Exhibit 10.30  LOAN AND SECURITY AGREEMENT NO. 8081149  THIS LOAN AND SECURITY AGREEMENT (this Agreement)
dated as of December 31, 2008 (the Effective Date)
by and between OXFORD FINANCE CORPORATION, a
Delaware corporation with its principal place of business located at 133 North
Fairfax Street, Alexandria, Virginia 22314 (Lender)
and ARYx THERAPEUTICS, INC., a Delaware
corporation (Borrower), provides the terms on
which Lender shall lend to Borrower and Borrower shall repay Lender. The
parties agree as follows:  1ACCOUNTING AND OTHER TERMS  Accounting
terms not defined in this Agreement shall be construed following GAAP.
Calculations and determinations must be made following GAAP. Capitalized terms
not otherwise defined in this Agreement shall have the meanings set forth in
Section 13. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meaning provided by the Code to the extent such terms
are defined therein.  2LOAN AND TERMS OF PAYMENT  2.1          Promise  to Pay.Borrower hereby
unconditionally promises to pay Lender the outstanding principal amount of the
Credit Extensions and accrued and unpaid interest thereon as and when due in
accordance with this Agreement.  2.1.1       EquipmentAdvance.  (a)           Availability.   Subject to the terms and
conditions of this Agreement, on the Effective Date, Lender shall make
available an advance (the Equipment Advance)in an amount of $1,500,000. The
Equipment Advance may be used to finance Eligible Equipment purchased on or
after January 1, 2007, provided that the Equipment Advance is requested on
the Effective Date. All Eligible Equipment must have been new when purchased by
Borrower, except for such Eligible Equipment that is disclosed in writing to
Lender by Borrower, and that Lender in its sole discretion has agreed to
finance, prior to being financed by Lender. Unless otherwise agreed to by
Lender, not more than twenty percent (20%) of the proceeds of the Equipment
Line shall be used to finance Other Equipment. After repayment, the Equipment
Advance may not be reborrowed.  (b)           Repayment.   The Equipment Advance shall
immediately amortize and be payable in 36 equal monthly payments of principal
and interest in accordance with the provisions of the Secured Promissory Note
relating to the Equipment Advance. Notwithstanding the foregoing, all unpaid
principal and interest on the Equipment Advance shall be due on the Equipment
Maturity Date. The Equipment Advance may only be prepaid in accordance with
Section 2.1.1(c), 2.1.1(d) and 2.1.1(e).  (c)           Prepayment Upon an Event of Loss.   Borrower shall bear the
risk of any loss, theft, destruction, or damage of or to the Financed
Equipment. If, during the term of this Agreement, any item of Financed
Equipment becomes obsolete or is lost, stolen, destroyed, damaged beyond
repair, rendered permanently unfit for use, or seized by a governmental
authority for any reason for a period ending beyond the Equipment Maturity Date
with respect to such Financed Equipment (an Event of Loss), then,
within ten (10) days following such Event of Loss, Borrower shall
(i) pay to Lender on account of the Obligations without penalty or premium
all accrued interest to the date of the prepayment, plus all outstanding
principal owing with respect to the Financed Equipment subject to the Event of
Loss; or (ii) if no Event of Default has occurred and is continuing, at
Borrowers option, repair or replace any Financed Equipment subject to an Event
of Loss provided the repaired or replaced Financed Equipment is of equal or like
value to the Financed Equipment subject to an Event of Loss and provided
further that Lender has a first priority perfected security interest in such
repaired or replaced Financed Equipment. Any partial prepayment of the
Equipment Advance paid by Borrower on account of an Event of Loss shall be
applied to prepay amounts owing for the Equipment Advance in inverse order of
maturity.  (d)           Mandatory Prepayment Upon an
Acceleration.If the Equipment Advance is accelerated following the occurrence of an
Event of Default, Borrower shall immediately pay to Lender an amount equal to
the sum of (i) all outstanding principal plus accrued and unpaid interest,
(ii) the Prepayment Fee, (iii) the Final Payment


and
(iv) all other sums, if any, that shall have become due and payable,
including interest at the Default Rate with respect to any past due amounts.  (e)Permitted Prepayment of Equipment Advances.   So long as no Event of Default has occurred
and is continuing, Borrower shall have the option to prepay all, but not less
than all, the Equipment Advance advanced by Lender under this Agreement,
provided Borrower (i) delivers written notice to Lender of its election to
prepay the Equipment Advance at least thirty (30) days prior to such
prepayment, and (ii) pays, on the date of such prepayment (A) all
outstanding principal plus accrued and unpaid interest, (B) the Prepayment
Fee, (C) the Final Payment and (D) all other sums, if any, that shall
have become due and payable, including interest at the Default Rate with
respect to any past due amounts.  2.2           Payment of Interest on the Credit
Extension.  (a)Interest Rate.   Subject
to Section 2.2(b), the principal amount outstanding under the Equipment
Advance shall accrue interest at a fixed per annum rate equal to the Basic
Rate, determined by Lender as of the Funding Date for the Equipment Advance,
which interest shall be payable monthly in accordance with
Section 2.2.(d).  (b)Default Rate.   Immediately upon the occurrence and during
the continuance of an Event of Default, the Obligations shall bear interest at
a rate per annum which is five percentage points above the rate that is
otherwise applicable thereto (the Default Rate).
Payment or acceptance of the
increased interest rate provided in this Section 2.2(b) is not a
permitted alternative to timely payment and shall not constitute a waiver of
any Event of Default or otherwise prejudice or limit any rights or remedies of
Lender.  (c)360-Day Year.   Interest
shall be computed on the basis of a 360-day year comprising twelve (12) months
consisting of thirty (30) days.  (d)Payments.   Unless
otherwise provided, interest is payable monthly on the Payment Date of each
month. Payments of principal and/or interest received after 12:00 noon Eastern
time are considered received at the opening of business on the next Business
Day. When a payment is due on a day that is not a Business Day, the payment is
due the next Business Day and additional fees or interest, as applicable, shall
continue to accrue.  2.3          Secured
Promissory Note.   The Equipment Advance shall be evidenced by a
Secured Promissory Note in the form attached as Exhibit D hereto (each a Secured Promissory Note), and shall be repayable as set forth therein.
The Borrower irrevocably authorizes Lender to make or cause to be made, on or
about the Funding Date, or at the time of receipt of any payment of principal
on Lenders Secured Promissory Note, an appropriate notation on Lenders
Secured Promissory Note Record reflecting the making of the Equipment Advance or
(as the case may be) the receipt of such payment. The outstanding amount of the
Equipment Advance set forth on Lenders Secured Promissory Note Record shall be
prima facie evidence of the principal amount thereof owing and unpaid to
Lender, but the failure to record, or any error in so recording, any such
amount on Lenders Secured Promissory Note Record shall not limit or otherwise
affect the obligations of the Borrower hereunder or under any Secured
Promissory Note to make payments of principal of or interest on any Secured
Promissory Note when due. Upon receipt of an affidavit of an officer of a
Lender as to the loss, theft, destruction, or mutilation of its Secured
Promissory Note, the Borrower shall issue, in lieu thereof, a replacement
Secured Promissory Note in the same principal amount thereof and of like tenor.  2.4          Fees.   Borrower shall pay to Lender:  (a)Commitment Fee.   A fully earned, non-refundable commitment fee
of $15,000 which Lender has received in total;  (b)           Prepayment Fee.The Prepayment Fee, when due hereunder;  (c)           Lenders Expenses.All Lenders Expenses (including reasonable
attorneys fees and expenses, plus expenses, for documentation and negotiation
of this Agreement) incurred through and after the Effective Date, when due; and


(d)Final Payment.   The Final Payment, when due hereunder.  3CONDITIONS OF LOAN  3.1          Conditions
Precedent to Credit Extension.   Lenders
obligation to make the Credit Extension is subject to the condition precedent
that Lender shall have received, in form and substance satisfactory to Lender,
such documents, and completion of such other matters, as Lender may reasonably
deem necessary or appropriate, including, without limitation:  (a)           duly executed original signatures to
the Loan Documents to which Borrower is a party;  (b)           duly executed original signatures to
the Warrant;  (c)           duly executed original Secured
Promissory Note in favor of Lender in an amount not to exceed the Equipment
Line;  (d)           Operating Documents and a good
standing certificate of Borrower certified by the Secretary of State of the
State of Delaware as of a date no earlier than thirty (30) days prior to the
Effective Date;  (e)           duly executed original signatures to
the completed Borrowing Resolutions for Borrower;  (f)            Lender shall have received certified
copies, dated as of a recent date, of financing statement searches, as Lender
shall request, accompanied by written evidence (including any UCC termination
statements) that the Liens indicated in any such financing statements either
constitute Permitted Liens or have been or, in connection with the initial
Credit Extension, will be terminated or released;  (g)           a landlords consent with respect to
Borrowers leased property located at 6300 Dumbarton Circle Fremont, CA 94555
executed in favor of Lender;  (h)           evidence satisfactory to Lender that
the insurance policies required by Section 6.5 hereof are in full force
and effect, together with appropriate evidence showing loss payable and/or
additional insured clauses or endorsements in favor of Lender;  (i)            Estoppel letter from Lighthouse
Capital Partners releasing any interest in the Collateral: and  (j)            payment of the fees and Lenders
Expenses then due as specified in Section 2.4 hereof.  The
obligation of Lender to make the Credit Extension is also subject to the
following:  (a)           except as otherwise provided in
Section 3.3, timely receipt of an executed Payment/Advance Form and a
UCC financing statement covering the Financed Equipment;  (b)           the representations and warranties in
Section 5 shall be true, accurate and complete in all material respects on
the date of the Payment/Advance Form and on the Funding Date; provided,
however, that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date, and no
Default or Event of Default shall have occurred and be continuing or result
from the Credit Extension. The Credit Extension is Borrowers representation
and warranty on that date that the representations and warranties in
Section 5 remain true in all material respects; provided, however, that
such materiality qualifier shall not be applicable to any representations and
warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date;


