Document:

Exhibit 4.10

 

THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM REGISTRATION UNDER SAID ACT AND, IF REQUESTED BY THE COMPANY, UPON
DELIVERY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
THE PROPOSED TRANSFER IS EXEMPT FROM SAID ACT.

 

	
  WARRANT
  NO.

  	
   

  	
  NUMBER
  OF SHARES:

  
	
  DATE
  OF ISSUANCE: November     , 2008

  	
   

  	
       (subject
  to adjustment)

  

 

WARRANT TO PURCHASE SHARES

OF COMMON STOCK OF

 

ARYx Therapeutics, Inc.

 

This Warrant is issued to                           ,
or its registered assigns in accordance with the terms hereof (the “Purchaser”),
pursuant to that certain Securities Purchase Agreement, dated as of November 11,
2008, between ARYx Therapeutics, Inc., a Delaware corporation (the “Company”),
the Purchaser and certain other purchasers thereunder (the “Purchase
Agreement”) and is subject to the terms and conditions of the Purchase
Agreement. This Warrant, together with such other warrants issued pursuant to
the terms of the Purchase Agreement, shall collectively be referred to as the “Warrants.”

 

1.                              EXERCISE OF WARRANT.

 

(a)                   Method of Exercise. 
Subject to the terms and conditions herein set forth, upon surrender of
this Warrant at the principal office of the Company and upon payment of the
Warrant Price (as defined below) by wire transfer to the Company or cashier’s
check drawn on a United States bank made to the order of the Company, or
exercise of the right to credit the Warrant Price against the fair market value
of the Warrant Stock (as defined below) at the time of exercise (the “Net Exercise
Right”) pursuant to Section 1(b), Purchaser is entitled to purchase
from the Company, at any time after the date hereof and on or before the date
that is five (5) years from the Date of Issuance set forth above (the “Expiration
Date”), up to             
shares (as adjusted from time to time pursuant to the provisions of this
Warrant) of Common Stock, par value $0.001 per share (“Common Stock”) of
the Company (the “Warrant Stock”), at a purchase price of $2.64 per
share (the “Warrant Price”).

 

(b)                  Net Exercise
Right.  If the Company shall receive written notice from the holder of this
Warrant at the time of exercise of this Warrant that the holder elects to
exercise the Net Exercise Right, the Company shall deliver to such holder
(without payment by the Purchaser of any exercise price in cash) that number of
fully paid and nonassessable shares of Common Stock equal to the quotient
obtained by dividing (y) the value of this Warrant (or the specified
portion thereof) on the date of exercise, which value shall be determined by
subtracting (1) the 

 

 

aggregate Warrant Price of
the Warrant Stock (or the specified portion thereof) immediately prior to the
exercise of this Warrant from (2) the Aggregate Fair Market Value (as
defined below) of the Warrant Stock (or the specified portion thereof) issuable
upon exercise of this Warrant (or specified portion thereof) on the date of
exercise by (z) the Fair Market Value (as defined below) of one share of
Common Stock on the date of exercise. 
The “Fair Market Value” of a share of Common Stock shall mean the
average of the closing or last
reported sale prices of the Common Stock on the NASDAQ Global Market or other
such other principal exchange or quotation system for the five (5) consecutive
trading days immediately prior to date of exercise as reported by the NASDAQ
Global Market or such other principal exchange or quotation system on which the
Common Stock is then traded or, if the Common Stock is not publicly traded, the
price determined in good faith by the Company’s Board of Directors.  The “Aggregate Fair Market Value” of
the Warrant Stock shall be determined by multiplying the number of shares of
Warrant Stock by the Fair Market Value of one share of Warrant Stock.

 

2.                              CERTAIN ADJUSTMENTS.

 

(a)                        Mergers or Consolidations.  If
at any time while this Warrant is exercisable there shall be a capital
reorganization (other than a combination or subdivision of Warrant Stock
otherwise provided for herein) (a “Reorganization”), or a merger or
consolidation of the Company with another corporation (other than a merger with
another corporation in which the Company is a continuing corporation and which
does not result in any reclassification or change of outstanding securities
issuable upon exercise of this Warrant or a merger effected exclusively for the
purpose of changing the domicile of the Company) (a “Merger”), then, as
a part of such Reorganization or Merger, the Company shall use its commercially
reasonable efforts to ensure Purchaser shall thereafter be entitled to receive
upon exercise of this Warrant, during the period specified in this Warrant and
upon payment of the Warrant Price, the same amount and kind of securities, cash
or other property of the Company or the successor corporation resulting from
such Reorganization or Merger, to which a holder of the Common Stock
deliverable upon exercise of this Warrant would have been entitled under the
provisions of the agreement in such Reorganization or Merger if this Warrant
had been exercised immediately before that Reorganization or Merger. In any
such case, appropriate adjustment (as determined in good faith by the Company’s
Board of Directors) shall be made in the application of the provisions of this
Warrant with respect to the rights and interests of the Purchaser after the
Reorganization or Merger to the end that the provisions of this Warrant
(including adjustment of the Warrant Price then in effect and the number of
shares of Warrant Stock) shall be applicable after that event, as near as
reasonably may be, in relation to any shares or other property deliverable
after that event upon exercise of this Warrant. Notwithstanding the foregoing,
in the event any successor to the Company, surviving entity or the corporation
purchasing or otherwise acquiring such assets or other appropriate corporation
or entity does not agree to assume this Warrant in connection with a
Reorganization or Merger, then this Warrant shall terminate and be of no
further force or effect unless exercised pursuant to Section 1 hereof
prior to the date of closing of such Reorganization or Merger.

 

(b)                  Splits and Subdivisions; Dividends.  In
the event the Company should at any time, or from time to time, fix a record
date for the effectuation of a split or subdivision of the outstanding shares
of Common Stock or the determination of the holders of Common Stock entitled to
receive a dividend or other distribution payable in additional shares of Common
Stock 

 

2

 

or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as the “Common
Stock Equivalents”) without payment of any consideration by such holder for
the additional shares of Common Stock or Common Stock Equivalents (including
the additional shares of Common Stock issuable upon conversion or exercise
thereof), then, as of such record date (or the date of such distribution, split
or subdivision if no record date is fixed), the per share Warrant Price shall
be appropriately decreased and the number of shares of Warrant Stock shall be
appropriately increased in proportion to such increase (or potential increase)
of outstanding shares.

 

(c)                   Combination of Shares.  If
the number of shares of Common Stock outstanding at any time after the date
hereof is decreased by a combination of the outstanding shares of Common Stock,
the per share Warrant Price shall be appropriately increased and the number of
shares of Warrant Stock shall be appropriately decreased in proportion to such
decrease in outstanding shares.

 

(d)                  Adjustments for Other Distributions.  In
the event the Company shall declare a distribution payable in securities of
other persons, evidences of indebtedness issued by the Company or other
persons, assets (excluding cash dividends paid out of net profits) or options
or rights not referred to in Section 2(b), then, in each such case for the
purpose of this Section 2(d), upon exercise of this Warrant the holder
hereof shall be entitled to a proportionate share of any such distribution as
though such holder was the holder of the number of shares of Common Stock into
which this Warrant may be exercised as of the record date fixed for the
determination of the holders of Common Stock entitled to receive such
distribution.

 

(e)     Certificate of Adjustment.  Whenever the Warrant Price or number or type
of securities issuable upon exercise of this Warrant is adjusted, as herein
provided, the Company shall, at its expense, promptly deliver to the record
holder of this Warrant a certificate of an officer of the Company setting forth
the nature of such adjustment and showing in detail the facts upon which such
adjustment is based.

 

3.                              NO FRACTIONAL SHARES.  No fractional shares of Warrant Shares will
be issued in connection with any exercise of this Warrant.  In lieu of any fractional shares which would
otherwise be issuable, the Company shall pay cash equal to the product of such
fraction multiplied by the Fair Market Value of one share of Warrant Stock.

 

4.                              NO STOCKHOLDER RIGHTS.  Until the exercise of this Warrant or any
portion of this Warrant, the Purchaser shall not have nor exercise any rights
by virtue hereof as a stockholder of the Company (including without limitation
the right to notification of stockholder meetings or the right to receive any
notice or other communication concerning the business and affairs of the
Company).

 

5.                              RESERVATION OF STOCK.  The Company covenants that during the period
this Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares of Common Stock (or other
securities, if applicable) to provide for the issuance of Warrant Stock (or
other securities) upon the exercise of this Warrant.  The Company agrees that its issuance of this
Warrant shall constitute full authority to its officers 

 

3

 

who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for the Warrant Stock upon the exercise of this Warrant.

 

6.                              MECHANICS OF EXERCISE.  This Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant and the Notice of
Exercise attached hereto as Exhibit A duly completed and executed
on behalf of the holder hereof, at the principal office of the Company together
with payment in full of the Warrant Price then in effect with respect to the
number of shares of Warrant Stock as to which the Warrant is being exercised.  This Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of its
surrender for exercise as provided above, and the person entitled to receive
the Warrant Stock issuable upon such exercise shall be treated for all purposes
as the holder of such shares of record as of the close of business on such
date.  As promptly as practicable on or
after such date, the Company at its expense shall cause to be issued and
delivered to the person or persons entitled to receive the same, a certificate
or certificates for the number of full shares of Warrant Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share as
provided above.  The shares of Warrant
Stock issuable upon exercise hereof shall, upon their issuance, be validly
issued, fully paid and nonassessable, and free from all preemptive rights,
taxes, liens and charges with respect to the issue thereof.  In the event that this Warrant is exercised
in part, the Company at its expense will execute and deliver a new Warrant of
like tenor exercisable for the number of shares for which this Warrant may then
be exercised.

 

7.                              REPRESENTATIONS OF PURCHASER.  As of the date hereof, the Purchaser hereby
confirms the representations and warranties made by the Purchaser in Section 4
of the Purchase Agreement.

 

8.                              TRANSFER RESTRICTIONS.

 

(a)                   Unregistered Security.  The
holder of this Warrant acknowledges that this Warrant and the Warrant Stock
have not been registered under the Securities Act of 1933, as amended (the “Securities
Act”) or applicable state securities laws (collectively, the “Acts”),
and agrees not to sell, encumber or otherwise transfer this Warrant or any
Warrant Stock issued upon its exercise unless (i) there is an effective
registration statement under the Securities Act covering the transaction, (ii) the
Company receives an opinion of counsel satisfactory to the Company that such
registration is not required, or (iii) the Company otherwise satisfies
itself that registration is not required. 
Each certificate or other instrument for Warrant Stock issued upon the
exercise of this Warrant shall bear a legend substantially to the foregoing
effect.

 

(b)                  No Transfer.  This Warrant is not
transferable without the Company’s prior written consent; provided, however,
such consent shall not be required in connection with the transfer by the
Purchaser of such Warrant (but only with all related obligations) without
consideration to a Qualifying Holder (as such term is defined in the
Registration Rights Agreement between the Company and the Purchaser entered
into in connection with the Purchase Agreement dated as of even date herewith),
provided that (i) written notice (in the form of Exhibit B as
attached hereto) is provided to the Company at least five (5) business
days prior to any such transfer, (ii) the transferee is an “accredited
investor” as defined in Rule 501(a) of Regulation D promulgated under
the Securities Act and (iii) the transferee agrees in writing to be bound
by all of the provisions of this Warrant.

 

4

 

9.                              NOTICES OF RECORD DATE.  In the event of:

 

(a)                   any taking by the Company of a record of the
holders of any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend (other than a cash dividend
payable out of earned surplus of the Company) or other distribution, or any
right to subscribe for, purchase or otherwise acquire any shares of stock of
any class or any other securities or property, or to receive any other right;
or

 

(b)                  any Reorganization or Merger; or

 

(c)                   any voluntary or involuntary dissolution,
liquidation or winding-up of the Company,

 

then
and in each such event the Company will mail or cause to be mailed to the
Purchaser (or a permitted transferee pursuant to Section 8(b) above)
a notice specifying (i) the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and stating the amount
and character of such dividend, distribution or right and (ii) the date on
which any such Reorganization, Merger, dissolution, liquidation or winding-up
is to take place, and the time, if any, as of which the holders of record of
Common Stock (or other securities) shall be entitled to exchange their shares of
Common Stock (or other securities) for securities or other property deliverable
upon such Reorganization, Merger, dissolution, liquidation or winding-up.  Such notice shall be mailed at least ten (10) business
days prior to the date therein specified.

 

10.                        REPLACEMENT OF WARRANTS.  On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of any such loss, theft, destruction or mutilation
of this Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender and cancellation of such Warrant, the Company at its
expense will execute and deliver, in lieu thereof, a new Warrant of like tenor.

 

11.                        SATURDAYS, SUNDAYS, HOLIDAYS, ETC.  If the last or appointed day for the taking
of any action or the expiration of any right required or granted herein shall
be a Saturday or Sunday or shall be a legal U.S. holiday, then such action may
be taken or such right may be exercised on the next succeeding day not a
Saturday, Sunday or legal U.S. holiday.

 

12.                        MISCELLANEOUS.  This Warrant shall be governed by the laws of
the State of Delaware.  The headings in
this Warrant are for purposes of convenience and reference only, and shall not
be deemed to constitute a part hereof. 
Neither this Warrant nor any term hereof may be changed, waived,
discharged or terminated except by an instrument in writing signed by the
Company and the Majority Purchasers (as defined in the Purchase Agreement)
provided that all Warrants are similarly affected.  Upon the effectuation of any such amendment,
discharge or waiver in conformance with this Section 12, the Company shall
promptly give written notice thereof to the record holders of the Warrants who
have not previously consented thereto in writing. All notices required or
permitted under this Warrant shall be in writing and shall be deemed
effectively given: (a) upon personal delivery to the party to be notified,
(b) when sent by confirmed electronic mail or facsimile if sent during
normal business hours of the recipient, if not, then on the next business day, (c) three
business (3) days after having been sent by 

 

5

 

registered or certified
mail, return receipt requested, postage prepaid, or (d) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All communications shall be
sent to the Company at the address listed below and to Purchaser at the address
set forth in the Purchaser Agreement or at such other address as the Company or
Purchaser may designate by ten (10) days’ advance written notice to the
other party hereto. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other provisions.
Receipt of this Warrant by the Purchaser shall constitute acceptance of and
agreement to all of the terms and conditions contained herein.

 

[SIGNATURE
PAGE FOLLOWS]

 

6

 

IN WITNESS WHEREOF, this Warrant to purchase shares
of Common Stock of ARYx Therapeutics, Inc. is issued effective as of the
Date of Issuance first set forth above.

 

 

	
   

  	
  ARYx
  Therapeutics, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Paul
  Goddard, Ph.D.

  
	
   

  	
   

  	
  Chairman of the Board and Chief

  
	
   

  	
   

  	
  Executive Officer

  
	
   

  	
   

  
	
   

  	
  Address:
  

  	
  6300
  Dumbarton Circle

  
	
   

  	
   

  	
  Fremont,
  CA 94555

  
	
   

  	
   

  	
  Attention:
  Paul Goddard, Ph.D.,

  
	
   

  	
   

  
	
   

  	
  with
  a copy to (which shall not constitute notice):

  
	
   

  	
   

  
	
   

  	
  Cooley
  Godward Kronish, LLP

  
	
   

  	
  Five
  Palo Alto Square

  
	
   

  	
  3000
  El Camino Real

  
	
   

  	
  Palo
  Alto, CA 94306

  
	
   

  	
  Attention:
  Jim F. Fulton, Jr., Esq.

  
				

 

 

EXHIBIT A

 

NOTICE OF INTENT TO EXERCISE

(To be signed only upon exercise of Warrant)

 

To:  ARYx Therapeutics, Inc.

 

The undersigned, the Purchaser of the attached
Warrant, hereby irrevocably elects to exercise the purchase right represented
by such Warrant for, and to purchase thereunder,                             
(                )
shares of Common Stock of ARYx Therapeutics, Inc. and (choose one)

 

                    
herewith makes payment of                                     
Dollars ($                  )
thereof

 

or

 

                    
exercises the Net Exercise Right pursuant to Section 1(b) thereof and
requests that the certificates for such shares be issued in the name of, and
delivered to                                                       ,
whose address is                                                                                                                                                                                                         .

