Exhibit
10.1


METABASIS THERAPEUTICS,
INC.


AMENDED AND RESTATED
SEVERANCE AGREEMENT


THIS AMENDED
AND RESTATED SEVERANCE AGREEMENT (this “Agreement”) is entered into effective as of
July 19, 2006 (the “Effective
Date”), by and between PAUL K. LAIKIND (the “Employee”) and METABASIS THERAPEUTICS, INC.,
a Delaware corporation (the “Company”).


RECITALS


WHEREAS, the
Employee and the Company entered into a Severance Agreement dated September 28,
1998 (the “Original
Severance Agreement”), as amended by an Amendment of the
Metabasis Therapeutics, Inc. Severance Agreements and Common Stock Purchase
Agreements dated January 2001 and restated by the Severance Agreement dated
June 30, 2003 (together, the “Amendments”);


WHEREAS, the
parties also entered into a certain Stock Restriction Agreement effective as of
June 30, 2003 (the “Stock
Restriction Agreement”); and


WHEREAS, the
parties have agreed that the Original Severance Agreement, as amended by the
Amendments, shall be amended, restated and superseded as set forth herein.


AGREEMENT


NOW,
THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which is acknowledged, it is agreed between the parties as
follows:


1.             Term of Agreement.


This Agreement shall remain in effect from the
Effective Date until the earlier of:


(a)           The date when the
Employee’s employment with the Company terminates for any reason not described
in Section 6; or


(b)           The date when the
Company has met all of its obligations under this Agreement following a
termination of the Employee’s employment with the Company for a reason
described in Section 6.


2.             Definition of Change in Control.


For all purposes under
this Agreement, “Change
in Control” shall mean the occurrence of any of the following
events after the Effective Date:


(a)           The Company is
merged, consolidated, or reorganized into or with another legal entity, and as
a result of such merger, consolidation or reorganization more than 50% of the
voting securities of such entity or its parent outstanding immediately after
such transaction are 









 



held by persons other than the holders of voting
securities of the Company immediately prior to such transaction;


(b)           The Company sells
all or substantially all of its assets to another legal entity and thereafter,
more than 50% of the voting securities of such entity or its parent outstanding
immediately after such transaction are held by persons other than the holders
of voting securities of the Company immediately prior to such transaction;


(c)           A change in the
composition of the Company’s Board of Directors (the “Board”) during any
period of two consecutive years such that individuals who at the beginning of
such period were members of the Board cease for any reason to constitute at
least a majority thereof, unless the election, or the nomination for election
by the Company’s stockholders, of each new director was approved by a vote of
at least two-thirds of the directors then still in office who were directors at
the beginning of the period; or


(d)           Any person (as the
term person is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act
of 1934, as amended (the “Exchange Act”)) has become the beneficial owner (as
the term “beneficial owner” is defined under Rule 13d-3, or any successor rule
or regulation promulgated under the Exchange Act) of more than 50% of the then
outstanding voting securities of the Company; provided
that changes in beneficial ownership resulting from issuances of securities by
the Company in transactions the primary purpose of which is to raise capital
through the sale of Company equity to one or more financial investors shall be
disregarded in determining whether a Change in Control has occurred.


3.             Definition of Good Reason.


For all purposes under
this Agreement, “Good
Reason” shall mean that the Employee:


(a)           Has been demoted or
has incurred a material reduction in his authority or responsibility as an
employee of the Company, including (without limitation) a reduction or
elimination of his authority to lead management of the Company, to establish
corporate goals, strategy, policies and procedures, to approve expenditures or
to hire, promote, demote or terminate subordinates; provided,
however, any matters ordinarily subject to approval by the Board of
Directors (such as the promotion, demotion or termination of officers or the
establishment of corporate goals) shall remain subject to Board approval;


(b)           Has incurred a
reduction in his total compensation (including benefits) as an employee of the
Company, other than pursuant to a Company-wide reduction of total compensation
(including benefits) for employees of the Company generally;


(c)           Has not received a
contemporaneous increase in his total compensation (including benefits) which
is commensurate with increases in total compensation (including benefits)
received by a majority of executive-level employees of the Company with duties
and responsibilities substantially comparable to those of the Employee;


(d)           Has not received a
bonus commensurate with bonuses (if any) received by a majority of
executive-level employees of the Company with duties and responsibilities
substantially comparable to those of the Employee; or









 



(e)           Has been notified
that his principal place of work as an employee of the Company will be
relocated by a distance of 50 miles or more.


4.             Definition of Cause.


For all purposes under
this Agreement, “Cause”
shall mean:


(a)           a material and
continuing failure to perform the duties of Employee’s employment which is
materially injurious to the Company, other than a failure resulting from
complete or partial incapacity due to physical or mental illness or impairment,
which failure is not corrected within 15 business days after written notice
thereof to the Employee;


(b)           Employee’s gross
misconduct or fraud which is materially injurious to the Company; or


(c)           Employee’s
conviction of, or plea of “guilty” or “no contest” to, a non-vehicular felony.


