Exhibit
10.29


 


AMENDMENT
NO. 1


TO


EMPLOYMENT
AGREEMENT


 


THIS AMENDMENT NO. 1 (this
“Amendment”) to the Employment
Agreement by and between Daniel Canafax (“Executive”)
and ARYX THERAPEUTICS, INC., a Delaware
corporation (the “Company”) dated January 31,
2007 (the “Prior Agreement”), is entered
into and effective as of December 19, 2008 (the “Effective
Date”).  Capitalized terms
not herein defined shall have the meanings ascribed to them in the Prior
Agreement.


 


WHEREAS, the Company and the Executive previously entered
into the Prior Agreement; and


 


WHEREAS, the Company and the Executive wish to amend the
Prior Agreement by entering into this Amendment to comply with the parties’
intent that the Prior Agreement be interpreted, construed and administered in a
manner that satisfies Section 409A of the Internal Revenue Code of 1986,
as amended from time to time, among other things.


 


NOW, THEREFORE, in consideration
of the mutual promises and covenants contained herein, the Company and the
Executive, intending to be legally bound, hereby amend the Prior Agreement
effective as of the Effective Date and agree as follows:


 


SECTION 1.                            AMENDMENT TO THE PRIOR AGREEMENT


 


Effective as of the Effective Date, the sections of
the Prior Agreement entitled “Termination of Employment,” “Change of Control”
and “Definitions” are hereby amended and restated in their entirety to read as
follows:


 


Termination of Employment


 


You may terminate your employment with ARYx at any
time, with or without Good Reason (as defined below), simply by notifying
us.  Likewise, ARYx may terminate your
employment at any time and for any reason whatsoever, with or without Cause (as
defined below), or advance notice.  As
required by law, this offer is subject to satisfactory proof of your right to
work in the United States.


 


If the Company terminates your employment at any time
for Cause, or if you resign from ARYx without Good Reason, your salary shall
cease on the date of termination, and you will not be entitled to severance
pay, pay in lieu of notice or any other such compensation, other than payment
of accrued salary and such other benefits as expressly required by applicable
law or the terms of any applicable Company benefit plans.  The Option and any other stock awards you
hold shall cease vesting as of the date of termination and those options which
are already vested shall be exercisable only pursuant to the terms of the ARYx
stock option plans and agreements.


 


However, if the Company terminates your employment at
any time without Cause (and other than as a result of death), or you resign
from ARYx for Good Reason (as long as you provide the Company with written
notice specifying the occurrence of the event which forms the basis for your
resignation for Good Reason within ninety (90) days following its initial
existence 


 


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and provide the Company forty-five (45) days to cure
such condition, and your resignation becomes effective within thirty (30) days
following the end of such cure period if the condition is not cured), and such
termination is a “separation from service” under Treasury Regulation Section 1.409A-1(h),
(i) the Company shall make a lump sum severance payment to you in an
amount equal to six (6) months of your then-current base salary, subject
to withholdings and deductions, payable within ten (10) days after the
effective date of the release agreement described below, (ii) if you
timely elect COBRA health insurance coverage, the Company will reimburse your
COBRA premiums for a maximum of either six (6) months following the date
your employment terminates or until you secure health insurance coverage from
another source, whichever occurs sooner (but in no event after you cease to be
eligible for COBRA), and (iii) the vesting of the Option shall immediately
accelerate with respect to the number of shares that would otherwise vest if
you were to remain employed by ARYx over the six (6) month period
following the date of such termination.


 


Change of
Control


 


In the event your employment with the Company is
involuntarily terminated without Cause by the Company or its successor, or you
resign for Good Reason, and in either case such termination is a “separation
from service” under Treasury Regulation Section 1.409A-1(h) and such
termination or resignation occurs within thirteen (13) months following a
Change of Control (as defined below), the vesting of the Option shall be
accelerated such that the Option shall become fully vested.  Your receipt of the accelerated vesting of
the Option provided in this paragraph, or the receipt of the severance pay
described above, shall be conditioned on your execution of a release agreement
in the form attached to this letter as Attachment II, such executed
release must be delivered to the Company within twenty-one (21) days after the
termination of your employment with the Company and become effective within
seven (7) days thereafter in order for any of such benefits be provided to
you.


