EXHIBIT 10.1


 





 


June 2,
2010


 


Dr. Peter
Milner


[Address]


 


Dear
Peter:


 


This letter sets forth the
substance of the separation and consulting agreement (the “Agreement”) that
ARYx Therapeutics, Inc. (the “Company”) is offering to you.


 


1.                                      Resignation. 
You hereby resign from all positions that you hold with the Company,
including your position on the Company’s Board of Directors, and the Company
hereby accepts all such resignations, effective June 15, 2010 (the “Separation
Date”).


 


2.                                      Accrued Salary and Vacation. 
On the Separation Date, the Company will pay you all accrued and unpaid
salary earned through the Separation Date, as well as all accrued and unused
vacation as of the Separation Date. 
These amounts will be subject to standard payroll deductions and
withholdings.  You are entitled to these
payments regardless of whether you sign this Agreement.


 


3.                                      Severance Benefits.  If you sign this Agreement, and allow the release
contained herein to become effective, then the Company will provide you with
the following severance benefits:


 


(a)                                  Severance Payments.  The Company will make two lump-sum severance payments
to you, each in an amount equal to six (6) months of your current base
salary, less standard payroll deductions and withholdings.  The first such payment shall be made on the
Separation Date, and the second such payment shall be made available to you on December 16,
2010, as specified below. The second payment will be made payable to Heffernan,
Seubert & French LLP, to be deposited into an Escrow Account managed
by that firm and held in your name. This second payment will be delivered to
Tom French, Esq. of Heffernan, Seubert & French LLP (1075 Curtis
Street, Menlo Park, CA 94025), counsel identified and retained by you, on the
Separation Date. The second payment will be held in escrow by your counsel
until December 16, 2010 at noon, at which time it will be released to you
unless, prior to December 15, 2010 at midnight, the Company has delivered
written notice to you and Mr. French that it is making a claim against you
based upon a violation by you of Section 9 of this Agreement.


 


(b)                                  Resolution of Company’s Section 9
Claim.  In the event the Company disputes the release
of the Cashier’s Check to you based on its claim that you have 


 


ARYx
Therapeutics, Inc.


6300
Dumbarton Circle,  Fremont, CA  94555 
Ph: 510-585-2200  Fax:
510-585-2202


www.
aryx.com


 

















 


violated Section 9,
the matter shall be submitted to JAMS for expedited resolution through the
submission of limited briefing. At the time of the submission of the matter to
JAMS, the Company shall provide a list that orders its preference for the use
of one of the following Neutrals associated with JAMS: Judge John Flaherty
(Ret.); Judge Read Ambler (Ret); Judge Rebecca Westerfield; Cathy Yanni. The first
of these JAMS Neutrals in the Company’s prioritization who is available and
willing to serve shall be agreed upon as the JAMS Neutral to resolve the claim.
Should the Company fail to provide the priority list at the time of the
submission, the Neutrals listed above shall be asked to serve in the order
listed above. Specifically, within 10 business days of submitting notice of a
claim to you and Mr. French, the Company shall submit the factual and
legal bases for its claimed violation of Section 9 to the selected JAMS
Neutral in a brief not to exceed twenty (20) pages (with pagination in
conformance with that required by the Santa Clara Superior Court) and exhibits,
if any, not to exceed 30 pages.  Within
15 business days of receipt of the Company’s brief and exhibits, you shall
submit the factual and legal bases of your defenses and objections to the
Company’s claimed violation of Section 9 to the selected JAMS Neutral in a
brief not to exceed twenty (20) pages (with pagination in conformance with
that required by the Santa Clara Superior Court) and exhibits, if any, not to
exceed 30 pages. Whichever JAMS Neutral accepts the matter, he or she will be
asked to render his or her decision within 30 days or as soon thereafter as
possible.  JAMS fees (administrative and
Neutral fees) shall be paid by the Company and the payment of each party’s
legal fees shall be set by the JAMS Neutral. The decision of the JAMS Neutral
shall be binding and not subject to appeal by either you or the Company.


 


(c)                                  COBRA Premiums.  If you timely elect continued coverage under COBRA,
then the Company will reimburse your COBRA payments upon invoice by you
necessary to continue your group health insurance coverage through COBRA at the
level in effect as of the Separation Date (including dependent coverage, if
applicable), for up to twelve (12) months following the Separation Date, but in
no event later than the date you cease to be eligible for such coverage.