5.             Definition of Continuation Period.


For all purposes under this Agreement, “Continuation Period”
shall mean the period commencing on the date when the termination of the
Employee’s employment under Section 6 is effective and ending on the later of:


(a)           The date twelve
(12) months after the date when the employment termination was effective; or


(b)           December 31, 2007.


6.             Entitlement to Severance Pay and
Benefits.


The Employee shall be entitled to receive the
severance pay described in Section 7 (the “Severance Pay”) and the benefits described
in Section 8(a), (b) and (c) from the Company if, and only if, one of the
following events occurs:


(a)           The Employee
voluntarily resigns his employment for Good Reason;


(b)           The Company
terminates the Employee’s employment for any reason other than Cause; or


(c)           The Company
terminates the Employee’s employment because his position has been eliminated
in connection with a restructuring or a reduction in force, as determined by
the Company.


In addition, if any of the events set forth in
subsections (a), (b) or (c) above occurs following a Change in Control, the
Employee shall be entitled to the additional benefits set forth in
Section 8(d).









 



7.             Amount of Severance Pay.


During the Continuation
Period, the Company shall pay the Employee Severance Pay at an annual rate
equal to the sum of:


(a)           The Employee’s base
compensation at the annual rate in effect on the date 30 days prior to the date
when the termination of his employment with the Company is effective; plus


(b)           The arithmetic mean
of the Employee’s annual bonuses for the last three calendar years completed
prior to the date when the termination of his employment with the Company is
effective.  In the event that the
Employee received no bonus from the Company for one or more of such calendar
years for reasons other than related to Employee’s performance, the years in
which no bonus was paid shall be disregarded and the arithmetic mean of the
Employee’s bonuses for the remaining years (if any) shall be used.


Such amount shall be paid at periodic intervals in
accordance with the Company’s standard payroll procedures.


8.             Other Benefits.


(a)           Stock Options and Restricted Stock.  The vesting of any unvested stock options and
shares of restricted stock granted to Employee by the Company (including the
Option Stock (as defined in the Stock Restriction Agreement), and
notwithstanding anything to the contrary contained in the terms of the Stock
Restriction Agreement)) shall be accelerated such that an additional number of
shares equal to the number that would have vested over the Continuation Period
shall vest immediately upon the occurrence of one of the events described in
Section 6.  The post-termination exercise
grace period under the Employee’s stock options shall commence at the end of
the Continuation Period.  The Employee
represents that he has consulted or will consult a tax adviser regarding the
impact of this Subsection (a) on the tax treatment of incentive stock options
and shares of restricted stock.


(b)           Group Insurance. 
At the commencement of the Continuation Period, the Employee (and, where
applicable, his dependents) shall be entitled to convert his key employee
long-term disability policy and group life insurance policy into individual
policies pursuant to the terms of such policies.  Should the Employee elect to convert either
or both of such policies, the Company will pay the premiums for such policy or
policies during the Continuation Period. 
At the commencement of the Continuation Period, the Employee shall be
eligible to continue his group health continuation coverage under the
Consolidated Omnibus Budget Reconciliation Act of 1986, and the Company will
pay the premiums for such coverage during the Continuation Period.  The foregoing notwithstanding, in the event
that the Employee becomes eligible for comparable group insurance coverage in
connection with new employment, the premium payments by the Company under this
Subsection (b) shall terminate immediately.


(c)           Outplacement Services. 
If one of the events described in Section 6 has occurred, the Employee
shall be entitled to reasonable outplacement services at the Company’s
expense.  Such services shall be provided
by a firm selected by the Employee from a list compiled by the Company and
shall be limited to a period of six consecutive months.









 



(d)           Acceleration of Vesting Upon or
Following a Change in Control.  Notwithstanding
anything else set forth herein, in the event of a Change in Control, fifty
percent (50%) of any remaining unvested stock options and shares of restricted
stock granted to Employee by the Company (including the Option Stock and
notwithstanding anything to the contrary contained in the Stock Restriction
Agreement) shall vest immediately.  The
other fifty percent (50%) of such remaining unvested stock options and shares
of restricted stock shall continue to vest in accordance with the original
vesting schedule applicable thereto, provided that in each such case, the
number of shares that would otherwise vest on each applicable vesting date
shall be reduced by fifty percent (50%). 
In addition, upon the occurrence of one of the events described in
Section 6 following a Change in Control, all remaining unvested stock options
and shares of restricted stock granted to Employee by the Company shall vest
immediately and all shares of the Option Stock shall be immediately released
from the Company’s Purchase Option set forth in the Stock Restriction
Agreement, which shall be of no further force and effect.


