EXHIBIT 10.45
SEVERANCE AND CHANGE IN CONTROL AGREEMENT
     This Severance and Change in Control Agreement (the “Agreement") is made
and entered into effective as of November 20, 2006 (the “Effective Date"), by
and between Anadys Pharmaceuticals, Inc., a Delaware corporation (the
“Company"), and Lawrence C. Fritz, Ph.D. (the “Executive"). The Company and the
Executive are hereinafter collectively referred to as the “Parties", and
individually referred to as a “Party".
AGREEMENT
     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. 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, except that Executive’s
service on outside boards of directors or other similar activities may be
permitted by the Company’s Board of Directors provided such activities are
consistent with 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 Section 2.2
below.
     2. Term; Compensation Upon Termination.
          2.1 Term. 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.
          2.2 Compensation Upon Termination.
               2.2.1 Death or Complete Disability. If the Executive’s employment
with the Company is terminated as a result of death or Complete Disability, the
Company shall pay to Executive, and/or Executive’s heirs, the Executive’s base
salary and accrued and unused vacation benefits earned through the date of
termination at the rate in effect at the time of termination, less standard
deductions and withholdings, and the Company shall thereafter have no further
obligations to the Executive and/or Executive’s heirs under this Agreement.
               2.2.2 With Cause or Without Good Reason. If the Executive’s
employment with the Company is terminated by the Company for Cause (as defined
below) or if the Executive terminates his employment with the Company without
Good Reason (as defined below), the Company shall pay the Executive’s base
salary and accrued and unused vacation benefits earned through the date of
termination at the rate in effect at the time of termination, less standard
deductions and withholdings, and the Company shall thereafter have no further
obligations to the Executive under this Agreement.

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               2.2.3 Without Cause or With Good Reason. If the Company
terminates the Executive’s employment without Cause or the Executive resigns
with Good Reason, the Company shall pay the Executive’s base salary and accrued
and unused vacation earned through the date of termination, at the rate in
effect at the time of termination subject to standard deductions and
withholdings. In addition, contingent upon the Executive’s furnishing to the
Company an effective waiver and release of claims (“Release and Waiver”) (a form
of which is attached hereto as Exhibit A), the Executive shall be entitled to:
                    (i) The equivalent of twelve (12) months of the Executive’s
annual base salary, less standard deductions and withholdings, which shall be
paid as soon as administratively practicable but no later than sixty (60) days
after termination unless Section 3.2 applies;
                    (ii) Reimbursement for continued health insurance coverage
under COBRA, provided that Executive elects such coverage, for the same portion
of Executive’s COBRA health insurance premium that it paid during the
Executive’s employment up until the earlier of either (i) twelve (12) months
after the date of termination or, (ii) the date on which the Executive begins
full-time employment with another company or business entity, which provides
Executive with similar benefits; and
                    (iii) Outplacement services for a period of six (6) months
to be provided by an outplacement firm mutually acceptable to the Company and
Executive.
                    (iv) In addition, in the event that Executive would
otherwise owe to the Company the reimbursement of his sign-on bonus, such
reimbursement shall not be required if the provisions of this Section 2.2.3
apply.
               2.2.4 Without Cause within First 12 Months. If the Company
terminates the Executive’s employment without Cause prior to the one-year
anniversary of Executive’s employment with the Company, then, in addition to the
benefits set forth in Section 2.2.3, and contingent upon the Executive’s
furnishing to the Company an effective Release and Waiver, the vesting and
exercisability of the Executive’s Initial Stock Option Grant (as defined in the
Offer Letter referenced below in Section 2.3.2 (i)) shall be accelerated such
that the number of shares determined by multiplying 1/48th of the Initial Stock
Option Grant by the number of months that Executive was employed by the Company
(rounded up to the next whole month) shall be vested and fully exercisable as of
the date of Executive’s termination.
               2.2.5 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 provided in this Section 2 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 this Section 2.2.

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          2.3 Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
               2.3.1 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 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.
               2.3.2 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 breach of any material provision of the offer
letter entered into on November 6, 2006 between Executive and the Company (the
“Offer Letter”), not cured within thirty (30) days of the breach. The Offer
Letter is incorporated by reference and made a part of this Agreement as if
fully set forth herein;
               (ii) a material adverse change in the nature or scope of
Executive’s job responsibilities, or in the case of a Change in Control, the
failure to be offered a substantially equivalent position with the successor
entity;
               (iii) 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
               (iv) a reduction in the annual base compensation paid to
Executive, without Executive’s consent; provided, however, that a reduction in
Executive’s compensation of less than 15% occurring as part of a Company-wide
similar reduction of salary for similarly-situated executives shall not
constitute Good Reason.
          2.4 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 negligent failure to substantially
perform his duties hereunder (other than any such failure resulting from a
Complete Disability), which failure continues for a period of thirty (30) days
after written demand for substantial performance is delivered by the Company to
Executive specifically identifying the manner in