 

As of the date hereof, the Purchaser hereby confirms
the representations and warranties made by the Purchaser in Section 4 of
the Purchase Agreement.

 

 

	
  DATED:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature
  must conform in all

  
	
   

  	
   

  	
  respects
  to name of the Purchaser

  
	
   

  	
   

  	
  as
  specified on the face of the

  
	
   

  	
   

  	
  Warrant)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Address)

  

 

 

EXHIBIT B

 

NOTICE OF ASSIGNMENT FORM

 

FOR VALUE RECEIVED,                                             
(the “Assignor”) hereby sells, assigns and transfers all of the rights
of the undersigned Assignor under the attached Warrant with respect to the
number of shares of Common Stock of ARYx Therapeutics, Inc. (the “Company”)
covered thereby set forth below, to the following “Assignee” and, in
connection with such transfer, represents and warrants to the Company that (i) such
Assignee is a Qualifying Holder (as such term is defined in the Registration
Rights Agreement between the Company and the Purchaser entered into in
connection with the Purchase Agreement dated as of even date herewith) of the
Assignor and (ii) the transfer is otherwise in compliance with Section 9(b) of
the Warrant:

 

	
  NAME OF ASSIGNEE

  	
   

  	
  ADDRESS/FAX NUMBER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
  Signature:  

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Witness:

  	
   

  
						

 

 

ASSIGNEE ACKNOWLEDGMENT

 

The undersigned Assignee acknowledges that it has
reviewed the attached Warrant and by its signature below it hereby represents
and warrants that it is a Qualifying Holder and an “accredited investor” as
defined in Rule 501(a) of Regulation D promulgated under the
Securities Act of 1933, as amended, and agrees to be bound by the terms and
conditions of the attached Warrant as of the date hereof.

 

 

	
   

  	
  Signature:

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
  Address:Exhibit 10.24

 

SECURITIES PURCHASE AGREEMENT

 

This
SECURITIES PURCHASE AGREEMENT (this “Agreement”) is dated as of the 11th
day of November, 2008 (the “Effective Date”) by and between ARYx
Therapeutics, Inc., a Delaware corporation, with its principal office at
6300 Dumbarton Circle, Fremont, California 94555 (the “Company”), and
the several purchasers identified in the attached Exhibit A
(individually, a “Purchaser” and collectively, the “Purchasers”).

 

WHEREAS, the
Company desires to issue and sell to the Purchasers an aggregate of (i) 
nine million six hundred forty-nine thousand five hundred forty-five
(9,649,545) shares (the “Shares”) of the authorized but unissued shares
of common stock, $0.001 par value per share, of the Company (the “Common
Stock”); and (ii) warrants in the form attached as Exhibit B
to purchase an aggregate of two million eight hundred ninety-four thousand
eight hundred sixty-four (2,894,864) shares of Common Stock (each, a “Warrant,”
and collectively, the “Warrants”); and

 

WHEREAS, the
Purchasers, severally, wish to purchase the Shares and the Warrants on the
terms and subject to the conditions set forth in this Agreement.

 

NOW,
THEREFORE, in consideration of the mutual agreements, representations,
warranties and covenants herein contained, the parties hereto agree as follows:

 

1.                                       Definitions.  As used in this Agreement, the following
terms shall have the following respective meanings:

 

(a)                                  “Affiliate”
of a party means any corporation or other business entity controlled by,
controlling or under common control with such party.  For this purpose “control” shall mean
direct or indirect beneficial ownership of fifty percent (50%) or more of
the voting or income interest in such corporation or other business entity.

 

(b)                                 “Closing
Date” means the date of the Closing.

 

(c)                                  “Exchange
Act” means the Securities Exchange Act of 1934, as amended, and all of the rules and
regulations promulgated thereunder.

 

(d)                                 “Majority
Purchasers” shall mean Purchasers which, at any given time, hold or have
the right to acquire hereunder greater than fifty percent (50%) of the
voting power of the Shares issued and sold or to be issued and sold pursuant to
this Agreement, that have not been resold pursuant to an effective registration
statement under the Securities Act or Rule 144 under the Securities Act.

 

(e)                                  “Operative
Agreements” shall mean the Registration Rights Agreement and the Warrants
together with this Agreement.

 

 

(f)                                    “Registration
Rights Agreement” shall mean that certain Registration Rights Agreement,
dated as of the date hereof, among the Company and the Purchasers.

 

(g)                                 “Rules and
Regulations” shall mean the rules and regulations of the SEC.

 

(h)                                 “SEC”
shall mean the Securities and Exchange Commission.

 

(i)                                     “SEC
Documents” shall have the meaning set forth in Section 3.29 below.

 

(j)                                     “Securities”
shall mean the Shares, the Warrants and the Underlying Shares.

 

(k)                                  “Securities
Act” shall mean the Securities Act of 1933, as amended, and all of the rules and
regulations promulgated thereunder.

 

(l)                                     “Underlying
Shares” shall mean the shares of Common Stock issuable upon exercise of the
Warrants.

 

2.                                       Purchase
and Sale of Securities.

 

2.1                                 Purchase and Sale.  Subject to and upon the terms and conditions
set forth in this Agreement, the Company agrees to issue and sell to each
Purchaser, and each Purchaser, severally, hereby agrees to purchase from the
Company, at the Closing (as defined below), (i) the number of Shares of
Common Stock set forth opposite the name of such Purchaser under the heading “Number
of Shares to be Purchased” on Exhibit A hereto, at a purchase
price of two dollars and twenty cents ($2.20) per share (the “Common Stock
Purchase Price”) and (ii) a Warrant to purchase thirty percent (30%)
of the number of Shares purchased by such Purchaser (rounded up to the nearest
whole share) pursuant to this Agreement, for a total number of Underlying
Shares as set forth under the heading “Number of Underlying Shares to be
Purchased under Warrants” on Exhibit A hereto, at a purchase
price per Underlying Share of twelve and one-half cents ($0.125) and having a
term of five (5) years from the Closing Date and an exercise price of two
dollars and sixty-four cents ($2.64) per Underlying Share, which is equal to
one hundred twenty percent (120%) of the Common Stock Purchase Price.  The total purchase price payable by each
Purchaser for the Shares and the Warrants that such Purchaser is hereby
agreeing to purchase is set forth opposite the name of such Purchaser under the
heading “Aggregate Purchase Price” on Exhibit A hereto.  The aggregate purchase price payable by the
Purchasers to the Company for all of the Shares and Warrants shall be equal to
approximately $21.6 million.

 

2.2                                 Closing.  Subject to Section 2.3 hereof, the
closing of the transactions contemplated under this Agreement (the “Closing”)
shall take place at the offices of Cooley Godward Kronish LLP (“Cooley”),
counsel to the Company, on the second or third business day after the Effective
Date subject to satisfaction of the closing conditions set forth in Sections
5.1 and 5.2 hereof or at such other location, date

 

2

 

and time as may be agreed upon between the Majority Purchasers and the
Company.  At the Closing, the Company
shall deliver to each Purchaser a single stock certificate and a single Warrant
representing the number of Shares and the right to acquire the number of
Underlying Shares purchased by such Purchaser, each to be registered in the
name of such Purchaser, against payment of the purchase price therefor by wire
transfer of immediately available funds to such account or accounts as the
Company shall designate in writing or such other method of closing upon which
the Company and a Purchaser may agree.

 

2.3                                 Subsequent Closing.  If Montreux Equity Partners III, SBIC, LP or
any Affiliate of OrbiMed Advisors LLC included as a Purchaser on Exhibit A
did not deposit into the designated escrow account established for the Closing
or otherwise remit to the Company their respective Aggregate Purchase Price at
or prior to the Closing (the “Subsequent Purchasers”), then, provided
the Closing has occurred, each Subsequent Purchaser shall have an absolute
obligation to deliver payment of such Subsequent Purchaser’s Aggregate Purchase
Price by wire transfer of immediately available funds to such account or
accounts as the Company shall designate in writing and to purchase the entire
number of Shares and Warrants set forth opposite such Subsequent Purchaser’s
name on Exhibit A no later than November 25, 2008, and the
Company agrees to deliver to each Subsequent Purchaser against payment of such
Aggregate Purchase Price a single stock certificate and a single Warrant
representing the number of Shares and the right to acquire the number of
Underlying Shares purchased by such Subsequent Purchaser, each to be registered
in the name of such Subsequent Purchaser 
(the “Subsequent Closing”). There shall be no conditions
precedent to the occurrence of the Subsequent Closing, the purchase and sale at
such Subsequent Closing shall otherwise be made on the terms and conditions set
forth in this Agreement, and (i) the representations and warranties of the
Company set forth in Section 3 hereof shall speak as of the Closing and
the Company shall have no obligation to update any such representations or
warranties, and (ii) the representations and warranties of each Subsequent
Purchaser in Section 4 hereof shall speak as of the Effective Date, the
Closing Date, and the date of the Subsequent Closing.

 

3.                                       Representations
and Warranties of the Company. Except as disclosed in the SEC Documents (as
hereinafter defined), the Company hereby represents and warrants to each of the
Purchasers, as of the Effective Date and the Closing Date, as follows:

 

3.1                                 Incorporation.  The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
with full power and authority (corporate and other) to own, lease and operate,
as the case may be, its properties and conduct its business as now conducted
and as described in the SEC Documents; and the Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
nature of the business conducted by it, or its ownership or leasing of
property, or its employment of employees or consultants therein, makes such
qualification necessary, except where the failure to be so qualified or be in
good standing would not reasonably be expected to have, individually or in the
aggregate, a material adverse effect on the financial condition, business,
properties, results of operations or prospects of the Company (“Material
Adverse Effect”).  The

 

3

 

Company has not received a written notification that any proceeding has
been instituted in any such jurisdiction, revoking, limiting or curtailing, or
seeking to revoke, limit or curtail, such power and authority or qualification,
and to the Company’s knowledge, no proceeding has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification.  The Company is in possession of and operating
in material compliance with all authorizations, licenses, certificates,
consents, orders and permits from state, federal and other regulatory
authorities that are material to the conduct of its business, all of which are
valid and in full force and effect.  The
Company is not in violation of its certificate of incorporation (the “Certificate
of Incorporation”) and bylaws (the “Bylaws”) as in effect on the
Effective Date and the Closing Date, complete and correct copies of which have
been filed by the Company with the SEC. 
The Company’s sole subsidiary, ARYx Therapeutics Limited, a United
Kingdom company, is a non-operating company with de minimis assets and
liabilities and no business operations. 
Except for short-term investments and investments that are not material
to the Company, the Company does not own any shares of stock or any other
equity or long-term debt securities of any corporation or have any equity
interest in any firm, partnership, limited liability company, joint venture,
association or other entity except as set forth in the SEC Documents.

 

3.2                                 Authority.  The Company has all requisite corporate power
and authority to enter into this Agreement and the other Operative Agreements
and to perform the transactions contemplated hereby and thereby.  The Operative Agreements have been duly
authorized, executed and delivered by the Company and are valid and binding
agreements on the part of the Company, enforceable in accordance with their
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors’ rights generally or by general equitable principles.

 

3.3                                 No Conflict.  The performance of this Agreement and the
other Operative Agreements and the consummation of the transactions herein and
therein contemplated will not result in (A) any violation of the
Certificate of Incorporation or Bylaws of the Company or (B) a breach or
violation of any of the terms and provisions of, or constitute a default under
any contract, agreement, license, understanding, indenture, mortgage, deed of
trust, loan agreement, joint venture, lease (including without limitation any
sale and leaseback arrangement) or bond, debenture, note or other evidence of
indebtedness, to which the Company is a party or by or to which it or its
properties (including without limitation all Company Intellectual Property (as
defined in Section 3.12(a))) are or may be bound or subject (each, a “Contract”)
or any law, order, ruling, rule, regulation, writ, assessment, injunction,
judgment or decree of any government or governmental court, agency or body,
including the NASDAQ Stock Market LLC (“NASDAQ”), or any arbitration
panel or authority, domestic or foreign, having jurisdiction over the Company
or over any of its respective properties (including without limitation all
Company Intellectual Property) or Contracts (“Government Entity”) or by
or to which they or such of its properties or Contracts are or may be bound or
subject (each, a “Law”), except in the case of this clause (B), such
defaults or

 

4

 

violations which would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.

 

3.4                                 Consents and
Approvals.  No consent, approval,
authorization or order of or qualification with any Government Entity is
required for the execution and delivery of this Agreement or the other
Operative Agreements and the consummation by the Company of the transactions
herein and therein contemplated, except such consents (i) that will be
obtained prior to the Closing Date and (ii) as may be required under the
Securities Act, the Exchange Act (if applicable), the Rules and
Regulations, or under state or other securities or blue sky laws or NASDAQ, all
of which requirements will be satisfied in all material respects at or prior to
the Closing Date (except for the filing of a Form D and related blue sky
law filings which will be timely filed after the Closing Date).

 

3.5                                 Litigation;
Contracts.  Except as disclosed in
the SEC Documents, there are no actions, suits, claims, investigations or
proceedings pending or, to the Company’s knowledge, threatened to which the
Company or, to the Company’s knowledge, any of its respective directors or
officers is a party, or of which any of its respective properties (including
without limitation all Company Intellectual Property) or any Contract is the
subject, at law or in equity, before or by any federal, state, local or foreign
governmental or regulatory commission, board, body, authority or agency which,
if adversely decided, would be reasonably likely to result in a decision,
ruling, finding, judgment, decree, order or settlement having a Material
Adverse Effect or to prevent or delay consummation of the transactions
contemplated hereby.  There are no
Contracts of a character required to be described or referred to in the SEC
Documents, and/or filed as an exhibit to the SEC Documents, by the Securities
Act, the Exchange Act or the Rules and Regulations, which have not been
accurately described in all material respects in the SEC Documents, and/or
filed as an exhibit to the SEC Documents, other than the omission of which
would not reasonably be expected to have a Material Adverse Effect.  The Contracts described in the SEC Documents
are in full force and effect and are valid agreements, enforceable by the
Company, except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors’ rights generally or by general equitable
principles.  No event has occurred, and
no circumstance or condition exists, that (with or without notice or lapse of
time) (A) has resulted or is reasonably likely to result in a breach,
default, violation or waiver of any Contract or any provision thereof; (B) gives
or is reasonably likely to give any party to any Contract the right to declare
a breach, default or violation of or exercise any remedy under such Contract; (C) gives
or is reasonably likely to give any party to any Contract the right to cancel,
terminate, modify or be excused from performance of any obligations under such
Contract; or (D) has resulted or is reasonably likely to result in a
violation of any Law or in imposition of any fines, penalties, damages,
injunctions, prohibitions or other sanctions, except where such breaches,
defaults, violations, waivers, remedies, cancellations, terminations,
modifications, excuses or impositions would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.

 

5

 

3.6                                 Capitalization.  All outstanding shares of capital stock of
the Company have been duly authorized and validly issued and are fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and have not been issued in violation of or subject to any
preemptive rights or other rights to subscribe for or purchase securities.  The authorized capital stock of the Company
consists of (i) 150,000,000 shares of Common Stock, of which approximately
17,689,332 shares are outstanding on the Effective Date and (ii) 10,000,000
shares of preferred stock, of which no shares are outstanding on the Effective
Date.  Except for (i) options to
purchase Common Stock or other equity awards issued to employees and
consultants of the Company pursuant to the employee benefits plans disclosed in
the SEC Documents and (ii) outstanding warrants disclosed in the SEC
Documents, there are no existing options, warrants, calls, preemptive (or
similar) rights, subscriptions or other rights, agreements, arrangements or
commitments of any character obligating the Company to issue, transfer or sell,
or cause to be issued, transferred or sold, any shares of the capital stock of
the Company or other equity interests in the Company or any securities convertible
into or exchangeable for such shares of capital stock or other equity
interests, and there are no outstanding contractual obligations of the Company
to repurchase, redeem or otherwise acquire any shares of its capital stock or
other equity interests.  There are no
voting agreements or other similar arrangements with respect to the Common
Stock to which the Company is a party. 
The description of the Company’s warrants, stock option plans, employee
stock purchase plans or similar arrangements, and the options or other rights
granted and exercised thereunder, set forth in the SEC Documents accurately and
fairly presents, in all material respects, the information required to be shown
with respect to such warrants, plans, arrangements, options and rights. The
issuance and sale of the Securities will not result in a right of any current
holder of Company securities to adjust the exercise, conversion, exchange or
reset price under such securities.

