**EXHIBIT 10.26****AMENDED EMPLOYMENT AGREEMENT**     THIS AGREEMENT (“Agreement”) amends and restates the Employment Agreement dated September 25,2006 (the “Effective Date”), as amended, and is made and entered into by and between **AtheroGenics,Inc**., a Georgia corporation (hereinafter called the “Employer”), and **Joseph M. Gaynor, Jr.,**aresident of the State of Georgia (hereinafter the “Executive”).**WITNESSETH:**     **WHEREAS**, the Executive has been employed by Employer since 2005;     **WHEREAS**, the Employer and Executive mutually desire that the Executive’s employment becontinued; and     **WHEREAS**, the Employer and Executive mutually desire to enter into an employment contract whichwill supersede any prior contracts;     **NOW, THEREFORE**, in consideration of the premises and the mutual covenants and agreementsherein contained, the parties hereto agree as follows:     **1.****Period of Employment**.     In exchange for the compensation, benefits and perquisites described in this Agreement, andupon such other terms and conditions hereinafter set forth, the Employer agrees to employ theExecutive for the “Period of Employment” (as hereinafter defined). For purposes of this Agreement,the “Period of Employment” shall commence as of the Effective Date of this Agreement and, unlessearlier terminated as provided in this Agreement, shall consist of an initial period of one (1)year (the “Initial Term”), and shall automatically be extended for additional one (1) year terms(each additional one (1) year term called a “Renewal Term”) unless Employer or Executive shallnotify the other not less than 30 days prior to the expiration of either the Initial Term or anyRenewal Term that Executive’s employment will end at the expiration of the then existing InitialTerm or Renewal Term.     **2.****Position and Responsibilities**.     During the Period of Employment, the Executive agrees to serve as the Senior Vice PresidentGeneral Counsel and Secretary of AtheroGenics, Inc., reporting directly to the Chief ExecutiveOfficer of the Employer (hereinafter the “CEO”), and to perform those functions and dutiescustomarily assigned to individuals serving in the position in which the Executive serveshereunder. Without limiting the foregoing, Executive shall be considered an executive officer ofEmployer, and shall be a member of Employer’s management executive committee. In addition,Executive shall keep the Board of Directors of Employer and the CEO of Employer fully apprised ofall material developments occurring under Executive’s supervision and responsibility.
 

 
     Except as may otherwise be approved in advance by the CEO of Employer, the Executive shalldevote his full working time throughout the Period of Employment to the services required of himhereunder. The Executive shall render his services exclusively to the Employer during the Periodof Employment, and shall use his best efforts, judgment and energy to improve and advance thebusiness and interests of the Employer in a manner consistent with the duties of his position.     **3.****Compensation, Benefits and Perquisites**.          (a) Base Salary     In exchange for the performance of his duties and responsibilities hereunder and all otherservices rendered by the Executive in any capacity to the Employer, the Employer agrees to pay basesalary (“Base Salary”) to the Executive for the Initial Term equal to **$308,256.00**per year. Forany Renewal Term thereafter during which this Agreement remains in effect, the Executive’s BaseSalary for each such Renewal Term shall be reviewed based upon an annual performance appraisal andcompetitive market conditions and may be increased from time to time by the Employer (at the solediscretion of Employer). Base Salary shall be payable according to the customary payroll practicesof the Employer.          (b) Incentive Compensation     In addition to Base Salary, the Executive shall be eligible to receive such incentivecompensation (“Incentive Compensation”) as shall be determined by the CEO and the Board ofDirectors of Employer (or a committee of the Board). The amount of such Incentive Compensation tobe earned in any year shall be based upon certain strategic and financial goals which shall bedetermined by the Executive and the CEO of the Employer. Such strategic and financial goals andtarget Incentive Compensation shall be set forth in the Employer’s annual budget during the term ofthis Agreement. For 2008, the target Incentive Compensation shall be **$77,064.00**. IncentiveCompensation earned for a calendar year pursuant to this Agreement shall be payable no later thansixty (60) days following the expiration of the calendar year.          (c) Equity Compensation     The Executive shall be eligible to participate in the Employer’s Equity Ownership Plans andreceive such awards of stock and/or options thereunder as shall be determined by the Board ofDirectors or a committee thereof.          (d) General Benefits and Perquisites     During the term of this Agreement, the Executive shall be entitled to participate, inaccordance with the terms and conditions thereof, in all employee benefit plans or perquisiteprograms generally available to all executive management personnel of the Employer which may be ineffect from time to time during the term of this Agreement; provided, however, that nothingcontained herein shall require the Employer to establish, or maintain, any such plan. These
-2-