(c)           Lender shall have the opportunity to
confirm that upon filing of the UCC financing statement covering the Financed
Equipment, that Lender shall have a perfected first priority security interest
in such Financed Equipment; and  (d)           in Lenders sole discretion, there
has not been any material impairment in the general affairs, management,
results of operation, financial condition or the prospect of repayment of the
Obligations, nor has there been any material adverse deviation by Borrower from
the most recent business plan of Borrower presented to and accepted by Lender.  3.2          Covenant
to Deliver.Borrower
agrees to deliver to Lender each item required to be delivered to Lender under
this Agreement as a condition to the Credit Extension. Borrower expressly
agrees that the extension of the Credit Extension prior to the receipt by
Lender of any such item shall not constitute a waiver by Lender of Borrowers
obligation to deliver such item, and any such extension in the absence of a
required item shall be in Lenders sole discretion.  3.3          Procedures
for Borrowing.   Subject
to the prior satisfaction of all other applicable conditions to the making of
the Equipment Advance set forth in this Agreement, to obtain the Equipment
Advance, Borrower shall notify Lender (which notice shall be irrevocable) by
electronic mail, facsimile, or telephone not later than 12:00 noon Eastern time
two (2) Business Days prior to the date the Equipment Advance is to be
made. Together with any such electronic or facsimile notification, Borrower
shall deliver to Lender by electronic mail or facsimile (i) a completed
Pay Proceeds Letter executed by a Responsible Officer, (ii) a copy of the
invoice for the Equipment being financed, together with a UCC Financing
Statement authorization covering the Financed Equipment described on Exhibit A, and (iii) such additional information
as Lender may reasonably request. Lender may rely on any telephone notice given
by a person whom Lender believes is a Responsible Officer. On the Funding Date,
Lender shall credit and/or transfer (as applicable) to Borrowers Designated
Deposit Account, an amount equal to the amount of the Equipment Advance.  4CREATION OF SECURITY
INTEREST  4.1          Grant
of Security Interest.   Borrower
hereby grants Lender, to secure the payment and performance in full of all of
the Obligations, a continuing security interest in, and pledges to Lender, the
Collateral, wherever located, whether now owned or hereafter acquired or
arising, and all proceeds and products thereof, excluding any intellectual
property or proceeds from intellectual property resulting from use of the
Collateral. Borrower represents, warrants, and covenants that the security
interest granted herein is and shall at all times continue to be a first
priority perfected security interest in the Collateral (subject only to
Permitted Liens that may have superior priority to Lenders lien under this Agreement).  If
this Agreement is terminated, Lenders Lien in the Collateral shall continue
until the Obligations (other than inchoate indemnity obligations and
Obligations relating to the Warrant) are repaid in full in cash. Upon payment
in full in cash of the Obligations (other than inchoate indemnity obligations
and Obligations relating to the Warrant) and at such time as the Lenders
obligation to make the Credit Extension has terminated, Lender shall, at
Borrowers sole cost and expense, release its Lien in the Collateral and all
rights therein shall revert to Borrower.  4.2          Authorization
to File Financing Statements.   Borrower hereby authorizes Lender to file financing
statements, without notice to Borrower, with all appropriate jurisdictions to
perfect or protect Lenders interest or rights hereunder, including a notice
that any disposition of the Collateral, by either Borrower or any other Person,
shall be deemed to violate the rights of Lender under the Code.  5REPRESENTATIONS AND
WARRANTIES  Borrower
represents and warrants as follows:  5.1          Due
Organization, Authorization: Power and Authority.   Borrower and each of its Subsidiaries,
if any, are duly existing and in good standing, as Registered Organizations in
their respective jurisdictions of formation and are qualified and licensed to
do business and are in good standing in any jurisdiction in which the conduct
of their business or their ownership of property requires that they be
qualified except where the failure to do so could not reasonably be expected to
have a material adverse effect on Borrowers business. In


connection
with this Agreement, Borrower has delivered to Lender a completed perfection
certificate signed by Borrower (thePerfection
Certificate). Borrower
represents and warrants to Lender that (a) Borrowers exact legal name is
that indicated on the Perfection Certificate and on the signature
page hereof; (b) Borrower is an organization of the type and is
organized in the jurisdiction set forth in the Perfection Certificate; (c) the
Perfection Certificate accurately sets forth Borrowers organizational
identification number or accurately states that Borrower has none; (d) the
Perfection Certificate accurately sets forth Borrowers place of business, or,
if more than one, its chief executive office as well as Borrowers mailing
address (if different than its chief executive office); (e) Borrower (and
each of its predecessors) has not, in the past five (5) years, changed its
jurisdiction of formation, organizational structure or type, or any
organizational number assigned by its jurisdiction except that Borrower
reincorporated in Delaware (formerly a California corporation) in 2007; and
(f) all other information set forth on the Perfection Certificate
pertaining to Borrower and each of its Subsidiaries is accurate and complete.
If Borrower is not now a Registered Organization but later becomes one,
Borrower shall promptly notify Lender of such occurrence and provide Lender
with Borrowers organizational identification number.  The
execution, delivery and performance by Borrower of the Loan Documents to which
it is a party have been duly authorized, and do not (i) conflict with any
of Borrowers organizational documents, (ii) contravene, conflict with,
constitute a default under or violate any material Requirement of Law,
(iii) contravene, conflict or violate any applicable order, writ,
judgment, injunction, decree, determination or award of any Governmental
Authority by which Borrower or any of its Subsidiaries or any of their property
or assets may be bound or affected, (iv) require any action by, filing,
registration, or qualification with, or Governmental Approval from, any
Governmental Authority (except such Governmental Approvals which have already
been obtained and are in full force and effect) or are being obtained pursuant
to Section 6.1(b) and except for filings, recordings or registrations
that are required to perfect Lenders security interests in the Collateral, or
(v) constitute an event of default under any material agreement by which
Borrower is bound. Borrower is not in default under any agreement to which it
is a party or by which it is bound in which the default could reasonably be
expected to have a material adverse effect on Borrowers business.  5.2          Collateral.   Borrower has good title to, has rights in,
and the power to transfer each item of the Collateral upon which it purports to
grant a Lien hereunder, free and clear of any and all Liens except Permitted
Liens.  The
Collateral is not in the possession of any third party bailee (such as a
warehouse) except as otherwise provided in the Perfection Certificate. None of
the components of the Collateral shall be maintained at locations other than as
provided in the Perfection Certificate or as Borrower has given Lender notice
pursuant to Section 7.2. Borrower shall give the Secured Party 30 days
prior written notice of any relocation of any Collateral. Notwithstanding the
foregoing, Borrower shall not relocate any Collateral to its wholly-owned
subsidiary, ARYx Therapeutics, Ltd. In the event that Borrower, after the date
hereof, intends to store or otherwise deliver any portion of the Collateral to
a bailee, then Borrower will first receive the written consent of Lender and
such bailee must execute and deliver a bailee agreement in form and substance
satisfactory to Lender in its sole discretion. Notwithstanding the foregoing,
the Borrower shall not transfer any of the Collateral to any Subsidiary without
the prior written consent of Lender.  5.3          Litigation.   There are no actions or proceedings pending
or, to the knowledge of the Responsible Officers, threatened in writing by or
against Borrower or any of its Subsidiaries involving more than One Hundred
Thousand Dollars ($100,000.00).  5.4          No
Material Deviation in Financial Statements.   All consolidated financial statements for Borrower
and any of its Subsidiaries delivered to Lender fairly present, in conformity
with GAAP, in all material respects Borrowers consolidated financial condition
and Borrowers consolidated results of operations. There has not been any
material deterioration in Borrowers consolidated financial condition since the
date of the most recent financial statements submitted to Lender.  5.5          Solvency.   The fair salable value of Borrowers assets
(including goodwill minus disposition costs) exceeds the fair value of its
liabilities; Borrower is not left with unreasonably small capital after the
transactions in this Agreement; and Borrower is able to pay its debts
(including trade debts) as they mature.


5.6          Regulatory
Compliance.   Borrower is not an investment company or a
company controlled by an investment company or a subsidiary of an
investment company under the Investment Company Act of 1940. Borrower is not
engaged in extending credit for margin stock (under Regulations T and U of the
Federal Reserve Board of Governors). Borrower has complied in all material
respects with the Federal Fair Labor Standards Act. Neither Borrower nor any of
its Subsidiaries is a holding company or an affiliate of a holding
company or a subsidiary company of a holding company as each term is
defined and used in the Public Utility Holding Company Act of 2005. Borrower
has not violated any laws, ordinances or rules, the violation of which could
reasonably be expected to have a material adverse effect on its business. None
of Borrowers or any of its Subsidiaries properties or assets has been used by
Borrower or any Subsidiary or, to the best of Borrowers knowledge, by previous
Persons, in disposing, producing, storing, treating, or transporting any
hazardous substance other than legally. Borrower and each of its Subsidiaries
have obtained all consents, approvals and authorizations of, made all
declarations or filings with, and given all notices to, all Governmental
Authorities that are necessary to continue their respective businesses as
currently conducted.  5.7          Subsidiaries;
Investments.   Borrower does not own any stock, partnership
interest or other equity securities except for Permitted Investments.  5.8          Tax Returns
and Payments; Pension Contributions.   Borrower
has timely filed all required tax returns and reports, and Borrower and its
Subsidiaries have timely paid all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower. Borrower may defer
payment of any contested taxes, provided that Borrower (a) in good faith
contests its obligation to pay the taxes by appropriate proceedings promptly
and diligently instituted and conducted, (b) notifies Lender in writing of
the commencement of, and any material development in, the proceedings,
(c) posts bonds or takes any other steps required to prevent the
governmental authority levying such contested taxes from obtaining a Lien upon
any of the Collateral that is other than a Permitted Lien. Borrower is
unaware of any claims or adjustments proposed for any of Borrowers prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid all amounts necessary to fund all present pension,
profit sharing and deferred compensation plans in accordance with their terms,
and Borrower has not withdrawn from participation in, and has not permitted
partial or complete termination of, or permitted the occurrence of any other
event with respect to, any such plan which could reasonably be expected to
result in any liability of Borrower, including any liability to the Pension
Benefit Guaranty Corporation or its successors or any other governmental
agency.  5.9          Use of
Proceeds.   Borrower shall use the proceeds of the Credit
Extension solely to purchase Eligible Equipment and not for personal, family,
household or agricultural purposes.  5.10        Full
Disclosure.   No written representation, warranty or other
statement of Borrower in any certificate or written statement given to Lender,
as of the date such representation, warranty, or other statement was made,
taken together with all such written certificates and written statements given
to Lender, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained in the certificates or
statements not misleading (it being recognized that the projections and
forecasts provided by Borrower in good faith and based upon reasonable assumptions
are not viewed as facts and that actual results during the period or periods
covered by such projections and forecasts may differ from the projected or
forecasted results).  6AFFIRMATIVE COVENANTS  Borrower
shall do all of the following:  6.1          Government
Compliance.  (a)           Maintain its and all its
Subsidiaries legal existence and good standing in their respective jurisdictions
of formation and maintain qualification in each jurisdiction in which the
failure to so qualify would reasonably be expected to have a material adverse
effect on Borrowers business or operations. Borrower shall comply, and have
each Subsidiary comply, with all laws, ordinances and regulations to which it
is subject, the noncompliance with which could have a material adverse effect on
Borrowers business.