 


(d)                                  Accelerated Vesting.  The Company will accelerate the vesting of all of your
outstanding equity awards (except the restricted stock units that you were
granted on February 25, 2010) such that all of the shares subject to such
awards shall be deemed vested and exercisable as of the Separation Date.


 


You acknowledge and agree that you are accepting the
severance benefits set forth herein, along with the other benefits set forth in
this Agreement, in lieu of and in full satisfaction of any severance benefits
from the Company to which you may be entitled, including (without limitation)
any severance benefits set forth in your Employment Agreement with the Company
dated September 30, 2005, as amended on December 19, 2008, and that
the Company’s provision of the benefits under this Agreement supersedes and
extinguishes any obligation of the Company to provide you with any severance
benefits, including any obligation set forth in any argument between you and
the Company.


 


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4.                                      Consulting Agreement. 
If you sign this Agreement, and allow the release contained herein to
become effective, then the Company will engage you as a consultant under the
terms set forth below.


 


(a)                                  Consulting Period. 
You will serve as a consultant beginning on the first day following the
Separation Date and ending on the effective date of any termination of the
consulting relationship by either you or the Company, pursuant to the terms set
forth in paragraph 4(j) below (the “Consulting Period”). However, the
Consulting Period will be for a term of not less than twelve (12) months from
the first day following the Separation Date.


 


(b)                                  Consulting Services. 
As a Consultant, you will be responsible for assisting the Company in
any area of your expertise (the “Consulting Services”), with all such services
to be approved by the CEO of the Company in advance. It is understood that you
will be limited to no more than thirty (30) hours per month of consulting
services to the Company. You will conduct the Consulting Services at a location
of your choosing.  You will exercise the
highest degree of professionalism and utilize your expertise and creative
talents in performing the Consulting Services.


 


(c)                                  Consulting Fees and Expenses. 
You will not be entitled to any cash compensation for the first sixteen
(16) hours per month of Consulting Services, measured on a month-by-month
basis.  For any Consulting Services in
excess of sixteen (16) in any given month, the Company will pay you consulting
fees (the “Consulting Fees”) at the rate of $400.00 per hour.  The Company will also reimburse you for
reasonable and documented business expenses incurred during the Consulting
Period in connection with any Consulting Services, provided that any such
expenses in excess of $300.00 will require advance written approval by the CEO.


 


(d)                                  Equity.  Your  Continuous
Service (as defined in the 2007 Equity Incentive Plan) will continue
uninterrupted during the Consulting Period. As a result, as part of your
compensation for providing Consulting Services, you will remain eligible to
vest the restricted stock units (awarded on February 25, 2010) while you
remain a consultant to the Company. The restricted stock units will vest in the
same manner, and under the same conditions, as the vesting may occur for all
other employees also granted restricted stock units under this same grant, as
if you are an employee of the Company at the time of vesting.


 


(e)                                  Tax Treatment. 
The Company will not make any withholdings or deductions, and will issue
you a form 1099, with respect to any Consulting Fees paid to you. You will be
responsible for all taxes with respect to the Consulting Fees, and you agree to
indemnify, hold harmless and defend the Company from any and all claims,
liabilities, damages, taxes, fines or penalties sought or recovered by any
governmental entity, including but not limited to the Internal Revenue Service
or any state taxing authority, arising out of or in connection with the
Consulting Fees.


 


(f)                                    Independent Contractor Status. 
You agree that during the Consulting Period (i) you will be an independent
contractor to the Company and not an 


 


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employee of the Company,
and (ii) the Company will not make payments for state or federal income
tax, FICA (social security and Medicare), make unemployment insurance or
disability insurance contributions, or obtain workers’ compensation insurance
on your behalf.


 


(g)                                 Protection of Information. 
You agree that during the Consulting Period and thereafter, you will not
use or disclose any confidential or proprietary information or materials of the
Company that you obtain or develop in the course of performing the Consulting
Services.  Any and all work product you
create in the course of performing the Consulting Services will be the sole and
exclusive property of the Company.  You
hereby assign to the Company all right, title, and interest in all inventions,
techniques, processes, materials, and other intellectual property developed in
the course of performing the Consulting Services.