9.             Golden Parachute Excise Tax
Gross-Up.  In the event that the benefits provided for
in this Agreement or otherwise payable to the Employee constitute “parachute
payments” within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the “Code”) that are subject to the excise tax imposed by
Section 4999 of the Code, then the Employee shall receive a one-time payment
from the Company sufficient to pay such excise tax.  Unless the Company and the Employee otherwise
agree in writing, the determination of the Employee’s excise tax liability and
the amount required to be paid under this Section shall be made in writing by
the Company’s accountants (the “Accountants”).  In the event that the excise tax incurred by
the Employee is determined by the Internal Revenue Service to be greater or
lesser than the amount so determined by the Accountants, the Company and the
Employee agree to promptly make such additional payment, including interest and
any tax penalties, to the other party as the Accountants reasonably determine
is appropriate.  For purposes of making
the calculations required by this Section, the Accountants may make reasonable
assumptions and approximations concerning applicable taxes and may rely on interpretations
of the Code for which there is a “substantial authority” tax reporting
position.  The Company and the Employee
shall furnish to the Accountants such information and documents as the
Accountants may reasonably request in order to make a determination under this
Section.  The Company shall bear all
costs the Accountants may reasonably incur in connection with any calculations
contemplated by this Section.


10.          Successors.


(a)           Company’s Successors. 
The Company shall require any successor (whether direct or indirect and
whether by purchase, lease, merger, consolidation, liquidation or otherwise) to
all or substantially all of the Company’s business and/or assets, by an
agreement in substance and form satisfactory to the Employee, to assume this Agreement
and to agree expressly to perform this Agreement in the same manner and to the
same extent as the Company would be required to perform it in the absence of a
succession.  For all purposes under this
Agreement, the term “Company” shall include any successor to the Company’s
business and/or assets which executes and delivers the assumption agreement
described in this Subsection (a) or which becomes bound by this Agreement by
operation of law.









 



(b)           Employee’s Successors. 
This Agreement and all rights of the Employee hereunder shall inure to
the benefit of, and be enforceable by, the Employee’s personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.


11.          Miscellaneous Provisions.


(a)           Notice.  Notices
and all other communications contemplated by this Agreement shall be in writing
and shall be deemed to have been duly given when personally delivered or when
mailed by U.S. registered or certified mail, return receipt requested and
postage prepaid.  In the case of the
Employee, mailed notices shall be addressed to him at the home address which he
most recently communicated to the Company in writing.  In the case of the Company, mailed notices
shall be addressed to its corporate headquarters, and all notices shall be
directed to the attention of its Secretary.


(b)           Waiver.  No
provision of this Agreement shall be modified, waived or discharged unless the
modification, waiver or discharge is agreed to in writing and signed by the
Employee and by an authorized officer of the Company (other than the
Employee).  No waiver by either party of
any breach of, or of compliance with, any condition or provision of this
Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at another time.


(c)           Whole Agreement. 
This Agreement and the Stock Restriction Agreement (including the
Exhibits thereto) constitute the full and entire understanding and agreement
between the parties with regard to the subject matter hereof, and supersede any
and all prior agreements, representations or understandings (whether oral or
written and whether express or implied) made or entered into by either party
with respect to the subject matter hereof, including without limitation the
Original Severance Agreement and the Amendments.


(d)           Legal Expenses.  The Company shall pay the reasonable legal
fees and expenses of Wilson Sonsini Goodrich & Rosati, P.C. in connection
with the preparation and negotiation of the Agreement and the transactions
contemplated thereby in an aggregate amount not to exceed $7,500.


(e)           No Setoff; Withholding Taxes.  There shall be no right of setoff or
counterclaim, with respect to any claim, debt or obligation against payments to
the Employee under this Agreement.  All
payments made under this Agreement shall be subject to reduction to reflect
taxes required to be withheld by law.


(f)            Choice of Law. 
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of California.


(g)           Severability. 
The invalidity or unenforceability of any provision or provisions of
this Agreement shall not affect the validity or enforceability of any other
provision hereof, which shall remain in full force and effect.


(h)           No Assignment. 
The rights of any person to payments or benefits under this Agreement
shall not be made subject to option or assignment, either by voluntary or
involuntary assignment or by operation of law, including (without limitation)
bankruptcy, 









 



garnishment, attachment or other creditor’s process,
and any action in violation of this Subsection (g) shall be void.


IN WITNESS
WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the Effective
Date.


	
  

  	
   

  	
  EMPLOYEE:

  
	
  

  	
   

  	
  /s/ Paul K. Laikind

  
	
   

  	
   

  	
  Paul K. Laikind

  
	
   

  	
   

  	
  COMPANY:

  
	
   

  	
   

  	
  METABASIS THERAPEUTICS,
  INC.

  
	
   

  	
   

  	
  By 

  	
   

  	
  /s/ John W. Beck

  
	
   

  	
   

  	
  Title 

  	
   

  	
  Snr VP Finance & CFO