(b)           Obtain all of the Governmental
Approvals necessary for the performance by Borrower of its obligations under
the Loan Documents to which it is a party and the grant of a security interest
to Lender in all of its property. Borrower shall promptly provide copies of any
such obtained Governmental Approvals to Lender.  6.2          Financial
Statements, Reports, Certificates.  (a)           Deliver to Lender: (i) as soon
as available, but no later than thirty (30) days after the last day of each
quarter, a company prepared consolidated balance sheet and income statement
covering Borrowers consolidated operations for such month certified by a
Responsible Officer and in a form acceptable to Lender; (ii) as soon as
available, but no later than one hundred twenty (120) days after the last day
of Borrowers fiscal year, audited consolidated financial statements prepared
under GAAP, consistently applied, together with an opinion on the financial
statements from an independent certified public accounting firm acceptable to
Lender in its reasonable discretion; (iii) as soon as available, but no
later than ten (10) days after the last day of Borrowers fiscal year,
Borrowers financial projections for current fiscal year as approved by
Borrowers Board of Directors; (iv) within five (5) days of delivery,
copies of all statements, reports and notices made available to all of
Borrowers security holders or to any holders of Subordinated Debt; (v) in
the event that Borrower becomes subject to the reporting requirements under the
Securities Exchange Act of 1934, as amended, within five (5) days of
filing, all reports on Form 10-K, 10-Q and 8-K filed with the Securities
and Exchange Commission or a link thereto on Borrowers or another website on
the Internet; (vi) a prompt report of any legal actions pending or
threatened against Borrower or any of its Subsidiaries that could result in
damages or costs to Borrower or any of its Subsidiaries of One Hundred Thousand
Dollars ($100,000) or more; and (vii) other financial information
reasonably requested by Lender.  (b)           Within forty five days (45) days
after the last day of each quarter, deliver to Lender with the quarterly
financial statements, a duly completed Compliance Certificate signed by a
Responsible Officer.  6.3          Taxes;
Pensions.Make, and cause each of its Subsidiaries to make, timely payment of all
foreign, federal, state, and local taxes or assessments (other than taxes and
assessments which Borrower is contesting pursuant to the terms of
Section 5.8 hereof) and shall deliver to Lender, on demand, appropriate
certificates attesting to such payments, and pay all amounts necessary to fund
all present pension, profit sharing and deferred compensation plans in
accordance with their terms.  6.4          Insurance.Keep its business and the Collateral insured
for risks and in amounts standard for companies in Borrowers industry and
location and as Lender may reasonably request. Insurance policies shall be in a
form, with companies, and in amounts that are reasonably satisfactory to
Lender. All property policies shall have a lenders loss payable endorsement
showing Lender as lender loss payee and waive subrogation against Lender, and
all liability policies shall show, or have endorsements showing, Lender, as an
additional insured. All policies (or the loss payable and additional insured
endorsements) shall provide that the Lender shall receive at least twenty (20)
days notice before canceling, amending, or declining to renew its policy. At
Lenders request, Borrower shall deliver certified copies of policies and
evidence of all premium payments. Proceeds payable under any policy shall, at
Lenders option, be payable to Lender on account of the Obligations.
Notwithstanding the foregoing, (a) so long as no Event of Default has occurred
and is continuing, Borrower shall have the option of applying the proceeds of
any casualty policy up to $50,000 with respect to any loss, but not exceeding
$100,000, in the aggregate for all losses under all casualty policies in any
one year, toward the replacement or repair of destroyed or damaged property;
provided that any such replaced or repaired property (i) shall be of equal
or like value as the replaced or repaired Collateral and (ii) shall be
deemed Collateral in which Lender has been granted a first priority security
interest, and (b) after the occurrence and during the continuance of an
Event of Default, all proceeds payable under such casualty policy shall, at the
option of Lender, be payable to Lender on account of the Obligations. If Borrower
fails to obtain insurance as required under this Section 6.5 or to pay any
amount or furnish any required proof of payment to third persons and Lender,
Lender may make all or part of such payment or obtain such insurance policies
required in this Section 6.5, and take any action under the policies
Lender deems prudent.  6.5          Litigation
Cooperation.From the date hereof and continuing through the termination of this Agreement,
make available to Lender, without expense to Lender, Borrower and its officers,
employees and agents and Borrowers books and records, to the extent that
Lender may deem them reasonably necessary to prosecute or defend any
third-party suit or proceeding instituted by or against Lender with respect to
any Collateral or relating to Borrower.


6.6          Further
Assurances.Execute any further instruments and take further action as Lender reasonably
requests to perfect or continue Lenders Lien in the Collateral or to effect
the purposes of this Agreement.  6.7          Notices
of Litigation and Default.   Borrower
will give prompt written notice to Lender of any litigation or governmental
proceedings pending or threatened (in writing) against Borrower which would
reasonably be expected to have a material adverse effect with respect to
Borrower. Without limiting or contradicting any other more specific provision
of this Agreement, promptly (and in any event within three (3) Business
Days) upon Borrower becoming aware of the existence of any Event of Default or
event which, with the giving of notice or passage of time, or both, would
constitute an Event of Default, Borrower shall give written notice to Lender of
such occurrence, which such notice shall include a reasonably detailed
description of such Event of Default or event which, with the giving of notice
or passage of time, or both, would constitute an Event of Default.  7NEGATIVE COVENANTS  Borrower
shall not do any of the following without Lenders prior written consent (not
to be unreasonably withheld or delayed):  7.1          Dispositions.Convey, sell, lease, transfer, assign, or
otherwise dispose of (collectively, Transfer),or permit any of its Subsidiaries to Transfer, all or any part of the
Collateral except in connection with Permitted Liens.  7.2          Changes
in Business, Management, Ownership, or Business Locations.(a) Engage in or permit any of its
Subsidiaries to engage in any business other than the businesses currently
engaged in by Borrower and such Subsidiary, as applicable, or reasonably
related thereto; (b) liquidate or dissolve; or (c) enter into any
transaction or series of related transactions in which the stockholders of
Borrower immediately prior to the first such transaction own less than 51% of
the voting stock of Borrower immediately after giving effect to such transaction
or related series of such transactions (other than by the sale of Borrowers
equity securities in a public offering or to venture capital investors so long
as Borrower identifies to Lender the venture capital investors prior to the
closing of the transaction). Borrower shall not, without at least thirty (30)
days prior written notice to Lender: (1) add any new offices or business
locations, including warehouses which would contain any of the Collateral
(2) change its jurisdiction of organization, (3) change its
organizational structure or type, (4) change its legal name, or
(5) change any organizational number (if any) assigned by its jurisdiction
of organization.  7.3          Mergers
or Acquisitions.Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate,
with any other Person, or acquire, or permit any of its Subsidiaries to
acquire, all or substantially all of the capital stock or property of another
Person unless (i) the cumulative cash consideration for all such
transactions is less than $3,000,000 in any fiscal year of Borrower,
(ii) no Event of Default has occurred and is continuing or would exist
after giving effect to such transactions, and (iii) Borrower is the
surviving entity. A Subsidiary may merge or consolidate into another Subsidiary
or into Borrower.  7.4          Encumbrance.Create, incur, allow, or suffer any Lien on
any of the Collateral, or permit any of its Subsidiaries to do so, except for
Permitted Liens, or permit any Collateral not to be subject to the first
priority security interest granted herein.  7.5          Subordinated
Debt.(a) Make
or permit any payment on any Subordinated Debt, except under the terms of the
subordination, intercreditor, or other similar agreement to which such
Subordinated Debt is subject, or (b) amend any provision in any document
relating to the Subordinated Debt which would increase the amount thereof or
adversely affect the subordination thereof to Obligations owed to the Lender.  7.6          Compliance.Become an investment company or a company
controlled by an investment company, under the Investment Company Act of 1940
or undertake as one of its important activities extending credit to purchase or
carry margin stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System), or use the proceeds of any Credit Extension for that
purpose; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could reasonably be expected to have a material
adverse effect on Borrowers business, or permit any of its Subsidiaries to


