Exhibit 10.28


 


AMENDMENT NO. 1


 


TO EMPLOYMENT
AGREEMENT


 


THIS AMENDMENT NO. 1 (this “Amendment”) to the Employment
Agreement by and between Pascal Druzgala (“Executive”)
and ARYX THERAPEUTICS, INC.,  a Delaware corporation 
(the “Company”) dated July 23,
2002 (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 following
sections of the Prior Agreement are hereby amended and restated in their
entirety to read as follows:


 


1.             Section 5.1(c) shall
read:


 


Termination
Without Cause.  If the
Company terminates Executive’s employment at any time without Cause (and other
than as a result of death) 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 Executive in an amount equal to six (6) months
of Executive’s then-current base salary, subject to withholdings and
deductions, payable within ten (10) days after the effective date of the
release executed in satisfaction of the requirements set forth in Section 8
of this Agreement, (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 Executive ceases 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 the Executive
was to remain employed by the Company over the six (6) month period
following the date of such termination. 
Executive shall not be entitled to this severance pay and Option
acceleration unless and until the release requirements set forth in Section 8
of this Agreement are satisfied.


 


1

















 


2.             Section 5.2(c) shall
read:


 


Executive’s
Resignation for Good Reason.  Executive
may resign his employment for Good Reason (as defined below) so long as
Executive provides the Company with written notice specifying the occurrence of
the event which forms the basis for his resignation for Good Reason within
ninety (90) days following its initial existence and provides the Company
forty-five (45) days to cure such condition, and the Executive’s resignation is
effective within thirty (30) days following the end of such cure period if the
condition is not cured.  In the event
that Executive resigns his employment for Good Reason 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 Executive in an amount equal
to six (6) months of the Executive’s then current base salary, subject to
applicable withholdings and deductions, (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, and (iii) the vesting of the Option shall
immediately accelerate with respect to the number of shares that would
otherwise vest if the Executive was to remain employed by the Company over the
six (6) month period following the date of such termination.  Executive shall not be entitled to any of
this severance pay unless and until the release requirements set forth in Section 8
of this Agreement are satisfied.


 


3.             Section 5.2(d) shall read:


 


Definition of Good Reason.  For purposes of this Agreement, “Good Reason” shall
mean any one of the following events which occurs on or after the commencement
of Executive’s employment without Executive’s consent: (i) any material
reduction of Executive’s 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 the Executive’s duties,
responsibilities, or authority; (iii) any requirement that the Executive
relocate to a work site that would increase the Executive’s one-way commute
distance by more than thirty-five (35) miles; or (iv) any material breach
by the Company of its obligations under this Agreement.


 


4.             Section 6.2
shall read:


 


Change
of Control Termination.  In
the event Executive’s employment with the Company is involuntarily terminated
without Cause by the Company or its successor, or Executive resigns 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,
Executive shall be entitled to: (a) the benefits set forth in either 5.1(c) or
5.2(c), as applicable; (b) the vesting of the Standard Option shall be
accelerated such that the Standard Option shall become fully vested; and (c) to
the extent that Executive was serving as the Chief Executive Officer
immediately prior to the Change in Control, the Special Option shall be
accelerated such that the Special Option shall become fully vested.  Executive’s receipt of the severance payment
and accelerated vesting of the Options provided in this Section 6.2 shall
be conditioned on Executive’s full compliance with the release requirements set
forth in Section 8 of this Agreement.


 


2

















 


5.             Section 8 shall
read:


 


RELEASE. As a
condition of receiving the severance benefits under this Agreement to which
Executive would not otherwise be entitled, Executive shall execute a release in
the form attached hereto as Exhibit B
(the “Release”).  Unless the Release is executed by Executive
and delivered to the Company within twenty-one (21) days after the termination
of Executive’s employment with the Company and become effective within seven (7) days
thereafter, Executive shall not receive any severance benefits (including
severance payments and Option acceleration) provided for under this Agreement.


 


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.


 


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]


 


3

















 


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


 


 


	
  ARYx THERAPEUTICS, INC.

  	
   

  	
  PASCAL DRUZGALA

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Paul Goddard

  	
   

  	
  /s/ Pascal
  Druzgala

  
	
   

  	
  Paul Goddard

  	
   

  	
  December 29, 2008.

  	
   

  
	
   

  	
  Chairman and Chief Executive Officer

  	
   

  	
   

  	
   

  



 


4