EXHIBIT 10.4

 

REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made as of the 13th day
of August, 2010, by and among (i) ARYx Therapeutics, Inc., a Delaware
corporation (the “Company”), (ii) each party listed on EXHIBIT A attached hereto
(collectively, the “Initial Investors” and each individually, an “Initial
Investor”), and (iii) each person or entity that subsequently becomes a party to
this Agreement pursuant to, and in accordance with, the provisions of Section 12
hereof (collectively, the “Investor Permitted Transferees” and each individually
an “Investor Permitted Transferee”).

 

WHEREAS, the Company has agreed to issue and sell to the Initial Investors, and
the Initial Investors have agreed to purchase from the Company, warrants (each a
“Warrant” and together the “Warrants”) to purchase an aggregate of two million
(2,000,000) shares of Common Stock of the Company, $0.001 par value per share
(the “Common Stock”), all upon  the terms and conditions set forth in that
certain Secured Note and Warrant Purchase Agreement, dated of even date
herewith, between the Company and the Initial Investors (the “Purchase
Agreement”); and

 

WHEREAS, the terms of the Purchase Agreement provide that it shall be a
condition precedent to the closing of the transactions thereunder, for the
Company and the Initial Investors to execute and deliver this Agreement.

 

NOW, THEREFORE, in consideration of the premises and mutual covenants contained
herein, the parties hereto hereby agree as follows:

 

1.             DEFINITIONS.  The following terms shall have the meanings
provided therefor below or elsewhere in this Agreement as described below:

 

“Board” shall mean the board of directors of the Company.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and
all of the rules and regulations promulgated thereunder.

 

“Initial Closing” shall have the meaning ascribed to such term in the Purchase
Agreement.

 

“Investors” shall mean, collectively, the Initial Investors and the Investor
Permitted Transferees; provided, however, that the term “Investors “ shall not
include any of the Initial Investors or any of the Investor Permitted
Transferees that does not own or hold any Registrable Shares.

 

“Majority Holders” shall mean, at the relevant time of reference thereto, those
Investors holding more than fifty percent (50%) of the Registrable Shares held
by all of the Investors.

 

“Qualifying Holder” shall have the meaning ascribed thereto in Section 12
hereof.

 

“Registrable Shares” shall mean the Underlying Shares, provided, however, such
term shall not, after the Mandatory Registration Termination Date, include any
of the Underlying Shares that become or have become eligible for resale without
restrictions or volume limitations pursuant to Rule 144 or as a result of a
subsequent sale made pursuant to Regulation S under the Securities Act.

 

“Rule 144” shall mean Rule 144 promulgated under the Securities Act and any
successor or substitute rule, law or provision.

 

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“SEC” shall mean the Securities and Exchange Commission.

 

“Securities Act” shall mean the Securities Act of 1933, as amended, and all of
the rules and regulations promulgated thereunder.

 

“Underlying Shares” shall mean the shares of Common Stock issuable upon exercise
of the Warrants.

 

2.             EFFECTIVENESS; TERMINATION.  This Agreement shall become
effective and legally binding only if the Initial Closing occurs.

 

3.             MANDATORY REGISTRATION.

 

(a)           Within sixty (60) days after the Initial Closing, the Company will
prepare and file with the SEC a registration statement on Form S-3 (or such
other form as may be then available to the Company) for the purpose of
registering under the Securities Act all of the Registrable Shares for resale
by, and for the account of, the Investors as selling stockholders thereunder
(the “Registration Statement”). The Registration Statement shall permit the
Investors to offer and sell, on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act, any or all of the Registrable Shares. The
Company agrees to use commercially reasonable best efforts to cause the
Registration Statement to become effective as soon as practicable, but in no
event later than ninety (90) days after the Initial Closing (or one hundred
twenty (120) days if the Registration Statement is reviewed by the SEC) (the
“Effectiveness Deadline”).  In the event that, after the Initial Closing and
before the Registration Statement is declared effective, there is an act of God,
war or terror that has the effect of causing a delay in the effectiveness of the
Registration Statement, the Effectiveness Deadline will be extended by a number
of days equal to the days of any such act, plus ten (10) additional days.
Notwithstanding the foregoing, if the Company is required to file the
Registration Statement on a Form S-1, then the Company shall have ninety (90)
days from the Initial Closing to prepare and file the Registration Statement and
the Effectiveness Deadline shall be, in such case, one hundred eighty (180) days
after the Initial Closing.