do
so; withdraw or permit any Subsidiary to withdraw from participation in, permit
partial or complete termination of, or permit the occurrence of any other event
with respect to, any present pension, profit sharing and deferred compensation
plan which could reasonably be expected to result in any liability of Borrower,
including any liability to the Pension Benefit Guaranty Corporation or its
successors or any other governmental agency.  8EVENTS OF DEFAULT  Any
one of the following shall constitute an event of default (anEvent of Default) under this Agreement:  8.1          Payment
Default.   Borrower fails to (a) make any payment
of principal or interest on any Credit Extension on its due date, or
(b) pay any other Obligations within three (3) Business Days after
such Obligations are due and payable (which three (3) Business Day grace
period shall not apply to payments due on the Equipment Maturity Date  8.2          Covenant
Default.  (a)           Borrower fails or neglects to perform
any obligation in Sections 6.2, 6.3, or 6.4, or violates any covenant in
Section 7; or  (b)           Borrower fails or neglects to
perform, keep, or observe any other term, provision, condition, covenant or
agreement contained in this Agreement or any Loan Documents, and as to any
default (other than those specified in this Section 8) under such other
term, provision, condition, covenant or agreement that can be cured, has failed
to cure the default within ten (10) days after the occurrence thereof;
provided, however, that if the default cannot by its nature be cured within the
ten (10) day period or cannot after diligent attempts by Borrower be cured
within such ten (10) day period, and such default is likely to be cured
within a reasonable time, then Borrower shall have an additional period (which
shall not in any case exceed thirty (30) days) to attempt to cure such default,
and within such reasonable time period the failure to cure the default shall
not be deemed an Event of Default (but no Credit Extensions shall be made
during such cure period). Grace periods provided under this Section shall
not apply, among other things, to financial covenants or any other covenants
set forth in subsection (a) above;  8.3          Material
Adverse Change.A Material Adverse Change occurs;  8.4          Attachment.(a) Any material portion of Borrowers
assets is attached, seized, levied on, or comes into possession of a trustee or
receiver and the attachment, seizure or levy is not removed in ten
(10) days; (b) the service of process seeking to attach, by trustee
or similar process, any funds of Borrower, or of any entity under control of Borrower
(including a Subsidiary), on deposit with Lender or an Affiliate;
(c) Borrower is enjoined, restrained, or prevented by court order from
conducting a material part of its business; (d) a judgment or other claim
in excess of One Hundred Thousand Dollars ($100,000.00) becomes a Lien on any
of Borrowers assets; or (e) a notice of lien, levy, or assessment is
filed against any of Borrowers assets by any government agency and not paid
within ten (10) days after Borrower receives notice. These are not Events
of Default if stayed or if a bond is posted pending contest by Borrower (but no
Credit Extensions shall be made during the cure period);  8.5          Insolvency(a) Borrower is
unable to pay its debts (including trade debts) as they become due or otherwise
becomes insolvent; (b) Borrower begins an Insolvency Proceeding; or
(c) an Insolvency Proceeding is begun against Borrower and not dismissed
or stayed within forty-five (45) days (but no Credit Extensions shall be made
while of any of the conditions described in clause (a) exist and/or until
any Insolvency Proceeding is dismissed);  8.6          Other
Agreements.There is a default in any agreement to which Borrower is a party with a
third party or parties resulting in a right by such third party or parties,
whether or not exercised, to accelerate the maturity of any Indebtedness in an
amount in excess of One Hundred Thousand Dollars ($100,000) or that could have
a material adverse effect on Borrowers business.  8.7          Judgments.A judgment or judgments, for the payment of
money in an amount, individually or in the aggregate, of at least One Hundred
Thousand Dollars ($100,000) (not covered by independent third-party insurance)
shall be rendered against Borrower and shall remain unsatisfied, or unstayed
for a period of ten (10) days


after
the entry thereof (provided that no Credit Extensions will be made prior to the
satisfaction, or stay of such judgment);  8.8          Misrepresentations.Borrower or any Person acting for Borrower
makes any representation, warranty, or other statement now or later in this
Agreement, any Loan Document or in any writing delivered to Lender or to induce
Lender to enter this Agreement or any Loan Document, and such representation,
warranty, or other statement is incorrect in any material respect when made; or  8.9          Subordinated
Debt.A
default or breach occurs under any agreement between Borrower and any creditor
of Borrower that signed a subordination, intercreditor, or other similar
agreement with Lender, or any creditor that has signed such an agreement with
Lender breaches any terms of such agreement.  9RIGHTS AND REMEDIES  9.1          Rights
and Remedies.While an Event of Default occurs and continues Lender may, without notice
or demand, do any or all of the following:  (a)           declare all Obligations immediately
due and payable (but if an Event of Default described in Section 8.5
occurs all Obligations are immediately due and payable without any action by
Lender);  (b)           stop advancing money or extending
credit for Borrowers benefit under this Agreement or under any other agreement
between Borrower and Lender;  (c)           make any payments and do any acts it
considers necessary or reasonable to protect the Collateral and/or its security
interest in the Collateral. Borrower shall assemble the Collateral if Lender
requests and make it available as Lender designates. Lender may enter premises
where the Collateral is located, take and maintain possession of any part of
the Collateral, and pay, purchase, contest, or compromise any Lien which
appears to be prior or superior to its security interest and pay all expenses
incurred. Borrower grants Lender a license to enter and occupy any of its
premises, without charge, to exercise any of Lenders rights or remedies;  (d)           apply to the Obligations any
(i) balances and deposits of Borrower it holds, or (ii) any amount
held by Lender owing to or for the credit or the account of Borrower;  (e)           ship, reclaim, recover, store,
finish, maintain, repair, prepare for sale, advertise for sale, and sell the
Collateral;  (f)            demand and receive possession of a
copy of Borrowers Books; and  (g)           exercise all rights and remedies
available to Lender under the Loan Documents or at law or equity, including all
remedies provided under the Code (including disposal of the Collateral pursuant
to the terms thereof).  9.2          Power
of Attorney.Borrower hereby irrevocably appoints Lender as its lawful
attorney-in-fact, exercisable only upon the occurrence and during the
continuance of an Event of Default, to: (a) endorse Borrowers name on any
checks or other forms of payment or security; (b) make, settle, and adjust
all claims under Borrowers insurance policies; (c) pay, contest or settle
any Lien, charge, encumbrance, security interest, and adverse claim in or to
the Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; and (d) transfer the Collateral into the
name of Lender or a third party as the Code permits. Borrower hereby appoints
Lender as its lawful attorney-in-fact to sign Borrowers name on any documents
necessary to perfect or continue the perfection of Lenders security interest
in the Collateral regardless of whether an Event of Default has occurred until
all Obligations (other than inchoate indemnity obligations and Obligations
relating to the Warrant) have been satisfied in full and Lender are under no
further obligation to make Credit Extensions hereunder. Lenders foregoing
appointment as Borrowers attorney in fact, and all of Lenders rights and
powers, coupled with an interest, are irrevocable until all Obligations (other
than inchoate indemnity obligations and Obligations relating to the Warrant)
have been fully repaid and performed and Lenders obligation to provide Credit
Extensions terminates.


9.3          Protective
Payments.If Borrower fails to obtain the insurance
called for by Section 6.5 or fails to pay any premium thereon or fails to
pay any other amount which Borrower is obligated to pay under this Agreement or
any other Loan Document, Lender may obtain such insurance or make such payment,
and all amounts so paid by Lender are Lenders Expenses and immediately due and
payable, bearing interest at the then highest applicable rate, and secured by
the Collateral. Lender will make reasonable efforts to provide Borrower with
notice of Lender obtaining such insurance at the time it is obtained or within
a reasonable time thereafter. No payments by Lender are deemed an agreement to
make similar payments in the future or Lenders waiver of any Event of Default.  9.4          Application
of Payments and Proceeds.Borrower shall have no right to specify the
order or the accounts to which Lender shall allocate or apply any payments
required to be made by Borrower to Lender or otherwise received by Lender under
this Agreement when any such allocation or application is not specified
elsewhere in this Agreement. If an Event of Default has occurred and is
continuing, Lender may apply any funds in its possession, whether from Borrower
account balances, payments, proceeds realized as the result of any disposition
of the Collateral, or otherwise, to the Obligations in such order as the Lender
shall determine in its sole discretion. Any surplus shall be paid to Borrower
or other Persons legally entitled thereto; Borrower shall remain liable to
Lender for any deficiency. If Lender, in its good faith business judgment,
directly or indirectly enters into a deferred payment or other credit
transaction with any purchaser at any sale of Collateral, Lender shall have the
option, exercisable at any time, of either reducing the Obligations by the
principal amount of the purchase price or deferring the reduction of the
Obligations until the actual receipt by Lender of cash therefor.  9.5          Liability
for Collateral.So long as Lender complies with reasonable
banking practices regarding the safekeeping of the Collateral in the possession
or under the control of Lender, Lender shall not be liable or responsible for:
(a) the safekeeping of the Collateral; (b) any loss or damage to the
Collateral; (c) any diminution in the value of the Collateral; or
(d) any act or default of any carrier, warehouseman, bailee, or other
Person. Borrower bears all risk of loss, damage or destruction of the
Collateral.  9.6          No Waiver;
Remedies Cumulative.Lenders failure, at any time or times, to
require strict performance by Borrower of any provision of this Agreement or
any other Loan Document shall not waive, affect, or diminish any right of
Lender thereafter to demand strict performance and compliance herewith or
therewith. No waiver hereunder shall be effective unless signed by Lender and
then is only effective for the specific instance and purpose for which it is
given. Lenders rights and remedies under this Agreement and the other Loan
Documents are cumulative. Lender has all rights and remedies provided under the
Code, by law, or in equity. Lenders exercise of one right or remedy is not an
election, and Lenders waiver of any Event of Default is not a continuing
waiver. Lenders delay in exercising any remedy is not a waiver, election, or
acquiescence.  9.7          Demand
Waiver.Borrower waives demand, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment
at maturity, release, compromise, settlement, extension, or renewal of
accounts, documents, instruments, chattel paper, and guarantees held by Lender
on which Borrower is liable.  10NOTICES  All
notices, consents, requests, approvals, demands, or other communication
(collectively,Communication) by any party to this Agreement or any other
Loan Document must be in writing and shall be deemed to have been validly
served, given, or delivered: (a) upon the earlier of actual receipt and
three (3) Business Days after deposit in the U.S. mail, first class, registered
or certified mail return receipt requested, with proper postage prepaid;
(b) upon transmission, when sent by electronic mail (if an email address
is specified herein) or facsimile transmission; (c) one (1) Business
Day after deposit with a reputable overnight courier with all charges prepaid;
or (d) when delivered, if hand-delivered by messenger, all of which shall
be addressed to the party to be notified and sent to the address, facsimile
number, or email address indicated below. Either Lender or Borrower may change
its address or facsimile number by giving the other party written notice
thereof in accordance with the terms of this Section 10.


