationship at any time, with or
without cause.

(c) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 500,000 Shares; provided that a new
employee of the Company may be granted in a single fiscal year upon joining the
Company Options to purchase 500,000 Shares.

(d) The foregoing limitation shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 13.

(e) If an Option is canceled in the same fiscal year of the
Company it was granted (other than in connection with a transaction described in
Section 13), the canceled Option will be counted against the limit set forth in
Section 6(c). For this purpose, if the exercise price of an Option is reduced,
the transaction will be treated as a cancellation of the Option and the grant of
a new Option.

7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall
become effective upon the earlier to occur of its adoption by the Board or its
approval by the shareholders of the Company as described in Section 19 of the
Plan. It shall continue in effect for a term of ten (10) year unless terminated
earlier under Section 15 of the Plan.

8. Term of Option. The term of each Option shall be stated in the
Notice of Grant; provided, however, that in the case of an Incentive Stock
Option, the term shall be ten (10) years from the date of grant or such shorter
term as may be provided in the Notice of Grant. Moreover, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option shall be five (5) years from
the date of grant or such shorter term as may be provided in the Notice of
Grant.

9. Option Exercise Price and Consideration.

(a) Exercise Price. The per share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:

(i) In the case of an Incentive Stock Option

(A) granted to an Employee who, at the
time the Incentive Stock Option is granted, owns stock representing more than
ten percent (10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be no less than
110% of the Fair Market Value per Share on the date of grant.

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39
(B) granted to any Employee, the per
Share exercise price shall be no less than 100% of the Fair Market Value per
Share on the date of grant.

(ii) In the case of Nonstatutory Stock Option,
the per Share exercise price shall be determined by the Administrator.

(b) Waiting Period and Exercise Dates. At the time an Option
is granted, the Administrator shall fix the period within which the Option may
be exercised and shall determine any conditions which must be satisfied before
the Option may be exercised. In so doing, the Administrator may specify that an
Option may not be exercised until the completion of a service period.

(c) Form of Consideration. The Administrator shall determine
the acceptable form of consideration for exercising an Option, including the
method of payment. In the case of an Incentive Stock Option, the Administrator
shall determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:

(i) cash;

(ii) check;

(iii) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
the broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price;

(iv) a reduction in the amount of any Company
liability to the Optionee, including any liability attributable to the
Optionee's participation in any Company-sponsored deferred compensation program
or arrangement;

(v) any combination of the foregoing methods of
payment; of

(vi) such other consideration and method of
payment for the issuance of Shares to the extent permitted by Applicable Laws.

10. Exercise of Option.

(a) Procedure for Exercise: Rights as a Shareholder. Any
Option granted hereunder shall be exercisable according to the terms of the Plan
and at such times and under such conditions as determined by the Administrator
and set forth in the Option Agreement.

An Option may not be exercised for a fraction of a
Share.

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40
An Option shall be deemed exercised when the Company
receives: (i) written notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the stock certificate evidencing such Shares is issued (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 13 of the Plan.

Exercising an Option in any manner shall decrease the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.

(b) Termination of Employment or Consulting Relationship. Upon
termination of an Optionee's Continuous Status as an Employee or Consultant,
other than upon the Optionee's death or Disability, the Optionee may exercise
his or her Option, but only within such period of time as is specified in the
Notice of Grant, and only to the extent that the Optionee was entitled to
exercise it at the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Notice of Grant). In
the absence of a specified time in the Notice of Grant, the Option shall remain
exercisable for 90 days following the Optionee's termination of Continuous
Status as an Employee or Consultant. In the case of an Incentive Stock Option,
such period of time shall not exceed ninety (90) days from the date of
termination. If, at the date of termination, the Optionee is not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified by the
Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.

(c) Disability of Optionee. In the event that an Optionee's
Continuous Status as an Employee or Consultant terminates as a result of the
Optionee's Disability, the Optionee may exercise his or her Option at any time
within twelve (12) months from the date of such termination, but only to the
extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant). If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.

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41
(d) Death of Optionee. In the event of the death of an
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Notice of Grant), by the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent that the Optionee was entitled to
exercise the Option at the date of death. If, at the time of death, the Optionee
was not entitled to exercise his or her entire Option, the Shares covered by the
unexercisable portion of the Option shall immediately revert to the Plan. If,
after death, the Optionee's estate or a person who acquired the right to
exercise the Option by bequest or inheritance does not exercise the Option
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.

(i) Rule 16b-3. Options granted to individuals subject to
Section 16 of the Exchange Act ("Insiders") must comply with the applicable
provisions of Rule 16b-3 and shall contain such additional conditions or
restrictions as may be required thereunder to qualify for the maximum exemption
from Section 16 of the Exchange Act with respect to Plan transactions.

