Document:

exv10w13

 

Exhibit 10.13

LICENSE AGREEMENT

     This Agreement is entered into as of December 10, 2005 (the “Effective Date”) by and between
(i) SD Pharmaceuticals, Inc., a Delaware corporation (“SDP”), and (ii) Latitude Pharmaceuticals,
Inc., a Delaware corporation (“LPI”), and (iii) Andrew X. Chen (“Dr. Chen”), with respect to the
following facts:

A. Dr. Chen is the sole owner of LPI and is a co-founder and a principal owner in SDP.

B. In connection with the formation of SDP, Dr. Chen assigned to SDP certain inventions and related
patent rights, and LPI granted to SDP (pursuant to that certain Inventions First Negotiation and
Refusal Agreement, dated as of June 16, 2004, the “Inventions Agreement”) a first negotiation right
for SDP to acquire additional future inventions and related patent rights conceived and developed
by LPI.

C. From June 2004 through December 2005, various additional inventions and related patent rights
have been conceived and developed by Dr. Chen, as an employee of LPI, which inventions and related
patent rights are useful for the business plan of SDP; and SDP has funded some of the development
costs and patent application costs for said additional inventions (collectively called the
“Additional Inventions”).

     WHEREFORE, the parties hereto and each agree as follows:

1. Assignment. In consideration of the license grant-back set forth in Section 2 of this
Agreement, LPI and Dr. Chen hereby assign to SDP all rights and interests of Dr. Chen and LPI in
the Additional Inventions and the related patent rights for all areas worldwide except for China,
Taiwan, Hong Kong and Macao (collectively called the “Retained Asian Territories”). Additionally,
Dr. Chen and LPI agree to execute and deliver such additional assignment documents as may be
necessary or appropriate to further evidence such assignment. Attached hereto as Exhibit A is a
combined listing of the Additional Inventions and the previsiously assigned inventions and related
patent rights (collectively called the ‘Subject Patent Rights”). LPI and Dr. Chen hereby ratify
and confirm their assignment to SDP of all of their rights and interests in the Subject Patent
Rights except for rights and interests in the Retained Asian Territories.

2. License Grant-Back. In consideration for the forgoing assignment of the Additional
Inventions, and subject to the terms of this Agreement, SDP hereby grants to LPI the worldwide,
exclusive, royalty-free, paid-up, and irrevocable license right to use the Subject Patent Rights
for LPI to use to develop, make, have made, use, sell and import products and to practice methods
and processes, only within the Permitted Fields (as defined below).

     (a) “Permitted Fields” means all fields of use other than the “Excluded Fields” as defined in
Exhibit B attached hereto.

     (b) For avoidance of doubt, SDP retains the sole and exclusive right to utilize and practice
the Subject Patent Rights in the Excluded Fields for all areas worldwide except for the

 

 

Retained Asian Territories; and LPI has no rights to utilize or practice the Subject Patent
Rights in the Excluded Fields, other than in the areas of the Retained Asian Territories.

     (c) LPI shall be entitled to grant sublicenses (and sub-tier-sublicenses), and to assign its
license rights under this Agreement; and upon any such sublicense or assignment, LPI shall give
prompt written notice thereof to SDP.

3. Patent Prosecution and Maintenance. SDP shall have the responsibility and authority to
manage the patent prosecution for the Subject Patent Rights, worldwide except for the Retained
Asian Territories, and to monitor and maintain the Subject Patent Rights, all at the expense of
SDP. SDP shall instruct the patent attorney handling these patent matters to keep LPI fully
informed as to all material matters concerning the patent prosecution and patent maintenance for
the Subject Patent Rights, including furnishing copies of correspondence with the governmental
patent offices, and furnishing copies of relevant documents related to the Subject Patent Rights.

4. Patent Infringement. If there is any third party infringing the Subject Patent Rights,
LPI and SDI shall confer and endeavor to reach a consensus as to how best to deal with the
infringer. If the infringement primarily affects the Excluded Fields in the SDP territories, then
SDP shall have the final and ultimate authority to decide how to proceed against the infringer; and
alternatively, if the infringement primarily affects the Permitted Fields or the Retained Asian
Territories, then LPI shall have the final and ultimate authority to decide how to proceed against
the infringer.

5. Inventions Agreement. As additional consideration for the assignment set forth in
Section 1 above, SDP shall also amend the Inventions Agreement (described in Recital B), so as to
allow LPI to have an early termination of the Inventions Agreement in the event that SDP is later
sold or there is a change in control of SDP.