If
  to Borrower:
  
  ARYx
  Therapeutics, Inc.
  6300 Dumbarton Circle
  Fremont, CA 94555Attn: Jason Barker Fax: (510) 585-2202 Email: jbarker@aryx.comwith
  a copy to:
  
  Cooley
  Godward Kronish LLP
  101 California Street5th Floor San Francisco, CA 94111-5800
  Attn: Barry Graynor, Esq.
  Fax: (415) 693-2222 Email: graynorba@cooley.comIf
  to Lender:
  
  Oxford
  Finance Corporation
  133 North Fairfax Street
  Alexandria, Virginia 22314
  Attention: General Counsel
  Fax: (703) 519-5225  11CHOICE OF LAW, VENUE AND
JURY TRIAL WAIVER  Virginia
law governs the Loan Documents without regard to principles of conflicts of
law. Borrower and Lender each submit to the exclusive jurisdiction of the State
and Federal courts in Virginia. Notwithstanding the foregoing, nothing in this
Agreement shall be deemed to operate to preclude Lender from bringing suit or
taking other legal action in any other jurisdiction to realize on the
Collateral or any other security for the Obligations, or to enforce a judgment
or other court order in favor of Lender. Borrower expressly submits and
consents in advance to such jurisdiction in any action or suit commenced in any
such court, and Borrower hereby waives any objection that it may have based
upon lack of personal jurisdiction, improper venue, or forum non conveniens and
hereby consents to the granting of such legal or equitable relief as is deemed
appropriate by such court. Borrower hereby waives personal service of the
summons, complaints, and other process issued in such action or suit and agrees
that service of such summons, complaints, and other process may be made by
registered or certified mail addressed to Borrower at the address set forth in
Section 10 of this Agreement and that service so made shall be deemed
completed upon the earlier to occur of Borrowers actual receipt thereof or
three (3) days after deposit in the U.S. mails, proper postage prepaid.  TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER
AND LENDER EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY
CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL
OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR THE PARTIES TO ENTER
INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.  12GENERAL PROVISIONS  12.1Successors and Assigns.This Agreement binds and is for the benefit of the successors and permitted
assigns of each party. Borrower may not assign this Agreement or any rights or
obligations under it without Lenders prior written consent (which may be
granted or withheld in Lenders discretion). Lender has the right, without the
consent of or notice to Borrower, to sell, transfer, assign, negotiate, or
grant participation in all or any part of, or any interest in, Lenders
obligations, rights, and benefits under this Agreement and the other Loan
Documents.  12.2Indemnification/Expenses.Borrower agrees to indemnify, defend and hold Lender and its directors,
officers, employees, agents, attorneys, or any other Person, affiliated
with or representing Lender harmless against: (a) all obligations,
demands, claims, and liabilities (collectively, Claims)asserted by any other party in connection
with the transactions contemplated by the Loan Documents; and (b) all
losses or Lenders Expenses


incurred,
or paid by Lender from, following, or arising from transactions between Lender
and Borrower (including reasonable attorneys fees and expenses), except for
Claims and/or losses directly caused by Lenders gross negligence or willful
misconduct.  12.3        Time of
Essence.Time is of the essence for the performance of
all Obligations in this Agreement.  12.4        Severability
of Provisions.Each provision of this Agreement is severable
from every other provision in determining the enforceability of any provision.  12.5        Amendments
in Writing; Integration.All amendments to this Agreement must be in
writing signed by Lender and Borrower. This Agreement and the Loan Documents
represent the entire agreement about this subject matter and supersede prior
negotiations or agreements. All prior agreements, understandings,
representations, warranties, and negotiations between the parties about the
subject matter of this Agreement and the Loan Documents merge into this
Agreement and the Loan Documents.  12.6        Counterparts.This Agreement may be executed in any number
of counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, is an original, and all taken together,
constitute one Agreement.  12.7        Survival.All covenants, representations and warranties made in this Agreement
continue in full force until this Agreement has terminated pursuant to its
terms and all Obligations (other than inchoate indemnity obligations and any
other obligations which, by their terms, are to survive the termination of this
Agreement and Obligations relating to the Warrant) have been satisfied. The
obligation of Borrower in Section 12.2 to indemnify Lender shall survive
until the statute of limitations with respect to such claim or cause of action
shall have run.  12.8        Confidentiality.In handling any confidential information,
Lender shall exercise the same degree of care that it exercises for its own
proprietary information, but disclosure of information may be made: (a) to
Lenders Subsidiaries or Affiliates; (b) to prospective transferees or
purchasers of any interest in the Credit Extensions (provided, however, Lender
shall use commercially reasonable efforts to obtain such prospective
transferees or purchasers agreement to the terms of this provision);
(c) as required by law, regulation, subpoena, or other order; (d) to
regulators or as otherwise required in connection with an examination or audit;
and (e) as Lender considers appropriate in exercising remedies under this
Agreement. Confidential information does not include information that either:
(i) is in the public domain or in Lenders possession when disclosed to
Lender, or becomes part of the public domain after disclosure to Lender through
no fault of Lender; or (ii) is disclosed to Lender by a third party, if Lender
does not know that the third party is prohibited from disclosing the
information.  12.9Right of Set Off.   Borrower
hereby grants to Lender, a lien, security interest and right of set off as
security for all Obligations to Lender hereunder, whether now existing or
hereafter arising upon and against all deposits, credits, collateral and
property, now or hereafter in the possession, custody, safekeeping or control
of Lender or any entity under the control of Lender or in transit to any of
them. At any time after the occurrence and during the continuance of an Event
of Default, without demand or notice, Lender may set off the same or any part
thereof and apply the same to any liability or obligation of Borrower even
though unmatured and regardless of the adequacy of any other collateral
securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE LENDER TO EXERCISE ITS
RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE
OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH
DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER ARE HEREBY KNOWINGLY,
VOLUNTARILY AND IRREVOCABLY WAIVED.  13DEFINITIONS  13.1        Definitions.As used in this Agreement, the following
terms have the following meanings:  Affiliateof any Person is a Person that owns or controls directly or indirectly
the Person, any Person that controls or is controlled by or is under common
control with the Person, and each of that Persons senior executive officers,
directors, partners and, for any Person that is a
limited liability company, that Persons managers and members.


Agreementis defined in the preamble hereof.  Basic Rateis the per annum rate of interest (based on a year of 360 days) equal
to the greater of: (i) 11.50%, and (ii) the sum of (a) the
3-month U.S. LIBOR rate as reported in the Wall Street Journal three
(3) Business days prior to the Funding Date, plus (b) the Loan
Margin.  Borroweris defined in the preamble hereof.  Borrowers Booksare all Borrowers books and records including ledgers, federal and
state tax returns, records regarding the Collateral and all computer programs
or storage or any equipment containing such information.  Borrowing Resolutionsare, with respect to any Person, those
resolutions adopted by such Persons Board of Directors and delivered by such
Person to Lender approving the Loan Documents to which such Person is a party
and the transactions contemplated thereby, together with a certificate executed
by its secretary on behalf of such Person certifying that (a) such Person
has the authority to execute, deliver, and perform its obligations under each
of the Loan Documents to which it is a party, (b) that attached as
Exhibit A to such certificate is a true, correct, and complete copy of the
resolutions then in full force and effect authorizing and ratifying the
execution, delivery, and performance by such Person of the Loan Documents to
which it is a party, (c) the name(s) of the Person(s) authorized
to execute the Loan Documents on behalf of such Person, together with a sample
of the true signature(s) of such Person(s), and (d) that Lender may
conclusively rely on such certificate unless and until such Person shall have
delivered to Lender a further certificate canceling or amending such prior
certificate.  Business Dayis any day that is not a Saturday, Sunday or a day on which Lender is
closed.  Claims are defined in Section 12.2.  Codeis the Uniform Commercial Code, as the same may, from time to time, be
enacted and in effect in the Commonwealth of Virginia provided, that, to the
extent that the Code is used to define any term herein or in any Loan Document
and such term is defined differently in different Articles or Divisions of the
Code, the definition of such term contained in Article or Division 9 shall
govern; provided further, that in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection, or priority of, or
remedies with respect to, Lenders Lien on any Collateral is governed by the
Uniform Commercial Code in effect in a jurisdiction other than Virginia, the
term Codeshall mean the Uniform
Commercial Code as enacted and in effect in such other jurisdiction solely for
purposes on the provisions thereof relating to such attachment, perfection,
priority, or remedies and for purposes of definitions relating to such
provisions.  Collateralis any and all properties, rights and assets of Borrower described on Exhibit A.  Communicationis defined in Section 10.  Compliance Certificateis that certain certificate in the form
attached hereto as Exhibit C.  Contingent Obligationis, for any Person, any direct or indirect
liability, contingent or not, of that Person for (a) any indebtedness,
lease, dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (b) any obligations for undrawn letters of credit for the account
of that Person; and (c) all obligations from any interest rate, currency
or commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but Contingent
Obligation does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under any guarantee or other support arrangement.  Credit Extensionis any Equipment Advance or any other
extension of credit by Lender for Borrowers benefit.


