Exhibit 10.23


 


AMENDMENT NO. 07 TO LOAN AND SECURITY
AGREEMENT


 


Dated October 17, 2008


 


THIS AMENDMENT NO. 07 (“Amendment”) to that
certain Loan and Security Agreement No. 4521 dated March 28,
2005, as amended (the “Agreement”;
all capitalized terms not otherwise defined herein are defined in the
Agreement), is entered into as of October 17, 2008, by and between LIGHTHOUSE CAPITAL PARTNERS V, L.P. (“Lender”)
and ARYX THERAPEUTICS, INC., a Delaware
corporation (“Borrower”).


 


WHEREAS, Borrower and Lender have previously entered into the
Agreement; and


 


WHEREAS, Borrower has requested Lender restructure the terms of its
existing term loan financing; and


 


WHEREAS, Lender has agreed to do so, subject to all of the terms and
conditions hereof and of the Agreement;


 


NOW, THEREFORE, in
consideration of the foregoing and the mutual covenants herein contained, the
parties hereby agree to modify the Agreement and to perform such other
covenants and conditions as follows:


 


I.              Section 1.1,
the following definitions shall be added to the Agreement:


 


“Amendment No. 07” means this Amendment No. 07 to
Loan and Security Agreement by and between Lender and Borrower.


 


“Restructure Warrant” means the Warrant in favor of Lender to purchase
securities of Borrower, substantially in the form of Exhibit C-2
attached
to Amendment No. 07 and issued in conjunction with Commitment Two.


 


II.            Section 1.1,
each of  the following
definitions of the Agreement shall be deleted in its entirety and replaced with
the following:


 


“Loan Documents” means, collectively, the
Agreement, Amendments 01 through 07, the Warrants, the Notes and all other documents,
instruments and agreements entered into between Borrower or any subsidiary or
affiliate of Borrower and Lender in connection with the Loan, all as amended or
extended from time to time.


 


“Note” means (i) a Secured Promissory Note in the form of Exhibit B
attached to this Agreement for Advances funded under the Commitment prior to
Amendment No. 05; (ii) a
Secured Promissory Note  in
the form of Exhibit B-1
attached to Amendment No. 05 for Advances funded under
Commitment Two and (iii) Amended and Restated Secured
Promissory Notes  in
the form of Exhibit B-2  and B-3 attached
to Amendment No. 07.


 


“Warrants” means the Warrants in favor of
Lender and its affiliated fund, Lighthouse Capital Partners IV, L.P. (“LCP-IV”) to purchase securities of
Borrower substantially in (i) the
form of Exhibit C,
(ii) the form attached to
Amendment No. 05 as Exhibit C-1
for Advances under Commitment Two and (iii) the
form attached to Amendment No. 07 as Exhibit C-2 for the Restructure Warrants.


 


III.           Section 7,
Section 7.3 of the Agreement shall be deleted in its entirety
and replaced with the following:


 


7.3
Restructure. Make any material change in Borrower’s financial
structure or business operations (other than through the sale of preferred or common stock to equity
investors which does not result in a change of control of Borrower or through
the sale of stock in an IPO or secondary public offering); cause a liquidation
event; or suspend operation of Borrower’s business.


 


IV.           Section 7.10 of the Agreement shall be deleted in its
entirety and replaced with the following:


 

















 


7.10 Deposit and Securities Accounts. Maintain any deposit accounts or
accounts holding securities owned by Borrower except accounts in which Lender
has obtained a perfected first priority security interest. Notwithstanding the
foregoing, Lender’s security interest shall be subordinate to that of Comerica (i) in
that certain deposit account
#                    
held with Comerica Bank as security for a line of credit related to corporate
purchasing credit cards; provided, such account shall not exceed $150,000; (ii) in
Borrower’s account
#                    
at Comerica supporting letter of credit
#                    
issued to Biomed Realty Trust, Inc. in conjunction with Borrower’s real
property lease; provided, such letter of credit shall not exceed $703,200 and
letter of credit
#                    
issued to ADP TotalSource, Inc. in conjunction with Borrower’s payroll;
provided, such letter of credit shall not exceed $500,000 and such account
subordination shall not exceed $1,203,200; and (iii) in that certain
deposit
account #                    
at Comerica in conjunction with Borrower’s employee stock purchase
plan (ESPP); provided, such account shall not exceed $150,000.


 


V.            Conditions Precedent to the effectiveness of
Amendment 07:


 


The obligation of Lender to make any Advances pursuant to Commitment
Two is subject to each and every of the following conditions precedent in form
and substance satisfactory to lender in its sole discretion:


 


(a)           This Amendment duly executed by Borrower.


 


(b)           The Restructure Warrant has been issued to Lender duly executed by
Borrower.


 


(c)           Without limiting the
foregoing or Lender’s rights or Borrower’s obligations under the Agreement,
such consents, amendments, filings, recordations, or other documents from any
persons or entities necessary to maintain the perfection and priority of Lender’s
security interest in the Collateral, in form and substance satisfactory to
Lender in its sole discretion.


 


(d)           A good standing certificate from Borrower’s state of incorporation or
formation and the state in which Borrower’s principal place of business is
located, together with certificates of the applicable governmental authorities
stating that Borrower is in compliance with the franchise tax laws of each such
state, each dated as of a recent date.