 

3.7                                 Authorization.  The Securities have been duly authorized for
issuance and sale to the Purchasers pursuant to this Agreement and, when issued
and delivered by the Company against payment therefor in accordance with the
terms of this Agreement, will be duly and validly issued and fully paid and
nonassessable, and will be sold free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest.  The Underlying Shares have been duly and
validly authorized and reserved for issuance and, upon exercise of the Warrants
in accordance with their terms, including payment of the exercise price
therefore, the Underlying Shares will be validly issued, fully paid and
nonassessable and will be sold free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest.  No preemptive right, co-sale right, right of
first refusal or other similar right of stockholders exists with respect to any
of the Securities or the issuance and sale thereof, other than those that have
been expressly waived prior to the date hereof, those that will have been
expressly waived prior to the Closing Date, those that will automatically
expire upon or will not apply to the consummation of the transactions
contemplated on the Closing Date and as set forth in the Operative Agreements.
Other than as set forth in that certain Amended and Restated Investor Rights
Agreement, dated October 22, 2007, by and between the Company and the
other parties thereto, no stockholder of the Company has any right (which has
not been waived or has not expired by reason of lapse of time) following the
notification of

 

6

 

the Company’s intent to file the registration statement to be filed by
the Company pursuant to Registration Rights Agreement (the “Registration
Statement”) to require the Company to register the sale of any shares owned
by such stockholder under the Securities Act in the Registration Statement
other than as set forth in the Registration Rights Agreement.  No further approval or authorization of any
stockholder or the Board of Directors of the Company is required for the
issuance and sale or transfer of the Securities, or the filing of the
Registration Statement by the Company. No further approval or authorization of
any other third party is required for the issuance and sale or transfer of the
Securities, or the filing of the Registration Statement by the Company, except
as may be required under federal, state or other securities or blue sky laws.

 

3.8                                 Accountants.  Ernst & Young LLP, whose report on
the financial statements of the Company is filed with the SEC in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2007, are,
to the Company’s knowledge, independent registered public accountants as
required by the Securities Act and the Rules and Regulations.  Except as described in the SEC Documents and
as pre-approved in accordance with the requirements set forth in Section 10A
of the Exchange Act, to the Company’s knowledge, Ernst & Young LLP has
not engaged in any “prohibited activities” (as defined in Section 10A of
the Exchange Act) on behalf of the Company.

 

3.9                                 Financial
Statements.  The financial statements
of the Company, together with the related schedules and notes, set forth in the
SEC Documents:  (i) present fairly,
in all material respects, the financial position of the Company as of the dates
indicated and the results of operations and cash flows of the Company for the
periods specified; and (ii) have been prepared in compliance with
requirements of the Securities Act and the Rules and Regulations and in
conformity with generally accepted accounting principles in the United States
applied on a consistent basis during the periods presented, except as may be
otherwise specified in such financial statements or the notes thereto and except
that unaudited financial statements may not contain all footnotes required by
GAAP, and the schedules included in such financial statements present fairly,
in all material respects, the information required to be stated therein (provided, however, that the statements that
are unaudited are subject to normal year-end adjustments).  There are no financial statements (historical
or pro forma) and/or related schedules and notes that are required to be
included in the SEC Documents that are not included as required by the
Securities Act, the Exchange Act and/or the Rules and Regulations, except
where a failure to so include would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.

 

3.10                           No Changes.  Except as disclosed in the SEC Documents,
subsequent to June 30, 2008 there has not been (i) any change,
development or event that would reasonably be expected to result, individually
or in the aggregate, in a Material Adverse Effect, (ii) any transaction
that is material to the Company, (iii) any obligation, direct or
contingent, that is material to the Company, incurred by the Company, (iv) any
change in the capital stock or outstanding indebtedness of the Company that is
material to the Company, (v) any dividend or distribution of any kind
declared, paid or made on the capital stock of the Company or (vi) any
loss or damage (whether or not insured) to the property of the Company that has
been sustained or will

 

7

 

have been sustained that would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.

 

3.11                           Property.  Except as set forth in the SEC
Documents:  (i) the Company has good
and marketable title to all properties and assets described in the SEC
Documents as owned by it free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest, whether imposed by agreement,
contract, understanding, law, equity or otherwise, except for Permitted Liens
(as defined below) or where any failure to have good and marketable title to
such properties and assets would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect; and (ii) the
Company has valid and enforceable leases, including without limitation any
leases that are the subject of any sale and leaseback arrangement, for all
properties described in the SEC Documents as leased by it, except as the
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors’ rights generally or by general equitable principles.  Except as set forth in the SEC Documents, the
Company owns or leases all such properties as are necessary to its operations
as now conducted or as proposed to be conducted.  A “Permitted Lien” shall mean (i) liens
for taxes not yet due, (ii) mechanics liens and similar liens for labor,
materials or supplies incurred in the ordinary course of business for amounts
that are not delinquent and (iii) any liens that individually or in the
aggregate are not material.

 

3.12                           Intellectual Property.

 

(a)                          The
Company owns, or has valid, binding, and enforceable licenses to use, the
inventions, works of authorship, technology, patents, patent applications,
copyrights, trademarks, service marks, domain names, trade names, service
names, trade secrets, know-how (and other unpatented and/or unpatentable
proprietary rights) and all other intellectual property and proprietary rights
necessary to conduct its business in the manner described in the SEC Documents
(collectively, the “Company Intellectual Property”), except for any
Company Intellectual Property the absence of which would not have, individually
or in the aggregate, a Material Adverse Effect. 
The Company Intellectual Property is free and clear of any pledge, lien,
security interest, encumbrance, claim or equitable interest, whether imposed by
agreement, contract, understanding, law, equity or otherwise, except for
Permitted Liens.  All patent applications
of the Company have been properly filed and prosecuted in accordance with all
applicable laws, including without limitation all rules regarding the duty
of candor, and, to the Company’s knowledge, no claim of any patent or patent
application (assuming the claims of patent applications issue as currently
pending) included in the Company Intellectual Property is unenforceable or
invalid, except for such unenforceability or invalidity that would not
reasonably be expected to result, individually or in the aggregate, in a
Material Adverse Effect.  The Company is
not obligated to pay a royalty, grant a license or provide other consideration
to any third party in connection with the Company Intellectual Property other
than as disclosed in the SEC Documents.

 

8

 

(b)                         Except
as disclosed in the SEC Documents, (i) the Company has not received any
notice, and otherwise has no knowledge, of any actual or potential infringement
or misappropriation by any third parties of any Company Intellectual Property; (ii) the
conduct of the business of the Company in the manner described in the SEC
Documents, including without limitation the manufacture, sale, use, or
importation of any potential products of the Company described therein, does
not and will not, to the knowledge of the Company, infringe, misappropriate, or
interfere or conflict with, any patent, copyright, trademark, trade secret, or
other intellectual property or proprietary right of any third party; (iii) the
Company is not making, and does not intend to make, any unauthorized use of any
confidential information or trade secrets of any third party; (iv) the
Company has not received any written notice, and is not otherwise aware, of any
intellectual property or other proprietary rights of any third parties that
actually or potentially materially conflict or interfere with the Company
Intellectual Property; (v) to the Company’s knowledge, no third party,
including without limitation any academic or governmental organization,
possesses rights to the Company Intellectual Property which, if exercised,
could enable such party to develop products competitive to those of the
Company; (vi) there is no pending, nor to the knowledge of the Company,
threatened action, suit, proceeding, or other claim challenging the validity,
enforceability, or exploitation of, or the Company’s rights in or to, any
Company Intellectual Property; and (vii) there is no pending, nor to the
knowledge of the Company, threatened action, suit, proceeding, or other claim
that the Company infringes, misappropriates, or otherwise violates any
intellectual property or proprietary rights of any third party.

 

(c)                          The
Company has a good faith belief that it has taken those steps required in
accordance with sound business practice and commercially reasonable business
judgment to establish and preserve its ownership of, and licenses to, all
Company Intellectual Property. Each former and current employee and independent
contractor of the Company has signed and delivered one or more written
contracts with the Company pursuant to which such employee or independent
contractor assigns to the Company all of his, her or its rights in and to any
inventions, discoveries, improvements, works of authorship, know-how, or
information made, conceived, reduced to practice, authored, or discovered in
the course of employment by or performance of services for the Company, as well
as any and all patent rights, copyrights, trademark rights, and other
intellectual property rights therein or thereto.  Neither the Company nor, to the knowledge of
the Company, any of its employees or independent contractors have any
agreements or arrangements with any third party restricting the Company’s or
any such employee’s or independent contractor’s engagement in business
activities that are material aspects of the Company’s business as described in
the SEC Documents.  To the Company’s
knowledge, no employee or independent contractor of the Company is in violation
of any term of any employment contract, patent disclosure agreement, invention
assignment agreement, non-competition agreement, non-disclosure agreement, or
any other agreement or arrangement with any former employer, customer, or other
third party as a result of such employee’s or independent contractors
relationship with the Company or any actions undertaken by such employee or
independent contractor while employed by or engaged with the

 

9

 

Company, except as such violation would not reasonably be expected to
have a Material Adverse Effect.

 

3.13                           Tax Returns. The
Company has timely filed all federal, state and foreign income and franchise
tax returns required to be filed by the Company on or prior to the date hereof,
and has paid all taxes shown thereon as due, and there is no tax deficiency
that has been or, to the Company’s knowledge, might be asserted against the
Company that would reasonably be expected to have a Material Adverse
Effect.  All tax liabilities are
adequately provided for on the books of the Company.

 

3.14                           Internal Controls.   Except as disclosed in the SEC Documents,
the Company has established and maintains a system of internal accounting
controls sufficient to provide reasonable assurances that:  (i) transactions are executed in
accordance with management’s general or specific authorization; (ii) transactions
are recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles in the United States
and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management’s general or specific
authorization; and (iv) the recorded accountability for assets is compared
with existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.

 

3.15                           Audit Committee.  The Company’s Board of Directors has validly
appointed an Audit Committee whose composition satisfies the requirements of Rule 4350(d)(2) of
the Rules of NASDAQ (the “NASDAQ Rules”) and the Board of Directors
and/or the Audit Committee has adopted a charter that satisfies the
requirements of Rule 4350(d)(1) of the NASDAQ Rules.  The Audit Committee has reviewed the adequacy
of its charter within the past 12 months.

 

3.16                           Disclosure Controls.  The Company has established and maintains
disclosure controls and procedures (as such term is defined in Rule 13a-15
and 15d-15 under the Exchange Act) in the manner and to the extent required by
the Exchange Act and the rules promulgated thereunder by the SEC; such
disclosure controls and procedures are designed to ensure that material
information relating to the Company is made known to the Company’s Chief
Executive Officer and its Chief Financial Officer by others within the Company;
the Company’s auditors’ and the Audit Committee of the Board of Directors have
been advised of: (i) any significant deficiencies in the design or
operation of internal controls which could adversely affect the Company’s
ability to record, process, summarize, and report financial data; and (ii) any
fraud, whether or not material, that involves management or other employees who
have a role in the Company’s internal controls; any material weaknesses in
internal controls have been identified for the Company’s auditors; and since
the date of the most recent evaluation of such disclosure controls and
procedures, there, have been no significant changes in internal controls or in
other factors that could significantly affect internal controls, including any
corrective actions with regard to significant deficiencies and material
weaknesses; the principal executive officers (or their equivalents) and
principal financial officers (or their equivalents) of the Company have made
all certifications required by the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley
Act”)

 

10

 

and any related Rules and Regulations, and the statements
contained in any such certification are complete and correct; the Company is
otherwise in compliance in all material respects with all applicable effective
provisions of the Sarbanes-Oxley Act.

 

3.17                           Insurance.  The Company maintains insurance with insurers
of recognized financial responsibility of the types and in the amounts it
reasonably believes to be adequate for its business and consistent with
insurance coverage maintained by similar companies in similar businesses,
including, but not limited to, insurance covering the acts and omissions of
directors and officers, real and personal property owned or leased by the
Company against theft, damage, destruction, acts of vandalism and all other risks
customarily insured against, all of which insurance is in full force and
effect; and the Company has no reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not reasonably be expected to have a Material
Adverse Effect.

 

3.18                           Losses.  The Company has not sustained since June 30,
2008 any losses or interferences with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, other than any losses
or interferences which would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.

 

3.19                           Labor Disputes.  No labor dispute with employees of the
Company exists or, to the Company’s knowledge, is imminent which would
reasonably be expected to have a Material Adverse Effect.  No collective bargaining agreement exists
with any of the Company’s employees and, to the Company’s knowledge, no such
agreement is imminent.

 

3.20                           NASDAQ Global Market.  The Common Stock is registered pursuant to Section 12(g) of
the Exchange Act and is listed on the NASDAQ Global Market, and the Company has
taken no action designed to, or likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or delisting the Common
Stock from the NASDAQ Global Market.  The
Company has not received any notification that the SEC or NASDAQ is
contemplating terminating such registration or listing.  The Company has taken all actions necessary
to list the Shares and the Underlying Shares for quotation on the NASDAQ Global
Market, except where a failure to take any action would not reasonably be
expected to result, individually or in the aggregate, in a Material Adverse
Effect. The Company is in compliance with all corporate governance requirements
of the NASDAQ Global Market.  The Company
shall have complied with all requirements of the NASDAQ Global Market with
respect to the issuance of the Securities.

 

3.21                           Investment Company.  The
Company is not and, after giving effect to the offering and sale of the
Securities and the receipt of the proceeds contemplated herein, will not be an “investment
company,” as such term is defined in the Investment Company Act of 1940, as
amended.

 

11

 

3.22                           Offering Materials; No
Integrated Offering.  Other than the
SEC Documents and the Operative Agreements (collectively, the “Offering
Materials”), the Company has not distributed and, prior to the Closing
Date, will not distribute, any offering materials in connection with the
offering and sale of the Securities.  The
Company has not in the past nor will it hereafter take any action to sell,
offer for sale or solicit offers to buy any securities of the Company which
would require the offer, issuance or sale of the Securities, as contemplated by
this Agreement, to be registered under Section 5 of the Securities Act.

 

3.23                           No Manipulation of Stock.  Neither the Company nor, to its knowledge,
any of its affiliates has taken, directly or indirectly, any action designed to
or which has constituted or which might reasonably be expected to cause or
result, under the Exchange Act or otherwise, in the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
or resale of the Securities.

 

3.24                           ERISA.  The Company is in compliance in all material
respects with all currently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and
published interpretations thereunder, except where a failure to so comply would
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.

 

3.25                           Environmental.  Except as set forth in the SEC
Documents:  (i) to the Company’s
knowledge, the Company is in material compliance with all rules, laws and
regulations relating to the use, treatment, storage and disposal of toxic
substances and protection of health or the environment (“Environmental Laws”)
which are applicable to its business, except where a failure to so comply would
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect; (ii) the Company has not received any notice from
any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the SEC
Documents; (iii) to the Company’s knowledge, the Company is not currently
required to make future material capital expenditures to comply with
Environmental Laws; and (iv) to the Company’s knowledge, no property that
is owned, leased or occupied by the Company has been designated a Superfund
site pursuant to the Comprehensive Response, Compensation and Liability Act of
1980, as amended (42 U.S.C. Section 9601, et seq.), or otherwise
designated as a contaminated site under applicable state or local law.

 

3.26                           Outstanding Loans to
Officers or Directors.  There are no
outstanding loans, advances (except normal advances for business expenses in
the ordinary course of business) or guarantees of indebtedness by the Company
to or for the benefit of any of the officers or directors of the Company or any
of the members of the families of any of them.

 

3.27                           Sales or Issuances.  The Company has not sold or issued any shares
of Common Stock during the six-month period preceding the date hereof,
including any sales pursuant to Rule 144A under, or Regulations D or S of,
the Securities Act, other than shares issued in a public offering pursuant to a
valid and

 

12

 

effective registration statement filed with the SEC or shares issued
pursuant to employee benefit plans, qualified stock option plans or other
employee compensation plans or pursuant to outstanding options, rights or
warrants.