 


Definitions


 


For purposes of this letter agreement:


 


·      “Cause” shall
mean that you have committed, or there has occurred, one or more of the
following:  (a) conviction of, a guilty plea with respect to, or a
plea of nolo  contendere to a
charge that you have committed a felony under the laws of the United States or
of any state of a crime involving moral turpitude, including, but not limited
to, fraud, theft, embezzlement or any crime that results in or is intended to
result in personal enrichment at the expense of the Company; (b) material
breach of any agreement entered into between you and the Company that impairs
the Company’s interest therein; (c) willful misconduct, or gross neglect
by you of your duties, if such conduct is not cured within seven (7) days
of your receipt of written notice (provided that such conduct can reasonably be
cured); (d) an unauthorized use or disclosure of the Company’s
confidential information or trade secrets; or (e) engagement in any
activity that constitutes a material conflict of interest with the
Company.  Your death or physical or
mental disability shall also constitute Cause for termination under this letter
agreement.  Cause to terminate your
employment based on your physical or mental disability shall exist if any
illness, disability or other incapacity renders you physically or mentally
unable to regularly perform your duties hereunder for a period in excess of
sixty (60) consecutive days or more than ninety (90) 


 


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days in any consecutive
twelve (12) month period.  The Board of
Directors shall make a good faith determination of whether you are physically
or mentally unable to regularly perform your duties, subject to its review and
consideration of any physical and/or mental health information provided to it
by you.


 


·      “Good Reason”
shall mean any one of the following events which occurs on or after the
commencement of your employment without your consent:  (i) any
material reduction of your then current annual base salary, except to the
extent that the annual base salary of all other officers of the Company is
similarly reduced; (ii) any material diminution of your duties,
responsibilities, or authority; (iii) any requirement that you relocate to
a work site that would increase your one-way commute distance by more than
sixty (60) miles; or (iv) any material breach by the Company of its
obligations under letter agreement.


 


·      “Change of Control”
shall mean the occurrence of any of the following: (i) a sale, lease, or
other disposition of all or substantially all of the assets of the Company; (ii) a
merger or consolidation in which the Company is not the surviving corporation; (iii) a
reverse merger involving the Company in which the Company is the surviving
corporation but the shares of common stock of the Company (the “Common Stock”) outstanding immediately preceding the merger
are converted by virtue of the merger into other property, whether in the form
of securities, cash or otherwise; (iv) an acquisition by any person,
entity or group within the meaning of Section 13(d) or 14(d) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
or any comparable successor provisions (excluding any employee benefit plan, or
related trust, sponsored or maintained by the Company or an affiliate of the
Company) of the beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor rules) of
securities of the Company representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election of directors; or, (v) in
the event that the individuals who, as of the date hereof, are members of the
Board (the “Incumbent Board”), cease for any reason
to constitute at least fifty percent (50%) of the Company’s Board of
Directors.  (If the election, or
nomination for election by the Company’s shareholders, of any new member of the
Company’s Board of Directors is approved by a vote of at least fifty percent
(50%) of the Incumbent Board, such new member of the Board of Directors shall
be considered as a member of the Incumbent Board.)  Notwithstanding the
foregoing, for the purposes of this letter agreement and with respect to any
and all clauses of this paragraph, an initial public offering of the securities
of the Company (an “IPO”) or any
transactions or events constituting part of an IPO, or any transaction or
series of transactions principally for bona fide equity financing purposes in
which cash is received by the Company or indebtedness of the Company is
cancelled or converted or a combination thereof shall not be deemed to constitute
or in any way effect a Change of Control.


 


SECTION 2.                            ADDITIONAL PROVISIONS


 


2.1          ENTIRE
AGREEMENT AND MODIFICATION.  The Prior Agreement, together with this
Amendment, constitute the entire agreement among the parties with respect to
the subject matter thereof and hereof and supersede any prior understandings,
agreements, or representations by or among the parties, written or oral, to the
extent they related in any way to the subject matter hereof.


 


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2.2          GOVERNING
LAW.  This Amendment shall be governed
by, construed and interpreted in accordance with the laws of the State of
California without regard to its choice of law principles.


 


2.3          COUNTERPARTS.  This Amendment may be executed in
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.


 


2.4          HEADINGS.  The Section headings contained in this
Amendment are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Amendment.


 


2.5          SEVERABILITY.  Any term or provision of this Amendment that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.


 


[SIGNATURE PAGE FOLLOWS]


 


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IN WITNESS WHEREOF, the parties have executed this Amendment  on and effective as of the Effective Date.


 


 


	
  ARYx THERAPEUTICS, INC.

  	
   

  	
  DANIEL CANAFAX

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Paul Goddard

  	
   

  	
  /s/ Daniel Canafax

  
	
   

  	
  Paul Goddard

  Chairman and Chief Executive Officer

  	
   

  	
   

  



 


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