 


(e)           All necessary
consents of shareholders, members, and other third parties with respect to the
execution, delivery and performance of this Agreement, Amendment 07, the
Restructure Warrant, and the other Loan Documents.


 


VI.           Additional Terms and Conditions


 


(a)           Further
Conditions.  The
following are conditions precedent to Lender’s obligations hereunder, without
delivery and performance of which to Lender’s satisfaction, the original
payment terms of the Loan Documents and the Promissory Notes shall remain in
full force and effect, unamended hereby:


 


(i)            Borrower shall
deliver an Incumbency Certificate, certified by responsible officers of
Borrower, and attachments thereto including the resolutions adopted by Borrower’s
board of directors authorizing the execution and delivery of this Amendment No. 07
and the other documents referred to in this Amendment and the performance by
Borrower of its obligations under such documents.


 


(ii)           Borrower shall execute and
deliver all other documents, as Lender shall have reasonably requested prior to
the execution by Borrower and Lender of this Amendment.


 


(iii)          Borrower shall pay all
Lenders Expenses for the preparation and negotiation of this Amendment No. 07,
up to a maximum of $5,000.


 


(b)           Representations and Warranties of Borrower. Borrower reaffirms the representations and
warranties made to Lender in the Agreement as of the date hereof as though
fully set forth herein.
Borrower further warrants and represents, as a significant material
inducement to Lender to enter hereinto, that: (i) no Events of Default have occurred that have
not been disclosed to Lender by Borrower in writing; (ii) it is not and
has no reason to believe


 


2

















 


it
may be named as a party to any judicial or administrative proceeding,
litigation or arbitration, and has not received any communication from any
person or entity (whether private or governmental) threatening or indicating
the same, except as previously disclosed to Lender in writing; and (iii) it
is in full compliance with Section 7.10 of the Agreement, as amended.


 


(c)           No Control.  Borrower warrants and represents, as a
significant material inducement to Lender to enter hereinto, that none of
Lender nor any affiliate, officer, director, employee, agent, or attorney of
Lender, have at any time, from Borrower’s date of formation through to the date
hereof, (i) exercised management or other control over the Borrower, (ii) exercised
undue influence over Borrower or any of its officers, employees or directors, (iii) made
any representation or warranty, express or implied, to any party on behalf of
Borrower, (iv) entered into any joint venture, agency relationship,
employment relationship, or partnership with Borrower, (v) directed or
instructed Borrower on the manner, method, amount, or identity of payee of any
payment made to any creditor of Borrower, and further, Borrower warrants and
represents that by entering hereinto with Lender has not, are not and will not
have engaged in any of the foregoing.


 


VII.         Integration Clause.  This Amendment represents and documents the
entirety of the agreement and understanding of the parties hereto with respect
to its subject matter.  All prior
understandings, whether oral or written, other than the Financing Documents,
are hereby merged hereinto.  NONE OF THE AGREEMENT OR THIS AMENDMENT MAY BE
MODIFIED EXCEPT BY A WRITING SIGNED BY LENDER AND BORROWER.  Each provision hereof shall be severable from
every other provision when determining its legal enforceability such that
Lender’s rights and remedies under this Amendment and the Agreement may be
enforced to the maximum extent permitted under applicable law.  This Amendment shall be binding upon, and
inure to the benefit of, each party’s respective permitted successors and
assigns.  This Amendment may be executed
in counterpart originals, all of which, when taken together, shall constitute
one and the same original document.  No
provision of any other document between Lender and Borrower shall limit the
effectiveness hereof or the rights and remedies of Lender against
Borrower.  In the event of any contradiction
or inconsistency among the terms and conditions of this Amendment or the
Agreement the interpretation most favorable to the interests of Lender shall
prevail.


 


Except
as amended hereby, the Agreement remains unmodified and unchanged.


 


	
  BORROWER:

  	
   

  	
  LENDER:

  
	
   

  	
   

  	
   

  
	
  ARYX
  THERAPEUTICS, INC.

  	
   

  	
  LIGHTHOUSE
  CAPITAL PARTNERS V, L.P.

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ 

  	
  John
  Varian

  	
   

  	
  By:

  	
  LIGHTHOUSE
  MANAGEMENT

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  PARTNERS
  V, L.L.C., its general partner

  
	
  Name:

  	
   

  	
   John Varian

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
    COO

  	
   

  	
  By:

  	
  /s/ Thomas Conneely

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
     Thomas Conneely

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
       Vice President

  
													



 


3





















 


EXHIBIT B-2


 


AMENDED AND
RESTATED SECURED PROMISSORY NOTE


 


(Notes originally issued in
the amount of $10,000,000)


 


$3,211,659.97


 


This
AMENDED AND RESTATED SECURED PROMISSORY NOTE (this “Note”) is made October 1, 2008, by ARYX THERAPEUTICS, INC. (“Borrower”) in favor of LIGHTHOUSE CAPITAL PARTNERS V, L.P.
(collectively with its assigns, “Lender”),
and its assigns (collectively, “Holder”) and
amends, restates and replaces in its entirety those certain Secured Promissory
Notes dated September 30, 2005 and December 30, 2005, each pursuant
to that certain Loan and Security Agreement No. 4521 between Borrower and
Lender dated March 28, 2005 (the “Loan Agreement”)
with reference to the following:


 


FOR
VALUE RECEIVED, Borrower promises to pay in lawful money of the United States,
to the order of Lender, at 500 Drake’s Landing Road, Greenbrae, California
94904, or such other place as Lender may from time to time designate (“Lender’s Office”), the principal sum of
$3,211,659.97 (the “Advance”),
including interest on the unpaid balance of the Advance at the Basic Rate, and
all other amounts due or to become due hereunder according to the terms
hereof.   Capitalized terms used and not
otherwise defined herein are defined in the Loan Agreement.