 
benefits are provided in accordance with the provisions of each individual plan, which may beamended from time to time at the sole discretion of the Employer.          (e) Additional Disability Coverage     In addition to the employee benefit plan coverage provided under Section 3(d) above, duringthe term of this Agreement the Executive will be provided with additional “Disability” (ashereinafter defined) benefits in an amount such that the total annual Disability benefit payableunder this provision, together with payments under any short-term and/or long-term disabilityprogram or policy maintained by the Employer and from workers compensation with respect to thedisabling condition, will be equal to 70% of the Executive’s annualized Base Salary immediatelyprior to the Disability. The Disability benefit provided under this Section 3(e) will be paid fromthe date of the Disability in the same manner and at the same time that benefits are paid under theEmployer’s short-term or long-term disability program or policy, as applicable until the earliestof (i) the cessation of the Disability; (ii) the Executive’s death; (iii) the Executive’sattainment of age 65; (iv) the date when short-term disability benefits terminate if long-termdisability benefits do not immediately commence thereafter pursuant to the terms of that policy; or(v) the date when long-term disability policy benefits terminate pursuant to the terms of thatpolicy.     For purposes of this Agreement, the term “Disability” or “Disabled” has the same meaning asprovided in the long-term disability plan maintained by the Employer, not taking into account anyexclusion or waiting period under such plan or, if the Employer determines that Code Section 409Ais applicable, has the meaning set forth in Code Section 409A and the related tax regulations;provided, however, if Executive is Disabled under the long-term disability plan maintained byEmployer but is not Disabled within the meaning of Code Section 409A and he has a Separation fromService when he is Disabled as so provided under such plan, his benefit under this Section 3(e)shall begin on the date of his Separation from Service or, if he is a Specified Employee on suchdate, shall begin on his Delayed Payment Date, and the payment made on his Delayed Payment Dateshall include all the payments which would have been made on and after the date of his Separationfrom Service but for Executive’s status as a Specified Employee plus interest at the Prime Ratefrom the date each such payment would have been made but for Executive’s status as a SpecifiedEmployee. In the event of a dispute, the determination of Disability or Disabled shall be made bythe Board of Directors or its designee. In the event that the Executive shall dispute thedetermination of the Board of Directors or its designee as to the Disability of the Executive, theExecutive may appeal the determination to a panel of three doctors, one to be selected by theExecutive at his expense, one to be selected by the Board of Directors or its designee at itsexpense, and one to be selected by the doctors chosen by the Executive and the Board of Directorsor its designee whose expense shall be shared equally between Executive and Employer. The decisionof the panel of doctors shall be final. Any Separation from Service for Disability under thisAgreement shall not affect the rights, if any, that the Executive may otherwise have under thelong-term disability plan the Employer may have in effect at the effective date of such Separationfrom Service and in which the Executive is then participating. Employer shall have the right toreview any determination of Disability no more frequently than bi-annually.
-3-