 

3.28                           Regulatory Compliance.
The Company possess all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to
conduct its business as currently conducted, including without limitation all
such certificates, authorizations and permits required by the United States
Food and Drug Administration or any other federal, state or foreign agencies or
bodies engaged in the regulation of pharmaceuticals or biohazardous materials,
except where a failure to so comply would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.  The Company has not received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit which, individually or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would have a Material Adverse
Effect.

 

3.29                           SEC Documents.  The Company has made available to each
Purchaser, a true and complete copy of the Company’s Registration Statement on Form S-1,
the Company’s Annual Report on Form 10-K for the year ended December 31,
2007 and the Company’s Quarterly Reports on Form 10-Q for the periods
ended March 31, 2008 and June 30, 2008, and any other statement,
report (including, without limitation, Current Reports on Form 8-K),
registration statement (other than registration statements on Form S-8) or
definitive proxy statement filed by the Company with the SEC during the period
commencing on January 1, 2008 and ending on the date hereof.  The Company will, promptly upon the filing
thereof, also make available to each Purchaser all statements, reports
(including, without limitation, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K), registration statements and definitive proxy
statements filed by the Company with the SEC during the period commencing on
the date hereof and ending on the Closing Date (all such materials required to
be furnished to each Purchaser pursuant to this sentence or pursuant to the
next preceding sentence of this Section 3.29 being called, collectively,
the “SEC Documents”).  The Company
has filed in a timely manner all documents that the Company was required to
file under the Exchange Act during the 12 months preceding the date of this
Agreement.  As of their respective filing
dates, the SEC Documents complied or will comply in all material respects with
the requirements of the Exchange Act or the Securities Act, as applicable, and
none of the SEC Documents contained or will contain any untrue statement of a
material fact or omitted or will omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading, as of
their respective filing dates, except to the extent corrected by a subsequently
filed SEC Document. Without limiting the foregoing, effective on or about December 1,
2008, the Company expects to meet each of the eligibility requirements for the
use of Form S-3 in connection with the resale registration of the Shares
and the Underlying Shares as contemplated under the Registration Rights
Agreement.

 

3.30                           Brokers or Finders.  Except for Pacific Growth Equities, LLC (the “Placement
Agent”), the Company has not dealt with any broker or finder in connection

 

13

 

with the transactions contemplated by this Agreement, and, except for
certain fees and expenses payable by the Company to the Placement Agent, the
Company has not incurred, and shall not incur, directly or indirectly, any
liability for any brokerage or finders’ fees or agents commissions or any
similar charges in connection with this Agreement or any transaction
contemplated hereby.

 

3.31                           No General Solicitation;
Securities Laws. Neither the Company nor, to the knowledge of the Company,
any person acting for the Company, has conducted any “general solicitation” (as
such term is defined in Regulation D) with respect to any of the Securities
being offered hereby.  Assuming that all
of the representations and warranties of the Purchasers set forth in Section 4,
are true and correct, the offer and sale of the Securities was conducted and
completed in compliance with the Securities Act.

 

4.                                       Representations
and Warranties of the Purchasers. 
Each Purchaser severally for itself, and not jointly with the other Purchasers,
represents and warrants to the Company, as of the Effective Date and the
Closing Date, as follows:

 

4.1                                 Authorization.  All action on the part of such Purchaser and,
if applicable, its officers, directors and shareholders necessary for the authorization,
execution, delivery and performance of the Operative Agreements and the
consummation of the transactions contemplated herein and therein has been
taken.  When executed and delivered, each
of the Operative Agreements will constitute the legal, valid and binding
obligation of such Purchaser, enforceable against such Purchaser in accordance
with its terms, except as such may be limited by bankruptcy, insolvency,
reorganization or other laws affecting creditors’ rights generally and by
general equitable principles.  Such
Purchaser has all requisite corporate power to enter into each of the Operative
Agreements and to carry out and perform its obligations under the terms of the
Operative Agreements.  Such Purchaser has
the knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of an investment in the Securities and has
the ability to bear the economic risks of an investment in the Securities for
an indefinite period of time.  The
Purchaser acknowledges that the Placement Agent has made no representations or
warranties regarding the Company; the Purchaser agrees that neither the
Placement Agent nor any of its controlling persons, Affiliates, directors,
officers, employees or consultants shall have any liability to the Purchaser or
any person asserting claims on behalf of or in right of the Purchaser for any
losses, claims, damages, liabilities or expenses arising out of or relating to
this Agreement or the Purchaser’s purchase of the Securities.

 

4.2                                 Purchase Entirely
for Own Account.  Such Purchaser is
acquiring the Securities being purchased by it hereunder for investment, for
its own account, and not for resale or with a view to distribution thereof in
violation of the Securities Act. Such Purchaser has not entered into an
agreement or understanding with any other party to resell or distribute such
Securities.

 

4.3                                 Investor Status;
Etc.  Such Purchaser certifies and
represents to the Company that it is now, and at the time such Purchaser
acquires any of the

 

14

 

Securities, such Purchaser will be, an “Accredited Investor” as defined
in Rule 501 of Regulation D promulgated under the Securities Act and was
not organized for the purpose of acquiring the Securities.  Such Purchaser’s financial condition is such
that it is able to bear the risk of holding the Securities for an indefinite
period of time and the risk of loss of its entire investment.  Such Purchaser has received, reviewed and
considered all information it deems necessary in making an informed decision to
make an investment in the Securities and has been afforded the opportunity to
ask questions of and receive answers from the management of the Company
concerning this investment and has sufficient knowledge and experience in
investing in companies similar to the Company in terms of the Company’s stage
of development so as to be able to evaluate the risks and merits of its
investment in the Company.

 

4.4                                 Confidential
Information.  Each Purchaser understands
that any information, other than the SEC Documents, provided to such Purchaser
by the Company, including, without limitation, the existence and nature of all
discussions and presentations, if any, regarding this offering and the
Operative Agreements, is strictly confidential and proprietary to the Company
and is being submitted to the Purchaser solely for such Purchaser’s
confidential use in connection with its investment decision regarding the
Securities.  Such Purchaser agrees to use
such information for the sole purpose of evaluating a possible investment in
the Securities and such Purchaser hereby acknowledges that it is prohibited
from reproducing or distributing such information, the Operative Agreements, or
any other offering materials, in whole or in part, or divulging or discussing
any of their contents except for use internally and by its legal counsel and
except as required by law or legal process. 
Such Purchaser understands that the federal securities laws prohibit any
person who possesses material nonpublic information about a company from
trading in securities of such company.

 

4.5                                 Shares Not
Registered.  Such Purchaser
understands that the Securities have not been registered under the Securities
Act, by reason of their issuance by the Company in a transaction exempt from
the registration requirements of the Securities Act, and that the Securities
must continue to be held by such Purchaser unless a subsequent disposition
thereof is registered under the Securities Act or is exempt from such
registration.  The Purchaser understands
that the exemptions from registration afforded by Rule 144 (the provisions
of which are known to it) promulgated under the Securities Act depend on the
satisfaction of various conditions, and that, if applicable, Rule 144 may
afford the basis for sales only in limited amounts.

 

4.6                                 No Conflict.  The execution and delivery of the Operative
Agreements by such Purchaser and the consummation of the transactions
contemplated hereby and thereby will not conflict with or result in any
material violation of or default by such Purchaser (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any material obligation or to a loss of a
material benefit under (i) any provision of the organizational documents
of such Purchaser, (ii) any material agreement or instrument, permit,
franchise, or license or (iii) any judgment, order, statute, law,
ordinance, rule or regulations, applicable to such Purchaser or its
respective properties or assets.

 

15

 

4.7                                 Brokers.  Such Purchaser has not retained, utilized or
been represented by any broker or finder in connection with the transactions
contemplated by this Agreement.

 

4.8                                 Consents.  All consents, approvals, orders and
authorizations required on the part of such Purchaser in connection with the
execution, delivery or performance of this Agreement and the consummation of
the transactions contemplated herein have been obtained and are, or will be,
effective as of the Closing.

 

4.9                                 No Intent to Effect
a Change of Control.  Such Purchaser
has no present intent to change or influence the control of the Company within
the meaning of Rule 13d of the Exchange Act.

 

4.10                           Acknowledgments Regarding
Placement Agent.  Each Purchaser
acknowledges that the Placement Agent is acting as placement agent for the
Securities being offered hereby and will be compensated by the Company for
acting in such capacity.  Each Purchaser
further acknowledges that the Placement Agent has acted solely as placement
agent for the Company in connection with the offering of the Securities by the
Company, that if the Placement Agent provided any information and data to such
Purchaser in connection with the transactions contemplated hereby, that such
information and data have not been subjected to independent verification by the
Placement Agent, and that the Placement Agent makes no representation or
warranty with respect to the accuracy or completeness of such information, data
or other related disclosure material. Each Purchaser further acknowledges that
in making its decision to enter into this Agreement and purchase the Securities
it has relied on its own examination of the Company and the terms of, and consequences,
of holding the Securities.  Each
Purchaser further acknowledges that the provisions of this Section 4.10
are also for the benefit of, and may also be enforced by, the Placement Agent.

 

4.11                           Information. Each
Purchaser and its advisors, if any, have been furnished with all materials
relating to the business, finances and operations of the Company, and materials
relating to the offer and sale of the Securities, if any, that have been
requested by the Purchaser or its advisors, if any.  The Purchaser and its advisors, if any, have
been afforded the opportunity to ask questions of the Company.  The Purchaser acknowledges and understands
that its investment in the Securities involves a significant degree of risk, including
the risks reflected in the SEC Documents.

 

4.12                           No Public Offering.  Such Purchaser has not received any
information relating to the Securities or the Company, and is not purchasing
the Securities as a result of, any form of general solicitation or general
advertising, including but not limited to, any advertisement, article, notice
or other communication published in any newspaper, magazine or similar media or
broadcast over television or radio or pursuant to any seminar or meeting whose
attendees were invited by any general solicitation or general advertising.

 

16

 

4.13                           Short Positions. Such
Purchaser will not use any of the Securities acquired pursuant to this
Agreement to cover any short position in the Common Stock if doing so would be in
violation of applicable securities laws.

 

4.14                           Residency.  Purchaser’s
principal executive offices are in the jurisdiction set forth immediately below
Purchaser’s name on the applicable signature page attached hereto.

 

4.15                           Governmental Review.  Purchaser
understands that no United States federal or state agency or any other
government or governmental agency has passed upon or made any recommendation or
endorsement of the Securities.

 

5.                                       Conditions
Precedent.

 

5.1                                 Conditions to the
Obligation of the Purchasers to Consummate the Closing.  The obligation of each Purchaser to
consummate the Closing and to purchase and pay for the Shares and Warrants
being purchased by it pursuant to this Agreement is subject to the satisfaction
of the following conditions precedent:

 

(a)                          The
representations and warranties of the Company contained herein shall be true
and correct on and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date (it being understood and agreed by
each Purchaser that, in the case of any representation and warranty of the
Company contained herein which is not hereinabove qualified by application
thereto of a materiality standard, such representation and warranty need be
true and correct only in all material respects in order to satisfy as to such
representation or warranty the condition precedent set forth in the foregoing
provisions of this Section 5.1(a)).

 

(b)                         The
Registration Rights Agreement and the applicable Warrant shall have been
executed and delivered by the Company.

 

(c)                          The
Company shall have performed all obligations and conditions required to be
performed or observed by the Company under this Agreement on or prior to the
Closing Date.

 

(d)                         No
proceeding challenging this Agreement or the transactions contemplated hereby,
or seeking to prohibit, alter, prevent or materially delay the Closing, shall
have been instituted before any court, arbitrator or governmental body, agency
or official and shall be pending.

 

(e)                          The
purchase of and payment for the Securities by the Purchaser shall not be
prohibited by any law or governmental order or regulation.  All necessary consents, approvals, licenses,
permits, orders and authorizations of, or registrations, declarations and
filings with, any governmental or administrative agency or of any other person
with respect to any of the transactions contemplated hereby shall have been
duly obtained or made and shall be in full force and effect (except for the
filing of a Form D and related blue sky law filings which will be timely
filed after the Closing Date).

 

17

 

(f)                            All
instruments and corporate proceedings in connection with the transactions
contemplated by this Agreement to be consummated at the Closing shall be satisfactory
in form and substance to such Purchaser, the Purchaser shall have received an
opinion of legal counsel to the Company substantially in the form of Exhibit C
attached hereto, and such Purchaser shall have received counterpart originals,
or certified or other copies of all documents, including without limitation
records of corporate or other proceedings, which it may have reasonably
requested in connection therewith and such certificates of the Company’s
officers as such Purchaser may have reasonably requested in connection with
such transactions.

 

(g)                         The
Purchasers shall have delivered a minimum of $18.2 million of the aggregate
purchase price for all of the Shares and the Warrants to be purchased hereunder
into the designated escrow account established for the Closing.

 

(h)                         The
Purchasers shall have received a copy of the irrevocable instructions to the
Company’s transfer agent instructing the transfer agent to deliver the Shares
to the Purchasers in accordance with the amounts set forth in Exhibit A.

 

5.2                                 Conditions to the
Obligation of the Company to Consummate the Closing.  The obligation of the Company to consummate
the Closing and to issue and sell to each of the Purchasers the Shares and
Warrants to be purchased by it at the Closing is subject to the satisfaction of
the following conditions precedent:

 

(a)                          The
representations and warranties contained herein of such Purchaser shall be true
and correct on and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date (it being understood and agreed by
the Company that, in the case of any representation and warranty of each
Purchaser contained herein which is not hereinabove qualified by application
thereto of a materiality standard, such representation and warranty need be
true and correct only in all material respects in order to satisfy as to such
representation or warranty the condition precedent set forth in the foregoing
provisions of this Section 5.2(a)).

 

(b)                         The
Registration Rights Agreement shall have been executed and delivered by each
Purchaser.

 

(c)                          The
Purchasers shall have performed all obligations and conditions herein required
to be performed or observed by the Purchasers on or prior to the Closing Date.

 

(d)                         No
proceeding challenging this Agreement or the transactions contemplated hereby,
or seeking to prohibit, alter, prevent or materially delay the Closing, shall
have been instituted before any court, arbitrator or governmental body, agency
or official and shall be pending.

 

(e)                          The
sale of the Securities by the Company shall not be prohibited by any law or
governmental order or regulation.  All
necessary consents, approvals, licenses, permits, orders and authorizations of,
or registrations, declarations

 

18

 

and filings with, any governmental or administrative agency or of any
other person with respect to any of the transactions contemplated hereby shall
have been duly obtained or made and shall be in full force and effect.

 

(f)                            The
Purchasers shall have delivered a minimum of $18.2 million of the aggregate
purchase price for all of the Shares and the Warrants to be purchased hereunder
into the designated escrow account established for the Closing.

 

(g)                         All
instruments and corporate proceedings in connection with the transactions
contemplated by this Agreement to be consummated at the Closing shall be
satisfactory in form and substance to the Company, and the Company shall have
received counterpart originals, or certified or other copies of all documents,
including without limitation records of corporate or other proceedings, which
it may have reasonably requested in connection therewith.