 


“Basic Rate” means a per annum fixed rate of interest equal to
9.75%.


 


“Final Payment”  means $1,200,000.


 


“Loan Commencement Date” for this Note
means July 1, 2009.


 


“Maturity Date” means June 30, 2010,
or if earlier, the date of prepayment under the Note.


 


“Repayment Period” means
the period beginning on the Loan Commencement Date and continuing for 12
calendar months.


 


“Restructure Fee”  means $200,000.


 


1.             Repayment.  Borrower
shall repay the principal and interest thereupon will be paid as
follows:


 


a.             Scheduled
Payments.  From and
after the Loan Commencement Date, Borrower shall make amortizing payments of
principal and interest in advance (collectively, “Scheduled Payments”) on the first day of each month during
the Repayment Period (each a “Payment Date”),
in an amount equal to $279,710.34.  In
addition, all unpaid principal and accrued interest, together with all Lenders
Expenses associated with the Advance and this Note shall be due and payable in
full on the Maturity Date.


 


b.             Interim
Payments.  In addition
to the Scheduled Payments, Borrower shall pay to Lender, monthly in advance, an
amount (the “Interim Payment”)
equal to $26,094.74 from the date of this Note until the Loan Commencement Date
with respect to this Note.


 


                c.             Final Payment.  On the
Maturity Date, Borrower shall pay, in addition to all unpaid principal and
interest due hereunder, the Final Payment and the Restructure Fee.


 


2.             Interest.  Interest not paid when due will, to the
maximum extent permitted under applicable law, become part of principal, at
Lender’s option, and thereafter bear like interest as principal.  All Obligations due not paid when due shall
bear interest at the Default Rate unless waived in writing by Lender. All
amounts paid hereunder including principal, interest or fees and expenses will
be applied in Lender’s discretion and as provided in the Loan Agreement.


 


1

















 


3.             Prepayment.


 


a.             Mandatory
Prepayment Upon Acceleration.  If this Note is accelerated following the
occurrence of an Event of Default or otherwise, then Borrower shall immediately
pay to Lender (i) all unpaid
Scheduled Payments due before the date of prepayment, (ii) the outstanding principal amount
of the Note, (iii) the Final
Payment, (iv) the Restructure
Fee and (v) all other sums,
if any, that shall have become due and payable hereunder with respect to this
Note.


 


b.             Voluntary
Prepayment.  Borrower
may voluntarily prepay all of the principal due under this Note, provided that each of the following
conditions is satisfied:  Borrower pays
to Lender (i) all unpaid
Scheduled Payments due before the date of prepayment, (ii) the outstanding principal amount
of this Note and any unpaid accrued interest, (iii) the
Final Payment, (iv) the
Restructure Fee and (v) all
other sums, if any, that shall have become due and payable.


 


c.             No Other
Prepayment.  Borrower may
not prepay this Note except described herein.


 


4.             Collateral.  This Note is secured by the Collateral.


 


5.             Waivers.  Borrower, and all guarantors and endorsers of
this Note, regardless of the time, order or place of signing, hereby waive
notice, demand, presentment, protest, and notices of every kind, presentment
for the purpose of accelerating maturity, diligence in collection, and, to the
fullest extent permitted by law, all rights to plead any statute of limitations
as a defense to any action on this Note.


 


6.             Choice of
Law; Venue.  THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.   EACH OF
BORROWER AND LENDER HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS LOCATED IN THE CITY AND COUNTY OF SAN FRANCISCO, STATE OF
CALIFORNIA.  BORROWER AND LENDER EACH
HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS NOTE. 
EACH PARTY FURTHER WAIVES ANY RIGHT TO CONSOLIDATE ANY ACTION IN WHICH A
JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT
BE OR HAS NOT BEEN WAIVED.


 


7.             Miscellaneous.  THIS NOTE MAY BE MODIFIED ONLY BY A
WRITING SIGNED BY BORROWER AND LENDER.  Each provision hereof is severable
from every other provision hereof and of the Loan Agreement when determining
its legal enforceability.  Sections and
subsections are titled for convenience, and not for construction.  “Hereof,” “herein,” “hereunder,” and similar
words refer to this Note in its entirety. 
“Or” is not necessarily exclusive. 
“Including” is not limiting.  The
terms and conditions hereof inure to the benefit of and are binding upon the
parties’ respective permitted successors and assigns.  This Note is subject to all the terms and conditions
of the Loan Agreement.