 

(b)           The Company shall be required to keep the Registration Statement
effective until such date that is the earlier of (i) the date when all of the
Registrable Shares registered thereunder shall have been sold, or (ii) the date
as of which all of the Registrable Shares (excluding such Registrable Shares as
are registered pursuant to any other effective Registration Statement) are
freely tradable (without any restrictions or volume limitations) by the
Investors pursuant to Rule 144 promulgated under the Securities Act or any
successor or substitute rule, law or provision (such date is referred to herein
as the “Mandatory Registration Termination Date”).  Thereafter, the Company
shall be entitled to withdraw the Registration Statement and the Investors shall
have no further right to offer or sell any of the Registrable Shares pursuant to
the Registration Statement (or any prospectus relating thereto).

 

(c)           The offer and sale of the Registrable Shares pursuant to the
Registration Statement shall not be underwritten.

 

4.             DEMAND REGISTRATION RIGHTS.

 

(a)           If a Registration Statement covering the Registrable Shares is not
filed with the SEC on or prior to sixty (60) days after the Initial Closing
(which shall be ninety (90) days from the Initial Closing in the event the
Company is required to file the Registration Statement on a Form S-1) (the
“Filing Deadline”) or if, at any time prior to the Mandatory Registration
Termination Date, the Registration Statement is no longer effective, subject to
the conditions set forth in this Section 4, and the

 

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Company shall have received a written request from the Majority Holders that the
Company file a registration statement under the Securities Act covering the
registration of Registrable Shares then held by the Investors, then the Company
shall, within ten (10) business days of the receipt thereof, give written notice
of such request to all Investors, and subject to the limitations of this
Section 4, effect, as expeditiously as reasonably possible, the registration
under the Securities Act of all Registrable Shares that all Investors request to
be registered, which registration statement may require the Company to use a
Registration Statement on Form S-1.

 

(b)           The Company shall not be required to effect a registration
pursuant to this Section 4:

 

(i)            after the Company has effected one registration pursuant to this
Section 4; and

 

(ii)           if the Company shall furnish to the Investors a certificate
signed by the Chairman of the Board stating that in the good faith judgment of
the Board, it would be materially detrimental to the Company and its
stockholders for such registration statement to be effected at such time because
such action (x) would materially interfere with a significant acquisition,
corporate reorganization or financing or other similar transaction involving the
Company, (y) would require premature disclosure of material information that the
Company has a bona fide business purpose for preserving as confidential
(provided, that no such information will be required to be disclosed to any of
the Investors) or (z) would render the Company unable to comply with
requirements under the Securities Act or Exchange Act, in which event the
Company shall have the right to defer such filing for a period of not more than
one hundred twenty (120) days after receipt of the request of the Majority
Holders; provided, that such right to delay a request shall be exercised by the
Company not more than once; provided, further, that the Company shall not
register any securities for the account of itself or any other stockholder
during such one hundred twenty (120) day period (other than pursuant to a
registration statement on Form S-4 or S-8).

 

5.             OBLIGATIONS OF THE COMPANY.  In connection with the Company’s
obligation under Section 3 and, if applicable, Section 4 hereof to file a
registration statement with the SEC and to use its commercially reasonable
efforts to cause such registration statement to become effective, the Company
shall, as expeditiously as reasonably possible:

 

(a)           Prepare and file with the SEC such amendments and supplements to
the Registration Statement and the prospectus used in connection therewith as
may be necessary to comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Shares covered by such
registration statement;

 

(b)           Furnish to the selling Investors such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents (including, without
limitation, prospectus amendments and supplements as are prepared by the Company
in accordance with Section 5(a) above) as the selling Investors may reasonably
request in order to facilitate the disposition of such selling Investors’
Registrable Shares;

 

(c)           Notify the selling Investors, at any time during which a
prospectus relating to such registration statement is required to be delivered
under the Securities Act, of the happening of any event as a result of which the
prospectus included in or relating to the registration statement contains an
untrue statement of a material fact or omits any fact necessary to make the
statements therein not misleading; and, thereafter, the Company will promptly
prepare (and, when completed, give notice and provide a copy thereof to each
selling Investor) a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Shares, such