Default is
any event which with notice or passage of time or both, would constitute an
Event of Default.  Default Rate
is defined in Section 2.2.(b).  Designated Deposit Account is Borrowers deposit account, account number
                             ,
maintained with
                                  .  Dollars, dollarsand $ each mean
lawful money of the United States.  Effective Date
is defined in the preamble of this Agreement.  Eligible Equipment is the following to the extent it complies with all of Borrowers
representations and warranties to Lender, is acceptable to Lender in all
respects, is located at Borrowers facility located in Fremont, California or
such other location of which Lender has approved in writing, and is subject to
a first priority Lien in favor of Lender: (a) general purpose equipment
(computer equipment, information technology equipment, office equipment,
manufacturing and laboratory equipment and office furnishings, subject to the
limitations set forth herein, and (b) Other Equipment.  Equipmentis all equipment as defined in the Code with such additions to such
term as may hereafter be made, and includes without limitation all machinery,
fixtures, goods, vehicles (including motor vehicles and trailers), and any
interest in any of the foregoing.  Equipment Advance isdefined in Section 2.1.1(a).  Equipment Lineis an Equipment Advance in an aggregate amount of One Million Five
Hundred Thousand Dollars ($1,500,000).  Equipment Maturity Dateis the date which is thirty-five (35) months
after the first Payment Date with respect to the Equipment Advance.  ERISAis the Employee Retirement Income Security Act of 1974, and its regulations.  Event of Defaultis defined in Section 8.  Event of Lossis defined in Section 2.1.1(c).  Final Paymentis a payment (in addition to and not a substitution for the regular
monthly payments of principal plus accrued interest) due on the earlier to
occur of (a) the Equipment Maturity Date, (b) the acceleration of the
Equipment Advance, or (c) the prepayment of the Equipment Advance, equal
to the amount of the Equipment Advance multiplied by the Final Payment
Percentage.  Final Payment Percentage is two percent (2.00%).  Financed Equipmentis all Eligible Equipment in which Borrower
has any interest, the purchase of which is financed by the Equipment Advance.  Funding Dateis the date on which the Credit Extension is
made to or on account of Borrower which shall be a Business Day.  GAAPis generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
Person as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.


Governmental Approvalis any consent, authorization, approval,
order, license, franchise, permit, certificate, accreditation, registration,
filing or notice, of, issued by, from or to, or other act by or in respect of,
any Governmental Authority.  Governmental Authorityis any nation or government, any state or
other political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization.  Indebtednessis (a) indebtedness for borrowed money
or the deferred price of property or services, such as reimbursement and other
obligations for surety bonds and letters of credit, (b) obligations
evidenced by notes, bonds, debentures or similar instruments, (c) capital
lease obligations, and (d) Contingent Obligations.  Insolvency Proceedingis any proceeding by or against any Person
under the United States Bankruptcy Code, or any other bankruptcy or insolvency
law, including assignments for the benefit of creditors, compositions,
extensions generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.  Lendershall mean Oxford Finance Corporation and each assignee that becomes a
party to this Agreement pursuant to Section 12.1.  Lenders Expensesare all audit fees and expenses, costs, and
expenses (including reasonable attorneys fees and expenses) for preparing,
amending, negotiating, administering, defending and enforcing the Loan
Documents (including, without limitation, those incurred in connection with
appeals or Insolvency Proceedings) or otherwise incurred with respect to Borrower.  Lienis a claim, mortgage, deed of trust, levy, charge, pledge, security
interest or other encumbrance of any kind, whether voluntarily incurred or
arising by operation of law or otherwise against any property.  Loan Documentsare, collectively, this Agreement, the
Warrant, the Perfection Certificate, the Secured Promissory Note and any other
present or future agreement between Borrower and/or
for the benefit of Lender in connection with this Agreement, all as amended,
restated, or otherwise modified.  Loan Marginis 770 basis points.  Material Adverse Changeis (a) a material impairment in the
perfection or priority of Lenders Lien in the Collateral or in the value of
such Collateral; (b) a material adverse change in the business,
operations, or condition (financial or otherwise) of Borrower; or (c) a
material impairment of the prospect of repayment of any portion of the
Obligations.  Obligationsare Borrowers obligation to pay when due any
debts, principal, interest, Lenders Expenses, Prepayment Fee, the Final
Payment and other amounts Borrower owes Lender now or later, whether under this
Agreement, the Loan Documents, or otherwise, including, without limitation, all
obligations relating to letters of credit (including reimbursement obligations
for drawn and undrawn letters of credit), cash management services, and foreign
exchange contracts, if any, and including interest accruing after Insolvency
Proceedings begin (whether or not allowed) and debts, liabilities, or
obligations of Borrower assigned to Lender, and the performance of Borrowers
duties under the Loan Documents.  Operating Documentsare, for any Person, such Persons formation
documents, as certified with the Secretary of State of such Persons state of
formation on a date that is no earlier than 30 days prior to the Effective
Date, and (a) if such Person is a corporation, its bylaws in current form,
(b) if such Person is a limited liability company, its limited liability
company agreement (or similar agreement), and (c) if such Person is a
partnership, its partnership agreement (or similar agreement), each of the
foregoing with all current amendments or modifications thereto.  Other Equipment is
leasehold improvements, intangible property such as computer software and
software licenses, equipment specifically designed or manufactured for
Borrower, other intangible property, limited


use property and other similar
property and soft costs approved by Lender, including taxes, shipping, warranty
charges, freight discounts and installation expenses.  Pay Proceeds Letteris that certain form attached hereto as Exhibit B.  Payment Dateis the first day of each calendar month.  Perfection Certificateis defined in Section 5.1.  Permitted Investmentsare investments shown on the Perfection
Certificate and existing on the Effective Date, cash equivalents and marketable
securities.  Permitted Liensare:  (a)           Liens existing on
the Effective Date and shown on the Perfection Certificate or arising under
this Agreement and the other Loan Documents;  (b)           Liens for taxes,
fees, assessments or other government charges or levies, either not delinquent
or being contested in good faith and for which Borrower maintains adequate
reserves on its Books, provided that no notice of any such Lien has been filed
or recorded under the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations adopted thereunder;  (c)           Liens of carriers,
warehousemen, suppliers, or other Persons that are possessory in nature arising
in the ordinary course of business so long as such Liens are not delinquent or
remain payable without penalty or are being contested in good faith and by
appropriate proceedings which proceedings have the effect of preventing the
forfeiture or sale of the property subject thereto;  (d)           purchase money Liens
(i) on Equipment acquired or held by Borrower incurred for financing the
acquisition of the Equipment securing no more than One Hundred Fifty Thousand
Dollars ($150,000) in the aggregate amount outstanding, or (ii) existing on
Equipment when acquired, if the Lien is confined to the property and
improvements and the proceeds of the Equipment;  (e)           Liens incurred in
the extension, renewal or refinancing of the indebtedness secured by Liens
described in (a) through (d), but any extension, renewal or
replacement Lien must be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness may not increase;  (f)            leases or subleases
of real property granted in the ordinary course of business, and leases,
subleases, non-exclusive licenses or sublicenses of property (other than real
property or intellectual property) granted in the ordinary course of Borrowers
business, if the leases, subleases, licenses and sublicenses do not
prohibit granting Lender a security interest; and  (g)           non-exclusive
licenses of intellectual property granted to third parties in the ordinary
course of business.  Personis any individual, sole proprietorship, partnership, limited liability
company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.  Prepayment Feeshall be an additional fee payable to Lender
in amount equal to:  (i)for a prepayment made from the Funding Date but
before the nineteenth month from the Funding Date of the Equipment Advance,
five percent (5.0%) of the outstanding principal amount of the Equipment
Advance prepaid;  (ii)for a prepayment made on or after the nineteenth
month but before the twenty fourth month after the Funding Date of the
Equipment Advance, three percent (3.0%) of the outstanding principal amount of
the Equipment Advance prepaid; or


(iii)for a prepayment made on or after the twenty
fourth month until the Equipment Maturity Date, two percent (2.0%) of the
outstanding principal amount of the Equipment Advance prepaid.  Registered Organizationis any registered organization as defined
in the Code with such additions to such term as may hereafter be made.  Requirement of Lawis as to any Person, the organizational or
governing documents of such Person, and any law (statutory or common), treaty,
rule or regulation or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.  Responsible Officeris any of the Chief Executive Officer,
President, Chief Financial Officer or Principal Accounting Officer of Borrower.  Secured Promissory Noteis defined in Section 2.3.  Secured Promissory Note Recordis a record maintained by Lender with respect
to the outstanding Obligations and credits made thereto.  Subordinated Debtis indebtedness incurred by Borrower
subordinated to all of Borrowers now or hereafter indebtedness to Lender
(pursuant to a subordination, intercreditor, or other similar agreement in form
and substance satisfactory to Lender entered into between Lender, Borrower and
the other creditor), on terms acceptable to Lender.  Subsidiarymeans, with respect to any Person, any Person of which more than 50.0%
of the voting stock or other equity interests (in the case of Persons other
than corporations) is owned or controlled, directly or indirectly, by such
Person or one or more Affiliates of such Person.  Transferis defined in Section 7.1.  Warrantis that certain Warrants to Purchase Stock dated as of the Effective
Date executed by Borrower in favor of Lender.


IN WITNESS WHEREOF,the parties hereto have caused this Agreement to be executed as of the
Effective Date.  BORROWER:ARYx
  THERAPEUTICS, INC.By
  
  /s/
  JOHN VARIANName:
  JOHN
  VARIANTitle:
  COO  LENDER:OXFORD
  FINANCE CORPORATION, as LenderByName:Title:


COLLATERAL MIX RIDER  TO LOAN AND SECURITY AGREEMENT NO. 8081149
DATED DECEMBER 31, 2008 BETWEEN OXFORD FINANCE CORPORATION (the LENDER) 
AND ARYX THERAPEUTICS, INC. (the BORROWER)  Borrower
shall cause the composition and mix of Equipment to conform to and meet the
following concentration requirements (hereinafter Concentration Requirement)
for each class of Equipment (hereinafter Equipment Class) as identified and
set forth below. Borrower herein represents and warrants that it shall maintain
each such Equipment Class and its respective Concentration Requirement,
except where Lender (at its sole and absolute discretion) authorizes any
variance from the Concentration Requirement (Concentration Variance). If
Lender authorizes the Concentration Variance then, within 120 days of the date
such Concentration Variance occurs, Borrower will do one of the following (a
Concentration Correction):  1.Grant to Lender a security interest in
additional equipment satisfactory to Lender, not previously subject to Lenders
security interest (collectively, the Additional Equipment), in sufficent type
and amount so that the Concentration Requirement set forth below is met and the
Concentration Variance is eliminated. The Additional Equipment shall be subject
to all of the terms and conditions of the Loan and Security Agreement,
including without limitation, Borrowers representations, warranties, and
covenants, which shall be deemed remade by Borrower upon its grant of a
security interest in the Additional Equipment.  2.Pay Lender cash in an amount equal to the
Concentration Variance to hold as cash collateral until the Note is fully
repaid. Borrower hereby grants Lender a security interest in such cash
collateral and all proceeds and products thereof. Borrower agrees that such
cash collateral held by Lender: (a) shall not bear interest, (b) may
be commingled with other funds of Lender, and (c) may be applied by Lender
to amounts owing by Borrower upon the occurrence and during the continuance of
any Event of Default under the Loan and Security Agreement or the Note.  The
failure of Borrower to do a Concentration Correction within the 120-day time
period shall constitute a Default under the Note and the Loan and Security
Agreement.  Equipment
  Class
  