 


IN
WITNESS WHEREOF, Borrower has caused this Note to be executed by a duly
authorized officer as of the day and year first above written.


 


 


	
   

  	
   

  	
  ARYX THERAPEUTICS, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ 

  	
  John
  Varian

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
  John
  Varian

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
  COO

  
								



 


2
















 


EXHIBIT B-3


 


AMENDED
AND RESTATED SECURED PROMISSORY NOTE


 


(Note
originally issued in the amount of $9,000,000)


 


$9,000,000


 


This AMENDED AND RESTATED SECURED PROMISSORY NOTE (this “Note”) is made October 1, 2008, by ARYX THERAPEUTICS, INC. (“Borrower”) in favor of LIGHTHOUSE CAPITAL PARTNERS V, L.P.
(collectively with its assigns, “Lender”),
and its assigns (collectively, “Holder”) and
amends, restates and replaces in its entirety that certain Secured Promissory
Note dated February 29, 2008, pursuant to that certain Loan and Security
Agreement No. 4521 between Borrower and Lender dated March 28, 2005
(the “Loan Agreement”) with
reference to the following:


 


FOR VALUE RECEIVED, Borrower promises to pay in lawful money of the
United States, to the order of Lender, at 500 Drake’s Landing Road, Greenbrae,
California 94904, or such other place as Lender may from time to time designate
(“Lender’s Office”), the
principal sum of $9,000,000 (the “Advance”),
including interest on the unpaid balance of the Advance at the Basic Rate, and
all other amounts due or to become due hereunder according to the terms
hereof.   Capitalized terms used and not
otherwise defined herein are defined in the Loan Agreement.


 


“Basic Rate” means a per annum fixed rate of interest equal to (i) 9.75%
prior to the Loan Commencement Date and (ii) 12.25% on and after the Loan
Commencement Date.


 


“Final
Payment”  means
$675,000.


 


“Loan Commencement Date”
for this Note means July 1, 2009.


 


“Maturity Date” means June 30,
2012, or if earlier, the date of prepayment under the Note.


 


“Prepayment Fee” means 3%
of the outstanding principal amount being prepaid.


 


“Repayment
Period” means the period beginning on the Loan Commencement Date and
continuing for 36 calendar months.


 


1.             Repayment.  Borrower shall repay the principal and
interest thereupon will be paid as follows:


 


a.             Scheduled Payments.  From and after the Loan Commencement Date,
Borrower shall make amortizing payments of principal and interest in advance
(collectively, “Scheduled Payments”)
on the first day of each month during the Repayment Period (each a “Payment Date”), in an amount equal to
$296,972.97.  In addition, all unpaid
principal and accrued interest, together with all Lenders Expenses associated
with the Advance and this Note shall be due and payable in full on the Maturity
Date.


 


b.             Interim Payments.  In addition to the Scheduled Payments,
Borrower shall pay to Lender, monthly in advance, an amount (the “Interim Payment”) equal to $73,125.00 from
the date of this Note until the Loan Commencement Date with respect to this
Note.


 


c.             Final Payment.  On the Maturity Date, Borrower shall pay, in
addition to all unpaid principal and interest due hereunder, the Final Payment.


 


2.             Interest.  Interest not paid when due will, to the
maximum extent permitted under applicable law, become part of principal, at
Lender’s option, and thereafter bear like interest as principal.  All Obligations due not paid when due shall
bear interest at the Default Rate unless waived in writing by Lender.  All amounts paid hereunder including
principal, interest or fees and expenses will be applied in Lender’s discretion
and as provided in the Loan Agreement.


 


1

















 


3.             Prepayment.


 


a.             Mandatory Prepayment
Upon Acceleration.  If this Note is
accelerated following the occurrence of an Event of Default or otherwise, then
Borrower shall immediately pay to Lender (i) all
unpaid Scheduled Payments due before the date of prepayment, (ii) the outstanding principal amount
of the Note, (iii) the Final
Payment, (iv) the Prepayment
Fee, and (v) all other sums,
if any, that shall have become due and payable hereunder with respect to this
Note.


 


b.             Voluntary Prepayment.  Borrower may voluntarily prepay all of the
principal due under this Note, provided that
each of the following conditions is satisfied: 
Borrower pays to Lender (i) all
unpaid Scheduled Payments due before the date of prepayment, (ii) the outstanding principal amount
of this Note and any unpaid accrued interest, (iii) the
Final Payment, (iv) the
Prepayment Fee, and (v) all
other sums, if any, that shall have become due and payable hereunder with
respect to this Note.


 


c.             No Other Prepayment.  Borrower may not prepay this Note except
described herein.


 


4.             Collateral.  This Note is secured by the Collateral.


 


5.             Waivers.  Borrower, and all guarantors and endorsers of
this Note, regardless of the time, order or place of signing, hereby waive
notice, demand, presentment, protest, and notices of every kind, presentment
for the purpose of accelerating maturity, diligence in collection, and, to the
fullest extent permitted by law, all rights to plead any statute of limitations
as a defense to any action on this Note.