 

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prospectus will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not misleading;
provided  that upon such notification by the Company, the selling Investors will
not offer or sell Registrable Shares until the Company has notified the selling
Investors that it has prepared a supplement or amendment to such prospectus and
delivered copies of such supplement or amendment to the selling Investors (it
being understood and agreed by the Company that the foregoing proviso shall in
no way diminish or otherwise impair the Company’s obligation to promptly prepare
a prospectus amendment or supplement as above provided in this Section 5(c) and
deliver copies of same as above provided in Section 5(b) hereof); and

 

(d)           Use commercially reasonable efforts to register and qualify the
Registrable Shares covered by such registration statement under such other
securities or Blue Sky laws of such states and other jurisdictions as shall be
reasonably appropriate in the opinion of the Company and the managing
underwriters, if any; provided  that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions; provided, further  that (notwithstanding anything in this
Agreement to the contrary with respect to the bearing of expenses) if any
jurisdiction in which any of such Registrable Shares shall be qualified shall
require that expenses incurred in connection with the qualification therein of
any such Registrable Shares be borne by the selling Investors, then the selling
Investors shall, to the extent required by such jurisdiction, pay their pro rata
share of such qualification expenses.

 

(e)           Subject to the terms and conditions of this Agreement, the Company
shall use its commercially reasonable efforts to (i) prevent the issuance of any
stop order or other suspension of effectiveness of a registration statement, or
the suspension of the qualification of any of the Registrable Shares for sale in
any jurisdiction in the United States, and (ii) if such an order or suspension
is issued, obtain the withdrawal of such order or suspension at the earliest
practicable moment and notify each holder of Registrable Shares of the issuance
of such order and the resolution thereof or its receipt of notice of the
initiation or threat of any proceeding for such purpose.

 

6.             FURNISH INFORMATION.  It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Agreement that
the selling Investors shall furnish to the Company such information regarding
them and the securities held by them as the Company shall reasonably request and
as shall be required in order to effect any registration by the Company pursuant
to this Agreement.  Each Investor shall prior to the Effectiveness Deadline
promptly notify the Company of any changes in the information furnished to the
Company.

 

7.             EXPENSES OF REGISTRATION.  Except as set forth in Section 5(d),
all expenses incurred in connection with the registration of the Registrable
Shares pursuant to this Agreement (excluding underwriting, brokerage and other
selling commissions and discounts), including without limitation all
registration and qualification and filing fees, printing, and fees and
disbursements of counsel for the Company, shall be borne by the Company.

 

8.             DELAY OF REGISTRATION.  The Investors shall not take any action
to restrain, enjoin or otherwise delay any registration as the result of any
controversy which might arise with respect to the interpretation or
implementation of this Agreement.

 

9.             INDEMNIFICATION.

 

(a)           To the extent permitted by law, the Company will indemnify and
hold harmless each selling Investor, any investment banking firm acting as an
underwriter for the selling Investors, any broker/dealer acting on behalf of any
selling Investors and each officer, director, partner,

 

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manager and/or member of such selling Investor, such underwriter, such
broker/dealer and each person, if any, who controls such selling Investor, such
underwriter or broker/dealer within the meaning of the Securities Act or the
Exchange Act, against any losses, claims, damages or liabilities, joint or
several, to which they may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue or alleged untrue statement
of any material fact contained in the Registration Statement, in any preliminary
prospectus or final prospectus relating thereto or in any amendments or
supplements to the Registration Statement or any such preliminary prospectus or
final prospectus, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading; and will reimburse such
selling Investor, such underwriter, broker/dealer or such officer, director or
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 9(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld),
nor shall the Company be liable in any such case for any such loss, damage,
liability or action to the extent that it arises out of or is based upon (i) an
untrue statement or alleged untrue statement or omission made in connection with
the Registration Statement, any preliminary prospectus or final prospectus
relating thereto or any amendments or supplements to the Registration Statement
or any such preliminary prospectus or final prospectus, in reliance upon and in
conformity with written information furnished expressly for use in connection
with the Registration Statement or any such preliminary prospectus or final
prospectus by the selling Investors or (ii) an untrue statement or alleged
untrue statement or omission in the Registration Statement or any prospectus
that is corrected in any subsequent amendment or supplement to the Registration
Statement or prospectus that was delivered to the selling Investor before the
pertinent sale or sales by the selling Investor.