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which the Company believes the Executive has not substantially performed his
duties. For purposes of this subparagraph, no act or failure to act on
Executive’s part shall be considered “willful” unless done, or omitted to be
done, by the Executive without reasonable belief that his action or omission was
in the best interest of the Company;
               (ii) the Executive’s breach of a material provision of this
Agreement or a breach of a material provision of the Agreement for Employees
dated November 20, 2006 (proprietary information and inventions agreement)
between Executive and the Company, which breach has not been cured (if it is of
a nature that can be cured) by Executive within 10 days after written notice
thereof from the Company to Executive specifying the nature of such breach;
               (iii) the Executive’s conviction of a felony involving moral
turpitude; and
               (iv) the Executive’s engaging in fraud, embezzlement or any other
illegal conduct detrimental to the Company.
          2.5 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

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               (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 sale, lease, license or other disposition.
          2.6 Integration. The parties acknowledge that the definition of “for
Cause” contained within this Agreement may differ from the definitions of “for
Cause” contained within Executive’s stock option agreement or agreements.
Accordingly, the Parties agree that unless it is determined that Executive shall
be terminated for Cause as defined in this Agreement, there shall be no
termination for Cause under any of Executive’s stock option agreements.
     3. Change in Control.
          3.1 Benefits.
               3.1.1 In the event that Executive’s employment with the Company
is terminated without Cause or for Good Reason within the sixty (60) day period
immediately preceding or the thirteen (13) month period immediately following a
Change in Control of the Company, then contingent upon the Executive’s delivery
to the Company of an effective Release and Waiver, the Executive shall be
entitled to:
               (i) the benefits set forth in Section 2.2.3 (i), (ii), (iii) and
(iv), except that in Sections 2.2.3 (i) and (ii), “twelve (12) months” will be
changed to “ eighteen (18) months” ; and
               (ii) accelerated vesting of all unvested shares subject to any
outstanding stock options, such that all shares shall be vested and fully
exercisable as of the date of Executive’s termination.
          3.2 Application of Internal Revenue Code Section 409A. If the Company
determines that the benefits payable under Sections 2.2.3 or 3.1 of this
Agreement fail to satisfy the distribution requirement of Section 409A(a)(2)(A)
of the Internal Revenue Code as a result of Section 409A(a)(2)(B)(i) of the
Internal Revenue Code, the payment of such benefits shall be delayed to the
minimum extent necessary so that such benefits are not subject to the provisions
of Section 409A(a)(1) of the Internal Revenue Code.
          3.3 Parachute Payment. If any payment or benefit Executive would
receive pursuant a Change in Control or otherwise (“Payment”) would
(i) constitute a “parachute payment” within the meaning of Section 280G of the
Code, and (ii) but for this sentence, be subject to the excise tax imposed by
Section 4999 of the Code (the “Excise Tax”), then such Payment shall be reduced
to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest
portion of the Payment that would result in no portion of the Payment being
subject to the Excise Tax or (y) the largest portion, up to and including the
total, of the Payment, whichever

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amount, after taking into account all applicable federal, state and local
employment taxes, income taxes, and the Excise Tax (all computed at the highest
applicable marginal rate), results in Executive’s receipt, on an after-tax
basis, of the greater amount of the Payment notwithstanding that all or some
portion of the Payment may be subject to the Excise Tax. If a reduction in
payments or benefits constituting “parachute payments” is necessary so that the
Payment equals the Reduced Amount, reduction shall occur in the following order
unless Executive elects in writing a different order (provided, however, that
such election shall be subject to Company approval if made on or after the
effective date of the event that triggers the Payment): reduction of cash
payments; cancellation of accelerated vesting of stock awards; reduction of
employee benefits. In the event that acceleration of vesting of stock award
compensation is to be reduced, such acceleration of vesting shall be cancelled
in the reverse order of the date of grant of Executive’s stock awards unless
Executive elects in writing a different order for cancellation.
     The Company shall engage a nationally recognized accounting or consulting
firm to perform the foregoing calculations. If the firm so engaged by the
Company is serving as accountant or auditor for the individual, entity or group
effecting the Change in Control, then the Company shall appoint another
nationally recognized accounting or consulting firm to make the determinations
required hereunder. The Company shall bear all expenses with respect to the
determinations by such firm required to be made hereunder.
     The firm engaged to make the determinations hereunder shall provide its
calculations, together with detailed supporting documentation, to Executive and
the Company within fifteen (15) calendar days after the date on which
Executive’s right to a Payment is triggered (if requested at that time by
Executive or the Company) or such other time as requested by Executive or the
Company. If the firm determines that no Excise Tax is payable with respect to a
Payment, either before or after the application of the Reduced Amount, it shall
furnish Executive and the Company with an opinion reasonably acceptable to
Executive that no Excise Tax will be imposed with respect to such Payment. Any
good faith determinations of the firm made hereunder shall be final, binding and
conclusive upon Executive and the Company.
     4. General. This Agreement is made in San Diego, California. This Agreement
shall be construed and interpreted in accordance with the internal laws of the
State of California. This Agreement supercedes and replaces any other agreement
between Executive and the Company regarding severance benefits and cannot be
amended or modified except by written agreement between Executive and the
Company. This Agreement may be executed in two counterparts, each of which shall
be deemed an original, all of which together shall contribute one and the same
instrument.