6. Development Costs. As additional consideration for the assignment set forth in Section
1 above, if SDP is later sold, funded, or there is a change in control of SDP (the “Triggering
Event”), then SDP shall reimburse LPI for its actual costs incurred after June 2004 through the
date of the Triggering Event to further develop the Subject Patent Rights (the “Development
Costs”). Said Development Costs shall be for the actual materials, labor, and overhead for such
development work, but shall not include any time and efforts contributed by Dr. Chen.

7. Confidentiality. To the extent that either party discloses its confidential information
to the other party, such other party shall maintain the confidentiality of that confidential
information and shall not use that confidential information without the prior written consent of
the disclosing party. This obligation of non-disclosure and non-use shall not extend to any
information which: (a) can be demonstrated by the recipient to have been within its legitimate
possession prior to the time of disclosure by the disclosing party; or (b) was in the public domain
prior to disclosure by the disclosing party; or (c) comes into the public domain through no fault
of the recipient party; or (d) is disclosed to the recipient by third party having legitimate
possession thereof and the unrestricted right to make such disclosure; or (e) is required by law or
legal proceedings to be disclosed, but then only to the limited extent the such disclosure is
legally required.

 

 

8. Disclaimers. Neither Dr. Chen, LPI nor SDP makes any representation or warranty of any
kind with respect to (i) the claims that will ultimately be included in the Subject Patent Rights
once patents are issued, or (ii) the validity or scope of any of the Subject Patent Rights, or
(iii) whether or not any viable products or services can be developed under the Subject Patent
Rights, or (iv) the utility or commercial applicability of the Subject Patent Rights, or (v) the
nature and scope of any other related third party patent rights.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set forth above

	 	 	 	 	 
	/s/ Andrew X. Chen	 	 
	 	 	 
	Andrew X. Chen	 	 
	 
	 	 	 	 
	Latitude Pharmaceuticals, Inc.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Andrew X. Chen	 	 
	 

	 	 	 	 
	 

	 	Andrew X. Chen, President	 	 
	 
	 	 	 	 
	SD Pharmaceuticals, Inc.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Paul J. Marangos	 	 
	 

	 	 	 	 
	 

	 	Paul J. Marangos, President	 	 

 

 

Exhibit A

Subject Patent Rights

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Pat./Appl.	 	 	 	 	 	 	 	 
	Reference	 	 	 	No.	 	 	 	Priority	 	 	 	Comments/Due
	Number	 	Title	 	Appl. Date	 	Inventors	 	Applications	 	Status	 	Dates
	401
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	401P1

	 	Pharmaceutical Compositions for Delivering Macrolide

Drugs
	 	60/493,209 08/06/03
	 	Chen
	 	N/A
	 	Expired	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	401

	 	Pharmaceutical Compositions for Delivering Macrolides
	 	10/895,018 07/20/04
	 	Chen
	 	60/493,209 (401P1)
	 	Pending
	 	•
	 	Published as

US-2005-0049209-A1 on

03-Mar-05
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	401CA

	 	Pharmaceutical Compositions for Delivering Macrolides
	 	 	 	Chen
	 	 	 	Unfiled
	 	•
	 	06-Jun-2007 –National

Stage Filing due
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	401EP

	 	Pharmaceutical Compositions for Delivering Macrolides
	 	08/05/04
	 	Chen
	 	60/493,209 (401P1)

& 10/895,018 (401)
	 	Pending
	 	•
	 	05-Aug-2006 – Annuity due
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	401JP

	 	Pharmaceutical Compositions for Delivering Macrolides
	 	08/05/04
	 	Chen
	 	60/493,209 (401P1)

& 10/895,018 (401)
	 	Pending
	 	•
	 	05-Aug-2007 – Deferred

Exam
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	401PC

	 	Macrolides Containing Oil-in-Water Emulsions
	 	US04/25284

08/05/04
	 	Chen
	 	60/493,209 (401P1)

& 10/895,018 (401)
	 	Pending
	 	•
	 	Published

 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Pat./Appl.	 	 	 	 	 	 	 	 
	Reference	 	 	 	No.	 	 	 	Priority	 	 	 	Comments/Due
	Number	 	Title	 	Appl. Date	 	Inventors	 	Applications	 	Status	 	Dates
	403
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	403P1

	 	Anti-Viral Pharmaceutical Compositions
	 	60/528,843

12/10/03
	 	Chen
	 	N/A
	 	Expired	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	403