 
          (f) Reimbursement of Business Expenses     The Employer will reimburse the Executive for all reasonable and necessary business expenses(including, but not limited to, professional and service organization dues, journal subscriptionsand educational seminars, conferences, symposiums and other meetings) and related travel expenses,incurred or expended in connection with the performance of his duties and responsibilities asExecutive under this Agreement in accordance with the reimbursement policies of Employer. Anyreimbursement payments made to Executive pursuant to the reimbursement policies of the Employerduring the term of this Agreement shall be paid no later than March 15 of the calendar yearimmediately following the expiration of the calendar year in which the related expense wasincurred.          (g) Change of Control     In the event of a Change of Control, as defined in Section 4(g) hereof, **18**months of vestingfor unvested stock options granted to the Executive pursuant to the Employer’s Equity OwnershipPlans (or any other or successor plans) shall be immediately accelerated (but the period duringwhich Executive may exercise the stock options shall not be extended under this Agreement).     **4.****Termination of Agreement**.          (a) General     Upon Executive’s Separation from Service for any reason, (i) the Employer shall pay theExecutive any Base Salary that was earned through the effective date of his Separation from Servicebut which remained unpaid as of that date, and (ii) Executive shall be entitled to any benefitsthat have been accrued and vested under any of Employer’s employee benefit plans in accordance withand to the extent provided in such benefit plans. Except as otherwise provided in this Agreement,Executive shall not be entitled to any other benefits or payments under this Agreement in the eventof his Separation from Service.          (b) Involuntary Termination     Employer recognizes that the Executive would incur substantial damage to personal andprofessional reputation in the event of an Involuntary Termination. Consequently, should suchInvoluntary Termination occur during the Period of Employment, the Employer shall pay to theExecutive, as liquidated damages, an amount (the “Severance Amount”) equivalent to the sum of (i)**1.25**times Executive’s then current annualized Base Salary and (ii) a percentage of the targetIncentive Compensation otherwise stipulated for the benefit of Executive pursuant to Section 3(b)of this Agreement for the calendar year in which the Involuntary Termination occurs as follows:
-4-

 
     **Aggregate Period of Employment** **Percentage of Target Incentive****with Employer** **Compensation Payable**     Under one year None     One year up to two years  50%     Two years and over  **125****%**     Employer, upon Executive’s Separation from Service, shall pay to Executive one-half of theSeverance Amount in a lump sum in cash within thirty (30) days after the date of Executive’sSeparation from Service and the remaining one-half of the Severance Amount shall be paid in equalinstallments over a twelve (12) month period commencing on the first day of the month following themonth of Executive’s Separation from Service and at the same time that Base Pay would have beenpaid has this Agreement continued; provided, Employer’s obligation to make such payments shall becontingent upon Executive signing a general release of all claims, in a form attached hereto asExhibit A, within twenty-one (21) days following his Separation from Service and notrevoking such release within his seven (7) day revocation period.     Upon Executive’s becoming ineligible to participate in the group health plan(s) sponsored bythe Employer, Executive may elect continuation coverage (“Continuation Coverage”) under suchplan(s) as permitted by the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended(“COBRA”). During such COBRA coverage period, the Employer will pay (or will reimburse theExecutive for paying) the premiums for COBRA Continuation Coverage (excluding any medical flexiblespending account coverage) until the first to occur of (i) **15 months**after the InvoluntaryTermination, or (ii) the date on which the Executive commences employment with a new employer andis eligible to participate in a subsequent employer’s medical and healthcare employee benefitsprogram with respect to the Employer’s insured group health plan; provided, however, that suchpayments or reimbursements shall not exceed the amount paid by Employer for the medical andhealthcare coverage in effect for Executive and his dependents immediately prior to the COBRAcoverage period. All other premiums shall be paid by Executive.     If the Executive has an Involuntary Termination, the Employer shall accelerate the vesting ofits stock options previously granted to Executive pursuant to the Employer’s Equity Ownership Plan(or any other or successor plans) as follows (but the period during which Executive may exercisethe stock options shall not be extended under this Agreement):
-5-

 
     **Options to Have Accelerated****Aggregate Period of** **Vesting as of Date of****Employment with Employer** **Involuntary Termination**   Under one year None   One year up to two years Options otherwise vesting within **6**months