  Concentration
  RequirementLaboratory & Manufacturing Equipment
  
  Minimum
  of 65%Computer Equipment
  
  Maximum
  of 8%Furniture/Office
  
  Maximum
  of 7%Soft
  
  Maximum
  of 20%  [Signature page follows]


COLLATERAL MIX RIDER  Dated as of:December 31, 2008  OXFORD FINANCE CORPORATION
  
  ARYX THERAPEUTICS, INC.By:
  
  
  By:
  /s/ JOHN VARIANName:
  
  
  Name:
  JOHN VARIANTitle:
  
  
  Title:
  COO


POST CLOSING OBLIGATIONS LETTER  December 31,
2008  RE: Loan and Security Agreement No.8081149,
dated as of December 31, 2008 (theLoan Agreement),by and between ARYx Therapeutics. Inc. (Borrower)and Oxford Finance Corporation (Lender).  Ladies and Gentlemen:  This letter shall confirm
our agreement regarding the post-closing requirements for the Loan Agreement.
This Letter is a Loan Document as such term is defined in the Loan Agreement.
All capitalized terms used in this letter agreement but not defined herein
shall have the meanings given such terms in the Loan Agreement.  The Borrower shall deliver
or cause to be delivered to Lender the following, as soon as practicable and in
any event by the applicable deadlines set forth below (subject to any
extensions of any such deadline as may be granted by Lender in its discretion
in writing), in form and substance reasonably satisfactory to Lender:  1.As soon as available and, in any event, no
later than 5:00PM New York time on Tuesday February 17th,
2009, the Borrower shall cause to be delivered to Lenders counsel a fully
executed Landlord Consent and Waiver for 6300 Dumbarton Circle Fremont, CA
94555; and  2.As soon as available and, in any event, no
later than 5:00PM New York time on Monday January 12th,
2009, the Borrower shall cause to be delivered to Lenders counsel a fully
executed Perfection Certificate.  If Borrower is unable to
obtain the Landlord Consent and Waiver in form and content and satisfactory to
Lender within forty-five (45) days after the date hereof, such failure shall
constitute a Default under the Loan Agreement. If Borrower is unable to obtain
the Perfection Certificate after the date hereof, such failure shall constitute
a Default under the Loan Agreement.  [Remainder of page left intentionally
blank; Signature pages follow]


Very truly yours,  OXFORD
  FINANCE CORPORATION  By:Name:Title:   ACCEPTED AND AGREED TO:ARYx THERAPEUTICS,
  INC.  By:
  /s/ JOHN
  VARIANName:
  JOHN VARIANTitle:
  COO


EXHIBIT
A  The Collateral consists of all right, title
and interest of Borrower in and to Equipment financed by Lender pursuant to the
Agreement including the attached list:  1


COLLATERAL SCHEDULE NO. 01 (36 MONTH AMORTIZATION)  THIS
COLLATERAL SCHEDULE NO. 01is annexed to and made a part of that certain Loan and Security
Agreement No. 8081149 dated as of December 31, 2008 (Agreement)
between Oxford Finance Corporation, together with its successors and assigns,
if any, as Lender, and ARYx Therapeutics, Inc. as Borrower, and describes
collateral in which Borrower has granted Lender a security interest in
connection with the Indebtedness (as defined in the Agreement) including
without limitation that certain Promissory Note dated December 31, 2008 in
the original principal amount of $1,000,000.00 (Note).  Borrower hereby reaffirms all of the
representations, warranties, and covenants contained in the Agreement and the
Note as of the date hereof and further represents and warrants to Lender that
no default has occurred and is continuing as of the date hereof.  See attached
Exhibit A for list of Collateral, all of which Collateral for this Schedule is
located at the following address(es). If more than one address, Exhibit A
contains a column with an indication of the location of each item:  Address 1: 6300 Dumbarton Circle, Fremont, CA 94555   [Signature page follows]


LENDER:
  
  BORROWER:Oxford
  Finance Corporation
  
  ARYx
  Therapeutics, Inc.  By:
  
  
  By:
  /s/ JOHN VARIAN  Name:
  
  
  Name:
  JOHN VARIAN  Title:
  
  
  Title:
  COO  Date:
  
  
  Date:
  31 - December - 2008


EXHIBIT
B  [Pay
Proceeds Letter to be attached]


EXHIBIT
C COMPLIANCE
CERTIFICATE  TO:
  Oxford Finance
  Corporation, as Lender
  
  Date: FROM: ARYx THERAPEUTICS, INC.  The undersigned authorized
officer of ARYx THERAPEUTICS, INC. (Borrower) certifies that under the terms
and conditions of the Loan and Security Agreement between Borrower and Lender
(the Agreement), (1) Borrower is in complete compliance for the period
ending                        
with all required covenants except as noted below, (2) there are no Events
of Default, except as noted below, (3) all representations and warranties
in the Agreement are true and correct in all material respects on this date
except as noted below; provided, however, that such materiality qualifier shall
not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof; and provided, further
that those representations and warranties expressly referring to a specific
date shall be true, accurate and complete in all material respects as of such
date, (4) Borrower, and each of its Subsidiaries, has timely filed all
required tax returns and reports, and Borrower has timely paid all foreign,
federal, state and local taxes, assessments, deposits and contributions owed by
Borrower except as otherwise permitted pursuant to the terms of Section 5.8
of the Agreement, and (5) no Liens have been levied or claims made against
Borrower or any of its Subsidiaries relating to unpaid employee payroll or
benefits of which Borrower has not previously provided written notification to
Lender. Attached are the required documents supporting the certification. The
undersigned certifies, in the capacity as an officer of the Borrower, that
these are prepared in accordance with GAAP consistently applied from one period
to the next except as explained in an accompanying letter or footnotes. The
undersigned acknowledges, in the capacity as an officer of the Borrower, that
no borrowings may be requested at any time or date of determination that
Borrower is not in compliance with any of the terms of the Agreement, and that
compliance is determined not just at the date this certificate is delivered.
Capitalized terms used but not otherwise defined herein shall have the meanings
given them in the Agreement.  Please
indicate compliance status by circling Yes/No under Complies column.  Reporting Covenant
  
  Required
  
  CompliesQuarterly
  Financial Statements Compliance Certificate
  
  Quarterly
  within 45 days
  
  Yes  NoAudited
  Financial Statements
  
  Annually
  within 120 days after FYE
  
  Yes  NoBoard
  Approved Projections
  
  Annually
  within 10 days after FYE
  
  Yes  No  The following are the
exceptions with respect to the certification above: (If no exceptions exist,
state No exceptions to note.)  LENDER
  USE ONLYReceived by:AUTHORIZED SIGNERBy:Name:
  
  
  Date:Title:Verified:AUTHORIZED
  SIGNERDate:Compliance Status:   Yes    No


EXHIBIT D  [SECURED PROMISSORY NOTE TO BE PROVIDED BY LENDER]


Promissory Note
  
  Loan and Security
  Agreement No. 8081149Schedule No. 01  PROMISSORY NOTE To Loan and Security Agreement No. 8081149  December 31, 2008  FOR
VALUE RECEIVED, ARYx Therapeutics, Inc., a Delaware corporation, located
at the address stated below (Maker)promises
to pay to the order of Oxford Finance
Corporationor any subsequent holder hereof (each, a Payee)at its office
located at 133 N. Fairfax Street, Alexandria,
VA 22314or at such other place as Payee or the holder hereof may
designate, the principal sum of One Million
Dollars ($1,000,000.00),with interest on the unpaid principal
balance, from the date hereof through and including the dates of payment, at a
fixed interest rate of eleven and fifty one-hundreths percent (11.50%) per
annum, in thirty-six (36) consecutive monthly installments of principal and
interest, each a Periodic Installmentas
follows:  PeriodicInstallment
  
  Amount1- 36
  
  $
  32,976.01  and
a final installment which shall be in the amount of the total outstanding
principal and interest, if any. The first Periodic Installment shall be due and
payable on February 1, 2009 and the following Periodic Installments and
the final installment shall be due and payable on the first day of each
succeeding month (each, a Payment Date) beginning on March 1, 2009.
Such installments have been calculated on the basis of a 360-day year of twelve
30-day months. Each payment may, at the option of the Payee, be calculated and
applied on an assumption that such payment would be made on its due date. Maker
agrees to pay any initial partial month interest payment fromthe date of this Note to the first day of the following month (Interim
Interest). (**Note:  Oxford
will invoice Debtor for the Interim Interest)  On the scheduled due date of the final installment
or,if earlier, on the date of any prepayment of
the entire outstanding balance of principal and accrued interest, the Maker
shall also pay to Payee a final payment (Final Payment) equal to $20,000.00.
For the avoidance of doubt, this Final Payment is a fixed payment that is in
addition to, and not in lieu of: a) all amounts of principal and interest due
and owing from the Maker; and b) the prepayment premium due to Payee that is
calculated as a percentage of the outstanding principal and further described
below in this promissory note. The amount of the Final Payment shall not be
adjusted on account of any such prepayment of principal and interest.  Defined
terms not otherwise defined herein shall have the meaning given to them in the
Security Agreement.  The
acceptance by Payee of any payment which is less than payment in full of all
amounts due and owing at such time shall not constitute a waiver of Payees
right to receive payment in full at such time or at any prior or subsequent
time.  The
Maker hereby expressly authorizes the Payee to insert the date value is
actually given in the blank space on the face hereof and on all related
documents pertaining hereto.  This
Note is secured by a Loan and Security Agreement dated as of December         ,
2008 between Maker and Payee (hereinafter called the Security Agreement and
the Security Agreement, this Note and any other document evidencing or securing
this loan is hereinafter called a Debt Document).  Time
is of the essence hereof. If any installment or any other sum due under this
Note or the Security Agreement is not received when due, the Maker agrees to
pay, in addition to the amount of each such installment or other sum, a late
payment charge of five percent (5%) of the amount of said installment or other
sum, but not exceeding any lawful maximum. If (i) Maker fails to make
payment of any amount due hereunder; or (ii) Maker is in default under, or
fails to perform under any term or condition contained in the Security Agreement,
then the entire principal sum remaining unpaid, together with all accrued
interest thereon and any other sum payable (including, without limitation, the
prepayment premium set forth hereinafter) under this Note or the Security
Agreement, at the election of Payee, shall immediately become due and payable,
with interest thereon at the lesser of    1


eighteen
percent (18%) per annum or the highest rate not prohibited by applicable law
from the date of such accelerated maturity until paid (both before and after
any judgment).  Notwithstanding
anything to the contrary contained herein or in the Security Agreement, Maker
may prepay in full, but not in part, its Obligations hereunder by payment of
the entire Obligations, plus an additional sum as a prepayment premium which
shall be equal to the following percentages of the remaining principal balance
for the indicated period:  (i)for a prepayment made from the Funding Date
but before the nineteenth month from the Funding Date of the Equipment Advance,
five percent (5.0%) of the outstanding principal amount of the Equipment
Advance prepaid;  (ii)for a prepayment made on or after the nineteenth month but before the
twenty fourth month after the Funding Date of the Equipment Advance, three
percent (3.0%) of the outstanding principal amount of the Equipment Advance
prepaid; or  (iii)for a prepayment made on or after the twenty fourth month until the
Equipment Maturity Date, two percent (2.0%) of the outstanding principal amount
of the Equipment Advance prepaid.  The
Maker and all sureties, endorsers, guarantors or any others (each such person,
other than the Maker, anObligor)who may at any time become liable for the
payment hereof jointly and severally consent hereby to any and all extensions
of time, renewals, waivers or modifications of, and all substitutions or
releases of, security or of any party primarily or secondarily liable on this
Note or the Security Agreement or any term and provision of either, which may
be made, granted or consented to by Payee, and agree that suit may be brought
and maintained against any one or more of them, at the election of Payee
without joinder of any other as a party thereto, and that Payee shall not be
required first to foreclose, proceed against, or exhaust any security hereof in
order to enforce payment of this Note. The Maker and each Obligor hereby waives
presentment, demand for payment, notice of nonpayment, protest, notice of
protest, notice of dishonor, and all other notices in connection herewith, as
well as filing of suit (if permitted by law) and diligence in collecting this
Note or enforcing any of the security hereof, and agrees to pay (if and to the
extent permitted by law) all expenses incurred in collection, including Payees
reasonable attorneys fees.  Maker
and Payee intend to strictly comply with all applicable federal and Virginia
laws, including applicable usury laws (or the usury laws of any jurisdiction
whose usury laws are deemed to apply to the Note or any other Debt Document
despite the intention and desire of the parties to apply the usury laws of the
Commonwealth of Virginia). Accordingly, the provisions of this paragraph shall
govern and control over every other provision of this Note or any other Debt
Document which conflicts or is inconsistent with this Section, even if such
provision declares that it controls. As used in this paragraph, the terminterestincludes the aggregate of all charges, fees,
benefits or other compensation which constitute interest under applicable law, provided that, to the maximum extent permitted by applicable law, (a) any
non-principal payment shall be characterized as an expense or as compensation
for something other than the use, forbearance or detention of money and not as
interest, and (b) all interest at any time contracted for, reserved,
charged or received shall be amortized, prorated, allocated and spread, in
equal parts during the full term of the obligations. In no event shall Maker or
any other person be obligated to pay, or Payee have any right or privilege to
reserve, receive or retain, (a) any interest in excess of the maximum
amount of non-usurious interest permitted under the laws of the Commonwealth of
Virginia or the applicable laws (if any) of the United States or of any other
state, or (b) total interest in excess of the amount which Payee could
lawfully have contracted for, reserved, received, retained or charged had the
interest been calculated for the full term of the obligations. On each day, if any,
that the interest rate (the Stated Rate) called for under
this Note or any other Debt Document exceeds the maximum non-usurious rate, the
rate at which interest shall accrue shall automatically be fixed by operation
of this sentence at the maximum non-usurious rate for that day. Thereafter,
interest shall accrue at the Stated Rate unless and until the Stated Rate again
exceeds the maximum non-usurious rate, in which case, the provisions of the
immediately preceding sentence shall again automatically operate to limit the
interest accrual rate to the maximum non-usurious rate. The daily interest
rates to be used in calculating interest at the maximum non-usurious rate shall
be determined by dividing the applicable maximum non-usurious rate by the number
of days in the calendar year for which such calculation is being made. None of
the terms and provisions contained in this Note or in any other Debt Document
which directly or indirectly relate to interest shall ever be construed without
reference to this paragraph, or be construed to create a contract to pay for
the use, forbearance or detention of money at an interest rate in excess of the
maximum non-usurious rate. If the term of any obligation is shortened by reason
of acceleration of maturity as a result of any Default or by any other cause,
or by reason of any required or permitted prepayment, and if for that (or any
other) reason Payee at any time,  2


including
but not limitedto, the
stated maturity, is owed or receives (and/or has received) interest in excess
of interest calculated at the maximum non-usurious rate, then and in any such
event all of any such excess interest shall be canceled automatically as of the
date of such acceleration, prepayment or other event which produces the excess,
and, if such excess interest has been paid to Payee, it shall be credited pro tanto against the then-outstanding principal balance of Makers obligations
to Payee, effective as of the date or dates when the event occurs which causes
it to be excess interest, until such excess is exhausted or all of such
principal has been fully paid and satisfied, whichever occurs first, and any
remaining balance of such excess shall be promptly refunded to its payor.  THE MAKER HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR
INDIRECTLY, THIS NOTE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN MAKER
AND PAYEE RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED
TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN MAKER
AND PAYEE. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY
AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION,
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS.) THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT
BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS NOTE, ANY
RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS
TRANSACTION OR ANY RELATED TRANSACTION. IN THE EVENT OF LITIGATION, THIS NOTE MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.  This
Note and the Security Agreement constitute the entire agreement of the Maker
and Payee with respect to the subject matter hereof and supersedes all prior
understandings, agreements and representations, express or implied.  No
variation or modification of this Note, or any waiver of any of its provisions
or conditions, shall be valid unless in writing and signed by an authorized
representative of Maker and Payee. Any such waiver, consent, modification or
change shall be effective only in the specific instance and for the specific
purpose given.  Any
provision in this Note or the Security Agreement which is in conflict with any
statute, law or applicable rule shall be deemed omitted, modified or
altered to conform thereto.  Upon
receipt of an affidavit of an officer of Payee as to the loss, theft,
destruction or mutilation of this Note or any Debt Document which is not of
public record, and, in the case of any such loss, theft, destruction or
mutilation, upon surrender and cancellation of such Note or other Debt
Document, Maker will issue, in lieu thereof, a replacement Note or other Debt
Document in the same principal amount thereof and otherwise of like tenor.  It
is understood and agreed that this Note and all of the Debt Documents were
negotiated and have been or will be delivered to Payee in the Commonwealth of
Virginia, which State the parties agree has a substantial relationship to the
parties and to the underlying transactions embodied by this Note and the Debt
Documents. Maker agrees to furnish to Payee at Payees office in Alexandria,
VA, all further instruments, certifications and documents to be furnished
hereunder. The parties also agree that if collateral is pledged to secure the
debt evidenced by this Note, that the state or states in which such collateral
is located each have a substantial relationship to the parties and to the
underlying transaction embodied by this Note and the Debt Documents.  MAKER
AGREES THAT THE PAYEE OF THIS NOTE SHALL HAVE THE OPTION BY WHICH STATE LAWS
THIS NOTE SHALL BE GOVERNED AND CONSTRUED: (A) THE LAWS OF THE
COMMONWEALTH OF VIRGINIA; OR (B) IF COLLATERAL HAS BEEN PLEDGED TO SECURE
THE DEBT EVIDENCED BY THIS NOTE, THEN BY THE LAWS OF THE STATE OR STATES WHERE
THE COLLATERAL IS LOCATED, AT PAYEES OPTION. THIS CHOICE OF STATE LAWS IS
EXCLUSIVE TO THE PAYEE OF THIS NOTE. MAKER SHALL NOT HAVE ANY OPTION TO  3


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THE LAWS BY WHICH THIS NOTE SHALL BE GOVERNED. MAKER AND GUARANTORS HEREBY
CONSENT TO THE EXERCISE OF JURISDICTION OVER IT BY ANY FEDERAL COURT SITTING IN
VIRGINIA OR ANY VIRGINIA COURT SELECTED BY PAYEE, FOR THE PURPOSES OF ANY AND
ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THE NOTE, THE LOAN
AGREEMENT AND ALL OTHER DOCUMENTS. MAKER AND GUARANTORS IRREVOCABLY WAIVE, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH PROCEEDING BROUGHT IN ANY
SUCH COURT, ANY CLAIM BASED ON THE CONSOLIDATION OF PROCEEDINGS IN SUCH COURTS
IN WHICH PROPER VENUE MAY LIE IN DIVERGENT JURISDICTIONS, AND ANY CLAIM
THAT ANY SUCH PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. MAKER AND GUARANTORS HEREBY IRREVOCABLY WAIVE, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE, THE OTHER DOCUMENTS
OR THE TRANSACTIONS CONTEMPLATED THEREBY.  ARYX THERAPEUTICS, INC.  By:
  /s/ JOHN VARIAN  Print Name:
  JOHN VARIAN  Title:
  COO  Federal Tax ID#:  Address:    PLEASE HAVE ABOVE SIGNATURE WITNESSED AT
  TIME OF EXECUTION:  Witness:
  /s/ Jason Barker  Print Name:
  Jason Barker  Address:
  6300 Dumbarton Circle  Fremont, CA 94555