 


(h)                                 Limitations on Authority. 
You will have no responsibilities or authority as a consultant to the
Company other than as provided above. 
You agree not to represent or purport to represent the Company in any
manner whatsoever to any third party except with prior consent of the CEO.  This includes any information pertaining to
the Company that is conjecture (beyond discussions about potential outcomes of
clinical trials), is not already in the public domain, or is outside the scope
of the consulting work then being performed.


 


(i)                                    Standard of Conduct. 
You agree not to engage in any conduct during the Consulting Period that
is detrimental to the interests of the Company.


 


(j)                                    Termination of Consulting Period. 
Either you or the Company may terminate the Consulting Period, at any
time following the initial twelve (12) month period, for any reason, upon
thirty (30) days written notice.  Upon
termination of the Consulting Period by either party, the Company will pay only
those Consulting Fees earned and expenses incurred through and including the
effective date of such termination.


 


5.                                      Other Compensation or Benefits. 
You acknowledge that, except as expressly provided in this Agreement,
you will not receive from the Company any additional compensation, severance or
benefits after the Separation Date, with the sole exception of any benefit the
right to which has vested as of the Separation Date under the express terms of
a Company benefit plan document.


 


6.                                      Expense Reimbursements. 
You agree that, within fifteen (15) days after the Separation Date, you
will submit your final documented expense reimbursement statement reflecting
all business expenses you incurred through the Separation Date, if any, for
which you seek reimbursement with respect to your Company employment.  The Company will reimburse you for these
expenses pursuant to its regular business practices.


 


7.                                      Return of Company Property. 
You agree that not later than the Separation Date, you will return to
the Company, unless otherwise specified by the Company, all Company documents
(and all copies thereof) and other Company property in your 


 


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possession or control,
including, but not limited to:  Company
files, notes, memoranda, correspondence, agreements, draft documents,
notebooks, logs, drawings, records, plans, proposals, reports, forecasts,
financial information, sales and marketing information, research and
development information, personnel information, specifications,
computer-recorded information, tangible property and equipment, credit cards,
entry cards, identification badges and keys; and any materials of any kind that
contain or embody any proprietary or confidential information of the Company
(and all reproductions thereof in whole or in part); provided,
however, that during the Consulting Period only, the Company will
permit you to retain, receive, and/or use any documents and/or information
reasonably necessary to perform the Consulting Services, all of which
equipment, documents and information you must return to the Company upon
request and not later than the last day of the Consulting Period.


 


8.                                      Proprietary Information
Obligations.  You hereby acknowledge your continuing
obligations under your Employee Proprietary Information and Inventions
Agreement with the Company, dated May 13, 2004.


 


9.                                      Nondisparagement.  You agree not to disparage the Company, or the Company’s
officers, directors, employees, shareholders, parents, subsidiaries,
affiliates, and agents, in any manner likely to be harmful to them or their
business, business reputation or personal reputation; provided that you may
respond accurately and fully to any question, inquiry or request for
information when required by legal process. Similarly, the Company (through its
officer and directors) agrees to not disparage you in a manner likely to be
harmful to you or your personal or business reputation. It is agreed that the
press release, dated June 2, 2010 and attached hereto as Exhibit A,
shall represent the way in which your resignation is described by you and the
Company (through its officers and directors) in all settings.


 


10.                               No Admissions.  The terms and provisions of this Agreement are not to
be construed as an admission by you or the Company of any wrongdoing or
liability, or as an admission of the truth of any claims made or which might be
made by any other party.


 


11.                               Mutual Release of Claims.


 


(a)                                  Mutual General Release. 
Except for the promises and/or obligations made or undertaken in this
Agreement, you and the Company hereby mutually release and absolutely and
forever discharge the other (and you also release and discharge the Company’s
past and present directors, managers, officers, shareholders, employees,
partners, agents, attorneys, predecessors, successors, parent and subsidiary
entities, affiliates, and assigns and each of them, separately and
collectively) from any and all claims, demands and causes of action of any kind
whatsoever, whether or not now known, suspected or claimed, which either ever
had, now has, or claims to have had (collectively the “Released Matters”).
These mutual releases apply and extend to all rights, causes of action, or
claims asserted (except as specified in this Section), or which could have been
asserted, by you or the Company as of the Severance Date, irrespective of the
theory of recovery that could have been asserted. This release shall not extend
to claims arising from your contractual or


 


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statutory obligations to refrain from the use or
disclosure of proprietary or trade secret information belonging to the Company;
nor to any claims arising from your willful misconduct that causes material
injury to the Company. The Company agrees that it will make no claims relating
to matters prior to the date of this Separation Agreement.