11. Stock Purchase Rights.

(a) Rights to Purchase. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing, by means of a Notice of Grant, of the terms,
conditions and restrictions related to the offer, including the number of Shares
that the offeree shall be entitled to purchase, the price to be paid, and the
time within which the offeree must accept such offer, which shall in no event
exceed six (6) months from the date upon which the Administrator made the
determination to grant the Stock Purchase Right. The offer shall be accepted by
execution of a Restricted Stock Purchase Agreement in the form determined by the
Administrator.

(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.

(c) Rule 16b-3. Stock Purchase Rights granted to Insiders, and
Shares purchased by Insiders in connection with Stock Purchase Rights, shall be
subject to any restrictions applicable thereto in compliance with Rule 16b-3. An
Insider may only purchase Shares pursuant to the grant of a Stock Purchase
Right, and may only sell Shares purchased pursuant to the grant of a Stock
Purchase Right, during such time or times as are permitted by Rule 16b-3.

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42
(d) Other Provisions. The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock Purchase Agreements need not be the
same with respect to each purchaser.

(e) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder -when his or her purchase is entered
upon the records of the duly authorized transfer agent of the Company. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the Stock Purchase Right is exercised, except as provided
in Section 13 of the Plan.

12. Non-Transferability of Options and Stock Purchase Rights. An Option
or Stock Purchase Right may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.

13. Adjustments Upon Chances in Capitalization. Dissolution.
Merger. Asset Sale or Chance of Control.

(a) Chances in Capitalization. Subject to any required action
by the shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason the~f shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.

(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option or Stock
Purchase Right has not been previously exercised, it will terminate immediately
prior to the consummation of such proposed action. The Board may, in the
exercise of its sole discretion in such instances, declare that any Option or
Stock Purchase Right shall terminate as of a date fixed by the Board and give
each Optionee the right to exercise his or her Option or Stock Purchase Right as
to all or any part of the Optioned Stock, including Shares as to which the
Option or Stock Purchase Right would not otherwise be exercisable.

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43
(c) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option and Stock Purchase Right
shall be assumed or an equivalent option or right shall be substituted by the
successor corporation or a Parent or Subsidiary of the successor corporation.
The Administrator may, in lieu of such assumption or substitution, provide for
the Optionee to have the right to exercise the Option or Stock Purchase Right as
to all or a portion of the Optioned Stock, including Shares as to which it would
not otherwise be exercisable. If the Administrator makes an Option or Stock
Purchase Right exercisable in lieu of assumption or substitution in the event of
a merger or sale of assets, the Administrator shall notify the Optionee that the
Option or Stock Purchase Right shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the Option or Stock Purchase
Right will terminate upon the expiration of such period. For the purposes of
this paragraph, the Option or Stock Purchase Right shall be considered assumed
if, following the merger or sale of assets, the option or right confers the
right to purchase, for each Share of Optioned Stock subject to the Option or
Stock Purchase Right immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets was not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon the
exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.

14. Date of Grant. The date of grant of an Option or Stock Purchase
Right shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.

15. Amendment and Termination of the Plan.

(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or terminate the Plan.

(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Rule 16b-3 or with Section 422 of the Code (or any successor rule or
statute or other applicable law, rule or regulation, including the requirements
of any exchange or quotation system on which the Common Stock is listed or
quoted). Such shareholder approval, if required, shall be obtained in such a
manner and to such a degree as is required by the applicable law, rule or
regulation.

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44
(c) Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company.

16. Conditions Upon Issuance of Shares.

(a) Legal Compliance. Shares shall not be issued pursuant to
the exercise of an Option or Stock Purchase Right unless the exercise of such
Option or Stock Purchase Right and the issuance and delivery of such Shares
shall comply with all relevant provisions of law, including, without limitation,
the Securities Act of 1933, as amended, the Exchange Act, the rules and
regulations promulgated thereunder, Applicable Laws, and the requirements of any
stock exchange or quotation system upon which the Shares may then be listed or
quoted, and shall be further subject to the approval of counsel for the Company
with respect to such compliance.

(b) Investment Representations. As a condition to the exercise
of an Option or Stock Purchase Right, the Company may require the person
exercising such Option or Stock Purchase Right to represent and warrant at the
time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is
required.

17. Liability of Company.

(a) Inability to Obtain Authority. The inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.

(b) Grants Exceeding Allotted Shares. If the Optioned Stock
covered by an Option or Stock Purchase Right exceeds, as of the date of grant,
the number of Shares which may be issued under the Plan without additional
shareholder approval, such Option or Stock Purchase Right shall be void with
respect to such excess Optioned Stock, unless shareholder approval of an
amendment sufficiently increasing the number of Shares subject to the Plan is
timely obtained in accordance with Section 15(b) of the Plan.

18. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.

19. Shareholder Approval. Continuance of the Plan shall be
subject to approval by the shareholders of the Company within twenty (12) months
before or after the date the Plan is adopted. Such shareholder approval shall be
obtained in the manner and to the degree required under applicable federal and
state law.

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45
VIVUS, INC.

1994 DIRECTOR OPTION PLAN

1. Purposes of the Plan. The purposes of this 1994 Director Option Plan
are to attract and retain the best available personnel for service as Outside
Directors (as defined herein) of the Company, to provide additional incentive to
the Outside Directors of the Company to serve as Directors, and to encourage
their continued service on the Board.

All options granted hereunder shall be "non-statutory stock
options."

2. Definitions. As used herein, the following definitions shall
apply:

(a) "Board" means the Board of Directors of the Company.

(b) "Code" means the Internal Revenue Code of 1986, as
amended.

(d) "Company" means Vivus, Inc., a California
corporation.

(e) "Continuous Status as a Director" means the absence
of any interruption or termination of service as a Director.

(f) "Director" means a member of the Board.

(g) "Employee" means any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a Director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.

(h) "Exchange Act" means the Securities Exchange Act of
1934, as amended.

(i) "Fair Market Value" means, as of any date, the value
of Common Stock determined as follows:

(i) If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") System, the Fair Market Value of a
Share of Common Stock shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such system or exchange (or
the exchange with the greatest volume of trading in Common Stock) on the date of
grant, as reported in The Wall Street Journal or such other source as the Board
deems reliable;

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46
(ii) If the Common Stock is quoted on the NASDAQ
System (but not on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the bid and
asked prices for the Common Stock on the last market trading day prior to the
day of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable, or;

(iii) In the absence of an established market for
the Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Board.

(j) "Option" means a stock option granted pursuant to the
Plan.

(k) "Optioned Stock" means the Common Stock subject to an
Option.

(l) "Optionee" means an Outside Director who receives an
Option.

(m) "Outside Director" means a Director who is not an
Employee.

(n) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.

(o) "Plan" means this 1994 Director Option Plan.

(i) "Share" means a share of the Common Stock, as
adjusted in accordance with Section 10 of the Plan.

(p) "Subsidiary" means a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f) of the Internal
Revenue Code of 1986.

3. Stock Subject to the Plan. Subject to the provisions of Section 10
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 100,000 Shares (the "Pool") of Common Stock. The Shares
may be authorized but unissued, or reacquired Common Stock.

If an Option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan.

4. Administration of and Grants of Options under the Plan.

(a) Procedure for Grants. The provisions set forth in
this Section 4(a) shall not be amended more than once every six months, other
than to comport with changes in the Code, the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder. All grants

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47
of Options to Outside Directors under this Plan shall be automatic and
non-discretionary and shall be made strictly in accordance with the following
provisions:

(i) No person shall have any discretion to
select which Outside Directors shall be granted Options or to determine the
number of Shares to be covered by Options granted to Outside Directors.

(ii) Each Outside Director shall be automatically
granted an Option to purchase 12,500 Shares (the "First Option") on the date on
which such person first becomes a Director, whether through election by the
shareholders of the Company or appointment by the Board to fill a vacancy.

(iii) After the First Option has been granted to
an Outside Director, such Outside Director shall thereafter be automatically
granted an Option to purchase 2,500 Shares (a "Subsequent Option") on the date
of the Company's Annual Meeting of Shareholders upon such Outside Director's
reelection, if on such date, he shall have served on the Board for at least six
(6) months.

(iv) The terms of a First Option granted
hereunder shall be as follows:

(A) the term of the First Option shall be
ten (10) years.

(B) the First Option shall be
exercisable only while the Outside Director remains a Director of the Company,
except as set forth in Section 8 hereof.

(C) the exercise price per Share shall
be 100% of the fair market value per Share on the date of grant of the First
Option.

(D) the First Option shall become
exercisable in installments cumulatively as to twenty-five percent of the Shares
subject to the First Option on each anniversary of its date of grant.

(v) The terms of a Subsequent Option granted
hereunder shall be as follows:

(A) the term of the Subsequent Option
shall be ten (10) years.

(B) the Subsequent Option shall be
exercisable only while the Outside Director remains a Director of the Company,
except as set forth in Section 8 hereof.

(C) the exercise price per Share shall
be 100% of the fair market value per Share on the date of grant of the
Subsequent Option.

(D) the Subsequent Option shall become
exercisable as to twelve and one-half percent of the Shares subject to the
Subsequent Option on the first day of each month following its date of grant.