	 	Anti-Viral Pharmaceutical Compositions
	 	11/003,302 12/03/04
	 	Chen
	 	60/528,843 (403P1)
	 	Pending
	 	•
	 	Published
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	403PC

	 	Anti-Viral Pharmaceutical Compositions
	 	US04/41117

12/08/04
	 	Chen
	 	60/528,843 (403P1)

& 11/003,302 (403)
	 	Pending
	 	•
	 	10-Jun-2006 – Chapter

I/II National Stage

Filing due
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	404
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	404P1

	 	Elemene Compositions Containing Liquid Oil
	 	60/538,851

01/23/04
	 	Chen
	 	N/A
	 	Expired	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	404

	 	Elemene Compositions Containing Liquid Oil
	 	11/040,079

01/21/05
	 	Chen
	 	60/538,851 (404P1)
	 	Pending
	 	•
	 	Published
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	406
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	406

	 	Injectable Pharmaceutical Compositions for

Irritating Drugs
	 	10/889,226

07/12/04
	 	Chen
	 	N/A
	 	Pending
	 	•
	 	Published
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	406PC

	 	Compositions for Delivering Highly Water

Soluble Drugs
	 	US2005/24594

7/12/05
	 	Chen
	 	10/889,226 (406)
	 	Pending
	 	•
	 	Published
	 

	 	 	 	 	 	 	 	 	 	 	 	•
	 	18-Mar-2006 – Amend Claims
	 

	 	 	 	 	 	 	 	 	 	 	 	•
	 	12-May-2006 – Demand Due

(Priority Date)
	 

	 	 	 	 	 	 	 	 	 	 	 	•
	 	12-Jan-2007 – Chapter

I/II National Stage

Filing due

 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Pat./Appl.	 	 	 	 	 	 	 	 
	Reference	 	 	 	No.	 	 	 	Priority	 	 	 	Comments/Due
	Number	 	Title	 	Appl. Date	 	Inventors	 	Applications	 	Status	 	Dates
	407
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	407P1

	 	Stable Injectable Composition of Alpha Tocopheryl
Succinate, Analogues and Salts Thereof
	 	60/592,097 07/28/04
	 	Chen
	 	N/A
	 	Expired	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	407

	 	Stable Injectable Composition of Alpha Tocopheryl
Succinate, Analogues and Salts Thereof
	 	11/192,439

07/28/05
	 	Chen
	 	60/592,097 (407P1)
	 	Pending
	 	•
	 	Published
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	407PC

	 	Stable Injectable Composition of Alpha Tocopheryl
Succinate, Analogues and Salts Thereof
	 	US2005/026783

7/28/05
	 	Chen
	 	60/592,097 (407P1)
	 	Pending
	 	•
	 	Published
	 

	 	 	 	 	 	 	 	 	 	 	 	•
	 	28-Jan-2007 – Chapter

I/II National Stage

Filing due
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	408
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	408

	 	Low Oil Emulsion Compositions for Delivering Taxoids
and Other Insoluble Drugs
	 	10/952,243

9/28/04
	 	Chen
	 	N/A
	 	Pending
	 	•
	 	30-Mar-2006 – Projected

Publication
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	408 PC

	 	Low Oil Emulsion Compositions for Delivering Taxoids
and Other Insoluble Drugs
	 	US2005/34971

9/28/05
	 	Chen
	 	10/952,243 (408)
	 	Pending
	 	•
	 	28-Mar-2007 – Chapter

I/II National Stage

Filing due

 

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Pat./Appl.	 	 	 	 	 	 	 	 
	Reference	 	 	 	No.	 	 	 	Priority	 	 	 	Comments/Due
	Number	 	Title	 	Appl. Date	 	Inventors	 	Applications	 	Status	 	Dates
	409
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	409P1

	 	Vitamin E Succinate Stabilized Pharmaceutical
Compositions, Methods for the Preparation
Thereof and
Methods for the Use Thereof
	 	To be filed	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	409P2

	 	Vitamin E Succinate Stabilized Pharmaceutical
Compositions, Methods for the Preparation
Thereof and Methods for the Use Thereof
	 	To be filed	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	410

	 	Vancomycin formation Patent
	 	To be filed	 	 	 	 	 	 	 	 	 	 

 

 

Exhibit B

Excluded Fields

1. Clarithromycin intravenous emulsion formulation for infectious disease and any other disease
indication.

2. Chitosan in combination with Zinc for topical anti-viral use.

3. B-Elemene intravenous emulsion formulation for Cancer treatment and any other disease
indication.

4. Vinca Alkyloid intravenous emulsion formulation for cancer treatment and any other disease
indication.

5. Alpha tocopheryl Succinate, Paclitaxel and Docetaxel intravenous emulsion formulations for
Cancer and any other disease indication.