 


(b)                                  Exceptions to Release. You are not releasing any claim that
cannot be waived under applicable state or federal law or any rights you have
to file or pursue a claim for workers’ compensation or unemployment insurance,
and you are not releasing any rights that you have to be indemnified (including
any right to reimbursement of expenses) arising under applicable law, the
certificate of incorporation or by-laws (or similar constituent documents of
the Company), any indemnification agreement between you and the Company, or any
directors’ and officers’ liability insurance policy of the Company. The foregoing  notwithstanding, nothing in
this Agreement shall prevent you from filing, cooperating with, or
participating in any proceeding before the Equal Employment Opportunity
Commission, the Department of Labor, or the California Department of Fair
Employment and Housing, except that you acknowledge and agree that you shall
not recover any monetary benefits in connection with any such claim, charge or
proceeding with regard to any claim released herein. Nothing in this Agreement
shall prevent you from challenging the validity of the release in a legal or
administrative proceeding.


 


12.                               ADEA Waiver. 
You acknowledge that you are knowingly and voluntarily waiving and
releasing any rights you may have under the ADEA (“ADEA Waiver”).  You also acknowledge that the consideration
given for the ADEA Waiver is in addition to anything of value to which you were
already entitled.  You further
acknowledge that you have been advised by this writing, as required by the
ADEA, that:  (a) your ADEA Waiver
does not apply to any rights or claims that arise after the date you sign this
Agreement; (b) you should consult with an attorney prior to signing this
Agreement; (c) you have twenty-one (21) days to consider this Agreement
(although you may choose to voluntarily sign it sooner); (d) you have
seven (7) days following the date you sign this Agreement to revoke it,
with such revocation to be effective only if you deliver written notice of
revocation to the Company within the seven (7)-day period; and (e) the
ADEA Waiver will not be effective until the date upon which the revocation
period has expired unexercised, which will be the eighth day after you sign
this Agreement (“Effective Date”). 
Nevertheless, your general release of claims, except for the ADEA
Waiver, is effective immediately, and not revocable.


 


13.                               Section 1542 Waiver. 
It is the intention of you and the company in executing this Agreement
and in tendering and receiving the consideration called for by this Agreement
that this Agreement shall be and is a full and final accord and satisfaction
and mutual general release of and from all matters relating to the Released
Matters.  The Parties each acknowledges
that they are familiar with Section 1542 of the Civil Code of the State of
California, which provides as follows:


 


A general release does not extend to claims which
the creditor does not know or suspect to exist in his or her favor at the time
of executing the release, which if known by him or her must have materially
affected his or her settlement with the debtor.


 


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You and the Company hereby
expressly waive and relinquish all rights and benefits under that section and
any law of any other jurisdiction of similar effect with respect to your and
the Company’s release of any unknown or unsuspected claims herein.


 


14.                               Representations. 
You hereby represent that you have been paid all compensation owed and
for all hours worked, have received all the leave and leave benefits and
protections for which you are eligible pursuant to the Family and Medical Leave
Act, the California Family Rights Act, or otherwise, and have not suffered any
on-the-job injury for which you have not already filed a workers’ compensation
claim.


 


15.                               Miscellaneous. 
This Agreement, including its exhibits, constitutes the complete, final
and exclusive embodiment of the entire agreement between you and the Company
with regard to its subject matter.  It is
entered into without reliance on any promise or representation, written or
oral, other than those expressly contained herein, and it supersedes any other
such promises, warranties or representations. 
This Agreement may not be modified or amended except in a writing signed
by both you and a duly authorized officer of the Company.  This Agreement will bind the heirs, personal
representatives, successors and assigns of both you and the Company, and inure
to the benefit of both you and the Company, their heirs, successors and
assigns.  If any provision of this
Agreement is determined to be invalid or unenforceable, in whole or in part,
this determination will not affect any other provision of this Agreement and
the provision in question will be modified so as to be rendered
enforceable.  This Agreement will be
deemed to have been entered into and will be construed and enforced in
accordance with the laws of the State of California without regard to conflict
of laws principles.  Any ambiguity in
this Agreement shall not be construed against either party as the drafter.  Any waiver of a breach of this Agreement
shall be in writing and shall not be deemed to be a waiver of any successive
breach.  This Agreement may be executed
in counterparts and facsimile signatures will suffice as original signatures.