 


6.             Choice of Law; Venue.  THIS NOTE
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.   EACH OF BORROWER AND LENDER HEREBY SUBMITS
TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE
CITY AND COUNTY OF SAN FRANCISCO, STATE OF CALIFORNIA.  BORROWER AND LENDER EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS NOTE.  EACH PARTY
FURTHER WAIVES ANY RIGHT TO CONSOLIDATE ANY ACTION IN WHICH A JURY TRIAL HAS
BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED.


 


7.             Miscellaneous.  THIS NOTE MAY BE MODIFIED ONLY BY A
WRITING SIGNED BY BORROWER AND LENDER.  Each provision hereof is severable
from every other provision hereof and of the Loan Agreement when determining
its legal enforceability.  Sections and
subsections are titled for convenience, and not for construction.  “Hereof,” “herein,” “hereunder,” and similar
words refer to this Note in its entirety. 
“Or” is not necessarily exclusive. 
“Including” is not limiting.  The
terms and conditions hereof inure to the benefit of and are binding upon the
parties’ respective permitted successors and assigns.  This Note is subject to all the terms and
conditions of the Loan Agreement.


 


IN WITNESS WHEREOF, Borrower has caused this Note to be executed by a
duly authorized officer as of the day and year first above written.


 


 


	
   

  	
  ARYX THERAPEUTICS, INC.

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
  /s/ 

  	
  John Varian

  	 

	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
  John Varian

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
  COO

  
								



 


2

















 


EXHIBIT
C-2


 


RESTRUCTURE
WARRANT


 


See attached


 

















 


EXHIBIT
C-2


 


RESTRUCTURE
WARRANT


 


THIS
WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “1933 ACT”), OR ANY APPLICABLE
STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH SALE
OR TRANSFER IS IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF SUCH ACT AND
APPLICABLE LAWS OR SOME OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
SUCH ACT AND APPLICABLE LAWS IS AVAILABLE WITH RESPECT THERETO.


 


COMMON
STOCK PURCHASE WARRANT


 


	
  Warrant No.
                           

  	
  Number of Shares: 158,770

  
	
   

  	
  Common Stock

  



 


ARYX THERAPEUTICS, INC.


 


Effective
as of October 17, 2008


 


Void
after October 17, 2013


 


1.             Issuance.  This Common Stock Purchase Warrant (the “Warrant”) is issued to LIGHTHOUSE CAPITAL PARTNERS V, L.P. (the “Holder”) by ARYX THERAPEUTICS, INC., a Delaware corporation (hereinafter
with its successors called the “Company”).


 


2.             Purchase Price; Number of Shares.


 


(a)           The registered
holder of this Warrant, commencing on the date hereof, is entitled upon
surrender of this Warrant with the subscription form annexed hereto duly
executed, at the principal office of the Company, to purchase from the Company,
at a price per share equal to $3.97516 (the “Purchase
Price”), 158,770 fully paid and nonassessable shares of the Company’s
Common Stock, par value $0.001 per share 
(the “Common Stock”).


 


Any term not defined herein shall have the meaning as
set forth in the Loan Agreement.


 


Until such time as this Warrant is exercised in full
or expires, the Purchase Price and the securities issuable upon exercise of
this Warrant are subject to adjustment as hereinafter provided.  The person or persons in whose name or names
any certificate representing shares of Common Stock is issued hereunder shall
be deemed to have become the holder of record of the shares represented thereby
as at the close of business on the date this Warrant is exercised with respect
to such shares, whether or not the transfer books of the Company shall be
closed.


 


3.             Payment of Purchase
Price.  The Purchase Price may be
paid (i) in cash or by check, (ii) by the surrender by the Holder to
the Company of any promissory notes or other obligations issued by the Company,
with all such notes and obligations so surrendered being credited against the
Purchase Price in an amount equal to the principal amount thereof plus accrued
interest to the date of surrender, or (iii) by any combination of the
foregoing.


 


4.             Net Issue Election.  The Holder may elect to receive, without the
payment by the Holder of any additional consideration, shares of Common Stock
equal to the value of this Warrant or any portion hereof by the surrender of
this Warrant or such portion to the Company, with the net issue election notice
annexed hereto duly executed, at the principal office of the Company.  Thereupon, the Company shall issue to the
Holder such number of fully paid and nonassessable shares of Common Stock as is
computed using the following formula:


 


1

















 


	
   

  	
  X=  

  	
  Y(A-B)

  	
   

  	
   

  
	
   

  	
   

  	
  A

  	
   

  	
   

  



 


	
  where:

  	
   

  	
  X =

  	
   

  	
  the number of shares of Common Stock to be issued
  to the Holder pursuant to this Section 4.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Y =

  	
   

  	
  the number of shares of Common Stock covered by this Warrant in respect
  of which the net issue election is made pursuant to this Section 4.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  A =

  	
   

  	
  the Fair Market Value (defined below) of one share of Common Stock, as
  determined at the time the net issue election is made pursuant to this Section 4.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  B =

  	
   

  	
  the Purchase Price in effect under this Warrant at the time the net
  issue election is made pursuant to this Section 4.