 

(b)           To the extent permitted by law, each selling Investor will
severally and not jointly indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the Registration Statement, each
person, if any, who controls the Company within the meaning of the Securities
Act or the Exchange Act, any investment banking firm acting as underwriter for
the Company or the selling Investors, or any broker/dealer acting on behalf of
the Company or any selling Investors, and all other selling Investors against
any losses, claims, damages or liabilities to which the Company or any such
director, officer, controlling person, underwriter, or broker/dealer or such
other selling Investor may become subject to, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any untrue or alleged untrue
statement of any material fact contained in the Registration Statement or any
preliminary prospectus or final prospectus, relating thereto or in any
amendments or supplements to the Registration Statement or any such preliminary
prospectus or final prospectus, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent and only to the extent that such untrue statement or alleged
untrue statement or omission or alleged omission (i) was made in the
Registration Statement, in any preliminary prospectus or final prospectus
relating thereto or in any amendments or supplements to the Registration
Statement or any such preliminary prospectus or final prospectus, in reliance
upon and in conformity with written information furnished by the selling
Investor expressly for use in connection with the Registration Statement or any
such preliminary prospectus or final prospectus or (ii) was corrected in any
subsequent amendment or supplement to the Registration Statement or prospectus
that was delivered to the selling Investor before the pertinent sale or sales by
the selling Investor and such corrected amendment or supplement to the
Registration Statement or prospectus was not delivered to the purchaser; and
such selling Investor will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, controlling person,
underwriter, broker/dealer or other selling Investor in connection with
investigating or defending any such loss, claim,

 

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damage, liability or action; provided, however, that the liability of each
selling Investor hereunder shall be limited to the proceeds (net of underwriting
discounts and commissions, if any) received by such selling Investor from the
sale of Registrable Shares covered by the Registration Statement; provided,
further, however, that the indemnity agreement contained in this
Section 9(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of those selling Investor(s) against which the request for indemnity is
being made (which consent shall not be unreasonably withheld).

 

(c)           Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying party
under this Section 9, notify the indemnifying party in writing of the
commencement thereof and the indemnifying party shall have the right to
participate in and, to the extent the indemnifying party desires, jointly with
any other indemnifying party similarly noticed, to assume at its expense the
defense thereof with counsel mutually satisfactory to the indemnifying parties
and the indemnified parties.  In the event that the indemnifying party assumes
any such defense, the indemnified party may participate in such defense with its
own counsel and at its own expense; provided, however, that the counsel for the
indemnifying party shall act as lead counsel in all matters pertaining to such
defense or settlement of such claim and the indemnifying party shall only pay
for such indemnified party’s expenses for the period prior to the date of its
participation in such defense.  In any such proceeding, any indemnified party
shall have the right to retain its own counsel, but the fees and expenses of
such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel, (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and the representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them or (iii) the indemnifying party shall have failed to retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party in any such proceeding. It is understood that the indemnifying party shall
not, in connection with any such proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate
firm  (in addition to one local counsel in each applicable jurisdiction) for all
such indemnified parties and that all such fees and expenses shall be reimbursed
as they are incurred. The failure to notify an indemnifying party promptly of
the commencement of any such action, if prejudicial to his ability to defend
such action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 9, but the omission so to notify the
indemnifying party will not relieve him of any liability which he may have to
any indemnified party otherwise other than under this Section 9.

 

(d)           Notwithstanding anything to the contrary herein, the indemnifying
party shall not be entitled to settle any claim, suit or proceeding unless in
connection with such settlement the indemnified party receives an unconditional
release with respect to the subject matter of such claim, suit or proceeding and
such settlement does not contain any admission of fault by the indemnified
party.