 

6.                                       Transfer,
Legends.

 

6.1                                 Securities Law
Transfer Restrictions.

 

(a)                          Each
Purchaser understands that, except as provided in the Registration Rights
Agreement, the Securities have not been registered under the Securities Act or
any state securities laws, and each Purchaser agrees that it will not sell,
offer to sell, solicit offers to buy, dispose of, loan, pledge or grant any
right with respect to (collectively, a “Disposition”), the Securities
nor will such Purchaser engage in any hedging or other transaction which is
designed to or could be reasonably expected to lead to or result in a
Disposition of Securities by such Purchaser or any other person or entity
unless (a) the Securities are registered under the Securities Act, or (b) such
Purchaser shall have delivered to the Company an opinion of counsel in form,
substance and scope reasonably acceptable to the Company, to the effect that
registration is not required under the Securities Act or any applicable state
securities law due to the applicability of an exemption therefrom.  In that connection, such Purchaser is aware
of Rule 144 under the Securities Act and the restrictions imposed
thereby.  Such Purchaser acknowledges and
agrees that no sales of the Securities may be made under the Registration
Statement filed by the Company pursuant to the Registration Rights Agreement and
that the Securities are not transferable on the books of the Company unless the
certificate submitted to the transfer agent evidencing the Securities is
accompanied by a separate Purchaser’s Certificate of Subsequent Sale: (i) in
the form of Exhibit D hereto; (ii) executed by an officer of, or
other authorized person designated by, the Purchaser; and (iii) to the
effect that (A) the shares have been sold in accordance with the
Registration Statement, the Securities Act and any applicable state securities
or blue sky laws, and (B) the requirement, if any, of delivering a current
prospectus has been satisfied.  Each
Purchaser agrees that it will not use any of the Securities acquired pursuant
to this Agreement to engage in any hedging or other transactions prohibited
under federal or state securities laws. 
Such prohibited hedging or other transactions would include, without
limitation, effecting any short sale or having in effect any short position
(whether or not such sale or position is in violation of applicable securities
laws and regardless of when such position was entered into) or any purchase,
sale or grant of

 

19

 

any right (including, without limitation, any put or call option) or
any borrowing or pre-borrowing with respect to the Securities or with respect
to any security (other than a broad-based market basket or index) that
includes, relates to or derives any significant part of its value from the
Common Stock of the Company.

 

(b)                         Each
Purchaser acknowledges that no action has been or will be taken in any
jurisdiction outside the United States by the Company or the Placement Agent
that would permit an offering of the Securities, or possession or distribution
of offering materials in connection with the issue of Securities, in any jurisdiction
outside of the United States where action for that purpose is required.  Each Purchaser outside the United States will
comply with all applicable laws and regulations in each foreign jurisdiction in
which it purchases, offers, sells or delivers Securities or has in its
possession or distributes any offering material, in all cases at its own
expense.  The Placement Agent is not
authorized to make any representation or use any information in connection with
the issue, placement, purchase and sale of the Securities.

 

(c)                          Each
Purchaser hereby covenants with the Company not to make any sale of the
Securities without complying with the provisions of the Operative Agreements
and with all applicable securities laws and regulations, and such Purchaser
acknowledges that the certificates evidencing the Shares and the Warrants will
be imprinted with a legend that prohibits their transfer except in accordance
therewith.  Each Purchaser acknowledges
that there may occasionally be times when the Company, based on the advice of
its counsel, determines that it must suspend the Registration Statement, until
such time as an amendment to the Registration Statement has been filed by the
Company and declared effective by the SEC or until the Company has amended or
supplemented such Prospectus.

 

6.2                                 Legends.

 

(a)                          Each
certificate representing any of the Shares and each Warrant shall be endorsed
with the legend substantially in the form as set forth below, together with
other legends as may be required by applicable securities laws, and each
Purchaser covenants that, except to the extent such restrictions are waived by
the Company, it shall not transfer the securities represented by any such
certificate without complying with the restrictions on transfer described in
this Agreement and the legends endorsed on such certificate:

 

“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT OR PURSUANT TO AN AVAILABLE EXEMPTION
FROM REGISTRATION UNDER SAID ACT AND, IF REQUESTED BY THE COMPANY, UPON
DELIVERY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
THE PROPOSED TRANSFER IS EXEMPT FROM SAID ACT.”

 

20

 

(b)                         After
the earlier of (i) the effectiveness of the Registration Statement and
receipt by the Company of a Purchaser’s written confirmation that such
Securities will not be disposed of except in compliance with the prospectus
delivery requirements, if any, of the Securities Act or (ii) unlimited
resale pursuant to Rule 144 under the Securities Act becoming available to
a Purchaser, the Company shall, upon such Purchaser’s written request, promptly
cause certificates evidencing the Purchaser’s Shares to be replaced with
certificates that do not bear such restrictive legends. When the Company is
required to cause unlegended certificates to replace previously issued legended
certificates, the Company shall deliver unlegended certificates to a Purchaser
within three (3) business days following (i) submission by that
Purchaser of legended certificate(s) to the Company’s transfer agent or (ii) in
the event of an exercise of the Warrant, submission by that Purchaser of all
required documents (including the payment of the exercise price) to the Company
and the Company’s transfer agent for the purposes of such exercise in
accordance with the terms of the Warrant, together with a representation letter
in customary form.  The Company’s
obligation to issue unlegended certificates pursuant to this Section 6.2(b) shall
be excused if (i) the SEC promulgates any rule or interpretation
expressly prohibiting removal of legends in such circumstances, (ii) the
SEC or other regulatory authority instructs the Company or its transfer agent
not to remove such legends, (iii) the SEC makes it a condition to the
effectiveness of the Registration Statement that the Company continue to keep
such legends in place, and (iv) with respect to a Purchaser, so long as
such Purchaser is deemed to be an “affiliate” of the Company pursuant to the
Securities Act and Rule 144 promulgated thereunder (in which case, the
certificate(s) evidencing such Purchaser’s shares shall also bear a legend
disclosing Purchaser’s status as an “affiliate” of the Company until such time
as such Purchaser is no longer deemed by the Company, in its reasonable
discretion with the advice of its legal counsel, to be an “affiliate” of the Company
in accordance with the Securities Act).

 

(c)                          Notwithstanding
the removal of legends as provided in Section 6.2(b), until a Purchaser’s
Shares or the Underlying Shares, as applicable, are sold pursuant to the
Registration Statement or unlimited resale pursuant to Rule 144 becomes
available to the Purchaser, the Purchaser shall continue to hold such shares in
the form of a definitive stock certificate and shall not hold the shares in
street name or in book-entry form with a securities depository.

 

7.                                       Termination;
Liabilities Consequent Thereon.  This
Agreement may be terminated and the transactions contemplated hereunder
abandoned at any time prior to the Closing only as follows:

 

(a)                                  by
the Purchasers, upon notice to the Company if the conditions set forth in Section 5.1
shall not have been satisfied on or prior to December 12, 2008; or

 

(b)                                 by
the Company, upon notice to the Purchasers if the conditions set forth in Section 5.2
shall not have been satisfied on or prior to December 12, 2008; or

 

(c)                                  at
any time by mutual agreement of the Company and the Purchasers; or

 

21

 

(d)                                 by
the Purchasers, if there has been any breach of any representation or warranty
or any material breach of any covenant of the Company contained herein and the
same has not been cured within 15 days after notice thereof (it being
understood and agreed by each Purchaser that, in the case of any representation
or warranty of the Company contained herein which is not hereinabove qualified
by application thereto of a materiality standard, such representation or
warranty will be deemed to have been breached for purposes of this Section 7(d) only
if such representation or warranty was not true and correct in all material
respects at the time such representation or warranty was made by the Company);
or

 

(e)                                  by
the Company, if there has been any breach of any representation, warranty or
any material breach of any covenant of any Purchaser contained herein and the
same has not been cured within 15 days after notice thereof (it being
understood and agreed by the Company that, in the case of any representation and
warranty of the Purchaser contained herein which is not hereinabove qualified
by application thereto of a materiality standard, such representation or
warranty will be deemed to have been breached for purposes of this Section 7(e) only
if such representation or warranty was not true and correct in all material
respects at the time such representation or warranty was made by such
Purchaser).

 

Notwithstanding
the foregoing, with respect to Sections 7(b) and 7(e), the Company may not
terminate this Agreement as to any Purchaser who (i) has met its closing
obligations under Section 5.2, (ii) is not in breach of any
representation or warranty or material breach of any covenant of such
Purchaser, and (iii) elects to proceed with the Closing despite the
failure of one or more other Purchasers to meet their respective closing
obligations under Section 5.2, which shall include any act that causes any
closing obligation under Section 5.2 to not be met, or the breach by one
or more other Purchasers of any representation, warranty or material covenant
of any such Purchaser. Any termination pursuant to this Section 7 shall be
without liability on the part of any party, unless such termination is the
result of a material breach of this Agreement by a party to this Agreement in
which case such breaching party shall remain liable for such breach
notwithstanding any termination of this Agreement. Any liability of a Purchaser
under this Section 7 shall be several, and not joint, with the obligations
of any other Purchaser.

 

22

 

8.                                       Indemnification.
To the fullest extent permitted by law, the Company agrees to indemnify and
hold harmless each Purchaser from and against any losses, claims, damages,
judgments, fines, penalties, expenses (including reasonable attorney’s fees and
expenses), amounts paid in settlement, and liabilities joint or several (“Claims”)
to which such Purchaser may become subject (under the Securities Act or
otherwise) or which it may incur in connection with investigating, preparing or
defending any action, claim, suit, inquiry, proceeding, investigation or appeal
taken from the foregoing by or before any court or governmental, administrative
or other regulatory agency, body or the SEC, whether pending or threatened,
whether or not an indemnified party is or may be a party thereto insofar as
such Claims (or actions or proceedings in respect thereof) arise out of, or are
based upon any breach of the representations or warranties of the Company
contained herein or failure to comply with the covenants and agreements of the
Company contained herein. The Company shall reimburse each Purchaser for the
amounts provided for herein on demand as such expenses are incurred as
reasonably documented by the Purchaser.

 

9.                                       Miscellaneous
Provisions.

 

9.1                                 Public Statements
or Releases.  The Company shall, on
the business day following the Closing Date, file a Current Report on Form 8-K,
disclosing the transactions contemplated hereby and make such other filings and
notices in the manner and time required by the SEC.  The Company and the Placement Agent shall
consult with each other in issuing any press releases with respect to the
transactions contemplated hereby, and none of the parties to this Agreement
shall make, issue, or release any announcement, whether to the public
generally, or to any of its suppliers or customers or other third parties, with
respect to this Agreement or the transactions provided for herein, or make any
statement or acknowledgment of the existence of, or reveal the status of, this
Agreement or the transactions provided for herein, without the prior consent of
the Company, which shall not be unreasonably withheld or delayed, provided,
that nothing in this Section 9.1 shall prevent any of the parties hereto from
making such public announcements as it may consider necessary in order to
satisfy its legal obligations, but to the extent not inconsistent with such
obligations, it shall provide the other parties with an opportunity to review
and comment on any proposed public announcement before it is made.

 

9.2                                 Further Assurances.  Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances, as may be reasonably requested by
the other parties to better evidence and reflect the transactions described
herein and contemplated hereby, and to carry into effect the intents and
purposes of this Agreement.

 

9.3                                 Rights Cumulative.  Each and all of the various rights, powers
and remedies of the parties shall be considered to be cumulative with and in
addition to any other rights, powers and remedies which such parties may have
at law or in equity in the event of the breach of any of the terms of this
Agreement.  The exercise or partial
exercise of any right, power or remedy shall neither constitute the exclusive
election thereof nor the waiver of any other right, power or remedy available
to such party.

 

23

 

9.4                                 Pronouns.  All pronouns or any variation thereof shall
be deemed to refer to the masculine, feminine or neuter, singular or plural, as
the identity of the person, persons, entity or entities may require.

 

9.5                                 Notices.  Any notices, reports or other correspondence
(hereinafter collectively referred to as “correspondence”) required or
permitted to be given hereunder shall be in writing, addressed as set forth
below and shall be deemed effectively given: (a) upon personal delivery to
the party to be notified, (b) when sent by confirmed electronic mail or
facsimile if sent during normal business hours of the recipient, if not, then
on the next business day, (c) three business (3) days after having
been sent by registered or certified mail, return receipt requested, postage
prepaid, or (d) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt, in each case costs prepaid.

 

(a)                                  All
correspondence to the Company shall be addressed as follows:

 

ARYx
Therapeutics, Inc.

6300 Dumbarton
Circle

Fremont, CA
94555

Attention:              Paul Goddard, Ph.D.

                                Chairman
of the Board and

                                Chief
Executive Officer

Facsimile:               510-585-2202

 

with a copy to
(which shall not constitute notice):

 

Cooley Godward
Kronish, LLP

Five Palo Alto
Square

3000 El Camino
Real

Palo Alto, CA
94306

Attention:              Jim
F. Fulton, Jr., Esq.

Facsimile:               650-849-7400

 

All
correspondence to any Purchaser shall be sent to such Purchaser at the address
set forth in Exhibit A.

 

(b)                                 Any
entity may change the address to which correspondence to it is to be addressed
by ten (10) days advance written notification as provided for herein.

 

9.6                                 Captions.  The captions and paragraph headings of this
Agreement are solely for the convenience of reference and shall not affect its
interpretation.

 

9.7                                 Severability.  Should any part or provision of this
Agreement be held unenforceable or in conflict with the applicable laws or
regulations of any jurisdiction, the invalid or unenforceable part or
provisions shall be replaced with a provision which accomplishes, to the extent
possible, the original business purpose of

 

24

 

such part or provision in a valid and enforceable manner, and the
remainder of this Agreement shall remain binding upon the parties hereto.

 

9.8                                 Governing Law;
Injunctive Relief.

 

(a)                          This
Agreement shall be governed by and construed in accordance with the internal
and substantive laws of the State of Delaware and without regard to any
conflicts of laws concepts which would apply the substantive law of some other
jurisdiction.

 

(b)                         Each
of the parties hereto acknowledges and agrees that damages will not be an
adequate remedy for any material breach or violation of this Agreement if such
material breach or violation would cause immediate and irreparable harm (an “Irreparable
Breach”).  Accordingly, in the event
of a threatened or ongoing Irreparable Breach, each party hereto shall be
entitled to seek equitable relief of a kind appropriate in light of the nature
of the ongoing or threatened Irreparable Breach, which relief may include,
without limitation, specific performance or injunctive relief; provided,
however, that if the party bringing such action is unsuccessful in
obtaining the relief sought, the moving party shall pay the non-moving party’s
reasonable costs, including attorney’s fees, incurred in connection with
defending such action.  Such remedies
shall not be the parties’ exclusive remedies, but shall be in addition to all
other remedies provided in this Agreement.

 

9.9                                 Amendments.
This Agreement may not be amended or modified, and no rights or provisions may
be waived, except pursuant to an instrument in writing signed by the Company
and the Majority Purchasers; provided,
however, that this Agreement may not be amended or modified, and no
rights or provisions may be waived, in any way that materially adversely
affects the rights and/or obligations of any Purchaser under this Agreement in
a manner materially different from the manner in which it affects the rights
and/or obligations of the other Purchasers without the written consent of such
adversely affected party. The Company shall give prompt written notice of any
amendment, modification or waiver hereof to any party hereto that did not
consent in writing to such amendment, modification or waiver. Any amendment,
modification or waiver effected in accordance with this Section 9.9 shall
be binding on all parties hereto, even if they do not execute such consent.

 

9.10                           Waiver.  No waiver of any term, provision or condition
of this Agreement, whether by conduct or otherwise, in any one or more
instances, shall be deemed to be, or be construed as, a further or continuing
waiver of any such term, provision or condition or as a waiver of any other
term, provision or condition of this Agreement.

 

9.11                           Expenses.  Each party will bear its own costs and
expenses in connection with this Agreement; provided however that the Company
shall reimburse Growth Equity Opportunities Fund, LLC (“NEA”), for all
documented legal, due diligence and other fees and expenses incurred by NEA in
connection with the transaction described in this Agreement (not to exceed
$40,000), and subsequently with

 

25

 

respect to review of the Registration Statement required to be filed
pursuant to the Registration Rights Agreement (not to exceed $10,000).

 

9.12                           Assignment.  The rights and obligations of the parties
hereto shall inure to the benefit of and shall be binding upon the authorized
successors and permitted assigns of each party. 
No party may assign its rights or obligations under this Agreement or
designate another person (i) to perform all or part of its obligations
under this Agreement or (ii) to have all or part of its rights and benefits
under this Agreement, in each case without the prior written consent of the
Company, provided, however, that a Purchaser may assign its
rights hereunder with respect to any Securities transferred to a “Qualified
Holder” pursuant to and in compliance with Section 14 of the Registration
Rights Agreement, and may designate such Qualified Holder to perform the duties
of the Purchaser hereunder with respect to such transferred Securities; provided,
further that irrespective of such transfer and designation the Purchaser
shall remain obligated hereunder with respect to all of such Purchaser’s
purchased Securities.  In the event of
any assignment in accordance with the terms of this Agreement, the assignee
shall specifically assume and be bound by the provisions of the Agreement by
executing and agreeing to an assumption agreement reasonably acceptable to the
Company.

