SEVERANCE AND CHANGE IN CONTROL
AGREEMENT
This Severance and Change in Control
Agreement (the “Agreement” ) is made
and entered into effective as of November 13, 2006, (the
“Effective Date” ), by and between
Anadys Pharmaceuticals,
Inc. , a Delaware corporation (the
“Company” ), and James T. Glover (the
“Executive” ). The Company and the Executive are
hereinafter collectively referred to as the
“Parties” , and individually referred to as a
“Party” .
In consideration
of the mutual promises and covenants herein contained, and for
other good and valuable consideration, the Parties, intending to be
legally bound, agree as follows:
1.1 Loyalty;
At Will Employment . During the Executive’s employment by
the Company, the Executive shall devote Executive’s full
business energies, interest, abilities and productive time to the
proper and efficient performance of Executive’s duties as an
officer of the Company. Executive’s employment with the
Company is at-will and not for any specified period and may be
terminated at any time, with or without cause, by either Executive
or Company, subject to the provisions of Sections 3 and 4
below.
1.2
Termination of Obligations . In the event of the termination of
the Executive’s employment with the Company, the Company
shall have no obligation to pay Executive any base salary, bonus or
other compensation or benefits, except as earned prior to the date
of termination or as provided in Sections 3 and 4 or for
benefits due to the Executive (and/or the Executive’s
dependents) under the terms of the Company’s benefit plans.
The Company may offset any amounts Executive owes it or its
subsidiaries against any amount it owes Executive pursuant to
Sections 3 or 4.
1.3 The
term of this Agreement (the “Term” )
shall begin on the Effective Date and shall continue until
Executive’s employment with the Company is terminated for any
reason.
For
purposes of this Agreement, the following terms shall have the
following meanings:
2.1 Complete
Disability . “Complete Disability” shall
mean the inability of the Executive to perform the
Executive’s duties under this Agreement because the Executive
has become permanently disabled within the meaning of any policy of
disability income insurance covering employees of the Company then
in force. In the event the Company has no policy of disability
income insurance covering employees of the
1.
Company in
force when the Executive becomes disabled, the term
“Complete Disability” shall mean the inability
of the Executive to perform the Executive’s duties under this
Agreement by reason of any incapacity, physical or mental, which
the Board, based upon medical advice or an opinion provided by a
licensed physician acceptable to the Board, determines to have
incapacitated the Executive from satisfactorily performing all of
the Executive’s usual services for the Company for a period
of at least one hundred twenty (120) days during any twelve
(12) month period (whether or not consecutive). Based upon
such medical advice or opinion, the determination of the Board
shall be final and binding and the date such determination is made
shall be the date of such Complete Disability for purposes of this
Agreement.
2.2 Good
Reason. “Good Reason” for the Executive to
terminate the Executive’s employment hereunder shall mean the
occurrence of any of the following events without the
Executive’s consent:
(i) a material adverse change in the nature or scope
of Executive’s job responsibilities, or in the case of a
Change of Control, the failure to be offered a substantially
equivalent position with the successor entity;
(ii) the relocation (or demand for relocation) of
Executive’s place of employment to a point more than thirty
(30) miles from Executive’s then current place of
employment; and
(iii) a reduction in the annual base compensation paid
to Executive, without Executive’s consent; provided, however,
that a reduction in Executive’s compensation occurring as
part of a Company-wide similar reduction of salary for
similarly-situated executives shall not constitute Good
Reason.
2.3 For
Cause . “Cause” for the Company to terminate
Executive’s employment hereunder shall mean the occurrence of
any of the following events:
(i) the Executive’s willful or grossly negligent
failure, as determined in good faith by the Board of Directors, to
satisfactorily perform the Executive’s assigned duties with
the Company, or any successor thereof, in the best interest of the
Company and as directed by the Company’s Board of Directors
or the Chief Executive Officer (except for the failure resulting
from Executive’s incapacity due to Complete Disability, or,
for the purposes of Section 4.1.1 only, any such actual or
anticipated failure resulting from a Good Reason termination) which
is not corrected within thirty (30) days of receiving notice
of such failure from the Company specifying in reasonable detail
the nature of such failure;
(ii) the Executive’s commission of a negligent
or willful act that materially injures the business of the
Company;
(iii) the Executive’s conviction of a felony
involving moral turpitude; and
(iv) the Executive’s engaging or in any manner
participating in any activity which is directly competitive with or
injurious to the Company or any of its affiliates or
2.
which violates
any material provisions of the Executive’s Agreement for
Employees dated September 25, 2006 (proprietary information
and inventions agreement) with the Company.
2.4 Change in
Control. For purposes of this Agreement, “Change in
Control” means:
(i) an acquisition by any person, entity or group
within the meaning of Section 13(d) or 14(d) of the Exchange Act,
or any comparable successor provisions (excluding any employee
benefit plan, or related trust, sponsored or maintained by the
Company or subsidiary of the Company or other entity controlled by
the Company) of the beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act, or comparable
successor rule) of securities of the Company representing more than
fifty percent (50%) of the combined voting power of the
Company’s then outstanding securities other than by virtue of
a merger, consolidation or similar transaction. Notwithstanding the
foregoing, a Change in Control shall not be deemed to occur solely
because the level of ownership held by a person, entity or group
exceeds the designated percentage threshold of the outstanding
voting securities as a result of a repurchase or other acquisition
of voting securities by the Company reducing the number of shares
outstanding, provided that if a Change in Control would occur (but
for the operation of this sentence) as a result of the acquisition
of voting securities by the Company, and after such share
acquisition, a person, entity or group becomes the owner of any
additional voting securities that, assuming the repurchase or other
acquisition had not occurred, increases the percentage of the then
outstanding voting securities owned by such person, entity or group
over the designated percentage threshold, then a Change in Control
shall be deemed to occur;
(ii) there is consummated a merger, consolidation or
similar transaction involving (directly or indirectly) the Company
and, immediately after the consummation of such merger,
consolidation or similar transaction, the stockholders of the
Company immediately prior thereto do not own, directly or
indirectly, outstanding voting securities representing more than
fifty percent (50%) of the combined outstanding voting power of the
surviving entity in such merger, consolidation or similar
transaction or more than fifty percent (50%) of the combined
outstanding voting power of the parent of the surviving entity in
such merger, consolidation or similar transaction; or
(iii) there is consummated a sale or other disposition
of all or substantially all of the consolidated assets of the
Company and its subsidiaries, other than a sale, lease, license or
other disposition of all or substantially all of the consolidated
assets of the Company and its subsidiaries to an entity, more than
fifty percent (50%) of the combined voting power of the voting
securities of which are owned by stockholders of the Company in
substantially the same proportions as their ownership of the
Company immediately prior to such sal
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