 

(e)           If the indemnification provided for in this Section 9 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Company on the one hand and the Investors
on the other in connection with the statements or omissions or other matters
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations.  The
relative fault shall be determined by reference to, among other things, in the
case of an untrue statement, whether the untrue statement relates to information
supplied by the Company on the

 

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one hand or an Investor on the other and the parties’ relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement. The Company and the Investors agree that it would not be just
and equitable if contribution pursuant to this subsection (e) were determined by
pro rata allocation (even if the Investors were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to above in this subsection (e).  The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (e) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim.  No person guilty of fraudulent
misrepresentation (within the meaning of Section 12(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Investors’ obligations in this subsection to
contribute are several, and not joint, in proportion to their sales of
Registrable Shares to which such loss relates.

 

(f)            The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 9, and are fully informed regarding said provisions. 
They further acknowledge that the provisions of this Section 9 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement as required by the Securities Act and the Exchange Act.

 

10.           REPORTS UNDER THE EXCHANGE ACT.  With a view to making available
to the Investors the benefits of Rule 144 and any other rule or regulation of
the SEC that may at any time permit the Investors to sell the Underlying Shares
to the public without registration, the Company agrees to use reasonable best
efforts: (i) to make and keep public information available as those terms are
understood in Rule 144, (ii) to file with the SEC in a timely manner all reports
and other documents required to be filed by an issuer of securities registered
under the Securities Act or the Exchange Act, (iii) as long as any Investor owns
any Registrable Shares, to furnish in writing upon such Investor’s request a
written statement by the Company that it has complied with the reporting
requirements of Rule 144 and of the Securities Act and the Exchange Act, and to
furnish to such Investor a copy of the most recent annual or quarterly report of
the Company, and such other reports and documents so filed by the Company as may
be reasonably requested in availing such Investor of any rule or regulation of
the SEC permitting the selling of any such Registrable Shares without
registration and (iv) undertake any additional actions reasonably necessary to
maintain the availability of the Registration Statement or the use of Rule 144.

 

11.           SUSPENSION.  Notwithstanding anything in this Agreement to the
contrary, in the event (i) of any request by the SEC or any other federal or
state governmental authority during the period of effectiveness of the
Registration Statement for amendments or supplements to a Registration Statement
or related prospectus or for additional information; (ii) of the issuance by the
SEC or any other federal or state governmental authority of any stop order
suspending the effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose; (iii) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Shares for sale in any jurisdiction
or the initiation of any proceeding for such purpose; (iv) of any event or
circumstance which necessitates the making of any changes in the Registration
Statement or related prospectus, or any document incorporated or deemed to be
incorporated therein by reference, so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and that in the case of the
prospectus, it will not contain any untrue statement of a material fact or any
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; or

 

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(v) that the Board has made the good faith determination (A) that continued use
by the selling Investors of the Registration Statement for purposes of effecting
offers or sales of Registrable Shares pursuant thereto would require, under the
Securities Act, premature disclosure in the Registration Statement (or the
prospectus relating thereto) of material, nonpublic information concerning the
Company, its business or prospects or any proposed material transaction
involving the Company, (B) that such premature disclosure would be materially
adverse to the Company, its business or prospects or any such proposed material
transaction or would make the successful consummation by the Company of any such
material transaction significantly less likely and (C) that it is therefore
essential to suspend the use by the Investors of such Registration Statement
(and the prospectus relating thereto) for purposes of effecting offers or sales
of Registrable Shares pursuant thereto, then the Company shall furnish to the
selling Investors a certificate signed by the Chairman of the Board of the
Company setting forth one or more of the above described circumstances, and the
right of the selling Investors to use the Registration Statement (and the
prospectus relating thereto) shall be suspended for a period (the “Suspension
Period”) of not more than ninety (90) days after delivery by the Company of the
certificate referred to above in this Section 11; provided that  the Company
shall be entitled to no more than one such Suspension Period during the twelve
(12) month period commencing on the Initial Closing and during each subsequent
twelve (12) month period until the Mandatory Registration Termination Date
(including any extension thereto).  During the Suspension Period, (1) the
Company shall not register, offer or sell any of its securities other than
pursuant to a registration statement on Form S-8, and (2) none of the Investors
shall offer or sell any Registrable Shares pursuant to or in reliance upon the
Registration Statement (or the prospectus relating thereto).  For the first
thirty (30) days after commencement of a Suspension Period, each of the
Investors shall keep the fact of the above-described certificate and its
contents confidential.  The Company shall use reasonable best efforts to
terminate any Suspension Period as promptly as practicable.