 

9.13                           Survival.  The respective representations and warranties
given by the parties hereto, and the other covenants and agreements contained
herein, shall survive the Closing Date and the consummation of the transactions
contemplated herein for a period of one (1) year from the Closing Date,
without regard to any investigation made by any party; provided, however, that
the covenants and agreements contained in Sections 6, 8 and 9 of this Agreement
shall survive the Closing Date and the consummation of the transactions
contemplated herein beyond the one (1) year period and provided further,
that for clarification purposes, the provisions of Section 8 of this
Agreement shall only survive with respect to any claims pending as of the one (1) year
anniversary of the Closing Date and any claims arising thereafter out of the
breach of the covenants and agreements of the Company under Sections 6 and 9 of
this Agreement.

 

9.14                           Counterpart. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original and all of which together shall constitute one instrument. A
facsimile, telecopy or other reproduction of this Agreement may be executed by
one or more parties hereto and delivered by such party by facsimile or any
similar electronic transmission device pursuant to which the signature of or on
behalf of such party can be seen. Such execution and delivery shall be
considered valid, binding and effective for all purposes.  At the request of any party hereto, all
parties hereto agree to execute and deliver an original of this Agreement as
well as any facsimile, telecopy or other reproduction hereof.

 

9.15                           Entire Agreement.  The Operative Agreements constitute the
entire agreement between the parties hereto respecting the subject matter
hereof and supersede all prior agreements, negotiations, understandings,
representations and statements respecting the subject matter hereof, whether
written or oral.  No modification,
alteration, waiver or change in any of the terms of the Operative

 

26

 

Agreements shall be valid or binding upon the parties hereto unless
made in writing and duly executed by the Company and the Majority Purchasers.

 

9.16                           Waiver of Conflicts.  Each party to this Agreement acknowledges
that Cooley, outside general counsel to the Company, has in the past performed
and is or may now or in the future represent one or more Purchasers or their
affiliates in matters unrelated to the transactions contemplated by this
Agreement (the “Financing”), including representation of such Purchasers
or their affiliates in matters of a similar nature to the Financing.  The applicable rules of professional
conduct require that Cooley inform the parties hereunder of this representation
and obtain their consent.  Cooley has
served as outside general counsel to the Company and has negotiated the terms
of the Financing solely on behalf of the Company.  The Company and each Purchaser hereby (a) acknowledge
that they have had an opportunity to ask for and have obtained information
relevant to such representation, including disclosure of the reasonably
foreseeable adverse consequences of such representation; (b) acknowledge
that with respect to the Financing, Cooley has represented solely the Company,
and not any Purchaser or any stockholder, director or employee of the Company
or any Purchaser; and (c) gives its informed consent to Cooley’s
representation of the Company in the Financing.

 

9.17                           Independent Nature of
Purchasers’ Obligations and Rights. The obligations of each Purchaser under
this Agreement are several and not joint with the obligations of any other
Purchaser, and no Purchaser shall be responsible in any way for the performance
of the obligations of any other Purchaser under this Agreement. Nothing
contained herein, and no action taken by any Purchaser, shall be deemed to
constitute the Purchasers as a partnership, an association, a joint venture or
any other kind of entity, or create a presumption that the Purchasers are in
any way acting in concert or as a group with respect to such obligations or the
transaction contemplated hereby. Each Purchaser shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement, and it shall not be necessary for any
other Purchaser to be joined as an additional party in any proceeding for such
purpose.

 

9.18                           Use of Proceeds.  The Company agrees that all proceeds from the
sale of the Shares and the Warrants pursuant to this Agreement shall be used
only for working capital and other corporate/operational purposes of the
Company; provided, however, that
the Company shall be permitted to use such proceeds to make required payments
on the Company’s outstanding indebtedness on the Effective Date as disclosed in
the SEC Documents.

 

[SIGNATURE PAGE TO FOLLOW]

 

27

 

IN
WITNESS WHEREOF, the parties hereto have executed this
SECURITIES PURCHASE AGREEMENT as
of the day and year first above written.

 

 

	
   

  	
  ARYX THERAPEUTICS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul Goddard

  
	
   

  	
  Name:

  	
  Paul Goddard, Ph.D.

  
	
   

  	
  Title:

  	
  Chairman
  of the Board and

  
	
   

  	
   

  	
  Chief
  Executive Officer

  

 

ARYX THERAPEUTICS, INC.

SECURITIES PURCHASE AGREEMENT – SIGNATURE PAGE

 

 

	
  PURCHASER:

  	
   

  
	
   

  	
  GROWTH
  EQUITY OPPORTUNITIES

  FUND, L.L.C.

  
	
   

  	
   

  
	
   

  	
  By:  New Enterprise Associates 12, Limited

  Partnership, its Member

  
	
   

  	
     By:
  NEA Partners 12, Limited

  
	
   

  	
  Partnership, its general partner

  
	
   

  	
  By: NEA 12 GP, LLC, its general

  
	
   

  	
  partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Charles
  W. Newhall

  
	
   

  	
  Name: 

  	
  Charles W.
  Newhall

  
	
   

  	
  Title:

  	
  Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  c/o New Enterprise Associates

  
	
   

  	
  1119 St. Paul Street

  
	
   

  	
  Baltimore, MD 21201

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Facsimile: (410) 752-7721

  

 

ARYX THERAPEUTICS, INC.

SECURITIES PURCHASE AGREEMENT – SIGNATURE PAGE

 

 

	
  PURCHASER:

  	
   

  
	
   

  	
  MPM BIOVENTURES III, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: MPM
  BioVentures III GP, L.P., its

  
	
   

  	
  General
  Partner

  
	
   

  	
  By: MPM BioVentures
  III LLC, its General

  
	
   

  	
  Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nicholas
  Simon III

  
	
   

  	
  Name: 

  	
  Nicholas
  Simon III

  
	
   

  	
  Title:

  	
  Series A
  Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  The John Hancock Tower

  
	
   

  	
  200 Clarendon Street, 54th
  Floor

  
	
   

  	
  Boston, MA 02116

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Facsimile: (617) 425-9201

  

 

ARYX THERAPEUTICS, INC.

SECURITIES PURCHASE AGREEMENT – SIGNATURE PAGE

 

 

	
  PURCHASER:

  	
   

  
	
   

  	
  MPM BIOVENTURES III-QP, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: MPM
  BioVentures III GP, L.P., its 

  
	
   

  	
  General
  Partner

  
	
   

  	
  By: MPM BioVentures
  III LLC, its General

  
	
   

  	
  Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nicholas
  Simon III

  
	
   

  	
  Name: 

  	
  Nicholas
  Simon III

  
	
   

  	
  Title:

  	
  Series A Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  The John Hancock Tower

  
	
   

  	
  200 Clarendon Street, 54th
  Floor

  
	
   

  	
  Boston, MA 02116

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Facsimile:
  (617) 425-9201

  

 

ARYX THERAPEUTICS, INC.

SECURITIES PURCHASE AGREEMENT – SIGNATURE PAGE

 

 

	
  PURCHASER:

  	
   

  
	
   

  	
  MPM BIOVENTURES III GMBH & CO.

  BETEILIGUNGS KG

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: MPM
  BioVentures III GP, L.P., in its 

  
	
   

  	
  capacity as
  the Managing Limited Partner

  
	
   

  	
  By: MPM
  BioVentures III LLC, its General 

  
	
   

  	
  Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nicholas
  Simon III

  
	
   

  	
  Name: 

  	
  Nicholas
  Simon III

  
	
   

  	
  Title:

  	
  Series A
  Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  The John Hancock Tower

  
	
   

  	
  200 Clarendon Street, 54th
  Floor

  
	
   

  	
  Boston, MA 02116

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Facsimile:
  (617) 425-9201

  

 

ARYX THERAPEUTICS, INC.

SECURITIES PURCHASE AGREEMENT – SIGNATURE PAGE

 

 

	
  PURCHASER:

  	
   

  
	
   

  	
  MPM BIOVENTURES III PARALLEL

  
	
   

  	
  FUND, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: MPM
  BioVentures III GP, L.P., its

  
	
   

  	
  General
  Partner

  
	
   

  	
  By: MPM
  BioVentures III LLC, its General

  
	
   

  	
  Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nicholas
  Simon III

  
	
   

  	
  Name: 

  	
  Nicholas
  Simon III

  
	
   

  	
  Title:

  	
  Series A
  Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  	
  The John
  Hancock Tower

  
	
   

  	
   

  	
  200
  Clarendon Street, 54th Floor

  
	
   

  	
   

  	
  Boston, MA
  02116

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile:  (617) 425-9201

  
				

 

ARYX THERAPEUTICS, INC.

SECURITIES PURCHASE AGREEMENT – SIGNATURE PAGE

 

 

	
  PURCHASER:

  	
   

  
	
   

  	
  MPM ASSET MANAGEMENT

  
	
   

  	
  INVESTORS 2002 BVIII LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nicholas
  Simon III

  
	
   

  	
  Name: 

  	
  Nicholas
  Simon III

  
	
   

  	
  Title:

  	
  Series A
  Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  	
  The John
  Hancock Tower

  
	
   

  	
   

  	
  200
  Clarendon Street, 54th Floor

  
	
   

  	
   

  	
  Boston, MA
  02116

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile:  (617) 425-9201

  
				

 

ARYX THERAPEUTICS, INC.

SECURITIES PURCHASE AGREEMENT – SIGNATURE PAGE

 

 

	
  PURCHASER:

  	
   

  
	
   

  	
  MPM BIOVENTURES STRATEGIC

  
	
   

  	
  FUND, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: MPM
  BioVentures III GP, L.P., its

  
	
   

  	
  General
  Partner

  
	
   

  	
  By: MPM
  BioVentures III LLC, its General

  
	
   

  	
  Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Nicholas
  Simon III

  
	
   

  	
  Name: 

  	
  Nicholas
  Simon III

  
	
   

  	
  Title:

  	
  Series A
  Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  	
  The John
  Hancock Tower

  
	
   

  	
   

  	
  200
  Clarendon Street, 54th Floor

  
	
   

  	
   

  	
  Boston, MA
  02116

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile:  (617) 425-9201

  
				

 

ARYX THERAPEUTICS, INC.

SECURITIES PURCHASE AGREEMENT – SIGNATURE PAGE

 

 

	
  PURCHASER:

  	
   

  
	
   

  	
  ORBIMED ASSOCIATES LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Eric A.
  Bittelman

  
	
   

  	
  Name: 

  	
  Eric A.
  Bittelman

  
	
   

  	
  Title:

  	
  CFO, OrbiMed
  Adivsors, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  	
  OrbiMed
  Advisors LLC

  
	
   

  	
   

  	
  767 Third
  Ave. 30th Floor

  
	
   

  	
   

  	
  New York NY
  10017 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile:

  	
   

  
					

 

ARYX THERAPEUTICS, INC.

SECURITIES PURCHASE AGREEMENT – SIGNATURE PAGE

 

 

	
  PURCHASER:

  	
   

  
	
   

  	
  CADUCEUS
  PRIVATE INVESTMENTS, LP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Eric A.
  Bittelman

  
	
   

  	
  Name: 

  	
  Eric A.
  Bittelman

  
	
   

  	
  Title:

  	
  CFO, OrbiMed
  Cpaital

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  	
  OrbiMed
  Advisors LLC

  
	
   

  	
   

  	
  767 Third
  Ave. 30th Floor

  
	
   

  	
   

  	
  New York NY
  10017 

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile:

  	
   

  
					

 

ARYX THERAPEUTICS, INC.

SECURITIES PURCHASE AGREEMENT – SIGNATURE PAGE

 

 

	
  PURCHASER:

  	
   

  
	
   

  	
  UBS
  JUNIPER CROSSOVER FUND, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Eric A.
  Bittelman

  
	
   

  	
  Name: 

  	
  Eric A.
  Bittelman

  
	
   

  	
  Title:

  	
  CFO, OrbiMed
  Adivsors, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  	
  OrbiMed
  Advisors LLC

  
	
   

  	
   

  	
  767 Third
  Ave. 30th Floor

  
	
   

  	
   

  	
  New York
  NY  10017

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile:

  	
   

  
				

 

ARYX THERAPEUTICS, INC.

SECURITIES PURCHASE AGREEMENT – SIGNATURE PAGE

 

 

	
  PURCHASER:

  	
   

  
	
   

  	
  Jennison Health Sciences Fund, a series of

  
	
   

  	
  Jennison Sector Funds, Inc. (the “Fund”)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Jennison
  Associates LLC (“Jennison”), as

  
	
   

  	
   

  	
  sub-adviser
  to the Fund

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David
  Chan

  
	
   

  	
  Name: 

  	
  David Chan

  
	
   

  	
  Title:

  	
  Managing
  Director of Jennison and

  Portfolio Manager to the Fund

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  	
  c/o Jennison
  Associates LLC

  
	
   

  	
   

  	
  466
  Lexington Ave

  
	
   

  	
   

  	
  New York
  NY  10017

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile:

  	
  (212)
  986-6138

  
					

 

ARYX THERAPEUTICS, INC.

SECURITIES PURCHASE AGREEMENT – SIGNATURE PAGE

 

 

	
  PURCHASER:

  	
   

  
	
   

  	
  Pacific Select Fund, Health Sciences

  
	
   

  	
  Portfolio (the “Fund”)

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Jennison
  Associates LLC (“Jennison”), as

  
	
   

  	
   

  	
  sub-advisor
  to the Fund

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David
  Chan

  
	
   

  	
  Name: 

  	
  David Chan

  
	
   

  	
  Title:

  	
  Managing
  Director of Jennison and

  Portfolio Manager to the Fund

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  	
  c/o Jennison
  Associates LLC

  
	
   

  	
   

  	
  466
  Lexington Ave

  
	
   

  	
   

  	
  New York
  NY  10017

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile:

  	
  (212)
  986-6138

  
					

 

ARYX THERAPEUTICS, INC.

SECURITIES PURCHASE AGREEMENT – SIGNATURE PAGE

 

 

	
  PURCHASER:

  	
   

  
	
   

  	
  NEXUS GEMINI, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Dominique
  Semon

  
	
   

  	
  Name: 

  	
  Dominique
  Semon

  
	
   

  	
  Title:

  	
  Fund Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  	
  Merlin Nexus

  
	
   

  	
   

  	
  230 Park
  Avenue, Suite 928

  
	
   

  	
   

  	
  New York
  NY  10169

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile:

  	
  (646)
  227-5201

  
				

 

ARYX THERAPEUTICS, INC.

SECURITIES PURCHASE AGREEMENT – SIGNATURE PAGE

 

 

	
  PURCHASER:

  	
   

  
	
   

  	
  MONTREUX EQUITY PARTNERS III 

  
	
   

  	
  SBIC, LP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Manish
  Chapekar

  
	
   

  	
  Name: 

  	
  Manish
  Chapekar

  
	
   

  	
  Title:

  	
  Managing
  Director of the General

  Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  	
  3000 Sand
  Hill Road

  
	
   

  	
   

  	
  Building 1, Suite 260

  
	
   

  	
   

  	
  Menlo Park,
  CA  94025

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile:

  	
  (650)
  234-1250

  
					

 

ARYX THERAPEUTICS, INC.

SECURITIES PURCHASE AGREEMENT – SIGNATURE PAGE

 

 

Exhibit A

 

SCHEDULE OF
PURCHASERS

 

	
  Purchaser Name and Address

  	
   

  	
  Number
  of 

  Shares to be 

  Purchased

  	
   

  	
  Number
  of 

  Underlying Shares to

  be Purchased under 

  Warrants

  	
   

  	
  Aggregate

  Purchase Price

  
	
  Growth
  Equity Opportunities Fund, LLC  

  c/o New Enterprise Associates  

  1119 St. Paul Street  

  Baltimore, MD 21201

  	
   

  	
  4,469,274

  	
   

  	
  1,340,782

  	
   

  	
  $

  	
  10,000,000.58

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MPM
  BioVentures III, L.P.  