  



 


 


For purposes of this
Warrant, the “Fair Market Value”
of a share of Common Stock as of the date that the net issue election is made
(the “Determination Date”) shall
mean: (i) if traded on a securities exchange or the NASDAQ Global Market,
the fair market value of the Common Stock shall be deemed to be the average of
the closing or last reported sale prices of the Common Stock on such exchange
or market for the five (5) consecutive trading days immediately prior to
the Determination Date, or (ii) if otherwise traded in an over-the-counter
market, the fair market value of the Common Stock shall be deemed to be the
average of the closing ask prices of the Common Stock for the five (5) consecutive
trading days immediately prior to the Determination Date, or (iii) if
there is no public market for the Common Stock or if the fair market value
cannot be calculated as of the Determination Date on any of the foregoing
bases, then the fair market value shall be determined in good faith by the
Company’s Board of Directors.


 


5.             Partial Exercise.  This Warrant may be exercised in part, and
the Holder shall be entitled to receive a new warrant, which shall be dated as
of the date of this Warrant, covering the number of shares in respect of which
this Warrant shall not have been exercised.


 


6.             Fractional Shares.  In no event shall any fractional share of
Common Stock be issued upon any exercise of this Warrant.  If, upon exercise of this Warrant in its
entirety, the Holder would, except as provided in this Section 6, be entitled to receive a
fractional share of Common Stock, then the Company shall, in lieu of issuance
of any fractional share, pay the Holder otherwise entitled to such fraction a
sum in cash equal to the product resulting from multiplying the then current
Fair Market Value of one share of Common Stock by such fraction.


 


7.             Expiration Date;
Automatic Exercise.  This Warrant
shall expire at the earliest to occur of (i) the close of business on October 17,
2013; or (ii) the effective date of a Merger as defined below, unless
otherwise assumed per the language below (the “Expiration
Date”) and shall be void thereafter.


 


“Merger”
means: (i) a sale, license or other disposition of all or substantially
all of the Company’s assets to an Unaffiliated Entity (as defined below), or (ii) the
merger, consolidation or acquisition of the Company with, into or by an
Unaffiliated Entity (other than a merger or consolidation for the principle
purpose of changing the domicile of the Company or a bona fide stock equity
financing), the result of which is that stockholders of the Company immediately
prior to the merger, consolidation or acquisition do not own or control more
than fifty percent (50%) of the voting power of the surviving entity
immediately following such merger, consolidation or acquisition.  “Unaffiliated
Entity” means any entity that is owned or controlled by parties who
own less than twenty percent (20%) of the combined voting power of the voting
securities of the Company immediately prior to such merger, consolidation or
acquisition.  Notwithstanding the
foregoing, in the event that any outstanding warrants to purchase equity
securities of the Company are assumed by the successor entity of a Merger (or
parent thereof), this Warrant will be similarly assumed.  Notwithstanding anything to the contrary in
this Warrant, if Holder exercises this Warrant after receiving a notice from
the Company of a proposed merger or if the exercise was otherwise precipitated
by such proposed Merger, the Company will hold the exercise notice, without
processing such notice, until immediately prior to the consummation of the
Merger, at which time the exercise notice shall be processed. If the Merger is
terminated, the Holder will have ten (10) business days from the date the
Company gives Holder notice indicating such termination to rescind its exercise
notice, otherwise the exercise notice shall be processed by


 


2

















 


the Company as set forth herein. 
In the event of such rescission, this Warrant will continue to be
exercisable on the same terms and conditions.


 


Notwithstanding the foregoing, this Warrant shall
automatically be deemed to be exercised in full pursuant to the provisions of Section 4 hereof, without any further
action on behalf of the Holder, immediately prior to the time this Warrant
would otherwise expire pursuant to this Section 7,
unless otherwise assumed per above.


 


8.             Reserved Shares;
Valid Issuance.  The Company
covenants that it will at all times from and after the date hereof reserve and
keep available such number of its authorized shares of Common Stock issuable
upon exercise of this Warrant free from all preemptive or similar rights
therein.  The Company further covenants
that such shares as may be issued pursuant to such exercise will, upon
issuance, be duly and validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issuance thereof.


 


9.             Stock Splits and
Dividends.  If after the date hereof
the Company shall subdivide the Common Stock, by split-up or otherwise, or
combine the Common Stock, or issue additional shares of Common Stock in payment
of a stock dividend on the Common Stock, the number of shares of Common Stock
issuable on the exercise of this Warrant shall forthwith be proportionately
increased in the case of a subdivision or stock dividend, or proportionately
decreased in the case of a combination, and the Purchase Price shall forthwith
be proportionately decreased in the case of a subdivision or stock dividend, or
proportionately increased in the case of a combination.