 

12.           TRANSFER OF REGISTRATION RIGHTS.  None of the rights of any
Investor under this Agreement shall be transferred or assigned to any person
unless (i) such person is a Qualifying Holder (as defined below), and (ii) such
person agrees to become a party to, and bound by, all of the terms and
conditions of, this Agreement by duly executing and delivering to the Company an
Instrument of Adherence in the form attached as EXHIBIT B  hereto.  For purposes
of this Section 12, the term “Qualifying Holder” shall mean, with respect to any
Investor, (i) any partner or member or retired member or partner thereof,
(ii) any corporation, partnership or limited liability company controlling,
controlled by, or under common control with, such Investor or any partner or
member thereof, or (iii) any other transferee who is at the time of such
transfer an “accredited investor,” as defined in Rule 501(a) of Regulation D
under the Securities Act and receives at least 20% of those Registrable Shares
held by such Investor.  None of the rights of any Investor under this Agreement
shall be transferred or assigned to any person (including, without limitation, a
Qualifying Holder) that acquires Registrable Shares in the event that and to the
extent that such person is eligible to resell such Registrable Shares pursuant
to Rule 144 without restrictions.  After any transfer in accordance with this
Section 12, the rights and obligations of an Investor as to any transferred
Registrable Shares shall be the rights and obligations of the Investor Permitted
Transferee holding such Registrable Shares.

 

13.           ENTIRE AGREEMENT.  This Agreement, the Warrants and the Purchase
Agreement constitute and contain the entire agreement and understanding of the
parties with respect to the subject matter hereof, and supersede any and all
prior negotiations, correspondence, agreements or understandings with respect to
the subject matter hereof.

 

14.           MISCELLANEOUS.

 

(a)           This Agreement may not be amended, modified or terminated, and no
rights or provisions may be waived, except with the written consent of the
Majority Holders and the Company;  provided, however, that this Agreement may
not be amended, modified or terminated, and no

 

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rights or provisions may be waived, in any way that adversely affects the rights
and/or obligations of any Investor under this Agreement in a manner materially
different from the manner in which it affects the rights and/or obligations of
the other Investors without the written consent of such adversely affected
Investor. The Company shall give prompt written notice of any amendment,
modification, termination or waiver hereof to any party hereto that did not
consent in writing to such amendment, modification, termination or waiver. Any
amendment, modification, termination or waiver effected in accordance with this
Section 14(a) shall be binding on all parties hereto, even if they do not
execute such consent.

 

(b)           This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of California and without regard to any
conflicts of laws concepts which would apply the substantive law of some other
jurisdiction, and shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, personal representatives, successors or
assigns provided  that the terms and conditions of Section 12 hereof are
satisfied.  This Agreement shall also be binding upon and inure to the benefit
of any transferee of any of the Registrable Shares provided that the terms and
conditions of Section 12 hereof are satisfied.  Notwithstanding anything in this
Agreement to the contrary, if at any time any Investor shall cease to own any
Registrable Shares, all of such Investor’s rights under this Agreement shall
immediately terminate.

 

(c)           Any notices, reports or other correspondence (hereinafter
collectively referred to as “correspondence”) required or permitted to be given
hereunder shall be in writing, addressed as set forth below and shall be deemed
effectively given: (a) upon personal delivery to the party to be notified,
(b) when sent by confirmed electronic mail or facsimile if sent during normal
business hours of the recipient, if not, then on the next business day,
(c) three business (3) days after having been sent by registered or certified
mail, return receipt requested, postage prepaid, or (d) one (1) day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt, in each case costs prepaid.

 

(i)            All correspondence to the Company shall be addressed as follows:

 

ARYx Therapeutics, Inc.

6300 Dumbarton Circle

Fremont, CA 94555

Attention:

Paul Goddard, Ph.D.

 

Chairman of the Board and

 

Chief Executive Officer

Facsimile:

510-585-2202

 

with a copy to (which shall not constitute notice):

 

Cooley LLP

3175 Hanover Street

Palo Alto, CA 94304

Attention:

Jim F. Fulton, Jr., Esq.