  MPM BioVentures III-QP, L.P.  

  MPM BioVentures III GMBH & Co. Beteiligungs
  KG  

  MPM BioVentures III Parallel Fund, L.P.  

  MPM Asset Management Investors 2002 BVIII LLC  

  MPM BioVentures Strategic Fund, L.P.  

  The John Hancock Tower  

  200 Clarendon Street, 54th Floor  

  Boston, MA 02116  

  Attn: Nicholas J. Simon III

  	
   

  	
  1,787,710

  	
   

  	
  536,313

  	
   

  	
  $

  	
  4,000,001.13

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Caduceus
  Private Investments, L.P.  

  OrbiMed Associates LLC  

  UBS Juniper Crossover Fund, LLC  

  Orbimed Advisors LLC  

  767 Third Ave. 30th Floor  

  New York, NY 10017  

  Attn: Eric A. Bittleman

  	
   

  	
  1,214,646

  	
   

  	
  364,394

  	
   

  	
  $

  	
  2,717,770.43

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  IFTCO, as
  nominee for Pacific Select Fund, Health 

  Sciences Portfolio  

  David Chan  

  c/o Jennison Associates LLC  

  466 Lexington Ave.  

  New York, NY 10017

  	
   

  	
  148,782

  	
   

  	
  44,635

  	
   

  	
  $

  	
  332,899.73

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hare &
  Co., as nominee for Jennison Health Sciences Fund  

  David Chan  

  c/o Jennison Associates LLC  

  466 Lexington Ave.  

  New York, NY 10017

  	
   

  	
  1,192,000

  	
   

  	
  357,600

  	
   

  	
  $

  	
  2,667,100

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Nexus
  Gemini, LP  

  Dominique Semon  

  230 Park Ave., Ste. 928  

  New York, NY 10169

  	
   

  	
  558,659

  	
   

  	
  167,598

  	
   

  	
  $

  	
  1,249,999.51

  

 

 

	
  Purchaser Name and Address

  	
   

  	
  Number
  of 

  Shares to be 

  Purchased

  	
   

  	
  Number
  of 

  Underlying Shares to

  be Purchased under 

  Warrants

  	
   

  	
  Aggregate

  Purchase Price

  
	
  Montreux
  Equity Partners III SBIC, LP  

  3000 Sand Hill Road  

  Building 1, Suite 260 

  Menlo Park, CA 94025-7073 

  Attn: Manish Chapekar

  	
   

  	
  278,474

  	
   

  	
  83,542

  	
   

  	
  $

  	
  623,085.58

  

 

 

Exhibit B

 

FORM OF
WARRANT

 

THE SECURITIES REPRESENTED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED, TRANSFERRED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION UNDER SAID ACT AND,
IF REQUESTED BY THE COMPANY, UPON DELIVERY OF AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT THE PROPOSED TRANSFER IS EXEMPT FROM SAID ACT.

 

	
  WARRANT NO.

  	
   

  	
  NUMBER OF SHARES:

  
	
  DATE OF ISSUANCE:
  November     , 2008

  	
   

  	
  (subject to adjustment)

  

 

WARRANT
TO PURCHASE SHARES

OF
COMMON STOCK OF

 

ARYx Therapeutics, Inc.

 

This Warrant is issued to
                          ,
or its registered assigns in accordance with the terms hereof (the “Purchaser”),
pursuant to that certain Securities Purchase Agreement, dated as of November 11,
2008, between ARYx Therapeutics, Inc., a Delaware corporation (the “Company”),
the Purchaser and certain other purchasers thereunder (the “Purchase
Agreement”) and is subject to the terms and conditions of the Purchase
Agreement. This Warrant, together with such other warrants issued pursuant to
the terms of the Purchase Agreement, shall collectively be referred to as the “Warrants.”

 

1.          EXERCISE OF WARRANT.

 

(a)      Method of Exercise.  Subject to the terms and conditions herein
set forth, upon surrender of this Warrant at the principal office of the
Company and upon payment of the Warrant Price (as defined below) by wire
transfer to the Company or cashier’s check drawn on a United States bank made
to the order of the Company, or exercise of the right to credit the Warrant
Price against the fair market value of the Warrant Stock (as defined below) at
the time of exercise (the “Net Exercise Right”) pursuant to Section 1(b),
Purchaser is entitled to purchase from the Company, at any time after the date
hereof and on or before the date that is five (5) years from the Date of
Issuance set forth above (the “Expiration Date”), up to
             shares
(as adjusted from time to time pursuant to the provisions of this Warrant) of
Common Stock, par value $0.001 per share (“Common Stock”) of the Company
(the “Warrant Stock”), at a purchase price of $2.64 per share (the “Warrant
Price”).

 

(b)      Net Exercise Right.  If the Company shall receive written notice
from the holder of this Warrant at the time of exercise of this Warrant that
the holder elects to exercise the Net Exercise Right, the Company shall deliver
to such holder (without payment by the Purchaser 

 

 

of any exercise price in
cash) that number of fully paid and nonassessable shares of Common Stock equal
to the quotient obtained by dividing (y) the value of this Warrant (or the
specified portion thereof) on the date of exercise, which value shall be determined
by subtracting (1) the aggregate Warrant Price of the Warrant Stock (or
the specified portion thereof) immediately prior to the exercise of this
Warrant from (2) the Aggregate Fair Market Value (as defined below) of the
Warrant Stock (or the specified portion thereof) issuable upon exercise of this
Warrant (or specified portion thereof) on the date of exercise by (z) the
Fair Market Value (as defined below) of one share of Common Stock on the date
of exercise.  The “Fair Market Value”
of a share of Common Stock shall mean the average of the closing or last
reported sale prices of the Common Stock on the NASDAQ Global Market or other
such other principal exchange or quotation system for the five (5) consecutive
trading days immediately prior to date of exercise as reported by the NASDAQ
Global Market or such other principal exchange or quotation system on which the
Common Stock is then traded or, if the Common Stock is not publicly traded, the
price determined in good faith by the Company’s Board of Directors.  The “Aggregate Fair Market Value” of
the Warrant Stock shall be determined by multiplying the number of shares of
Warrant Stock by the Fair Market Value of one share of Warrant Stock.

 

2.          CERTAIN ADJUSTMENTS.

 

(a)        Mergers or Consolidations.  If at any time while this Warrant is
exercisable there shall be a capital reorganization (other than a combination
or subdivision of Warrant Stock otherwise provided for herein) (a “Reorganization”),
or a merger or consolidation of the Company with another corporation (other
than a merger with another corporation in which the Company is a continuing
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant or a merger
effected exclusively for the purpose of changing the domicile of the Company)
(a “Merger”), then, as a part of such Reorganization or Merger, the
Company shall use its commercially reasonable efforts to ensure Purchaser shall
thereafter be entitled to receive upon exercise of this Warrant, during the
period specified in this Warrant and upon payment of the Warrant Price, the
same amount and kind of securities, cash or other property of the Company or
the successor corporation resulting from such Reorganization or Merger, to
which a holder of the Common Stock deliverable upon exercise of this Warrant
would have been entitled under the provisions of the agreement in such
Reorganization or Merger if this Warrant had been exercised immediately before
that Reorganization or Merger. In any such case, appropriate adjustment (as
determined in good faith by the Company’s Board of Directors) shall be made in
the application of the provisions of this Warrant with respect to the rights
and interests of the Purchaser after the Reorganization or Merger to the end
that the provisions of this Warrant (including adjustment of the Warrant Price
then in effect and the number of shares of Warrant Stock) shall be applicable
after that event, as near as reasonably may be, in relation to any shares or
other property deliverable after that event upon exercise of this Warrant.
Notwithstanding the foregoing, in the event any successor to the Company,
surviving entity or the corporation purchasing or otherwise acquiring such
assets or other appropriate corporation or entity does not agree to assume this
Warrant in connection with a Reorganization or Merger, then this Warrant shall
terminate and be of no further force or effect unless exercised pursuant to Section 1
hereof prior to the date of closing of such Reorganization or Merger.

 

 

(b)      Splits and Subdivisions;
Dividends.  In the
event the Company should at any time, or from time to time, fix a record date
for the effectuation of a split or subdivision of the outstanding shares of
Common Stock or the determination of the holders of Common Stock entitled to
receive a dividend or other distribution payable in additional shares of Common
Stock or other securities or rights convertible into, or entitling the holder
thereof to receive directly or indirectly, additional shares of Common Stock
(hereinafter referred to as the “Common Stock Equivalents”) without
payment of any consideration by such holder for the additional shares of Common
Stock or Common Stock Equivalents (including the additional shares of Common
Stock issuable upon conversion or exercise thereof), then, as of such record
date (or the date of such distribution, split or subdivision if no record date
is fixed), the per share Warrant Price shall be appropriately decreased and the
number of shares of Warrant Stock shall be appropriately increased in
proportion to such increase (or potential increase) of outstanding shares.

 

(c)      Combination of Shares.  If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by a combination of
the outstanding shares of Common Stock, the per share Warrant Price shall be
appropriately increased and the number of shares of Warrant Stock shall be
appropriately decreased in proportion to such decrease in outstanding shares.

 

(d)      Adjustments for Other
Distributions.  In the
event the Company shall declare a distribution payable in securities of other
persons, evidences of indebtedness issued by the Company or other persons,
assets (excluding cash dividends paid out of net profits) or options or rights
not referred to in Section 2(b), then, in each such case for the purpose
of this Section 2(d), upon exercise of this Warrant the holder hereof
shall be entitled to a proportionate share of any such distribution as though
such holder was the holder of the number of shares of Common Stock into which
this Warrant may be exercised as of the record date fixed for the determination
of the holders of Common Stock entitled to receive such distribution.

 

(e)     Certificate of Adjustment.  Whenever the Warrant Price or number or type
of securities issuable upon exercise of this Warrant is adjusted, as herein
provided, the Company shall, at its expense, promptly deliver to the record
holder of this Warrant a certificate of an officer of the Company setting forth
the nature of such adjustment and showing in detail the facts upon which such
adjustment is based.

 

3.          NO FRACTIONAL SHARES.  No fractional shares of Warrant Shares will
be issued in connection with any exercise of this Warrant.  In lieu of any fractional shares which would
otherwise be issuable, the Company shall pay cash equal to the product of such
fraction multiplied by the Fair Market Value of one share of Warrant Stock.

 

4.          NO STOCKHOLDER RIGHTS.  Until the exercise of this Warrant or any
portion of this Warrant, the Purchaser shall not have nor exercise any rights
by virtue hereof as a stockholder of the Company (including without limitation
the right to notification of stockholder meetings or the right to receive any
notice or other communication concerning the business and affairs of the
Company).

 

5.          RESERVATION OF STOCK.  The Company covenants that during the period
this Warrant is exercisable, the Company will reserve from its authorized and
unissued Common 

 

 

Stock a sufficient number of
shares of Common Stock (or other securities, if applicable) to provide for the
issuance of Warrant Stock (or other securities) upon the exercise of this
Warrant.  The Company agrees that its
issuance of this Warrant shall constitute full authority to its officers who
are charged with the duty of executing stock certificates to execute and issue
the necessary certificates for the Warrant Stock upon the exercise of this
Warrant.

 

6.          MECHANICS OF EXERCISE.  This Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant and the Notice of
Exercise attached hereto as Exhibit A duly completed and executed
on behalf of the holder hereof, at the principal office of the Company together
with payment in full of the Warrant Price then in effect with respect to the
number of shares of Warrant Stock as to which the Warrant is being
exercised.  This Warrant shall be deemed
to have been exercised immediately prior to the close of business on the date
of its surrender for exercise as provided above, and the person entitled to
receive the Warrant Stock issuable upon such exercise shall be treated for all
purposes as the holder of such shares of record as of the close of business on
such date.  As promptly as practicable on
or after such date, the Company at its expense shall cause to be issued and
delivered to the person or persons entitled to receive the same, a certificate
or certificates for the number of full shares of Warrant Stock issuable upon
such exercise, together with cash in lieu of any fraction of a share as
provided above.  The shares of Warrant
Stock issuable upon exercise hereof shall, upon their issuance, be validly
issued, fully paid and nonassessable, and free from all preemptive rights,
taxes, liens and charges with respect to the issue thereof.  In the event that this Warrant is exercised
in part, the Company at its expense will execute and deliver a new Warrant of
like tenor exercisable for the number of shares for which this Warrant may then
be exercised.

 

7.          REPRESENTATIONS OF
PURCHASER.  As of the date hereof, the
Purchaser hereby confirms the representations and warranties made by the
Purchaser in Section 4 of the Purchase Agreement.

 

8.          TRANSFER RESTRICTIONS.

 

(a)      Unregistered Security.  The holder of this Warrant acknowledges that
this Warrant and the Warrant Stock have not been registered under the
Securities Act of 1933, as amended (the “Securities Act”) or applicable
state securities laws (collectively, the “Acts”), and agrees not to
sell, encumber or otherwise transfer this Warrant or any Warrant Stock issued
upon its exercise unless (i) there is an effective registration statement
under the Securities Act covering the transaction, (ii) the Company
receives an opinion of counsel satisfactory to the Company that such
registration is not required, or (iii) the Company otherwise satisfies
itself that registration is not required. 
Each certificate or other instrument for Warrant Stock issued upon the
exercise of this Warrant shall bear a legend substantially to the foregoing
effect.

 

(b)      No Transfer.  This Warrant is not transferable without the
Company’s prior written consent; provided, however, such consent
shall not be required in connection with the transfer by the Purchaser of such
Warrant (but only with all related obligations) without consideration to a
Qualifying Holder (as such term is defined in the Registration Rights Agreement
between the Company and the Purchaser entered into in connection with the
Purchase Agreement dated as of even date herewith), provided that (i) written
notice (in the form of Exhibit B as attached hereto) is provided to
the Company at least five (5) business days prior 

 

 

to any such transfer, (ii) the
transferee is an “accredited investor” as defined in Rule 501(a) of
Regulation D promulgated under the Securities Act and (iii) the transferee
agrees in writing to be bound by all of the provisions of this Warrant.

 

9.          NOTICES OF RECORD DATE.  In the event of:

 

(a)      any taking by the Company of
a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend payable out of earned surplus of the Company) or other
distribution, or any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right; or

 

(b)      any Reorganization or
Merger; or

 

(c)      any voluntary or involuntary
dissolution, liquidation or winding-up of the Company,

 

then and in each such event
the Company will mail or cause to be mailed to the Purchaser (or a permitted
transferee pursuant to Section 8(b) above) a notice specifying (i) the
date on which any such record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right and (ii) the date on which any such Reorganization,
Merger, dissolution, liquidation or winding-up is to take place, and the time,
if any, as of which the holders of record of Common Stock (or other securities)
shall be entitled to exchange their shares of Common Stock (or other
securities) for securities or other property deliverable upon such
Reorganization, Merger, dissolution, liquidation or winding-up.  Such notice shall be mailed at least ten (10) business
days prior to the date therein specified.

 

10.        REPLACEMENT OF
WARRANTS.  On receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft,
destruction or mutilation of this Warrant, on delivery of an indemnity
agreement or security reasonably satisfactory in form and amount to the Company
or, in the case of any such mutilation, on surrender and cancellation of such
Warrant, the Company at its expense will execute and deliver, in lieu thereof,
a new Warrant of like tenor.

 

11.        SATURDAYS, SUNDAYS,
HOLIDAYS, ETC.  If the last or appointed
day for the taking of any action or the expiration of any right required or
granted herein shall be a Saturday or Sunday or shall be a legal U.S. holiday,
then such action may be taken or such right may be exercised on the next
succeeding day not a Saturday, Sunday or legal U.S. holiday.