6. Paclitaxel and Docetaxel intravenous emulsion formulation for cancer treatment and any other
disease indication.

7. Vancomycin intravenous emulsion formulation for infectious disease and any other disease
indication.exv10w25

 

EXHIBIT 10.25

SEVERANCE AGREEMENT

     This Severance Agreement (the “Agreement”) is made and entered into effective as of
November 14, 2003 (the “Effective Date”), by and between Anadys Pharmaceuticals, Inc., a
Delaware corporation (the “Company”), and Steve Worland (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. 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.

1.

 

               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,
subject to the limitations stated in Section 2.2.4 herein and upon the Executive’s furnishing to
the Company an effective waiver and release of claims (“Waiver and Release”) (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 in effect at
the time of termination, less standard deductions and withholdings;

               (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) nine (9) 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.

               2.2.4 Covenant not to Compete. Notwithstanding any provisions in this Agreement to the
contrary, including any provisions contained in this Section 2.2, the Company’s obligations, and
the Executive’s rights, pursuant to Section 2.2.3 shall cease and be rendered a nullity immediately
should the Executive violate any provision of Section 1 herein, or should the Executive violate the
terms and conditions of the Executive’s Agreement for Employees dated March 22, 2001 (proprietary
information and inventions agreement) with the Company.

               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.

          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,

2.

 

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 significant 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 an 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 current place of employment; and

               (iii) a reduction in the annual base compensation paid to Executive, without Executive’s
consent.

               2.3.3 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 failure to satisfactorily perform 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 (except for the failure resulting from Executive’s incapacity due to
Complete Disability, or 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 an 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 which violates any
material provisions of the Executive’s Agreement for Employees dated March 22, 2001 (proprietary
information and inventions agreement) with the Company.

          2.4 Integration. The Parties agree that unless it is determined that Executive
shall be terminated for Cause under this Agreement, there shall be no termination for Cause under
Executive’s Stock Option Agreements dated April 12, 2001 and February 12, 2003.

     3. Change of Control. 

3.

 

          3.1 Benefits.

               3.1.1 Pursuant to the Executive’s stock option grant dated April 12, 2001 (the “Hire Grant”),
upon a Change of Control of the Company all shares under the Hire Grant shall be vested and fully
exercisable in accordance with the terms thereof.

               3.1.2 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 of Control of the Company, then upon the Executive’s delivery
to the Company of an effective Waiver and Release, the Executive shall be entitled to the benefits
set forth in Section 2.2.3 and 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 Definition. For purposes of this Agreement, the term Change of Control shall have the
meaning set forth in the Company’s 2002 Equity Incentive Plan.

          3.3 Parachute Payment. If any payment or benefit Executive would receive pursuant a Change of
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 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 accounting firm engaged by the Company for general audit purposes as of the day prior to
the effective date of the Change of Control shall perform the foregoing calculations. If the
accounting firm so engaged by the Company is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, then the Company shall appoint a nationally
recognized accounting firm to make the determinations required hereunder. The Company shall bear
all expenses with respect to the determinations by such accounting firm required to be made
hereunder.

4.

 

     The accounting 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 accounting 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 accounting 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.

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

Anadys Pharmaceuticals, Inc.

	 	 	 
	By: /s/ Kleanthis G. Xanthopoulos, Ph.D.
 

Name: Kleanthis G. Xanthopoulos, Ph.D.

	 	 
	 
	 	 
	Its: President and Chief Executive Officer
	 	 
	 
	 	 
	Dated: 11/14/2003
	 	 
	 
	 	 
	Executive:
	 	 
	 
	 	 
	/s/ Stephen Worland
 

	 	 
	 
	 	 
	Steve Worland
	 	 
	 
	 	 
	Dated: 01/07/2004
	 	 

5.

 

EXHIBIT A

RELEASE AND WAIVER OF CLAIMS

     In consideration of the payments and other benefits set forth in Section 2.2 of the Severance
Agreement dated November 13, 2003, to which this form is attached, I, Steve Worland,
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 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, 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 favor at the time of executing the release, which if known by him
must have materially affected his 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 (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

1.

 

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 March 22, 2001
(proprietary information and inventions agreement), a copy of which is 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 severance
pay 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:
	 	 	 	 
	 

	 	 	 	 	 	 	 	Steve Worland	 	 

2.

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