Facsimile:

650-849-7400

 

(ii)           All correspondence to any Investor shall be sent to such Investor
at the address set forth in EXHIBIT A.

 

(iii)          Any entity may change the address to which correspondence to it
is to be addressed by ten (10) days advance written notification as provided for
herein.

 

9

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(d)           The parties acknowledge and agree that in the event of any breach
of this Agreement, remedies at law may be inadequate, and each of the parties
hereto shall be entitled to seek specific performance of the obligations of the
other parties hereto and such appropriate injunctive relief as may be granted by
a court of competent jurisdiction.

 

(e)           Should any part or provision of this Agreement be held
unenforceable or in conflict with the applicable laws or regulations of any
jurisdiction, the invalid or unenforceable part or provisions shall be replaced
with a provision which accomplishes, to the extent possible, the original
business purpose of such part or provision in a valid and enforceable manner,
and the remainder of this Agreement shall remain binding upon the parties
hereto.

 

(f)            This Agreement may be executed in a number of counterparts, any
of which together shall for all purposes constitute one Agreement, binding on
all the parties hereto notwithstanding that all such parties have not signed the
same counterpart. A facsimile, telecopy or other reproduction of this Agreement
may be executed by one or more parties hereto and delivered by such party by
facsimile or any similar electronic transmission device pursuant to which the
signature of or on behalf of such party can be seen. Such execution and delivery
shall be considered valid, binding and effective for all purposes.  At the
request of any party hereto, all parties hereto agree to execute and deliver an
original of this Agreement as well as any facsimile, telecopy or other
reproduction hereof.

 

[SIGNATURE PAGE TO FOLLOW]

 

10

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IN WITNESS WHEREOF, the parties hereto have executed this REGISTRATION RIGHTS
AGREEMENT as of the date and year first above written.

 

 

ARYx THERAPEUTICS, INC.

 

 

 

 

 

 

 

By:

/s/ Paul Goddard

 

Name:

Paul Goddard, Ph.D.

 

Title:

Chairman of the Board and

 

 

Chief Executive Officer

 

SIGNATURE PAGE TO ARYx THERAPEUTICS, INC.

REGISTRATION RIGHTS AGREEMENT

 

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INITIAL INVESTOR:

AYER CAPITAL PARTNERS MASTER FUND, L.P.

 

 

 

 

By:

Ayer Capital Partners, LLC, its general partner

 

 

 

 

 

 

 

By:

/s/ Jay Venkatesan

 

 

 

 

Print Name:

Jay Venkatesan

 

 

 

 

Title:

Managing Member

 

 

 

 

Address:

Ayer Capital Management, L.P.

 

 

Attn: Jay Venkatesan

 

 

230 California Street, Suite 600

 

 

San Francisco, CA 94123

 

 

fax: (415) 651-9005

 

 

 

 

 

 

 

AYER CAPITAL PARTNERS KESTREL FUND, L.P.

 

 

 

 

By:

Ayer Kestrel Partners, LLC, its general partner

 

 

 

 

 

 

 

By:

/s/ Jay Venkatesan

 

 

 

 

Print Name:

Jay Venkatesan

 

 

 

 

Title:

Managing Member

 

 

 

 

Address:

Ayer Capital Management, L.P.

 

 

Attn: Jay Venkatesan

 

 

230 California Street, Suite 600

 

 

San Francisco, CA 94123

 

 

fax: (415) 651-9005

 

SIGNATURE PAGE TO ARYx THERAPEUTICS, INC.

REGISTRATION RIGHTS AGREEMENT

 

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INITIAL INVESTOR:

MPM BIOVENTURES III, L.P.

 

 

 

 

By:

MPM BioVentures III GP, L.P., its General Partner

 

 

 

 

By:

MPM BioVentures III LLC, its General Partner

 

 

 

 

 

 

 

By:

/s/ Nicholas Simon III

 

 

 

 

Print Name:

Nicholas Simon III

 

 

 

 

Title:

Series A Member

 

 

 

 

Address:

200 Clarendon Street, 54th Floor

 

 

Boston, MA 02116

 

 

 

 

 

 

 

MPM BIOVENTURES III-QP, L.P.