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48
(vi) In the event that any Option granted under
the Plan would cause the number of Shares subject to outstanding Options plus
the number of Shares previously purchased under Options to exceed the Pool, then
the remaining Shares available for Option grant shall be granted under Options
to the Outside Directors on a pro rata basis. No further grants shall be made
until such time, if any, as additional Shares become available for grant under
the Plan through action of the shareholders to increase the number of Shares
which may be issued under the Plan or through cancellation or expiration of
Options previously granted hereunder.

5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof. An Outside Director who has been granted an Option may, if he
is otherwise eligible, be granted an additional Option or Options in accordance
with such provisions.

The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate his or her directorship at any time.

6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 16 of the Plan. It shall continue in effect for
a term of ten (10) years unless sooner terminated under Section 11 of the Plan.

7. Form of Consideration. The consideration to be paid for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) delivery of a properly executed exercise
notice together with such other documentation as the Company and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price, or
(iv) any combination of the foregoing methods of payment.

8. Exercise of Option.

(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times as are set forth in
Section 4 hereof; provided, however, that no Options shall be exercisable until
shareholder approval of the Plan in accordance with Section 16 hereof has been
obtained.

An Option may not be exercised for a fraction of a Share.

An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the

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49
stock certificate evidencing such Shares, no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. A share certificate for the
number of Shares so acquired shall be issued to the Optionee as soon as
practicable after exercise of the Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 10 of the Plan.

Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

(b) Rule 16b-3. Options granted to Outside Directors must
comply with the applicable provisions of Rule 16b-3 promulgated under the
Exchange Act or any successor thereto and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.

(c) Termination of Continuous Status as a Director. In the
event an Optionee's Continuous Status as a Director terminates (other than upon
the Optionee's death or total and permanent disability (as defined in Section
22(e)(3) of the Code)), the Optionee may exercise his or her Option, but only
within three (3) months from the date of such termination, and only to the
extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option at
the date of such termination, and to the extent that the Optionee does not
exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.

(d) Disability of Optionee. In the event Optionee's Continuous
Status as a Director terminates as a result of total and permanent disability
(as defined in Section 22(e)(3) of the Code), the Optionee may exercise his or
her Option, but only within twelve (12) months from the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it at the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option at the date of termination, or if he or she does not exercise
such Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.

(e) Death of Optionee. In the event of an Optionee's death,
the Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it at the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option at the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.

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9. Non-Transferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.

10. Adjustments Upon Changes in Capitalization, Dissolution,
Merger, Asset Sale or Change of Control.

(a) Changes in Capitalization. Subject to any required action
by the shareholders of the Company, the number of Shares covered by each
outstanding Option and the number of Shares which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.

(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it will terminate immediately prior to the
consummation of such proposed action.

(c) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation, or the sale of substantially all of
the assets of the Company, each outstanding Option shall be assumed or an
equivalent option shall be substituted by the successor corporation or a Parent
or Subsidiary of the successor corporation. In the event that the successor
corporation does not agree to assume the Option or to substitute an equivalent
option, each outstanding Option shall become fully vested and exercisable,
including as to Shares as to which it would not otherwise be exercisable, unless
the Board, in its discretion, determines otherwise. If an Option becomes fully
vested and exercisable in the event of a merger or sale of assets, the Board
shall notify the Optionee that the Option shall be fully exercisable for a
period of thirty (30) days from the date of such notice, and the Option will
terminate upon the expiration of such period. For the purposes of this
paragraph, the Option shall be considered assumed if, following the merger or
sale of assets, the option or right confers the right to purchase, for each
Share of Optioned Stock subject to the Option immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares).

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11. Amendment and Termination of the Plan.

(a) Amendment and Termination. Except as set forth in Section
4, the Board may at any time amend, alter, suspend, or discontinue the Plan, but
no amendment, alteration, suspension, or discontinuation shall be made which
would impair the rights of any Optionee under any grant theretofore made,
without his or her consent. In addition, to the extent necessary and desirable
to comply with Rule 16b-3 under the Exchange Act (or any other applicable law or
regulation), the Company shall obtain shareholder approval of any Plan amendment
in such a manner and to such a degree as required.

(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.

12. Time of Granting Options. The date of grant of an Option shall, for all
purposes, be the date determined in accordance with Section 4 hereof. Notice of
the determination shall be given to each Outside Director to whom an Option is
so granted within a reasonable time after the date of such grant.

13. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant
to the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder,
state securities laws, and the requirements of any stock exchange upon which the
Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.

As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.

Inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.

14. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

15. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.

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16. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company at or prior to the first annual
meeting of shareholders held subsequent to the granting of an Option hereunder.
Such shareholder approval shall be obtained in the degree and manner required
under applicable state and federal law.

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