 

12.        MISCELLANEOUS.  This Warrant shall be governed by the laws of
the State of Delaware.  The headings in
this Warrant are for purposes of convenience and reference only, and shall not
be deemed to constitute a part hereof. 
Neither this Warrant nor any term hereof may be changed, waived, discharged
or terminated except by an instrument in writing signed by the Company and the
Majority Purchasers (as defined in the Purchase Agreement) provided that all
Warrants are similarly affected.  Upon
the effectuation of any such amendment, discharge or waiver in conformance with
this Section 12, the Company shall promptly give written notice thereof to
the record holders of the Warrants who have not previously consented thereto in
writing. All notices required or permitted under this Warrant shall be in writing
and shall be 

 

 

deemed effectively given: (a) upon
personal delivery to the party to be notified, (b) when sent by confirmed
electronic mail or facsimile if sent during normal business hours of the
recipient, if not, then on the next business day, (c) three business (3) days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (d) one (1) day after deposit with a
nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the
Company at the address listed below and to Purchaser at the address set forth
in the Purchaser Agreement or at such other address as the Company or Purchaser
may designate by ten (10) days’ advance written notice to the other party
hereto. The invalidity or unenforceability of any provision hereof shall in no
way affect the validity or enforceability of any other provisions. Receipt of
this Warrant by the Purchaser shall constitute acceptance of and agreement to
all of the terms and conditions contained herein.

 

[SIGNATURE
PAGE FOLLOWS]

 

 

IN WITNESS WHEREOF, this
Warrant to purchase shares of Common Stock of ARYx Therapeutics, Inc. is
issued effective as of the Date of Issuance first set forth above.

 

	
   

  	
  ARYx
  Therapeutics, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Paul Goddard, Ph.D.

  
	
   

  	
   

  	
  Chairman of the Board and
  Chief

  
	
   

  	
   

  	
  Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  6300 Dumbarton Circle

  
	
   

  	
   

  	
  Fremont, CA 94555

  
	
   

  	
   

  	
  Attention: Paul Goddard,
  Ph.D.,

  
	
   

  	
   

  
	
   

  	
  with a copy to (which shall not constitute notice):

  
	
   

  	
   

  
	
   

  	
  Cooley Godward Kronish,
  LLP

  
	
   

  	
  Five Palo Alto Square

  
	
   

  	
  3000 El Camino Real

  
	
   

  	
  Palo Alto, CA 94306

  
	
   

  	
  Attention: Jim F.
  Fulton, Jr., Esq.

  
				

 

 

EXHIBIT A

 

NOTICE
OF INTENT TO EXERCISE

(To
be signed only upon exercise of Warrant)

 

To:  ARYx Therapeutics, Inc.

 

The undersigned, the
Purchaser of the attached Warrant, hereby irrevocably elects to exercise the
purchase right represented by such Warrant for, and to purchase thereunder,
                            
(                )
shares of Common Stock of ARYx Therapeutics, Inc. and (choose one)

 

                    
herewith makes payment of
                                    
Dollars
($                  )
thereof

 

or

 

                    
exercises the Net Exercise Right pursuant to Section 1(b) thereof and
requests that the certificates for such shares be issued in the name of, and
delivered to
                                                      ,
whose address is                                                                                                                                                                                                         .

 

As of the date hereof, the
Purchaser hereby confirms the representations and warranties made by the
Purchaser in Section 4 of the Purchase Agreement.

 

	
  DATED:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Signature must conform in
  all

  
	
   

  	
  respects to name of the
  Purchaser

  
	
   

  	
  as specified on the face
  of the

  
	
   

  	
  Warrant)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Address)

  

 

 

EXHIBIT B

 

NOTICE
OF ASSIGNMENT FORM

 

FOR VALUE RECEIVED,
                                            
(the “Assignor”) hereby sells, assigns and transfers all of the rights
of the undersigned Assignor under the attached Warrant with respect to the
number of shares of Common Stock of ARYx Therapeutics, Inc. (the “Company”)
covered thereby set forth below, to the following “Assignee” and, in
connection with such transfer, represents and warrants to the Company that (i) such
Assignee is a Qualifying Holder (as such term is defined in the Registration
Rights Agreement between the Company and the Purchaser entered into in
connection with the Purchase Agreement dated as of even date herewith) of the
Assignor and (ii) the transfer is otherwise in compliance with Section 9(b) of
the Warrant:

 

	
  NAME
  OF ASSIGNEE

  	
   

  	
  ADDRESS/FAX
  NUMBER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature:

  	
   

  
	
  Dated:

  	
   

  	
   

  	
  Witness:

  	
   

  
						

 

 

ASSIGNEE
ACKNOWLEDGMENT

 

The undersigned Assignee
acknowledges that it has reviewed the attached Warrant and by its signature
below it hereby represents and warrants that it is a Qualifying Holder and an “accredited
investor” as defined in Rule 501(a) of Regulation D promulgated under
the Securities Act of 1933, as amended, and agrees to be bound by the terms and
conditions of the attached Warrant as of the date hereof.

 

 

	
   

  	
  Signature:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
  Address:

  	
   

  
					

 

 

Exhibit C

 

FORM OF LEGAL OPINION

 

November     ,
2008

 

To the
Purchasers Set Forth on Schedule A Hereto

 

RE:   ARYx Therapeutics, Inc.

 

Ladies and Gentlemen:

 

We have acted as counsel for
ARYx Therapeutics, Inc., a Delaware corporation (the “Company”), in
connection with the issuance and sale of
[                              ]
“Common Stock”),
and warrants (the “Warrants”)
to purchase up to
[                              ]
shares of the Common Stock (the “Warrant Shares,” and, collectively with the
Shares and Warrants, the “Securities”),
to the Purchasers under the Securities Purchase Agreement dated as of November 11,
2008 (the “Purchase
Agreement”).  We are
rendering this opinion pursuant to Section 5.1(f) of the Purchase
Agreement.  Except as otherwise defined
herein, capitalized terms used but not defined herein have the respective
meanings given to them in the Purchase Agreement.

 

In connection with this
opinion, we have examined and relied upon the representations and warranties as
to factual matters contained in and made pursuant to the Purchase Agreement by
the various parties and originals or copies certified to our satisfaction, of
such records, documents, certificates, opinions, memoranda and other
instruments as in our judgment are necessary or appropriate to enable us to
render the opinion expressed below.

 

As to certain factual
matters, we have relied upon certificates of officers of the Company and have
not sought to independently verify such matters.  Where we render an opinion “to our knowledge”
or concerning an item “known to us” or our opinion otherwise refers to our
knowledge, it is based solely upon (i) an inquiry of attorneys within this
firm who have represented the Company in this transaction, (ii) receipt of
a certificate executed by an officer of the Company covering such matters and (iii) such
other investigation, if any, that we specifically set forth herein.

 

In rendering this opinion,
we have assumed: (i) the authenticity of all documents submitted to us as
originals; (ii) the conformity to originals of all documents submitted to
us as copies; (iii) the accuracy, completeness and authenticity of
certificates of public officials; (iv) the due authorization, execution
and delivery of all documents (except the due authorization, execution and
delivery by the Company of the Purchase Agreement, the Registration Rights
Agreement and the Warrants (together, the “Transaction Documents”)), where
authorization, execution and delivery are prerequisites to the effectiveness of
such documents; and (v) the genuineness and authenticity of all signatures
on original documents (except the signatures on behalf of the Company on the
Transaction Documents). We have also assumed: that all individuals executing
and delivering documents had the legal capacity to so execute and deliver; that
the Transaction Documents are obligations binding upon the parties thereto
other than the Company; that the parties to the Transaction Documents other
than the Company have filed any required California franchise or income tax
returns and have paid any required California 

 

 

franchise or income taxes;
and that there are no extrinsic agreements or understandings among the parties
to the Transaction Documents or to the Material Agreements (as defined below)
that would modify or interpret the terms of any of the Transaction Documents or
the respective rights or obligations of the parties thereunder.

 

Our opinion is expressed
only with respect to the federal laws of the United States of America and the
laws of the State of California and the General Corporation Law of the State of
Delaware. 
We note that the parties to the Transaction Documents have
designated the laws of the State of Delaware as the laws governing the
Transaction Documents.  Our opinion in
paragraph 3 below as to the validity, binding effect and enforceability of the
Transaction Documents is premised upon the result that would obtain if a
California court were to apply the internal laws of the State of California
(notwithstanding the designation of the laws of the State of Delaware) to the
interpretation and enforcement of the Transaction Documents.  We
express no opinion as to whether the laws of any particular jurisdiction apply
and no opinion to the extent that the laws of any jurisdiction other than those
identified above are applicable to the subject matter hereof or any liquidated
damages provisions in the Transaction Documents.

 

We are not rendering any
opinion as to any statute, rule, regulation, ordinance, decree or decisional
law relating to antitrust, banking, land use, environmental, pension, employee
benefits, tax, fraudulent conveyance, usury, laws governing the legality of
investments for regulated entities, Regulations T, U or X of the Board of
Governors of the Federal Reserve System, any law, rules or regulations
relating to the United States Food and Drug Administration or any other
federal, state or foreign agencies or bodies engaged in the regulation of
pharmaceuticals or the bylaws, rules or regulations of the National
Association of Securities Dealers, Inc. (“NASD”). 
Furthermore, we express no opinion with respect to compliance with
antifraud laws, rules or regulations relating to securities or the offer
and sale thereof; compliance with fiduciary duties by the Company’s Board of
Directors or stockholders; compliance with safe harbors for disinterested Board
of Director or stockholder approvals; compliance with state securities or blue
sky laws except as specifically set forth below; compliance with the Investment
Company Act of 1940; or compliance with laws that place limitations on
corporate distributions.

 

With regard to our opinion
in paragraph 1 below with respect to the good standing and due qualification of
the Company, we have relied solely upon certificates of the Secretaries of
State of the indicated jurisdiction as of a recent date.

 

With regard to our opinion
in paragraph 4 below with respect to securities of the Company to be issued
after the date hereof, we express no opinion to the extent that,
notwithstanding its current reservation of shares of Common Stock, future
issuance of securities of the Company and/or antidilution adjustments to
outstanding securities of the Company cause the Warrants to be exercisable for
more shares of Common Stock than the number that then remain authorized but
unissued.

 

With regard to our opinion
in paragraph 5 below concerning defaults under and any material breaches of any
Material Agreement, we have relied solely upon (i) inquiries of officers
of the Company and (ii) an examination of the contracts filed by the
Company in the SEC Documents, a list of which is attached hereto as SCHEDULE B (the “Material Agreements”),
in the form provided to us by the Company. 
We have made no further investigation. 
Further, with regard to our opinion in paragraph 5 below concerning
Material Agreements, we express no opinion as to 

 

 

(i) financial covenants
or similar provisions therein requiring financial calculations or
determinations to ascertain compliance, (ii) provisions therein relating
to the occurrence of a “material adverse event” or words of similar import or (iii) any
statement or writing that may constitute parol evidence bearing on
interpretation or construction.  To the
extent that laws other than those of California govern any of the Material
Agreements, we assume that the Material Agreements would be interpreted in
accordance with their plain meaning.

 

With regard to our opinion
in paragraph 7 below, we have assumed the following: (a) that the
representations made by each Purchaser in the Purchase Agreement are true and
correct; (b) that neither the Company, the Placement Agent nor any person
acting on behalf of either the Company or the Placement Agent has offered or
sold the Securities by any form of general solicitation or general advertising
within the meaning of Rule 502(c) of Regulation D promulgated under
the Securities Act; and (c) that there will be no offerings or sales of
securities of the Company after the date hereof in a transaction that can be “integrated”
with any sales of the Securities.

 

On the basis of the
foregoing, in reliance thereon and with the foregoing qualifications, we are of
the opinion that:

 

1.             The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all corporate power and authority necessary to own
and lease its properties and to conduct its business as it is currently being
conducted, except as would not reasonably be expected to have a material
adverse effect upon the Company taken as a whole. The Company is qualified to
do business as a foreign corporation in California.

 

2.             The Company has the
requisite corporate power and authority to execute, deliver and perform its
obligations under the Transaction Documents.

 

3.             All corporate action on the
part of the Company necessary for the authorization, execution and delivery of
the Transaction Documents by the Company, the authorization, sale, issuance and
delivery of the Securities and the performance by the Company of its
obligations under the Transaction Documents has been taken. Each of the
Transaction Documents has been duly and validly authorized, executed and
delivered by the Company and each such agreement constitutes a valid and
binding agreement of the Company enforceable against the Company in accordance
with its respective terms, except that we express no opinion as to the validity
of rights to indemnity and contribution under section 8 of the Purchase
Agreement and section 11 of the Registration Rights Agreement and except as
such enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, arrangement, moratorium or other similar
laws affecting creditors’ rights generally, and subject to general equity
principles and to limitations on availability of equitable relief, including
specific performance.

 

4.             The Shares have been duly
authorized, and upon issuance and delivery against payment therefor in
accordance with the terms of the Purchase Agreement, the Shares will be validly
issued, outstanding, fully paid and nonassessable.  The Warrant Shares, when issued 

 

 

upon exercise of the
Warrants in accordance with their terms, will be validly issued, fully paid and
nonassessable.

 

5.             The execution and delivery
of the Transaction Documents, and the issuance of the Shares and the Warrants
pursuant thereto, do not violate any provision of the Company’s Certificate of
Incorporation or Bylaws, do not constitute a default under or a material breach
of any Material Agreement and do not violate (a) any governmental statute,
rule or regulation which in our experience is typically applicable to
transactions of the nature contemplated by the Transaction Documents or (b) any
order, writ, judgment, injunction, decree, determination or award which has
been entered against the Company and of which we are aware, in each case to the
extent the violation of which would materially and adversely affect the
Company.

 

6.             All consents, approvals,
authorizations, or orders of, and filings, registrations, and qualifications with
any U.S. Federal or California regulatory authority or governmental body
required for the issuance of the Shares and Warrants, have been made or
obtained, except (a) for the filing of a Form D pursuant to
Securities and Exchange Commission Regulation D, and (b) for the filing of
the notice to be filed under California Corporations Code Section 25102.1(d).

 

7.             The offer and sale of the
Shares and Warrants are exempt from the registration requirements of the
Securities Act of 1933, as amended, subject to the timely filing of a Form D
pursuant to Securities and Exchange Commission Regulation D.

 

[Signature Page Follows]

 

 

This opinion is intended
solely for your benefit and is not to be made available to or be relied upon by
any other person, firm, or entity without our prior written consent.

 

 

	
  Very truly yours,

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  COOLEY
  GODWARD KRONISH LLP

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
        James
  F. Fulton, Jr., Esq.

  	
   

  
				

 

 

SCHEDULE A

 

PURCHASERS

 

 

SCHEDULE B

 

MATERIAL AGREEMENTS

 

1.    Loan and Security Agreement No. 4521,
dated March 28, 2005, by and between Lighthouse and the Company, as
amended on April 22, 2005, July 25, 2005, June 27, 2006, August 30,
2007, October 19, 2007, February 22, 2008 and October 17, 2008.

 

2.    Master Security Agreement,
dated August 24, 2005, by and between General Electric Capital Corporation
and the Company.

 

3.    Lease Agreement, dated November 16,
2004, by and between Trinet Essential Facilities X, Inc. and the Company,
for the premises located at 6300 Dumbarton Circle, Fremont, California 94555.

 

4.    Amended and Restated
Investor Rights Agreement by and between the Company and certain of its
securityholders as indentified therein, dated October 22, 2007.

 

 

Exhibit D

 

PURCHASER’S
CERTIFICATE OF SUBSEQUENT SALE

 

	
  Attention:

  	
  ARYx
  Therapeutics, Inc.  

  Chief Financial Officer

  

 

The undersigned, [an officer
of, or other person duly authorized by] 
                                                                                                                        [fill in official name of individual or institution]
hereby certifies that he/she [said institution] is the Purchaser of the
Securities evidenced by the attached certificate, and as such, sold such shares
on
                                          
in accordance with the Registration Statement number
                                                
[fill in the number of or otherwise identify Registration Statement] and the
requirement, if any, of delivering a current prospectus forming a part of such
Registration Statement has been complied with in connection with such sale.

 

Print or Type:

 

	
  Name of Purchaser 

  (Individual or Institution):

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name of Individual 

  Representing Purchaser 

  (if an institution):

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title of Individual 

  Representing Purchaser 

  (if an institution):

  	
   

  	
   

  

 

Signature by:

 

	
  Individual Purchaser 

  or Individual Representing 

  Purchaser:

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