 


If
this Agreement is acceptable to you, please sign below and return the original
to me as soon as possible. You have twenty-one (21) calendar days to decide
whether you would like to accept this Agreement, and the Company’s offer
contained herein will automatically expire if you do not sign and return it
within that time frame.Sincerely,


 


ARYx
THERAPEUTICS, INC.


 


 


	
  By:

  	
  /s/
  David Nagler

  	
   

  
	
   

  	
  David
  Nagler

  	
   

  
	
   

  	
  Vice
  President Corporate Affairs

  	
   

  



 


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Exhibit A
—                              ARYx
Press Release Dated June 2, 2010


 


I HAVE
READ, UNDERSTAND, AND AGREE FULLY TO THE FOREGOING AGREEMENT:


 


 


	
  /s/ Peter G. Milner, M.D.

  	
   

  	
  June 2, 2010

  
	
  Peter G. Milner, M.D.

  	
   

  	
  Date

  



 


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EXHIBIT A — ARYx PRESS RELEASE


 





 


Contact:


ARYx
Therapeutics, Inc.


David
Nagler, 510-585-2200 ext. 211


Vice
President Corporate Affairs


 


FOR
IMMEDIATE RELEASE


 


ARYX ANNOUNCES RESIGNATION OF PETER G. MILNER, PRESIDENT RESEARCH AND
DEVELOPMENT


 


FREMONT,
CA., June 2, 2010 — ARYx Therapeutics, Inc. (NASDAQ:
ARYX) today announced that Peter G. Milner, M.D., has resigned, effective June 15,
2010, as a director and as president research and development. He will continue
to consult to the company in support of ARYx’s on-going strategic process. Dr. Milner,
along with Dr. Pascal Druzgala, co-founded ARYx in 1997 in pursuit of
novel therapies that avoid known safety concerns with previously commercialized
pharmaceuticals. Based upon ARYx’s unique drug discovery approach, the company
now has three late-stage development product candidates and a fourth in Phase 1
clinical development.


 


“Peter
Milner provided the vision that built a highly productive and dedicated ARYx
team which has invented four drug candidates possessing demonstrated sustained
efficacy while enhancing their safety profile,” said Dr. Paul Goddard,
ARYx chairman and chief executive officer. “Notwithstanding our need to
undertake our current corporate development efforts, Peter can be proud of what
has been accomplished at ARYx due to his leadership, passion and devotion to
discovering and developing medicines that demonstrate that safety does not need
to be compromised for efficacy. We are grateful to Peter for ARYx’s existence
and for the on-going consulting contributions he will continue to make,”
concluded Dr. Goddard.


 


“ARYx
has reached a point in its current strategic process that I am now able to turn
my focus to the other projects I have recently begun,” explained Dr. Peter
Milner. “Pascal and I founded ARYx around the vision that proven therapies
could be made safer by applying our unique insights into the role of metabolism
in drug safety, believing efficacy does not need to be compromised for safety.
I am proud of everything we have accomplished and look to the day that patients
will benefit from our work,” concluded Dr. Milner.


 


As
a result of Dr. Milner’s resignation, all officers of the company will now
report directly to the CEO, including the chief scientific officer, Pascal Druzgala.


 


ARYx Therapeutics, Inc.


6300 Dumbarton Circle,  Fremont,
CA  94555 
Ph: 510-585-2200  Fax:
510-585-2202


www. aryx.com


 


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About ARYx Therapeutics, Inc.


 


ARYx Therapeutics is a biopharmaceutical company
focused on developing a portfolio of internally discovered products designed to
eliminate known safety issues associated with well-established, commercially
successful drugs. ARYx uses its RetroMetabolic Drug Design technology to design
structurally unique molecules that retain the efficacy of these original drugs
but are metabolized through a potentially safer pathway to avoid specific
adverse side effects associated with these compounds. ARYx currently has four
products in clinical development: an oral anticoagulant agent for patients at
risk for the formation of dangerous blood clots, tecarfarin (ATI-5923); a
prokinetic agent for the treatment of various gastrointestinal disorders,
ATI-7505; an oral anti-arrhythmic agent for the treatment of atrial fibrillation,
budiodarone (ATI-2042); and, an agent for the treatment of schizophrenia and
other psychiatric disorders, ATI-9242. Please visit ARYx’s Website at
www.aryx.com for additional information.


 


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