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     In Witness Whereof, the Parties have executed this Agreement as of the date
first above written.

          Anadys Pharmaceuticals, Inc.    
 
       
By:
Name:
  /s/ George A. Scangos, Ph.D.
 
George A. Scangos, Ph.D.    
Its:
  Chairman of the Board    
 
       
Dated:
  11/17/2006    
 
        Executive:    
 
        /s/ Lawrence C. Fritz, Ph.D.          
 
       
Dated:
  11/20/2006    

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EXHIBIT A
RELEASE AND WAIVER OF CLAIMS
     In consideration of the payments and other benefits set forth in
Sections 2.2.3 and 3.1 of the Severance and Change in Control Agreement dated
November 20, 2006, to which this form is attached, I, Lawrence C. Fritz, Ph.D.,
hereby furnish Anadys Pharmaceuticals, Inc. (the “Company”), with the following
release and waiver (“Release and Waiver”).
     In exchange for the consideration provided to me by the Severance and
Change in Control Agreement that I am not otherwise entitled to receive, I
hereby generally and completely release the Company and its directors, officers,
employees, shareholders, partners, agents, attorneys, predecessors, successors,
parent and subsidiary entities, insurers, Affiliates, and assigns from any and
all claims, liabilities and obligations (excluding indemnification obligations
and rights under the Company’s directors and officers insurance policies) both
known and unknown, that arise out of or are in any way related to events, acts,
conduct, or omissions occurring prior to my signing this Release and Waiver.
This general release includes, but is not limited to: (1) all claims arising out
of or in any way related to my employment with the Company or the termination of
that employment; (2) all claims related to my compensation or benefits from the
Company, including, but not limited to, salary, bonuses, commissions, vacation
pay, expense reimbursements, severance pay, fringe benefits, stock, stock
options, or any other ownership interests in the Company; (3) all claims for
breach of contract, wrongful termination, and breach of the implied covenant of
good faith and fair dealing; (4) all tort claims, including, but not limited to,
claims for fraud, defamation, emotional distress, and discharge in violation of
public policy; and (5) all federal, state, and local statutory claims,
including, but not limited to, claims for discrimination, harassment,
retaliation, attorneys’ fees, or other claims arising under the federal Civil
Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of
1990, the federal Age Discrimination in Employment Act of 1967 (as amended)
(“ADEA”), and the California Fair Employment and Housing Act (as amended).
     I also acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: “A general release does not extend
to claims which the creditor does not know or suspect to exist in his or her
favor at the time of executing the release, which if known by him or her must
have materially affected his or her settlement with the debtor.” I hereby
expressly waive and relinquish all rights and benefits under that section and
any law of any jurisdiction of similar effect with respect to any claims I may
have against the Company.
     I acknowledge that, among other rights, I am waiving and releasing any
rights I may have under ADEA, that this Release and Waiver is knowing and
voluntary, and that the consideration given for this Release and Waiver is in
addition to anything of value to which I was already entitled as an executive of
the Company. If I am 40 years of age or older upon execution of this Release and
Waiver, I further acknowledge that I have been advised, as required by the Older
Workers Benefit Protection Act, that: (a) the release and waiver granted herein
does not relate to claims under the ADEA which may arise after this Release and
Waiver is executed; (b) I have the right to consult with an attorney prior to
executing this Release and Waiver (although I may choose voluntarily not to do
so); and (c) I have twenty-one (21) days from the date of termination of my
employment with the Company in which to consider this Release and Waiver

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(although I may choose voluntarily to execute this Release and Waiver earlier);
(d) I have seven (7) days following the execution of this Release and Waiver to
revoke my consent to this Release and Waiver; and (e) this Release and Waiver
shall not be effective until the seven (7) day revocation period has expired.
     If I am less than 40 years of age upon execution of this Release and
Waiver, I acknowledge that I have the right to consult with an attorney prior to
executing this Release and Waiver (although I may choose voluntarily not to do
so); and (c) I have five (5) days from the date of termination of my employment
with the Company in which to consider this Release and Waiver (although I may
choose voluntarily to execute this Release and Waiver earlier).
     I acknowledge my continuing obligations under my Agreement for Employees
dated November 20, 2006 (proprietary information and inventions agreement),
attached hereto as Exhibit B. Pursuant to the Agreement for Employees I
understand that among other things, I must not use or disclose any confidential
or proprietary information of the Company and I must immediately return all
Company property and documents (including all embodiments of proprietary
information) and all copies thereof in my possession or control. I understand
and agree that my right to the change in control benefits I am receiving in
exchange for my agreement to the terms of this Release and Waiver is contingent
upon my continued compliance with my Agreement for Employees.
     This Release and Waiver, including Exhibit B hereto, constitutes the
complete, final and exclusive embodiment of the entire agreement between the
Company and me with regard to the subject matter hereof. I am not relying on any
promise or representation by the Company that is not expressly stated herein.
This Release and Waiver may only be modified by a writing signed by both me and
a duly authorized officer of the Company.

                 
Date:
          By:    
 
               

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