 

 

 

By:

MPM BioVentures III GP, L.P., its General Partner

 

 

 

 

By:

MPM BioVentures III LLC, its General Partner

 

 

 

 

 

 

 

By:

/s/ Nicholas Simon III

 

 

 

 

Print Name:

Nicholas Simon III

 

 

 

 

Title:

Series A Member

 

 

 

 

Address:

200 Clarendon Street, 54th Floor

 

 

Boston, MA 02116

 

 

 

 

 

 

 

MPM BIOVENTURES III GMBH & CO. BETEILIGUNGS KG

 

 

 

By:

MPM BioVentures III GP, L.P., in its capacity as Managing Limited Partner

 

 

 

 

By:

MPM BioVentures III LLC, its General Partner

 

 

 

 

 

 

 

By:

/s/ Nicholas Simon III

 

 

 

 

Print Name:

Nicholas Simon III

 

 

 

 

Title:

Series A Member

 

 

 

 

Address:

200 Clarendon Street, 54th Floor

 

 

Boston, MA 02116

 

SIGNATURE PAGE TO ARYx THERAPEUTICS, INC.

REGISTRATION RIGHTS AGREEMENT

 

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INITIAL INVESTOR:

MPM BIOVENTURES III PARALLEL FUND, L.P.

 

 

 

 

By:

MPM BioVentures III GP, L.P., its General Partner

 

 

 

 

By:

MPM BioVentures III LLC, its General Partner

 

 

 

 

 

 

 

By:

/s/ Nicholas Simon III

 

 

 

 

Print Name:

Nicholas Simon III

 

 

 

 

Title:

Series A Member

 

 

 

 

Address:

200 Clarendon Street, 54th Floor

 

 

Boston, MA 02116

 

 

 

 

 

MPM ASSET MANAGEMENT INVESTORS 2002 BVIII LLC

 

 

 

 

 

 

 

By:

/s/ Nicholas Simon III

 

 

 

 

Print Name:

Nicholas Simon III

 

 

 

 

Title:

Manager

 

 

 

 

Address:

200 Clarendon Street, 54th Floor

 

 

Boston, MA 02116

 

SIGNATURE PAGE TO ARYx THERAPEUTICS, INC.

REGISTRATION RIGHTS AGREEMENT

 

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EXHIBIT A

 

Investor Name and Address

 

Ayer Capital Partners Master Fund, L.P.

 

Ayer Capital Partners Kestrel Fund, L.P.

 

Attn: Jay Venkatesan

230 California Street, Suite 600

San Francisco, CA 94111

 

MPM BioVentures III, L.P.

 

MPM BioVentures III-QP, L.P.

 

MPM BioVentures III GmbH & Co. Beteiligungs KG

 

MPM BioVentures III Parallel Fund, L.P.

 

MPM Asset Management Investors 2002 BVIII LLC

 

230 Clarendon Street, 54th Floor

Boston, MA 02116

 

A-1

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EXHIBIT B

 

Instrument of Adherence

 

Reference is hereby made to that certain Registration Rights Agreement, dated as
of August 13, 2010, among ARYx Therapeutics, Inc., a Delaware corporation (the
“Company”), the Initial Investors and the Investor Permitted Transferees, as
amended and in effect from time to time (the “Registration Rights Agreement”).
Capitalized terms used herein without definition shall have the respective
meanings ascribed thereto in the Registration Rights Agreement.

 

The undersigned, in order to become the owner or holder of
[                      ] shares of common stock, par value $0.001 per share (the
“Common Stock”), of the Company, hereby agrees that, from and after the date
hereof, the undersigned has become a party to the Registration Rights Agreement
in the capacity of an Investor Permitted Transferee, and is entitled to all of
the benefits under, and is subject to all of the obligations, restrictions and
limitations set forth in, the Registration Rights Agreement that are applicable
to Investor Permitted Transferees.  This Instrument of Adherence shall take
effect and shall become a part of the Registration Rights Agreement immediately
upon execution.

 

Executed as of the date set forth below under the laws of the State of
California.

 

 

 

 

Signature:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

Accepted:

 

 

 

 

 

[                                               ]

 

 

 

 

 

 

 

 

By:

 

 

 

 

Name:

 

 

 

Title:

 

 

 

 

 

 

Date:

                  , 20

 

 

 

B-1

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