 


11.          Mergers and
Reclassifications.  Subject to Section 7, if after the date hereof
the Company shall enter into any Reorganization (as hereinafter defined), then,
as a condition of such Reorganization, lawful provisions shall be made, and
duly executed documents evidencing the same from the Company or its successor
shall be delivered to the Holder, so that the Holder shall thereafter have the
right to purchase, at a total price not to exceed that payable upon the
exercise of this Warrant in full, the kind and amount of shares of stock and
other securities and property receivable upon such Reorganization by a holder
of the number of shares of Common Stock which might have been purchased by the
Holder immediately prior to such Reorganization, and in any such case
appropriate provisions shall be made with respect to the rights and interest of
the Holder to the end that the provisions hereof (including without limitation,
provisions for the adjustment of the Purchase Price and the number of shares
issuable hereunder and the provisions relating to the net issue election) shall
thereafter be applicable in relation to any shares of stock or other securities
and property thereafter deliverable upon exercise hereof.  For the purposes of this Section 11, the term “Reorganization” shall include without
limitation any reclassification, capital reorganization or change of the Common
Stock (other than as a result of a subdivision, combination or stock dividend
provided for in Section 9
hereof), or any consolidation of the Company with, or merger of the Company
into, another corporation or other business organization (other than a merger
in which the Company is the surviving corporation and which does not result in
any reclassification or change of the outstanding Common Stock), or any sale or
conveyance to another corporation or other business organization of all or
substantially all of the assets of the Company.


 


12.          Certificate of
Adjustment.  Whenever the Purchase
Price is adjusted, as herein provided, the Company shall promptly deliver to
the Holder a certificate of the Company’s chief financial officer setting forth
the Purchase Price after such adjustment and setting forth a brief statement of
the facts requiring such adjustment.


 


13.          Notices of Record Date,
Etc.  In the event of:


 


(a)            any taking by the
Company of a record of the holders of any class of securities for the purpose
of determining the holders thereof who are entitled to receive any dividend or
other distribution, or any right to subscribe for, purchase, sell or otherwise
acquire or dispose of any shares of stock of any class or any other securities
or property, or to receive any other right;


 


(b)            any reclassification
of the capital stock of the Company, capital reorganization of the Company,
consolidation or merger involving the Company, or sale or conveyance of all or
substantially all of its assets; or


 


(c)            any voluntary or
involuntary dissolution, liquidation or winding-up of the Company;


 


3

















 


then
in each such event the Company will provide or cause to be provided to the
Holder a written notice thereof.  Such
notice shall be provided at least ten (10) business days prior to the date
specified in such notice on which any such action is to be taken.


 


14.          Representations,
Warranties and Covenants.  This
Warrant is issued and delivered by the Company and accepted by each Holder on
the basis of the following representations, warranties and covenants made by
the Company:


 


(a)            The Company has all
necessary authority to issue, execute and deliver this Warrant and to perform
its obligations hereunder.  This Warrant
has been duly authorized issued, executed and delivered by the Company and is
the valid and binding obligation of the Company, enforceable in accordance with
its terms.


 


(b)            The shares of Common
Stock issuable upon the exercise of this Warrant have been duly authorized and
reserved for issuance by the Company and, when issued in accordance with the
terms hereof, will be validly issued, fully paid and nonassessable.


 


(c)            The issuance,
execution and delivery of this Warrant do not, and the issuance of the shares
of Common Stock upon the exercise of this Warrant in accordance with the terms
hereof will not, (i) violate or contravene the Company’s Certificate of
Incorporation or by-laws, or any law, statute, regulation, rule, judgment or
order applicable to the Company, (ii) violate, contravene or result in a
material breach or default under any material contract, material agreement or
material instrument to which the Company is a party or by which the Company or
any of its assets are bound or (iii) require the consent or approval of or
the filing of any notice or registration with any person or entity.


 


16.          Amendment.  The terms of this Warrant may be amended,
modified or waived only with the written consent of the Holder and the Company.


 


17.          Representations and
Covenants of the Holder.  This
Warrant has been entered into by the Company in reliance upon the following
representations and covenants of the Holder, which by its execution hereof the
Holder hereby confirms:


 


(a)            Investment Purpose.  The right to acquire Common Stock issuable
upon exercise of the Holder’s rights contained herein will be acquired for
investment and not with a view to the sale or distribution of any part thereof,
and the Holder has no present intention of selling or engaging in any public
distribution of the same except pursuant to a registration or exemption.


 


(b)            Accredited Investor.  Holder is an “accredited investor” within the
meaning of Rule 501 of Regulation D promulgated under the 1933 Act.


 


(c)            Private Issue.  The Holder understands (i) that the
Common Stock issuable upon exercise of the Holder’s rights contained herein is
not registered under the 1933 Act or qualified under applicable state
securities laws on the ground that the issuance contemplated by this Warrant
will be exempt from the registration and qualifications requirements thereof,
and (ii) that the Company’s reliance on such exemption is predicated on
the representations set forth in this Section 17.


 


(d)            Financial Risk.  Holder understands that the purchase of this
Warrant and its underlying securities involves substantial risk.  Holder has experience as an investor in
securities of companies in the development stage and acknowledges that Holder
can bear the economic risk of such Holder’s investment in this Warrant and its
underlying securities and has such knowledge and experience in financial or
business matters that Holder is capable of evaluating the merits and risks of
its investment in this Warrant and its underlying securities and/or has a
preexisting personal or business relationship with the Company and certain of
its officers, directors or controlling persons of a nature and duration that
enables Holder to be aware of the character, business acumen and financial
circumstances of such persons.


 


4

















 


(e)            Rule 144. The Holder is aware that neither the
Warrant, nor the Common Stock issuable upon conversion thereof may be sold
pursuant to Rule 144 adopted under the 1933 Act unless certain conditions
are met, including, among other things, the existence of a public market for
the shares, the availability of certain current public information about the
Company, the resale following the required holding period under Rule 144
and the number of shares being sold during any three month period not exceeding
specified limitations. Holder is aware that the Company has no obligation
hereunder to satisfy the conditions for resale set forth in Rule 144.


 


18.          Notices, Transfers, Etc.


 


(a)            Any notice or written communication
required or permitted hereunder shall be in writing and shall be deemed
effectively given: (a) upon personal delivery to the party to be notified,
(b) when sent by confirmed facsimile to the facsimile number specified in
writing by the recipient if sent during normal business hours of the recipient
on a business day, if not, then on the next business day, or (c) the next
business day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt.  All communications shall be sent to the
Company or the Holder at the address listed on the signature page hereto
or at such other address as the Company or Holder may designate by ten (10) days
advance written notice to the other party hereto.


 


(b)            Subject to compliance
with applicable federal and state securities laws and the terms hereof, this
Warrant may be transferred by the Holder with respect to any or all of the
shares purchasable hereunder.  Upon
surrender of this Warrant to the Company, together with the assignment notice
annexed hereto duly executed, for transfer of this Warrant as an entirety by
the Holder, the Company shall issue a new warrant of the same denomination to
the assignee.  Upon surrender of this Warrant
to the Company, together with the assignment hereof properly endorsed, by the
Holder for transfer with respect to a portion of the shares of Common Stock
purchasable hereunder, the Company shall issue a new warrant to the assignee,
in such denomination as shall be requested by the Holder hereof, and shall
issue to such Holder a new warrant covering the number of shares in respect of
which this Warrant shall not have been transferred.


 


(c)            In case this Warrant
shall be mutilated, lost, stolen or destroyed, the Company shall, on such terms
as to indemnity or otherwise as it may reasonably impose (which shall, in the
case of a mutilated Warrant, include the surrender thereof), issue a new
warrant of like tenor and denomination and deliver the same (i) in exchange
and substitution for and upon surrender and cancellation of any mutilated
Warrant, or (ii) in lieu of any Warrant lost, stolen or destroyed, upon
receipt of an affidavit of the Holder or other evidence reasonably satisfactory
to the Company of the loss, theft or destruction of such Warrant


 


19.          Governing Law.  The provisions and terms of this Warrant
shall be governed by and construed in accordance with the internal laws of the
State of California without giving effect to its principles regarding conflicts
of laws.


 


20.          Successors and Assigns.  This Warrant shall be binding upon the
Company’s successors and assigns and shall inure to the benefit of the Holder’s
successors, legal representatives and permitted assigns.


 


21.          Business Days.  If the last or appointed day for the taking
of any action required or the expiration of any rights granted herein shall be
a Saturday or Sunday or a legal holiday in California, then such action may be
taken or right may be exercised on the next succeeding day which is not a
Saturday or Sunday or such a legal holiday.


 


5

















 


22.          No Stockholder Rights. This Warrant in and of itself shall not
entitle the Holder to any voting rights or other rights as a stockholder of the
Company.


 


 


	
   

  	
  ARYX THERAPEUTICS, INC.

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  By:

  	
  /s/ 

  	
  John Varian

  	 

	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
  John Varian

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
  COO

  
	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
   

  	
  Address:

  	
  6300 Dumbarton Circle

  	 

	
   

  	
   

  	
  Fremont, CA 94555

  	 

								



 


Accepted
and Agreed:


 


LIGHTHOUSE CAPITAL PARTNERS V, L.P.


 


	
  By:

  	
  Lighthouse Management Partners V, L.L.C.

  
	
   

  	
  its general partner

  



 


 


	
  By:

  	
  /s/ Thomas Conneely

  	
   

  
	
   

  
	
  Name:

  	
  Thomas Conneely

  	
   

  
	
   

  
	
  Title:

  	
    Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
  500 Drake’s Landing Road  

  	
   

  
	
   

  	
  Greenbrae, CA  94904

  	
   

  
						



 


6

















 


Subscription


 


	
  To:

  
	
  Date:

  	
   

  	
   

  



 


The
undersigned hereby subscribes for                                   
shares of Common Stock covered by this Warrant. 
The certificate(s) for such shares shall be issued in the name of
the undersigned or as otherwise indicated below:


 


	
   

  	
   

  
	
  Signature

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Name for Registration

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Mailing Address

  	
   

  



 

















 


Net Issue Election Notice


 


	
  To:

  	
   

  	
  Date:

  	
   

  



 


The
undersigned hereby elects under Section 4
to surrender the right to purchase shares of Common Stock pursuant to this
Warrant.  The certificate(s) for
such shares issuable upon such net issue election shall be issued in the name
of the undersigned or as otherwise indicated below:


 


	
   

  	
   

  
	
  Signature

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Name for Registration

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Mailing Address

  	
   

  



 

















 


Assignment


 


For value received                                                                               
hereby sells, assigns and transfers unto


 


 


[Please print or typewrite name and address of Assignee]


 


the within Warrant, and does hereby irrevocably constitute and appoint                                                                     
its attorney to transfer the within Warrant on the books of the within named
Company with full power of substitution on the premises.


 


	
  Dated:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signature

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Name for Registration

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  In the Presence of: