Document:

Exhibit 10.10

 

ARYX THERAPEUTICS, INC.

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (“Agreement”) is
entered into and effective as of September 1, 2005 (the “Signing Date”), by
and between Paul Goddard (“Executive”)
and ARYX THERAPEUTICS, INC. (the “Company”), a Delaware
corporation.

 

WHEREAS,
Executive has been providing services to the Company under the terms of an
Amended and Restated Consulting Agreement effective as of February 17, 2005
(the “Consulting
Agreement”);

 

WHEREAS, the Company desires to terminate
the Consulting Agreement and to employ Executive as an employee to provide
personal services to the Company on the Effective Date (as defined below), and
wishes to provide Executive with certain compensation and benefits in return
for his employment services as set forth herein;

 

WHEREAS,
Executive wishes to terminate the Consulting Agreement as of the Effective Date
and to be retained as an employee by the Company and to provide personal
services to the Company as an employee commencing on the Effective Date in
return for certain compensation and benefits as set forth herein;

 

NOW,
THEREFORE, in consideration of the mutual promises and
covenants contained herein, it is hereby agreed by and between the parties
hereto as follows, effective as of the Effective Date:

 

1.             EMPLOYMENT BY THE COMPANY.

 

1.1          Termination of Consulting Agreement. If the Consulting
Agreement has not been terminated earlier, the parties agree that it will
terminate by their mutual agreement effective as of the Effective Date, without
regard to any notice period or other termination requirements contained therein.
The “Effective Date” shall be August 31, 2005 or any earlier date mutually
agreed upon by Executive and the Company.

 

1.2          Title and Responsibilities.
Subject to the terms set forth herein, Executive will be employed as the
Company’s Chief Executive Officer (“CEO”). Executive shall also serve as the
Chairman of the Board of Directors. During his employment with the Company,
Executive will devote his best efforts and substantially all of his business
time and attention (except for vacation periods and reasonable periods of
illness or other incapacity permitted by the Company’s general employment
policies) to the business of the Company.

 

1.3          Executive Position. Executive
will serve in an executive capacity and shall report to the Company’s Board of
Directors of the Company (the “Board”). Executive shall perform the duties of his
executive position as required by the Board.

 

 

1.4          Company Employment Policies.
The employment relationship between the parties shall continue to be governed
by the general employment policies and procedures of the Company, including
those relating to the protection of confidential information and assignment of
inventions, except that when the terms of this Agreement differ from or are in
conflict with the Company’s general employment policies or procedures, this
Agreement shall control.

 

2.             COMPENSATION.

 

2.1          Salary. Executive
shall receive for services to be rendered hereunder a base salary at an annualized
rate of $400,000, payable on the Company’s standard payroll dates. Executive
will be considered for annual increases in base salary in accordance with
Company policy and subject to review and approval by the Compensation Committee
of the Board.

 

2.2          Annual Target Bonus.

 

(a)           Executive shall
also be eligible to earn an annual target bonus of up to fifty percent (50%) of
his annual base salary (the “Bonus”). Payment of any such bonus shall be conditioned
on the successful completion of specific business objectives to be determined
by the Board.

 

(b)           The Bonus will be
subject to increase in the additional amount of $40,000, if either of the
following occurs on or before August 31, 2006 and Executive remains employed in
the position of CEO through the date of such occurrence:  (a) the Company consummates a significant
partnership concerning one of the Company’s lead products with a major
pharmaceutical company; or (b) the Company completes a firmly underwritten
initial public offering of its common stock with gross cash proceeds to the
Company (before underwriting discounts, commissions and fees) of at least forty
million ($40,000,000). For the avoidance of doubt, the maximum that the Bonus
can be increased is an additional $40,000, including in the event that both (a)
and (b) of the preceding sentence occur. Any such additional amount will be
paid to Executive in the first normal pay period following September 1, 2006.

 

(c)           In future years,
the Board will set additional business objectives beyond those on which the
Bonus is measured and increase the amount of the Bonus by an additional amount
of up to $40,000 if such additional business objectives are all met.

 

(d)           The Bonus, if
awarded, shall be subject to applicable payroll withholdings and employment taxes.
The Board will determine, in its sole discretion, whether and to what extent
the Bonus criteria has been met and whether and to what extent the Bonus has
been earned. Executive must remain employed during the complete calendar year
to earn and be eligible to receive the Bonus, and no prorated Bonus payment
will be earned or provided.

 

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(e)           Notwithstanding the
foregoing, Executive will be eligible for a pro rated Bonus for the year ended
2005 based on the number of days during 2005 that Executive is employed by the
Company pursuant to this Agreement. In addition, the Company and Executive will
agree to set a pro rated increase to the Bonus amount during the period between
the first anniversary of the Effective Date and December 31, 2006.

 

2.3          Stock Options. Executive’s current stock options are not
affected by this Agreement and will remain in effect in accordance with the
terms of the applicable stock option agreements and stock option plan(s). The
parties agree that the Company will not provide Executive with any additional
or new stock options in connection with his hire as an employee.

 

2.4          Standard Company Benefits. Executive
shall be entitled to participate in the Company’s employee benefits and compensation
plans which may be in effect from time to time and provided by the Company to
its executives, under the terms and conditions of such benefit and compensation
plans.

 

3.             CONFIDENTIAL INFORMATION, RIGHTS
AND DUTIES.

 

3.1          Confidential Information Agreement. As
a condition of his employment, Executive must sign and comply with the Employee
Proprietary Information and Inventions Agreement (the “Confidential Information Agreement”),
attached hereto as Exhibit A.

 

3.2          Exclusive Property. Executive
agrees that all Company-related business procured by the Executive, and all
Company-related business opportunities and plans made known to Executive, while
employed by the Company are and shall remain the permanent and exclusive
property of the Company.

 

4.             OUTSIDE ACTIVITIES.

 

4.1          Activities. Except
with the prior written consent of the Board, Executive will not during his
employment with the Company undertake or engage in any other employment,
occupation or business enterprise, other than ones in which Executive is a
passive investor. Executive may engage in civic and not-for-profit activities
so long as such activities do not materially interfere with the performance of
his duties hereunder. Subject to the limitations of Sections 4.2 and 4.3 of
this Agreement and with the prior written consent of the Board, Executive may
serve as a director of other corporations and may devote a reasonable amount of
his time to other types of business or public activities; provided, that, Executive will not be
permitted to serve as a director on more than four external boards of other
for-profit corporations at the same time. The Board may rescind its consent to
Executive’s service as a director of other corporations or participation in
other business or public activities if the Board, in its sole discretion,
determines that such activities materially compromise or threaten to materially
compromise the Company’s business interests. To the extent Executive is engaged
in activities not related to the

 

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Company as permitted in
this section, the Company is not required to provide paid leave (unless
Executive utilizes available vacation).

 

4.2          Investments and Interests.
Executive agrees not to acquire, assume or participate in, directly or
indirectly, any position, investment or interest known by him to be adverse or
antagonistic to the Company, its business or prospects, financial or otherwise.

 

4.3          Non-Competition. During
his employment by the Company, except on behalf of the Company, Executive will
not directly or indirectly, whether as an officer, director, stockholder,
partner, proprietor, associate, representative, consultant, or in any capacity
whatsoever engage in, become financially interested in, be employed by or have
any business connection with any other person, corporation, firm, partnership
or other entity whatsoever known by him to compete directly with the Company,
anywhere in the world, in any line of business engaged in (or planned to be
engaged in) by the Company; provided, however, that the Executive may purchase
or otherwise acquire up to (but not more than) one percent (1%) of any class of
securities of any enterprise (but without participating in the activities of
such enterprise) if such securities are listed on any national or regional
securities exchange or have been registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

5.             TERMINATION OF EMPLOYMENT

 

5.1          Termination With or Without Cause.

 

(a)           At-Will Employment. Executive’s relationship with the
Company is at-will. The Company shall have the right to terminate this
Agreement and Executive’s employment with the Company at any time with or
without Cause (as defined below), and with or without advance notice, and Executive
shall have the right to terminate his employment with the Company at any time,
for any reason or for no reason, with or without advance notice. In addition,
the Company retains the discretion to modify the terms of Executive’s
employment, including but not limited to position, duties, reporting
relationship, office location, compensation, and benefits, at any time. Executive’s
at-will employment relationship only may be changed in a written agreement
approved by the Board and signed by Executive and a duly authorized officer or
director of the Company. Executive also may be removed from any position he
holds in the manner specified by the Bylaws of the Company and applicable law.

 

(i)            Definition of Cause. For
purposes of this Agreement, “Cause” shall mean that Executive has committed, or there
has occurred, one or more of the following: 
(a) conviction of, a guilty plea with respect to, or a plea of nolo  contendere to a
charge that the Executive has committed a felony under the laws of the United
States or of any state of a crime involving moral turpitude, including, but not
limited to, fraud, theft, embezzlement or any crime that results in or is
intended to result in personal enrichment at the expense of the Company; (b)
material breach of any agreement entered into between the Executive and the
Company that impairs the Company’s interest

 

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therein (including but
not limited to this Agreement or the Confidentiality Agreement);
(c) willful misconduct, or gross neglect by the Executive of Executive’s
duties, if such conduct is not cured within seven (7) days of Executive’s
receipt of written notice (provided that written notice must only be provided
if such conduct can reasonably be cured); (d) an unauthorized use or disclosure
of the Company’s confidential information or trade secrets; (e) engagement in
any activity that constitutes a material conflict of interest with the Company.
Executive’s death or physical or mental disability (as defined below) shall also
constitute Cause for termination under this Agreement; (f) Executive’s
Inability to Perform Services (as defined below); or (g) failure of Executive
to commence performing duties under this Agreement on the Effective Date.

 

(ii)           Definition of Inability to Perform
Services. For purposes of this Agreement, Cause to terminate
Executive’s employment based on the Executive’s inability to perform services
shall exist if any illness or other incapacity renders the Executive physically
or mentally unable to perform the essential functions of his position, with or
without reasonable accommodation, for a period in excess of twelve (12)
workweeks in any consecutive twelve (12) month period (“Inability to Perform
Services”). The Board shall make a good faith determination of whether
Executive is physically or mentally unable to perform the essential functions
of his position, with or without reasonable accommodation, subject to its
review and consideration of all relevant information.

 

(b)           Termination for Cause.
If the Company terminates Executive’s employment at any time for Cause,
Executive’s salary shall cease on the date of termination, and Executive will
not be entitled to the Severance Benefits (defined below), severance pay, pay
in lieu of notice or any other such compensation, other than payment of accrued
salary and such other benefits as expressly required in such event by
applicable law or the terms of any applicable Company benefit plans.

 

(c)           Termination Without Cause.
If the Company terminates Executive’s employment at any time without Cause,
Executive shall be eligible for the following severance benefits (the “Severance Benefits”):  (i) the Company shall make a lump sum
severance payment to Executive in an amount equal to six (6) months of
Executive’s then-current base salary, subject to withholdings and deductions,
and (ii) if Executive timely elects COBRA health insurance coverage, the
Company will reimburse Executive’s COBRA premiums for a maximum of either six
(6) months following the date his employment terminates or until he becomes
eligible for health insurance coverage from another source, whichever occurs
sooner (provided that Executive must promptly inform the Company, in writing,
if he becomes eligible for health insurance coverage from another source within
six (6) months after the termination). Executive shall not be entitled to the
Severance Benefits unless and until the release requirements set forth in
Section 7 of this Agreement are satisfied.

 

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5.2          Resignation With or Without Good
Reason.

 

(a)           Executive’s Resignation. Executive
may resign from his employment with the Company at any time, with or without
advance notice, and with or without Good Reason (as defined below).

 

(b)           Executive’s Resignation Without Good
Reason. In the event that Executive resigns his employment
without Good Reason, Executive will not be entitled to the Severance Benefits
(defined above), severance pay, pay in lieu of notice or any other such
compensation, other than payment of accrued salary and such other benefits as
expressly required in such event by applicable law or the terms of any
applicable Company benefit plans. Executive’s death will be treated as
Executive’s resignation without Good Reason.

 

(c)           Executive’s Resignation for Good
Reason. Executive may resign his employment for Good Reason
(as defined below) so long as Executive tenders his resignation in writing to
the Company within thirty (30) days after the occurrence of the event which
forms the basis for his resignation for Good Reason. In the event that
Executive resigns his employment for Good Reason, Executive will be eligible to
receive the Severance Benefits, provided
that, the release requirements set forth in Section 7 of this
Agreement are satisfied.

 

(d)           Definition of Good Reason. For
purposes of this Agreement, “Good Reason” shall mean any one of the following events
which occurs on or after the commencement of Executive’s employment without
Executive’s consent:  (i) any reduction
of Executive’s then current annual base salary, except to the extent that the
annual base salary of all other officers of the Company is similarly reduced;
(ii) any material reduction in Executive’s benefits, except to the extent that
such benefits of all other officers of the Company are similarly reduced; (iii)
any material diminution of the Executive’s duties, responsibilities, or
authority, excluding for this purpose an isolated or inadvertent action not
taken in bad faith which is remedied by the Company immediately after written
notice thereof is given by the Executive; (iv) any requirement that the
Executive relocate to a work site that would increase the Executive’s one-way
commute distance to more than thirty-five (35) miles from the Company’s current
headquarters; or (v) any material breach by the Company of its obligations
under this Agreement that is not remedied by Company within thirty (30) days of
written notice of such breach from Executive.

 

5.3          Cessation of Severance Benefits.
If Executive violates any provision of Sections 3 or 6 of this Agreement, any
Severance Benefits or other benefits being provided to Executive will cease
immediately, and Executive will not be entitled to any further compensation and
benefits from the Company.

 

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5.4          Application of Internal Revenue Code
Section 409A. In the event that the Company determines that
any of the Severance Benefits payments fail to satisfy the distribution
requirement of Section 409A(a)(2)(A) of the Internal Revenue Code (the “Code”) as a result of Section
409A(a)(2)(B)(i) of the Code, the payment of such benefit shall be accelerated
to the minimum extent necessary so that the benefit is not subject to the
provisions of Section 409A(a)(1) of the Code. (The payment schedule as revised
after the application of the preceding sentence shall be referred to as the “Revised Payment Schedule.”)  However, in the event the payment of benefits
pursuant to the Revised Payment Schedule would be subject to Section 409A(a)(1)
of the Code, the payment of such benefits shall not be paid pursuant to the
Revised Payment Schedule and instead the payment of such benefits shall be
delayed to the minimum extent necessary so that such benefits are not subject
to the provisions of Section 409A(a)(1) of the Code. The Board may attach
conditions to or adjust the amounts paid pursuant to this Section 5.4 to
preserve, as closely as possible, the economic consequences that would have
applied in the absence of this Section 5.4; provided,
however, that no such condition or adjustment shall result in the
payments being subject to Section 409A(a)(1) of the Code.

 

6.             NONSOLICITATION. During
Executive’s employment and for two (2) years after termination of his
employment for any reason, Executive shall not, without first obtaining the
prior written approval of the Company, directly or indirectly solicit, induce,
persuade or entice, or attempt to do so, or otherwise cause, or attempt to
cause, any employee or independent contractor of the Company to terminate his
or her employment or contracting relationship in order to become an employee,
or independent contractor to or for any person or entity

 

7.             RELEASE. As a
condition of receiving the severance benefits under this Agreement to which
Executive would not otherwise be entitled, Executive shall execute a release
substantially in the form attached hereto as Exhibit B (the “Release”) (the
Company shall determine the actual form of Release to be provided by Executive).
Unless the Release is timely executed by Executive and delivered to the Company
after the termination of Executive’s employment with the Company, Executive
shall not receive any of the Severance Benefits provided for under this
Agreement.

 

8.             PARACHUTE PAYMENTS.

 

8.1          BETTER AFTER-TAX. If
any payment or benefit (including payments and benefits pursuant to this
Agreement) Executive would receive in connection with a change in control of
the Company or otherwise (“Payment”)
would (a) constitute a “parachute payment” within the meaning of Section 280G
of the Code, and (b) but for this sentence, be subject to the excise tax
imposed by Section 4999 of the Code (the “Excise Tax”),
then the Company shall cause to be determined, before any amounts of the
Payment are paid to Executive, which of the following two amounts would
maximize Executive’s after-tax proceeds: (i) payment in full of the entire
amount of the Payment (a “Full Payment”),
or (ii) payment of only a part of the Payment so that Executive receives the
largest payment possible without the imposition of the Excise Tax (a “Reduced Payment”), whichever amount
results in Executive’s receipt, on an after-tax basis, of the greater

 

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amount of the Payment
notwithstanding that all or some portion of the Payment may be subject to the
Excise Tax. For purposes of determining whether to make a Full Payment or a
Reduced Payment, the Company shall cause to be taken into account all
applicable federal, state and local income and employment taxes and the Excise Tax
(all computed at the highest applicable marginal rate, net of the maximum
reduction in federal income taxes which could be obtained from a deduction of
such state and local taxes). If a Reduced Payment is made, (i) the Payment
shall be paid only to the extent permitted under the Reduced Payment
alternative, and Executive shall have no rights to any additional payments
and/or benefits constituting the Payment, and (ii) reduction in payments and/or
benefits shall occur in the following order unless Executive elects in writing
a different order (provided, however,
that such election shall be subject to Company approval if made on or after the
date on which the event that triggers the Payment occurs): (1) reduction of
cash payments pursuant to this Agreement; (2) cancellation of accelerated
vesting pursuant to this Agreement of equity awards other than stock options;
(3) cancellation of accelerated vesting pursuant to this Agreement of stock
options; and (4) reduction of other benefits payable to Executive pursuant to
this Agreement. In the event that acceleration of compensation from Executive’s
equity awards is to be reduced, such acceleration of vesting shall be canceled
in the reverse order of the date of grant unless Executive elects in writing a
different order for cancellation.

 

8.2          STOCKHOLDER VOTE. The
provisions of this Section 8.2 shall apply only in the event that no stock of
the Company is readily tradeable on an established securities market or
otherwise at the time of a Payment. Executive may conditionally waive the right
to all or any portion of the Payment attributable to payments and/or benefits
pursuant to this Agreement that would be subject to the Excise Tax (the “At-Risk Payments”). If Executive
makes such a conditional waiver, the Company shall use its best efforts to
timely solicit stockholder approval of the At-Risk Payments (the “Parachute Payment Vote”) in
accordance with the requirements of Treasury Regulations § 1.280G-1,
Q&A-7 or any successor thereto (the “Regulations”).
If the Parachute Payment Vote results in the approval of the payment of the
At-Risk Payments by the requisite percentage of voting power under the
Regulations, the At-Risk Payments shall be paid to Executive, notwithstanding
the prior conditional waiver of the At-Risk Payments.

 

8.3          MODIFIED GROSS-UP. The
provisions of this Section 8.3 shall apply only in the event that stock of the
Company is readily tradeable on an established securities market or otherwise
at the time of a Payment. If it is determined that: (a) the Payment would
result in an Excise Tax, and (b) a Full Payment would maximize  Executive’s after-tax proceeds, as determined
in accordance with Section 8.1 above, the Company shall pay and Executive shall
be entitled to receive an additional payment (a “Gross-Up
Payment”) from the Company in an amount such that after the
payment of all taxes (including, without limitation, (i) any income or
employment taxes, (ii) any interest or penalties imposed with respect to such
taxes, and (iii) any additional excise tax imposed by Section 4999 of the Code)
on the Gross-Up Payment, Executive shall retain an amount equal to the full
Excise Tax. For purposes of determining the amount of the Gross-Up Payment,
Executive shall be deemed to have: (x) paid federal income taxes at the highest
marginal rate of federal income and employment taxation for the calendar year
in which the

 

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Gross-Up Payment is to be
made, and (y) paid applicable state and local income taxes at the highest rate
of taxation for the calendar year in which the Gross-Up Payment is to be made,
net of the maximum reduction in federal income taxes which could be obtained
from deduction of such state and local taxes. Except as otherwise provided
herein, Executive shall not be entitled to any additional payments or other
indemnity arrangements in connection with the Payment or the Gross-Up Payment.

 

8.4          PARACHUTE PAYMENT DETERMINATIONS.
The independent registered public accounting firm engaged by the Company for general
audit purposes as of the day prior to the effective date of a change in control
of the Company shall make all determinations required to be made under this
Section 8. If the independent registered public accounting firm so engaged by
the Company is serving as accountant or auditor for the individual, entity or
group effecting a change in control of the Company, the Company shall appoint a
different nationally recognized independent registered public accounting firm
to make the determinations required hereunder. The Company shall bear all
expenses with respect to the determinations by such independent registered
public accounting firm required to be made hereunder. The independent
registered public accounting firm engaged to make the determinations hereunder
shall provide its calculations, together with detailed supporting
documentation, to the Company and Executive within fifteen (15) calendar days
after the date on which Executive’s right to a Payment is triggered (if
requested at that time by the Company or Executive) or at such other time as
requested by the Company. If the independent registered public accounting firm
determines that no Excise Tax is payable with respect to a Payment, either
before or after the application of the Reduced Amount, it shall furnish the
Company and Executive with an opinion reasonably acceptable to Executive that
no Excise Tax will be imposed with respect to such Payment. Any good faith
determinations of the accounting firm made hereunder shall be final, binding
and conclusive upon the Company and Executive.

 

9.             GENERAL PROVISIONS.

 

9.1          Notices. Any notices
provided hereunder must be in writing and shall be deemed effective upon the
earlier of personal delivery (including, personal delivery by facsimile
transmission), delivery by express delivery service (e.g.,
Federal Express), or the third day after mailing by first class mail, to the
Company at its primary office location and to Executive at his address as
listed on the Company payroll (which address may be changed by either party by
written notice).

 

9.2          Severability. Whenever
possible, each provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or any other jurisdiction,
and such invalid, illegal or unenforceable provision will be reformed,
construed and enforced in such jurisdiction so as to render it valid, legal,
and enforceable consistent with the intent of the parties insofar as possible.

 

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9.3          Waiver. If either
party should waive any breach of any provisions of this Agreement, he or it
shall not thereby be deemed to have waived any preceding or succeeding breach
of the same or any other provision of this Agreement.

 

9.4          Entire Agreement. This
Agreement, including its exhibits, constitutes the entire agreement between
Executive and the Company regarding the subject matter hereof. As of the
Effective Date, this Agreement supersedes and replaces any and all other
agreements, promise, representation, written or otherwise, between Executive
and the Company with regard to this subject matter. This Agreement is entered
into without reliance on any agreement, promise, or representation, other than
those expressly contained or incorporated herein, and, except for those changes
expressly reserved to the Company’s or Board’s discretion in this Agreement,
the terms of this Agreement cannot be modified or amended except in a writing
signed by Executive and a duly authorized officer of the Company which is
approved by the Board.

 

9.5          Counterparts. This
Agreement may be executed in separate counterparts, any one of which need not
contain signatures of more than one party, but all of which taken together will
constitute one and the same Agreement. Signatures transmitted via facsimile
shall be deemed the equivalent of originals.

 

9.6          Headings and Construction. The
headings of the sections hereof are inserted for convenience only and shall not
be deemed to constitute a part hereof or to affect the meaning thereof. For
purposes of construction of this Agreement, any ambiguities shall not be
construed against either party as the drafter.

 

9.7          Successors and Assigns. This
Agreement is intended to bind and inure to the benefit of and be enforceable by
Executive, the Company, and their respective successors, assigns, heirs,
executors and administrators, except that Executive may not assign any of his
duties hereunder and he may not assign any of his rights hereunder without the
written consent of the Company.

 

9.8          Attorney Fees. If
either party hereto brings any action to enforce his or its rights hereunder,
the prevailing party in any such action shall be entitled to recover his or its
reasonable attorneys’ fees and costs incurred in connection with such action.

 

9.9          Arbitration. To
provide a mechanism for rapid and economical dispute resolution, Executive and
the Company agree that any and all disputes, claims, or causes of action, in
law or equity, arising from or relating to this Agreement (including the
Release) or its enforcement, performance, breach, or interpretation, or arising
from or relating to Executive’s employment with the Company or the termination
of Executive’s employment with the Company, will be resolved, to the fullest
extent permitted by law, by final, binding, and confidential arbitration held
in Santa Clara County, California and conducted by JAMS, Inc. (“JAMS”), under its
then-applicable Rules and Procedures. By
agreeing to this arbitration procedure, both Executive and the Company waive
the right to resolve any such dispute through a trial by jury or judge or by
administrative

 

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proceeding.
Executive will have the right to be represented by legal
counsel at any arbitration proceeding at his expense. The arbitrator
shall:  (a) have the authority to
compel adequate discovery for the resolution of the dispute and to award such
relief as would otherwise be available under applicable law in a court
proceeding; and (b) issue a written statement signed by the arbitrator
regarding the disposition of each claim and the relief, if any, awarded as to
each claim, the reasons for the award, and the arbitrator’s essential findings
and conclusions on which the award is based. The Company shall bear all fees
for the arbitration, except for any attorneys’ fees or costs associated with
Executive’s personal representation. The arbitrator, and not a court, shall
also be authorized to determine whether the provisions of this paragraph apply
to a dispute, controversy or claim sought to be resolved in accordance with
these arbitration procedures. Notwithstanding the provisions of this paragraph,
the parties are not prohibited from seeking injunctive relief in a court of
appropriate jurisdiction to prevent irreparable harm on any basis, pending the
outcome of arbitration. Any awards or orders in such arbitrations may be
entered and enforced as judgments in the federal and the state courts of any
competent jurisdiction.

 

9.10        Governing Law. All
questions concerning the construction, validity and interpretation of this
Agreement shall be governed by the law of the State of California without
regard to conflicts of laws principles.

 

9.11        Exhibits.

 

Exhibit A – Proprietary Information and Inventions
Agreement

 

Exhibit B – Release Agreement

 

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IN
WITNESS WHEREOF, the parties have executed this EMPLOYMENT AGREEMENT on the Signing Date
and is effective as of the Effective Date.

 

	
  ARYX
  THERAPEUTICS, INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
  /s/ Nick Simon

  	
   

  
	
   

  	
  Nick Simon

  
	
   

  	
  Member
  of the Board of Directors of Aryx Therapeutics, Inc.

  
	
   

  
	
   

  
	
  PAUL
  GODDARD

  
	
   

  
	
   

  
	
  /s/ Paul Goddard

  	
   

  

 

 

EXHIBIT A

 

PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

 

 

ARYX THERAPEUTICS

 

EMPLOYEE PROPRIETARY INFORMATION

AND INVENTIONS AGREEMENT

 

In consideration
of my employment or continued employment by ARYX
THERAPEUTICS (the “Company”), and
the compensation now and hereafter paid to me, I hereby agree as follows:

 

1.             NONDISCLOSURE

 

1.1          Recognition of Company’s Rights;
Nondisclosure. At all times during my employment and
thereafter, I will hold in strictest confidence and will not disclose, use,
lecture upon or publish any of the Company’s Proprietary Information (defined
below), except as such disclosure, use or publication may be required in
connection with my work for the Company, or unless an officer of the Company
expressly authorizes such in writing. I will obtain Company’s written approval
before publishing or submitting for publication any material (written, verbal,
or otherwise) that relates to my work at Company and/or incorporates any
Proprietary Information. I hereby assign to the Company any rights I may have
or acquire in such Proprietary Information and recognize that all Proprietary
Information shall be the sole property of the Company and its assigns.

 

1.2          Proprietary Information. The
term “Proprietary Information” shall mean any
and all confidential and/or proprietary knowledge, data or information of the
Company. By way of illustration but not limitation, “Proprietary
Information” includes (a) information relating to products,
processes, know-how, designs, drawings, clinical data, test data, formulas,
methods, samples, media and/or cell lines, developmental or experimental work,
improvements, discoveries, plans for research, new products, manufacturing,
marketing and selling, business plans, budgets and unpublished financial
statements, licenses, prices and costs, suppliers and customers, and
information regarding the skills and compensation of other employees of the
Company. (hereinafter collectively referred to as “Inventions”);
and (b) information regarding plans for research, development, new
products, marketing and selling, business plans, budgets and unpublished
financial statements, licenses, prices and costs, suppliers and customers; and
(c) information regarding the skills and compensation of other employees of the
Company. Notwithstanding the foregoing, it is understood that, at all such
times, I am free to use information which is generally known in the trade or
industry, which is not gained as result of a breach of this Agreement, and my
own skill, knowledge, know-how and experience to whatever extent and in
whichever way I wish.

 

1.3          Third Party Information. I
understand, in addition, that the Company has received and in the future will
receive from third parties confidential or proprietary information (“Third Party Information”) subject to a duty on the Company’s
part to maintain the confidentiality of such information and to use it only for
certain limited purposes. During the term of my employment and thereafter, I
will hold Third Party Information in the strictest confidence and will not
disclose to anyone (other than Company personnel who need to know such
information in connection with their work for the Company) or use, except in
connection with my work for the Company, Third Party Information unless
expressly authorized by an officer of the Company in writing.

 

1.4          No Improper Use of Information of
Prior Employers and Others. During my employment by the
Company I will not improperly use or disclose any confidential information or
trade secrets, if any, of any former employer or any other person to whom I
have an obligation of confidentiality, and I will not bring onto the premises
of the Company any unpublished documents or any property belonging to any former
employer or any other person to whom I have an obligation of confidentiality
unless consented to in writing by that former employer or person. I will use in
the performance of my duties only information which is generally known and used
by persons with training and experience comparable to my own, which is common
knowledge in the industry or otherwise legally in the public domain, or which
is otherwise provided or developed by the Company.

 

2.             ASSIGNMENT OF INVENTIONS.

 

2.1          Proprietary Rights. The
term “Proprietary Rights” shall mean all
trade secret, patent, copyright, mask work and other intellectual property
rights throughout the world.

 

2.2          Prior Inventions. Inventions,
if any, patented or unpatented, which I made prior to the commencement of my employment
with the Company

 

1

 

are excluded from the
scope of this Agreement. To preclude any possible uncertainty, I have set forth
on Exhibit B (Previous Inventions)
attached hereto a complete list of all Inventions that I have, alone or jointly
with others, conceived, developed or reduced to practice or caused to be
conceived, developed or reduced to practice prior to the commencement of my
employment with the Company, that I consider to be my property or the property
of third parties and that I wish to have excluded from the scope of this
Agreement (collectively referred to as “Prior Inventions”).
If disclosure of any such Prior Invention would cause me to violate any prior
confidentiality agreement, I understand that I am not to list such Prior
Inventions in Exhibit B but am only to
disclose a cursory name for each such invention, a listing of the party(ies) to
whom it belongs and the fact that full disclosure as to such inventions has not
been made for that reason. A space is provided on Exhibit B
for such purpose. If no such disclosure is attached, I represent that there are
no Prior Inventions. If, in the course of my employment with the Company, I
incorporate a Prior Invention into a Company product, process or machine, the
Company is hereby granted and shall have a nonexclusive, royalty-free,
irrevocable, perpetual, worldwide license (with rights to sublicense through
multiple tiers of sublicensees) to make, have made, modify, use and sell such
Prior Invention. Notwithstanding the foregoing, I agree that I will not
incorporate, or permit to be incorporated, Prior Inventions in any Company
Inventions without the Company’s prior written consent.

 

2.3          Assignment of Inventions. Subject
to Sections 2.4, and 2.6, I hereby assign and agree to assign in the future
(when any such Inventions or Proprietary Rights are first reduced to practice
or first fixed in a tangible medium, as applicable) to the Company all my
right, title and interest in and to any and all Inventions (and all Proprietary
Rights with respect thereto) whether or not patentable or registrable under
copyright or similar statutes, made or conceived or reduced to practice or
learned by me, either alone or jointly with others, during the period of my
employment with the Company. Inventions assigned to the Company, or to a third
party as directed by the Company pursuant to this Section 2, are
hereinafter referred to as “Company Inventions.”

 

2.4          Nonassignable Inventions. This
Agreement does not apply to an Invention which qualifies fully as a
nonassignable Invention under Section 2870 of the California Labor Code
(hereinafter “Section 2870”). I have
reviewed the notification on Exhibit A
(Limited Exclusion Notification) and agree that my signature acknowledges
receipt of the notification.

 

2.5          Obligation to Keep Company Informed. During
the period of my employment and for six (6) months after termination of my
employment with the Company, I will promptly disclose to the Company fully and
in writing all Inventions authored, conceived or reduced to practice by me,
either alone or jointly with others. In addition, I will promptly disclose to
the Company all patent applications filed by me or on my behalf within a year
after termination of employment. At the time of each such disclosure, I will
advise the Company in writing of any Inventions that I believe fully qualify
for protection under Section 2870; and I will at that time provide to the
Company in writing all evidence necessary to substantiate that belief. The
Company will keep in confidence and will not use for any purpose or disclose to
third parties without my consent any confidential information disclosed in
writing to the Company pursuant to this Agreement relating to Inventions that
qualify fully for protection under the provisions of Section 2870. I will
preserve the confidentiality of any Invention that does not fully qualify for
protection under Section 2870.

 

2.6          Government or Third Party. I
also agree to assign all my right, title and interest in and to any particular
Company Invention to a third party, including without limitation the United
States, as directed by the Company.

 

2.7          Works for Hire. I
acknowledge that all original works of authorship which are made by me (solely
or jointly with others) within the scope of my employment and which are
protectable by copyright are “works made for hire,” pursuant to United States
Copyright Act (17 U.S.C., Section 101).

 

2.8          Enforcement of Proprietary Rights. I
will assist the Company in every proper way to obtain, and from time to time
enforce, United States and foreign Proprietary Rights relating to Company
Inventions in any and all countries. To that end I will execute, verify and
deliver such documents and perform such other acts (including appearances as a
witness) as the Company may reasonably request for use in applying for,
obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary
Rights and the assignment thereof. In addition, I will execute, verify and
deliver assignments of such Proprietary Rights to the Company or its designee. My
obligation to assist the Company with respect to Proprietary Rights relating to
such Company Inventions in any and all countries shall continue beyond the
termination of

 

2

 

my employment, but the
Company shall compensate me at a reasonable rate after my termination for the
time actually spent by me at the Company’s request on such assistance.

 

In the event the
Company is unable for any reason, after reasonable effort, to secure my
signature on any document needed in connection with the actions specified in
the preceding paragraph, I hereby irrevocably designate and appoint the Company
and its duly authorized officers and agents as my agent and attorney in fact,
which appointment is coupled with an interest, to act for and in my behalf to
execute, verify and file any such documents and to do all other lawfully
permitted acts to further the purposes of the preceding paragraph with the same
legal force and effect as if executed by me. I hereby waive and quitclaim to
the Company any and all claims, of any nature whatsoever, which I now or may
hereafter have for infringement of any Proprietary Rights assigned hereunder to
the Company.

 

3.             RECORDS. I agree
to keep and maintain adequate and current records (in the form of notes,
sketches, drawings and in any other form that may be required by the Company)
of all Proprietary Information developed by me and all Inventions made by me
during the period of my employment at the Company, which records shall be
available to and remain the sole property of the Company at all times.

 

4.             ADDITIONAL ACTIVITIES. I
agree that during the period of my employment by the Company I will not,
without the Company’s express written consent, engage in any employment or
business activity which is competitive with, or would otherwise conflict with,
my employment by the Company. I agree further that for the period of my
employment by the Company and for one (l) year after the date of termination of
my employment by the Company I will not, either directly or through others,
solicit or attempt to solicit any employee, independent contractor or
consultant of the company to terminate his or her relationship with the Company
in order to become an employee, consultant or independent contractor to or for
any other person or entity.

 

5.             NO CONFLICTING OBLIGATION. I
represent that my performance of all the terms of this Agreement and as an
employee of the Company does not and will not breach any agreement to keep in
confidence information acquired by me in confidence or in trust prior to my
employment by the Company. I have not entered into, and I agree I will not
enter into, any agreement either written or oral in conflict herewith.

 

6.             RETURN OF COMPANY DOCUMENTS. When
I leave the employ of the Company, I will deliver to the Company any and all
drawings, notes, memoranda, specifications, devices, formulas, and documents,
together with all copies thereof, and any other material containing or
disclosing any Company Inventions, Third Party Information or Proprietary
Information of the Company. I further agree that any property situated on the
Company’s premises and owned by the Company, including disks and other storage
media, filing cabinets or other work areas, is subject to inspection by Company
personnel at any time with or without notice. Prior to leaving, I will
cooperate with the Company in completing and signing the Company’s termination
statement.

 

7.             LEGAL AND EQUITABLE REMEDIES. Because
my services are personal and unique and because I may have access to and become
acquainted with the Proprietary Information of the Company, the Company shall
have the right to enforce this Agreement and any of its provisions by
injunction, specific performance or other equitable relief, without bond and
without prejudice to any other rights and remedies that the Company may have
for a breach of this Agreement.

 

8.             NOTICES. Any
notices required or permitted hereunder shall be given to the appropriate party
at the address specified below or at such other address as the party shall
specify in writing. Such notice shall be deemed given upon personal delivery to
the appropriate address or if sent by certified or registered mail, three (3)
days after the date of mailing.

 

9.             NOTIFICATION OF NEW EMPLOYER. In
the event that I leave the employ of the Company, I hereby consent to the
notification of my new employer of my rights and obligations under this
Agreement.

 

10.          GENERAL PROVISIONS.

 

10.1        Governing Law; Consent to Personal
Jurisdiction. This Agreement will be governed by and
construed according to the laws of the State of California, as such laws are
applied to agreements entered into and to be performed entirely within
California between California residents. I hereby expressly consent to the
personal jurisdiction of the state and federal courts located in Santa Clara
County, California for any lawsuit filed there against me by Company arising
from or related to this Agreement.

 

10.2        Severability. In case
any one or more of the provisions contained in this Agreement

 

3

 

shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect the other provisions of this
Agreement, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. If moreover, any one
or more of the provisions contained in this Agreement shall for any reason be
held to be excessively broad as to duration, geographical scope, activity or
subject, it shall be construed by limiting and reducing it, so as to be
enforceable to the extent compatible with the applicable law as it shall then
appear.

 

10.3        Successors and Assigns. This
Agreement will be binding upon my heirs, executors, administrators and other
legal representatives and will be for the benefit of the Company, its
successors, and its assigns.

 

10.4        Survival. The
provisions of this Agreement shall survive the termination of my employment and
the assignment of this Agreement by the Company to any successor in interest or
other assignee.

 

10.5        Employment. I agree
and understand that nothing in this Agreement shall confer any right with
respect to continuation of employment by the Company, nor shall it interfere in
any way with my right or the Company’s right to terminate my employment at any
time, with or without cause.

 

10.6        Waiver. No waiver by
the Company of any breach of this Agreement shall be a waiver of any preceding
or succeeding breach. No waiver by the Company of any right under this
Agreement shall be construed as a waiver of any other right. The Company shall
not be required to give notice to enforce strict adherence to all terms of this
Agreement.

 

10.7        Entire Agreement. The
obligations pursuant to Sections 1 and 2 of this Agreement shall apply to any
time during which I was previously employed, or am in the future employed, by
the Company as a consultant if no other agreement governs nondisclosure and
assignment of inventions during such period. This Agreement is the final,
complete and exclusive agreement of the parties with respect to the subject
matter hereof and supersedes and merges all prior discussions between us. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, will be effective unless in writing and signed by the
party to be charged. Any subsequent change or changes in my duties, salary or
compensation will not affect the validity or scope of this Agreement.

 

This
Agreement shall be effective as of the first day of my employment with the
Company, namely:  September 1, 2005.

 

I HAVE
READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE COMPLETELY
FILLED OUT EXHIBIT B TO THIS AGREEMENT.

 

	
  Dated: September
  1, 2005

  
	
   

  
	
   

  
	
  /s/ Paul Goddard

  	
   

  
	
  (Signature)

  
	
   

  
	
  Paul Goddard

  	
   

  
	
  (Printed
  Name)

  
	
   

  
	
   

  
	
  ACCEPTED
  AND AGREED TO:

  
	
   

  
	
  ARYX
  THERAPEUTICS

  
	
   

  
	
   

  
	
  By:

  	
  /s/ David Nagler

  	
   

  
	
   

  
	
  Title:

  	
  VP Corporate
  Affairs

  	
   

  
	
   

  
	
  6300 Dumbarton
  Circle

  	
   

  
	
  (Address)

  
	
   

  
	
  Fremont, CA
  94555

  	
   

  
	
   

  
	
  Dated: 9/7/05

  
					

 

4

 

EXHIBIT A

 

LIMITED EXCLUSION NOTIFICATION

 

THIS IS
TO NOTIFY you in accordance with Section 2872 of the
California Labor Code that the foregoing Agreement between you and the Company
does not require you to assign or offer to assign to the Company any invention
that you developed entirely on your own time without using the Company’s
equipment, supplies, facilities or trade secret information except for those
inventions that either:

 

1.             Relate at the time of conception or
reduction to practice of the invention to the Company’s business, or actual or
demonstrably anticipated research or development of the Company;

 

2.             Result from any work performed by you
for the Company.

 

To the
extent a provision in the foregoing Agreement purports to require you to assign
an invention otherwise excluded from the preceding paragraph, the provision is
against the public policy of this state and is unenforceable.

 

This
limited exclusion does not apply to any patent or invention covered by a
contract between the Company and the United States or any of its agencies
requiring full title to such patent or invention to be in the United States.

 

I
ACKNOWLEDGE RECEIPT of a copy of this notification.

 

	
   

  	
  By:

  	
  Paul Goddard

  
	
   

  	
    (PRINTED NAME OF EMPLOYEE)

  
	
   

  	
   

  
	
   

  	
  Date:

  	
  9/1/05

  
	
  WITNESSED
  BY:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ [illegible]

  	
   

  
	
  (PRINTED
  NAME OF REPRESENTATIVE)

  	
   

  	
   

  
				

 

A-1

 

EXHIBIT B

 

	
  TO:

  	
   

  	
  ARYx
  Therapeutics

  
	
   

  	
   

  	
   

  
	
  FROM:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  DATE:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SUBJECT:

  	
   

  	
  Previous
  Inventions

  

 

1.          Except as listed in Section 2 below,
the following is a complete list of all inventions or improvements relevant to
the subject matter of my employment by ARYx Therapeutics (the “Company”) that have been made or conceived or first reduced
to practice by me alone or jointly with others prior to my engagement by the
Company:

 

	
   

  	
  o

  	
  No inventions or
  improvements.

  
	
   

  	
   

  	
   

  
	
   

  	
  o

  	
  See below:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  o

  	
  Additional
  sheets attached.

  

 

2.        Due to a prior confidentiality
agreement, I cannot complete the disclosure under Section 1 above with
respect to inventions or improvements generally listed below, the proprietary
rights and duty of confidentiality with respect to which I owe to the following
party(ies):

 

	
   

  	
  Invention or Improvement

  	
   

  	
  Party(ies)

  	
   

  	
  Relationship

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

o          Additional sheets attached.

 

 

EXHIBIT B

 

RELEASE AGREEMENT

 

I understand that my
employment with ARYX THERAPEUTICS, INC.
(the “Company”)
terminated effective
           ,
      (the “Separation Date”). The Company has agreed
that if I choose to sign this Release Agreement (“Release”), the Company will pay me
certain severance benefits (minus the standard withholdings and deductions)
pursuant to the terms of the Employment Agreement (the “Agreement”) entered
into and effective as of August 31, 2005, between myself and the Company, and
any agreements incorporated therein by reference. I understand that I am not
entitled to such severance benefits unless I sign this Release and allow it to
become effective. I understand that, regardless of whether I sign this Release,
the Company will pay me all of my accrued salary and vacation through the
Separation Date, to which I am entitled by law.

 

In consideration for the
severance benefits I am receiving under the Agreement, I hereby generally and
completely release the Company and its officers, directors, agents, attorneys,
employees, stockholders, parents, subsidiaries, and affiliates from any and all
claims, liabilities, demands, causes of action, attorneys’ fees, damages, or
obligations of every kind and nature, whether they are now known or unknown,
arising at any time prior to or on the date I sign this Release. This general
release includes, but is not limited to: (a) all claims arising out of or in
any way related to my employment with the Company or the termination of that
employment; (b) all claims related to my compensation or benefits from the
Company, including salary, bonuses, commissions, vacation pay, expense reimbursements,
severance pay, fringe benefits, stock, stock options, or any other ownership
interests in the Company; (c) all claims for breach of contract, wrongful
termination, and breach of the implied covenant of good faith and fair dealing
(including, but not limited to, any claims based on or arising from the
Agreement); (d) all tort claims, including claims for fraud, defamation,
emotional distress, and discharge in violation of public policy; and (e) all
federal, state, and local statutory claims, including claims for
discrimination, harassment, retaliation, attorneys’ fees, or other claims
arising under the federal Civil Rights Act of 1964 (as amended), the federal
Americans with Disabilities Act of 1990, the federal Age Discrimination in
Employment Act of 1967 (as amended), and the California Fair Employment and
Housing Act (as amended). Notwithstanding the release in the preceding
sentence, I am not releasing any right of indemnification I may have for any
liabilities arising from my actions within the course and scope of my
employment with the Company or within the course and scope of my role as a
member of the Board of Directors of the Company.

 

In releasing claims
unknown to me at present, I am waiving all rights and benefits under Section
1542 of the California Civil Code, and any law or legal principle of similar
effect in any jurisdiction:  “A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor.”

 

If I am forty (40) years
of age or older as of the Separation Date, I acknowledge that I am knowingly
and voluntarily waiving and releasing any rights I may have under the federal
Age Discrimination in Employment Act of 1967, as amended (“ADEA”). I also
acknowledge that the consideration given for the waiver in the above paragraphs
is in addition to anything of value to which I was already entitled. I have
been advised by this writing, as required by the ADEA that:  (a) my waiver and release do not apply to any
claims that may arise after the date that I sign this Release; (b) I should
consult with an attorney prior to signing this Release (although I may choose
voluntarily not to do so); (c) I have twenty-one (21) days within which to
consider this Release

 

 

(although I may choose
voluntarily to sign this Release earlier); (d) I have seven (7) days following
the date that I sign this Release to revoke the Release by providing written
notice of revocation to the Company’s Board of Directors; and (e) this Release
will not be effective until the eighth day after this Release has been signed
by me (“Effective Date”).

 

	
  Understood
  and Agreed:

  
	
   

  
	
  PAUL
  GODDARD

  
	
   

  
	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  
				

 

2Exhibit 10.11

ARYX
THERAPEUTICS, INC.

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (“Agreement”) is
entered into as of September 30, 2005 (the “Effective Date”), by and between Peter G.
Milner, M.D. (“Executive”)
and ARYX THERAPEUTICS, INC. (the “Company”), a Delaware
corporation.

 

WHEREAS,
the Company desires to continue to employ Executive to provide personal
services to the Company, and wishes to provide Executive with certain
compensation and benefits in return for his continued services as set forth
herein;

 

WHEREAS,
Executive wishes to continue to be employed by the Company and to provide
personal services to the Company in return for certain compensation and
benefits as set forth herein;

 

NOW,
THEREFORE, in consideration of the mutual promises and
covenants contained herein, it is hereby agreed by and between the parties
hereto as follows, effective as of the Effective Date:

 

1.             CONTINUED EMPLOYMENT BY THE
COMPANY.

 

1.1          Title and Responsibilities.
Executive will continue to be employed in the position of President. During his
employment with the Company, Executive will continue to devote his best efforts
and substantially all of his business time and attention (except for vacation
periods and reasonable periods of illness or other incapacity permitted by the
Company’s general employment policies) to the business of the Company.

 

1.2          Executive Position. Executive
will continue to serve in an executive capacity and shall report to the Company’s
Chief Executive Officer. Executive shall perform the duties of the President
position as required by the Company’s Chief Executive Officer and/or the Board
of Directors of the Company (the “Board”).

 

1.3          Company Employment Policies.
The employment relationship between the parties shall continue to be governed
by the general employment policies and procedures of the Company, including
those relating to the protection of confidential information and assignment of
inventions, except that when the terms of this Agreement differ from or are in
conflict with the Company’s general employment policies or procedures, this
Agreement shall control.

 

2.                                      COMPENSATION.

 

2.1          Salary. Executive
shall receive for services to be rendered hereunder a base salary, payable on
the Company’s standard payroll dates. Executive will be considered for annual
increases in base salary in accordance with Company policy and subject to
review and approval by the Compensation Committee of the Board.

 

 

2.2          Annual Target Bonus. Executive
shall also be eligible to earn an annual target bonus appropriate to his
position as established by the Compensation Committee of the Board (the “Bonus”). The Bonus,
if awarded, shall be subject to applicable payroll withholdings and employment
taxes. Payment of any such bonus shall be conditioned on the successful completion
of specific business objectives to be mutually determined by Executive and the
Board. The Board will determine, in its sole discretion, whether and to what
extent the Bonus has been earned. Executive must remain employed during the
complete calendar year to earn and be eligible to receive the Bonus, and no
prorated Bonus payment will be earned or provided.

 

2.3          Stock Options. Under
the Company’s 2001 Equity Incentive Plan (the “Option Plan”), Executive was issued an
option grant to purchase 300,000 shares of the common stock of the Company (the
“Standard Option”),
a separate option grant to purchase 200,000  shares of
common stock of the Company (the “Special Option”) and two option grants to
purchase 200,000 and 125,000  shares of
common stock of the Company, respectively (the “New Options”). The Standard Option and
the New Options are not affected by this Agreement and will continue in effect
in accordance with the terms of the Option Plan, and Executive’s previously
issued stock option grant notice and stock option agreement. The Special Option
was previously amended to provide that vesting of the shares subject to the
Special Option will continue so long as Executive continues to provide
continuous service to the Company (as defined in the Option Plan),
notwithstanding that Executive will no longer serve as the Company’s Chief
Executive Officer as of the Effective Date. That amendment remains in full
force and effect.

 

2.4          Standard Company Benefits. Executive
shall continue to be entitled to all rights and benefits for which he is
eligible under the terms and conditions of the standard Company benefits and
compensation plans which may be in effect from time to time and provided by the
Company to its executives.

 

3.                                      CONFIDENTIAL
INFORMATION, RIGHTS AND DUTIES.

 

3.1          Confidential Information Agreement. The
Employee Proprietary Information and Inventions Agreement signed by Executive
as of March 14, 2000 (the “Confidentiality
Agreement”) (attached hereto as Exhibit A) is not affected by this Agreement and shall
continue in effect in accordance with its terms. Executive is required to
continue to comply with the Confidentiality Agreement as a condition of his
continued employment and as a condition of his receipt, or continued receipt,
of severance benefits pursuant to Sections 5 and 6 hereof, to the extent
applicable.

 

3.2          Exclusive Property. Executive
agrees that all Company-related business procured by the Executive, and all
Company-related business opportunities and plans made known to Executive, while
employed by the Company are and shall remain the permanent and exclusive
property of the Company.

 

2

 

4.                                      OUTSIDE
ACTIVITIES.

 

4.1          Activities. Except
with the prior written consent of the Board, Executive will not during his
employment with the Company undertake or engage in any other employment,
occupation or business enterprise, other than ones in which Executive is a
passive investor. Executive may engage in civic and not-for-profit activities
so long as such activities do not materially interfere with the performance of
his duties hereunder. Subject to the limitations of Sections 4.2 and 4.3 of
this Agreement and with the prior written consent of the Board, Executive may
serve as a director of other corporations and may devote a reasonable amount of
his time to other types of business or public activities not expressly
mentioned in this paragraph, including devoting up to three (3) days a month to
ML Laboratories PLC; provided, that, Executive
will not be permitted to serve as a director on more than two external boards
of other for-profit corporations at the same time. For purposes of this
Agreement, consent is hereby given to Executive with regards to ML Laboratories
PLC. The Board may rescind its consent to Executive’s service as a director of
other corporations or participation in other business or public activities
(including providing services to ML Laboratories PLC) if the Board, in its sole
discretion, determines that such activities materially compromise or threaten
to materially compromise the Company’s business interests. To the extent
Executive is engaged in activities not related to the Company as permitted in
this section, the Company is not required to provide paid leave (unless
Executive utilizes available vacation).

 

4.2          Investments and Interests.
Executive agrees not to acquire, assume or participate in, directly or
indirectly, any position, investment or interest known by him to be adverse or
antagonistic to the Company, its business or prospects, financial or otherwise.

 

4.3          Non-Competition. During
his employment by the Company, except on behalf of the Company, Executive will
not directly or indirectly, whether as an officer, director, stockholder,
partner, proprietor, associate, representative, consultant, or in any capacity
whatsoever engage in, become financially interested in, be employed by or have
any business connection with any other person, corporation, firm, partnership
or other entity whatsoever known by him to compete directly with the Company,
anywhere in the world, in any line of business engaged in (or planned to be
engaged in) by the Company; provided, however, that the Executive may purchase
or otherwise acquire up to (but not more than) one percent (1%) of any class of
securities of any enterprise (but without participating in the activities of
such enterprise) if such securities are listed on any national or regional
securities exchange or have been registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

5.                                      TERMINATION
OF EMPLOYMENT.

 

5.1          Termination With or Without Cause.

 

(a)           At-Will Employment.
Executive’s relationship with the Company is at-will. The Company shall have
the right to terminate Executive’s employment with the Company at any time with
or without Cause (as defined below), and 

 

3

 

with or without advance
notice. Executive may be removed from any position he holds in the manner
specified by the Bylaws of the Company and applicable law.

 

(i)            Definition of Cause. For
purposes of this Agreement, “Cause” shall mean that Executive has committed, or there
has occurred, one or more of the following, as determined by the Board:  (a) conviction of, a guilty plea with respect
to, or a plea of nolo  contendere
to a charge that the Executive has committed a felony under the laws of the
United States or of any state of a crime involving moral turpitude, including,
but not limited to, fraud, theft, embezzlement or any crime that results in or
is intended to result in personal enrichment at the expense of the Company (a “Conviction”);
(b) material breach done in bad faith of any agreement entered into
between the Executive and the Company that impairs the Company’s interest
therein, including but not limited to this Agreement or the Confidential
Information Agreement; or (c) willful misconduct, or gross neglect by the
Executive of Executive’s duties, if such conduct is not cured within seven (7)
days of Executive’s receipt of written notice (provided that notice is required
only if such conduct can reasonably be cured). Executive’s death shall also
constitute Cause for termination under this Agreement.

 

(b)           Termination for Cause.
If the Company terminates Executive’s employment at any time for Cause,
Executive’s salary shall cease on the date of termination or, if earlier, the
last date that Executive provided services to the Company, and, except as
expressly provided in Section 5.2(c) hereof, Executive will not be entitled to
severance pay, pay in lieu of notice or any other such compensation, other than
payment of accrued salary, accrued and unused vacation, and such other benefits
as expressly required in such event by applicable law or the terms of any
applicable Company benefit plans. All option grants and any other stock awards
held by Executive shall cease vesting as of the date of termination, unless
otherwise provided herein, and shall be exercisable thereafter only pursuant to
the terms of the applicable stock option plans and agreements.

 

(c)           Severance Benefits for Termination
Without Cause. If the Company terminates Executive’s
employment at any time without Cause, Executive shall be eligible to receive
the following as his sole severance benefits (the “Without Cause Severance Benefits”):  (i) the Company shall make a lump sum
severance payment to Executive in an amount equal to twelve (12) months of
Executive’s then-current base salary, subject to withholdings and deductions;
(ii) if Executive timely elects COBRA health insurance coverage, the Company
will reimburse Executive’s COBRA premiums for a maximum of either twelve (12)
months following the employment termination date or until such date as
Executive is eligible for health insurance coverage from another source,
whichever occurs sooner; and (iii) the vesting of the Standard Option and the
Special Option shall immediately accelerate in full so that all shares subject
to the Standard Option and the Special Option are fully vested and immediately
exercisable. For the avoidance of doubt, the New Options, and any other option
grants not specifically referenced in the immediately preceding sentence, will
not be subject to accelerated vesting under this Section 5.1(c). Executive
shall not earn or be entitled to receive any of the Without Cause Severance
Benefits unless and until the release requirements set forth in Section 8 of
this Agreement are satisfied.

 

4

 

5.2          Resignation With or Without Good
Reason.

 

(a)           Executive’s Resignation. Executive
may resign from his employment with the Company at any time, with or without
advance notice, and with or without Good Reason (as defined below).

 

(b)           Executive’s Resignation Without Good
Reason. In the event that Executive resigns his employment without
Good Reason, Executive will not be entitled to severance pay, pay in lieu of
notice or any other such compensation other than payment of accrued salary,
accrued and unused vacation, and such other benefits as expressly required in
such event by applicable law or the terms of any applicable Company benefit
plans. All option grants and any other stock awards held by Executive shall
cease vesting as of the date of resignation, unless otherwise provided herein,
and shall be exercisable thereafter only pursuant to the terms of the
applicable stock option plans and agreements.

 

(c)           Severance Benefits For Good Reason Resignation. Executive
may resign his employment for Good Reason so long as Executive tenders his
written resignation to the Company within thirty (30) days after the occurrence
of the event which forms the basis for his resignation for Good Reason. If Executive
resigns for Good Reason, Executive shall be eligible to receive the Without
Cause Severance Benefits as his sole severance benefits. Executive shall not
earn or be entitled to receive any of the Without Cause Severance Benefits
unless and until the release requirements set forth in Section 8 of this
Agreement are satisfied. For the avoidance of doubt, Executive will not be
eligible to receive any severance benefits if he resigns after the conclusion
of the Walking Window and the resignation does not qualify hereunder as a Good
Reason resignation.

 

(d)           Definition of Good Reason. For
purposes of this Agreement, “Good Reason” shall mean any one of the following events
which occurs on or after the Effective Date without Executive’s consent:  (i) any reduction of Executive’s then current
annual base salary, except to the extent that the annual base salary of all
other officers of the Company is similarly reduced; (ii) any material reduction
in Executive’s benefits, except to the extent that such benefits of all other
officers of the Company are similarly reduced; (iii) any requirement that the
Executive relocate to a work site that would increase the Executive’s one-way
commute distance to more than thirty-five (35) miles from the Company’s current
headquarters; or (iv) any material breach by the Company of its obligations
under this Agreement that is not remedied by the Company within thirty (30) days
of written notice of such breach from Executive.

 

5.3          Cessation of Severance Benefits.
If Executive violates any provision of Sections 3, 7 or 8 of this Agreement, or
violates the Confidentiality Agreement, any severance payments or other
benefits being provided to Executive will cease immediately, and Executive will
not be entitled to any further compensation and benefits from the Company.

 

5

 

6.             CHANGE OF CONTROL.

 

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

 

6.2          Change of
Control Termination. In the event Executive’s employment with the
Company is involuntarily terminated without Cause by the Company or its
successor, or Executive resigns for Good Reason, and such termination or
resignation occurs within thirteen (13) months following a Change of Control,
Executive shall be entitled to:  (a) the severance
benefits set forth in either Sections 5.1(c) or 5.2(c) of this Agreement, to
the extent and as applicable; and (b) vesting of the Standard Option, the
Special Option and the New Options shall accelerate in full, effective as of
Executive’s termination or resignation date, so that all shares subject to the
Standard Option, the Special Option and the New Options are fully vested and
immediately exercisable. Executive’s receipt of severance benefits, as
applicable, and accelerated vesting of options as provided in this Section 6.2
shall be conditioned on Executive’s full compliance with the release
requirements set forth in Section 8 of this Agreement.

 

7.             NONSOLICITATION. In
the event Executive’s employment with the Company is terminated by the Company
or the Executive for any reason, with or without Cause or Good Reason, then for
two (2) years immediately following the termination date, Executive shall not,
without first obtaining the prior written approval of the Company directly or
indirectly solicit, induce, persuade or entice, or attempt to do so, or
otherwise 

 

6

 

cause, or attempt to
cause, any employee or independent contractor of the Company to terminate his
or her employment or contracting relationship in order to become an employee,
or independent contractor to or for any person or entity.

 

8.             RELEASE. As a
condition of receiving any of the severance benefits under this Agreement or as
otherwise specifically required by this Agreement, Executive shall execute a
release in the form attached hereto as Exhibit B (the “Release”). Unless the
Release is executed by Executive, delivered to the Company within twenty-one
(21) days after the termination of Executive’s employment with the Company (or
any other longer time period required by law), and allowed by Executive to
become effective, Executive shall not earn or be eligible to receive any
severance benefits (including severance payments, reimbursement of COBRA
premiums, acceleration of option grant shares, or other payments) provided for
under this Agreement.

 

9.             GENERAL PROVISIONS.

 

9.1          Notices. Any notices
provided hereunder must be in writing and shall be deemed effective upon the
earlier of personal delivery (including, personal delivery by facsimile
transmission), delivery by express delivery service (e.g. Federal Express), or
the third day after mailing by first class mail, to the Company at its primary
office location and to Executive at his address as listed on the Company
payroll (which address may be changed by either party by written notice).

 

9.2          Severability. Whenever
possible, each provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or any other jurisdiction,
and such invalid, illegal or unenforceable provision will be reformed,
construed and enforced in such jurisdiction so as to render it valid, legal,
and enforceable consistent with the intent of the parties insofar as possible.

 

9.3          Waiver. If either
party should waive any breach of any provisions of this Agreement, he or it
shall not thereby be deemed to have waived any preceding or succeeding breach
of the same or any other provision of this Agreement.

 

9.4          Entire Agreement. This
Agreement, including all Exhibits hereto, constitutes the entire agreement
between Executive and the Company regarding the subject matter hereof. As of
the Effective Date, this Agreement supersedes and replaces that certain
Employment Agreement between the Company and Executive dated February 17, 2005,
as amended through the date hereof, and this Agreement supersedes and replaces
any other agreement, promise, representation, written or otherwise, between
Executive and the Company with regard to this subject matter. This Agreement is
entered into without reliance on any agreement, promise, or representation,
other than those expressly contained or incorporated herein, and it cannot be
modified or amended except in a writing signed by Executive and a duly
authorized officer of the Company.

 

7

 

9.5          Counterparts. This
Agreement may be executed in separate counterparts, any one of which need not
contain signatures of more than one party, but all of which taken together will
constitute one and the same Agreement. Signatures transmitted via facsimile
shall be deemed the equivalent of originals.

 

9.6          Headings and Construction. The
headings of the sections hereof are inserted for convenience only and shall not
be deemed to constitute a part hereof or to affect the meaning thereof. For
purposes of construction of this Agreement, any ambiguities shall not be
construed against either party as the drafter.

 

9.7          Successors and Assigns. This
Agreement is intended to bind and inure to the benefit of and be enforceable by
Executive, the Company, and their respective successors, assigns, heirs,
executors and administrators, except that Executive may not assign any of his
duties hereunder and he may not assign any of his rights hereunder without the
written consent of the Company.

 

9.8          Attorney Fees. If
either party hereto brings any action to enforce his or its rights hereunder,
the prevailing party in any such action shall be entitled to recover his or its
reasonable attorneys’ fees and costs incurred in connection with such action.

 

9.9          Arbitration. To
provide a mechanism for rapid and economical dispute resolution, Executive and
the Company agree that any and all disputes, claims, or causes of action, in
law or equity, arising from or relating to this Agreement (including the
Release) or its enforcement, performance, breach, or interpretation, or arising
from or relating to Executive’s employment with the Company or the termination
of Executive’s employment with the Company, will be resolved, to the fullest
extent permitted by law, by final, binding, and confidential arbitration held
in Santa Clara County, California and conducted by Judicial Arbitration &
Mediation Services (“JAMS”),
under its then-applicable Rules and Procedures. By agreeing to this arbitration procedure, both Executive and the Company
waive the right to resolve any such dispute through a trial by jury or judge or
by administrative proceeding. The arbitrator shall:  (a) have the authority to compel adequate
discovery for the resolution of the dispute; and (b) issue a written arbitration
decision including the arbitrator’s essential findings and conclusions and a
statement of the award. The arbitrator shall be authorized to determine if an
issue is subject to this arbitration obligation, and to award any or all
remedies that Executive or the Company would be entitled to seek in a court of
law. The Company shall pay all JAMS’ arbitration fees. Nothing in this
Agreement shall prevent either Executive or the Company from obtaining
injunctive relief in court if necessary to prevent irreparable harm pending the
conclusion of any arbitration. Any awards or orders in such arbitrations may be
entered and enforced as judgments in the federal and the state courts of any
competent jurisdiction.

 

9.10        Governing Law. All
questions concerning the construction, validity and interpretation of this
Agreement shall be governed by the law of the State of California as applied to
contracts made and to be performed entirely within California.

 

8

 

9.11        Exhibits.

 

Exhibit A – Proprietary Information and Inventions
Agreement

 

Exhibit B – Release Agreement

 

9

 

IN
WITNESS WHEREOF, the parties have executed this EMPLOYMENT AGREEMENT effective as of the
Effective Date written above.

 

	
  ARYX
  THERAPEUTICS, INC.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ David Nagler

  	
   

  
	
  David Nagler

  
	
  Vice President Corporate Affairs

  
	
   

  
	
   

  
	
  PETER
  MILNER, M.D.

  
	
   

  
	
   

  
	
  /s/
  Peter Milner

  	
   

  

 

 

EXHIBIT A

 

PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

 

 

ARYX THERAPEUTICS

 

EMPLOYEE PROPRIETARY INFORMATION

AND INVENTIONS AGREEMENT

 

In consideration
of my employment or continued employment by ARYX
THERAPEUTICS (the “Company”), and
the compensation now and hereafter paid to me, I hereby agree as follows:

 

1.             NONDISCLOSURE

 

1.1          Recognition of Company’s Rights;
Nondisclosure. At all times during my employment and
thereafter, I will hold in strictest confidence and will not disclose, use,
lecture upon or publish any of the Company’s Proprietary Information (defined
below), except as such disclosure, use or publication may be required in
connection with my work for the Company, or unless an officer of the Company
expressly authorizes such in writing. I will obtain Company’s written approval
before publishing or submitting for publication any material (written, verbal,
or otherwise) that relates to my work at Company and/or incorporates any
Proprietary Information. I hereby assign to the Company any rights I may have
or acquire in such Proprietary Information and recognize that all Proprietary
Information shall be the sole property of the Company and its assigns.

 

1.2          Proprietary Information. The
term “Proprietary Information” shall mean any
and all confidential and/or proprietary knowledge, data or information of the
Company. By way of illustration but not limitation, “Proprietary
Information” includes (a) information relating to products,
processes, know-how, designs, drawings, clinical data, test data, formulas,
methods, samples, media and/or cell lines, developmental or experimental work,
improvements, discoveries, plans for research, new products, manufacturing,
marketing and selling, business plans, budgets and unpublished financial
statements, licenses, prices and costs, suppliers and customers, and
information regarding the skills and compensation of other employees of the
Company. (hereinafter collectively referred to as “Inventions”);
and (b) information regarding plans for research, development, new
products, marketing and selling, business plans, budgets and unpublished
financial statements, licenses, prices and costs, suppliers and customers; and
(c) information regarding the skills and compensation of other employees of the
Company. Notwithstanding the foregoing, it is understood that, at all such
times, I am free to use information which is generally known in the trade or
industry, which is not gained as result of a breach of this Agreement, and my
own skill, knowledge, know-how and experience to whatever extent and in
whichever way I wish.

 

1.3          Third Party Information. I
understand, in addition, that the Company has received and in the future will
receive from third parties confidential or proprietary information (“Third Party Information”) subject to a duty on the Company’s
part to maintain the confidentiality of such information and to use it only for
certain limited purposes. During the term of my employment and thereafter, I
will hold Third Party Information in the strictest confidence and will not
disclose to anyone (other than Company personnel who need to know such information
in connection with their work for the Company) or use, except in connection
with my work for the Company, Third Party Information unless expressly
authorized by an officer of the Company in writing.

 

1.4          No Improper Use of Information of
Prior Employers and Others. During my employment by the
Company I will not improperly use or disclose any confidential information or
trade secrets, if any, of any former employer or any other person to whom I
have an obligation of confidentiality, and I will not bring onto the premises
of the Company any unpublished documents or any property belonging to any
former employer or any other person to whom I have an obligation of
confidentiality unless consented to in writing by that former employer or
person. I will use in the performance of my duties only information which is
generally known and used by persons with training and experience comparable to
my own, which is common knowledge in the industry or otherwise legally in the
public domain, or which is otherwise provided or developed by the Company.

 

2.             ASSIGNMENT OF INVENTIONS.

 

2.1          Proprietary Rights. The
term “Proprietary Rights” shall mean all
trade secret, patent, copyright, mask work and other intellectual property
rights throughout the world.

 

2.2          Prior Inventions. Inventions,
if any, patented or unpatented, which I made prior to the commencement of my
employment with the Company 

 

1

 

are excluded from the
scope of this Agreement. To preclude any possible uncertainty, I have set forth
on Exhibit B (Previous Inventions)
attached hereto a complete list of all Inventions that I have, alone or jointly
with others, conceived, developed or reduced to practice or caused to be
conceived, developed or reduced to practice prior to the commencement of my
employment with the Company, that I consider to be my property or the property
of third parties and that I wish to have excluded from the scope of this
Agreement (collectively referred to as “Prior Inventions”).
If disclosure of any such Prior Invention would cause me to violate any prior
confidentiality agreement, I understand that I am not to list such Prior
Inventions in Exhibit B but am only to
disclose a cursory name for each such invention, a listing of the party(ies) to
whom it belongs and the fact that full disclosure as to such inventions has not
been made for that reason. A space is provided on Exhibit B
for such purpose. If no such disclosure is attached, I represent that there are
no Prior Inventions. If, in the course of my employment with the Company, I
incorporate a Prior Invention into a Company product, process or machine, the
Company is hereby granted and shall have a nonexclusive, royalty-free,
irrevocable, perpetual, worldwide license (with rights to sublicense through
multiple tiers of sublicensees) to make, have made, modify, use and sell such
Prior Invention. Notwithstanding the foregoing, I agree that I will not
incorporate, or permit to be incorporated, Prior Inventions in any Company
Inventions without the Company’s prior written consent.

 

2.3          Assignment of Inventions. Subject
to Sections 2.4, and 2.6, I hereby assign and agree to assign in the future
(when any such Inventions or Proprietary Rights are first reduced to practice
or first fixed in a tangible medium, as applicable) to the Company all my
right, title and interest in and to any and all Inventions (and all Proprietary
Rights with respect thereto) whether or not patentable or registrable under
copyright or similar statutes, made or conceived or reduced to practice or
learned by me, either alone or jointly with others, during the period of my
employment with the Company. Inventions assigned to the Company, or to a third
party as directed by the Company pursuant to this Section 2, are hereinafter
referred to as “Company Inventions.”

 

2.4          Nonassignable Inventions. This
Agreement does not apply to an Invention which qualifies fully as a
nonassignable Invention under Section 2870 of the California Labor Code
(hereinafter “Section 2870”). I have
reviewed the notification on Exhibit A
(Limited Exclusion Notification) and agree that my signature acknowledges
receipt of the notification.

 

2.5          Obligation to Keep Company Informed. During
the period of my employment and for six (6) months after termination of my employment
with the Company, I will promptly disclose to the Company fully and in writing
all Inventions authored, conceived or reduced to practice by me, either alone
or jointly with others. In addition, I will promptly disclose to the Company
all patent applications filed by me or on my behalf within a year after
termination of employment. At the time of each such disclosure, I will advise
the Company in writing of any Inventions that I believe fully qualify for
protection under Section 2870; and I will at that time provide to the
Company in writing all evidence necessary to substantiate that belief. The
Company will keep in confidence and will not use for any purpose or disclose to
third parties without my consent any confidential information disclosed in
writing to the Company pursuant to this Agreement relating to Inventions that
qualify fully for protection under the provisions of Section 2870. I will
preserve the confidentiality of any Invention that does not fully qualify for
protection under Section 2870.

 

2.6          Government or Third Party. I
also agree to assign all my right, title and interest in and to any particular
Company Invention to a third party, including without limitation the United
States, as directed by the Company.

 

2.7          Works for Hire. I acknowledge
that all original works of authorship which are made by me (solely or jointly
with others) within the scope of my employment and which are protectable by
copyright are “works made for hire,” pursuant to United States Copyright Act
(17 U.S.C., Section 101).

 

2.8          Enforcement of Proprietary Rights. I
will assist the Company in every proper way to obtain, and from time to time
enforce, United States and foreign Proprietary Rights relating to Company
Inventions in any and all countries. To that end I will execute, verify and
deliver such documents and perform such other acts (including appearances as a
witness) as the Company may reasonably request for use in applying for,
obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary Rights
and the assignment thereof. In addition, I will execute, verify and deliver
assignments of such Proprietary Rights to the Company or its designee. My
obligation to assist the Company with respect to Proprietary Rights relating to
such Company Inventions in any and 

 

2

 

all countries shall
continue beyond the termination of my employment, but the Company shall
compensate me at a reasonable rate after my termination for the time actually
spent by me at the Company’s request on such assistance.

 

In the event the
Company is unable for any reason, after reasonable effort, to secure my
signature on any document needed in connection with the actions specified in
the preceding paragraph, I hereby irrevocably designate and appoint the Company
and its duly authorized officers and agents as my agent and attorney in fact,
which appointment is coupled with an interest, to act for and in my behalf to
execute, verify and file any such documents and to do all other lawfully permitted
acts to further the purposes of the preceding paragraph with the same legal
force and effect as if executed by me. I hereby waive and quitclaim to the
Company any and all claims, of any nature whatsoever, which I now or may
hereafter have for infringement of any Proprietary Rights assigned hereunder to
the Company.

 

3.             RECORDS. I agree
to keep and maintain adequate and current records (in the form of notes,
sketches, drawings and in any other form that may be required by the Company)
of all Proprietary Information developed by me and all Inventions made by me
during the period of my employment at the Company, which records shall be
available to and remain the sole property of the Company at all times.

 

4.             ADDITIONAL ACTIVITIES. I
agree that during the period of my employment by the Company I will not,
without the Company’s express written consent, engage in any employment or
business activity which is competitive with, or would otherwise conflict with,
my employment by the Company. I agree further that for the period of my
employment by the Company and for one (l) year after the date of termination of
my employment by the Company I will not, either directly or through others,
solicit or attempt to solicit any employee, independent contractor or consultant
of the company to terminate his or her relationship with the Company in order
to become an employee, consultant or independent contractor to or for any other
person or entity.

 

5.             NO CONFLICTING OBLIGATION. I
represent that my performance of all the terms of this Agreement and as an
employee of the Company does not and will not breach any agreement to keep in
confidence information acquired by me in confidence or in trust prior to my
employment by the Company. I have not entered into, and I agree I will not
enter into, any agreement either written or oral in conflict herewith.

 

6.             RETURN OF COMPANY DOCUMENTS. When
I leave the employ of the Company, I will deliver to the Company any and all
drawings, notes, memoranda, specifications, devices, formulas, and documents,
together with all copies thereof, and any other material containing or
disclosing any Company Inventions, Third Party Information or Proprietary
Information of the Company. I further agree that any property situated on the
Company’s premises and owned by the Company, including disks and other storage
media, filing cabinets or other work areas, is subject to inspection by Company
personnel at any time with or without notice. Prior to leaving, I will
cooperate with the Company in completing and signing the Company’s termination
statement.

 

7.             LEGAL AND EQUITABLE REMEDIES. Because
my services are personal and unique and because I may have access to and become
acquainted with the Proprietary Information of the Company, the Company shall
have the right to enforce this Agreement and any of its provisions by
injunction, specific performance or other equitable relief, without bond and
without prejudice to any other rights and remedies that the Company may have
for a breach of this Agreement.

 

8.             NOTICES. Any
notices required or permitted hereunder shall be given to the appropriate party
at the address specified below or at such other address as the party shall
specify in writing. Such notice shall be deemed given upon personal delivery to
the appropriate address or if sent by certified or registered mail, three (3)
days after the date of mailing.

 

9.             NOTIFICATION OF NEW EMPLOYER. In
the event that I leave the employ of the Company, I hereby consent to the
notification of my new employer of my rights and obligations under this
Agreement.

 

10.          GENERAL PROVISIONS.

 

10.1        Governing Law; Consent to Personal
Jurisdiction. This Agreement will be governed by and
construed according to the laws of the State of California, as such laws are
applied to agreements entered into and to be performed entirely within
California between California residents. I hereby expressly consent to the
personal jurisdiction of the state and federal courts located in Santa Clara
County, California for any lawsuit filed there against 

 

3

 

me by Company arising
from or related to this Agreement.

 

10.2        Severability. In case
any one or more of the provisions contained in this Agreement shall, for any
reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect the other
provisions of this Agreement, and this Agreement shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein. If
moreover, any one or more of the provisions contained in this Agreement shall
for any reason be held to be excessively broad as to duration, geographical
scope, activity or subject, it shall be construed by limiting and reducing it,
so as to be enforceable to the extent compatible with the applicable law as it
shall then appear.

 

10.3        Successors and Assigns. This
Agreement will be binding upon my heirs, executors, administrators and other
legal representatives and will be for the benefit of the Company, its
successors, and its assigns.

 

10.4        Survival. The
provisions of this Agreement shall survive the termination of my employment and
the assignment of this Agreement by the Company to any successor in interest or
other assignee.

 

10.5        Employment. I agree
and understand that nothing in this Agreement shall confer any right with
respect to continuation of employment by the Company, nor shall it interfere in
any way with my right or the Company’s right to terminate my employment at any
time, with or without cause.

 

10.6        Waiver. No waiver by
the Company of any breach of this Agreement shall be a waiver of any preceding
or succeeding breach. No waiver by the Company of any right under this
Agreement shall be construed as a waiver of any other right. The Company shall
not be required to give notice to enforce strict adherence to all terms of this
Agreement.

 

10.7        Entire Agreement. The
obligations pursuant to Sections 1 and 2 of this Agreement shall apply to any
time during which I was previously employed, or am in the future employed, by
the Company as a consultant if no other agreement governs nondisclosure and
assignment of inventions during such period. This Agreement is the final,
complete and exclusive agreement of the parties with respect to the subject matter
hereof and supersedes and merges all prior discussions between us. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, will be effective unless in writing and signed by the
party to be charged. Any subsequent change or changes in my duties, salary or
compensation will not affect the validity or scope of this Agreement. This agreement
is effective from the date shown below.

 

I HAVE
READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE COMPLETELY FILLED
OUT EXHIBIT B TO THIS AGREEMENT.

 

	
  Dated:

  	
  5/13/2004

  	
   

  	
   

  

 

	
   

  	
   

  
	
  /s/ Peter G.
  Milner

  	
   

  
	
  (Signature)

  	
   

  
	
   

  	
   

  
	
  PETER G. MILNER

  	
   

  
	
  (Printed
  Name)

  	
   

  
	
   

  	
   

  
	
  ACCEPTED
  AND AGREED TO:

  	
   

  
	
   

  	
   

  
	
  ARYX
  THERAPEUTICS

  	
   

  
	
   

  	
   

  

 

	
  By:

  	
  /s/ David Nagler

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  VP Corp Affairs

  	
   

  

 

	
  2255 Martin Ave

  	
   

  
	
  (Address)

  	
   

  
	
   

  	
   

  
	
  SANTA CLARA CA 95050

  	
   

  
	
   

  	
   

  
	
  Dated: 5/13/04

  	
   

  

 

4

 

EXHIBIT A

 

LIMITED EXCLUSION NOTIFICATION

 

THIS IS
TO NOTIFY you in accordance with Section 2872 of the
California Labor Code that the foregoing Agreement between you and the Company
does not require you to assign or offer to assign to the Company any invention
that you developed entirely on your own time without using the Company’s
equipment, supplies, facilities or trade secret information except for those
inventions that either:

 

1.             Relate at the time of conception or
reduction to practice of the invention to the Company’s business, or actual or
demonstrably anticipated research or development of the Company;

 

2.             Result from any work performed by you
for the Company.

 

To the
extent a provision in the foregoing Agreement purports to require you to assign
an invention otherwise excluded from the preceding paragraph, the provision is
against the public policy of this state and is unenforceable.

 

This
limited exclusion does not apply to any patent or invention covered by a
contract between the Company and the United States or any of its agencies
requiring full title to such patent or invention to be in the United States.

 

I
ACKNOWLEDGE RECEIPT of a copy of this notification.

 

	
   

  	
  By:

  	
  /s/ Peter G. Milner

  
	
   

  	
  (PRINTED NAME OF EMPLOYEE)

  
	
   

  	
   

  
	
   

  	
  Date:

  	
   

  
	
  WITNESSED
  BY:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ David Nagler

  	
   

  
	
  (PRINTED
  NAME OF REPRESENTATIVE)

  	
   

  	
   

  
				

 

A-1

 

EXHIBIT B

	
  TO:

  	
   

  	
  ARYx Therapeutics

  
	
   

  	
   

  	
   

  
	
  FROM:

  	
   

  	
  Peter
  G. Milner

  	
   

  
	
   

  	
   

  	
   

  
	
  DATE:

  	
   

  	
  May 13,
  2004

  	
   

  
	
   

  	
   

  	
   

  
	
  SUBJECT:

  	
   

  	
  Previous
  Inventions

  

 

1.          Except as listed in Section 2 below,
the following is a complete list of all inventions or improvements relevant to
the subject matter of my employment by Aryx Therapeutics (the “Company”) that have been made or conceived or first reduced
to practice by me alone or jointly with others prior to my engagement by the
Company:

 

	
   

  	
  o

  	
  No inventions or
  improvements.

  
	
   

  	
   

  	
   

  
	
   

  	
  x

  	
  See below:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  x

  	
  Additional
  sheets attached.

  

 

2.        Due to a prior confidentiality
agreement, I cannot complete the disclosure under Section 1 above with
respect to inventions or improvements generally listed below, the proprietary
rights and duty of confidentiality with respect to which I owe to the following
party(ies):

 

	
   

  	
  Invention or Improvement

  	
   

  	
  Party(ies)

  	
   

  	
  Relationship

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
  2, 14, 23, 24, 26, 30

  	
   

  	
  Washington Univ.

  	
   

  	
  None Now, Former Employee

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  1, 3, 4, 5, 6, 25

  	
   

  	
  CV Therapeutics

  	
   

  	
  None Now, Founder, Ex-Employee

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  7, 13, 15, 17, 19, 27, 28, 29, 31, 32, 33, 34, 35, 36,
  37, 38, 39

  	
   

  	
  Conchju Chem

  	
   

  	
  SAB Member

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

x                           Additional
sheets attached.

 

 

 

PATENTS

 

ISSUED –

 

1.     U.S. Patent No. 5,631,260
“XANTHINE EPOXIDES AS A1 ADENOSINE RECEPTOR AGONISTS AND ANTAGONISTS”
Inventors Luiz Belardinelli, Ray Olsson, Stephen Baker, Peter J. Scammells. Peter G. Milner, Jurg R. Pfister, George F. Schreiner - Date
of Patent: May 20, 1997.

 

2.     EP Patent No. 441,763B1
“HEPARIN BINDING GROWTH FACTOR” Inventors Thomas F. Deuel, Yue-Sheng Li, Ned R.
Siegel, Peter G. Milner - Date of Patent: May
21, 1997.

 

3.     U.S. Patent No. 5,668,139
“A1 ADENOSINE RECEPTOR AGONISTS AND ANTAGONISTS” Inventors; Luiz Belardinelli,
Ray Olsson, Stephen Baker, Peter J. Scammells, Peter G.
Milner, Jurg R. Pfister, George F. Schreiner- Date of Patent:
September 16, 1997.

 

4.     U.S. Patent No. 5,736,528
“N-6-(EPOXYNORBRON-2-YL) ADENOSINES AS A1 ADENOSINE RECEPTOR AGONISTS”
Inventors Luiz Belardinelli, Ray Olsson, Stephen Baker, Peter J. Scammells, Peter G. Milner Jurg R. Pfister - Date of Patent: April 7,
1998.

 

5.     U.S. Patent No. 5,998,387
“METHOD FOR USING A.SUB.1 ADENOSINE RECEPTOR AGONISTS” Inventors Luiz
Belardinelli, Ray Olsson, Stephen Baker, Peter J. Scammells, Peter G. Milner, Jurg R. Pfister - Date of Patent: December
7, 1999

 

6.     EP Patent No. 725,782B1 “A1
ADENOSINE RECEPTOR AGONISTS AND ANTIAGOINISTS” Inventors Luiz Belardinelli, Ray
Olsson, Stephen Baker, Peter J. Scammells, Peter G. Milner,
Jurg R. Pfister, George F. Schreiner - Date of Patent: December 15, 1999

 

7.     U.S. Patent No. 6,087,375
“METHODS OF TREATING OR PREVENTING THROMBOSES” Inventors Dominique P. Bridon,
Alan Ezrin, Peter G. Milner - Date of Patent:
July 11, 2000

 

8.     U.S. Patent No. 6,114,3444
“NOVEL LONG-ACTING LOCAL ANESTHETICS” Inventors Pascal Druzgala, Peter G. Milner - Date of Patent: September 5, 2000.

 

9.     U.S. Patent No. 6,316,487 “NOVEL COMPOUNDS
FOR TREATMENT OF CARDIAC ARRHYTHMIA, SYNTHESIS, AND METHOD OF USE” Inventors
Pascal Druzgala, Peter G. Milner - Date of Patent:
November 13, 2001.

 

2

 

10.   U.S. Patent No. 6,362,223
“ENANTIOMERIC COMPOUNDS FOR TREATMENT OF CARDIAC ARRHYTHMIAS AND METHOD OF USE”
Inventors Pascal Druzgala. Peter G. Milner
- Date of Patent: March 26, 2002.

 

11.   U.S. Patent No. 6,372,783
“ENANTIOMERIC COMPOUNDS FOR TREATMENT OF CARDIACARRHYTHMIAS AND METHOD OF USE”
Inventors Pascal Druzgala, Peter G. Milner
- Date of Patent: April 16, 2002.

 

12.   U.S. Patent No. 6,387,914
“ULTRASHORT ACTING HYPNOTIC BARBITURATE” Inventors Pascal Druzgala, Peter G. Milner - Date of Patent: May 14, 2002.

 

13.   U.S. Patent No. 6,437.092
“CONJUGATES OF OPIOIDS AND ENDOGENOUS CARRIERS” Inventors Alan M. Ezrin,
Dominique Bridon, Darren Holmes, Peter G. Milner
– Date of Patent: August 20, 2002

 

14.   U.S. Patent No. 6,448,381
“DNA ENCODING HEPARIN-BINDING GROWTH FACTOR” Inventors Thomas F. Deuel,
Yue-Sheng Li, Ned R. Siegel, Peter G. Milner
- Date of Patent: September 10,
2002.

 

15.   U.S. Patent No. 6,500,918
“CONJUGATE COMPRISING AN ANTINOCICEPTIVE AGENT COVALENTLY BONDED TO A BLOOD
COMPONENT” Inventors Alan M. Ezrin, Dominique Bridon, Darren Holmes, Peter G. Milner – Date of Patent: December 31, 2002.

 

16.   U.S. Patent No. 6,552,046
“MATERIALS AND METHODS FOR THE TREATMENT OF GASTROESOPHAGEAL REFLUX DISEASE”
Inventors Pascal Druzgala, Peter G. Milner,
Jurg Pfister, Cyrus Becker - Date of Patent: April 22, 2003.

 

17.   US Patent No. 6,602,981
“ANTINOCICEPTIVE AGENT DERIVATIVE” Inventors Alan M. Ezrin, Dominique P.
Bridon, Darren L. Holmes, Peter G. Milner
– Date of Patent: August 5, 2003.

 

18.   US Patent No. 6,608,097
“MATERIALS AND METHODS FOR THE TREATMENT OF HYPERTENSION AND ANGINA’ Inventors
Pascal Druzgala. Peter G. Milner, Jurg Pfister,
Xiaoming Zhang - Date of Patent: August 19, 2003.

 

19.   US Patent No. 6,610,825
“METHOD FOR ALLEVIATING PAIN OR PROVIDING AN ANALGESIC EFFECT IN A PATIENT”
Inventors Alan M. Ezrin. Dominique P. Bridon, Darren L. Holmes, Peter G. Milner – Date of Patent; August 26, 2003.

 

3

 

20.   US Patent No. 6,680,387 ‘MATERIALS AND
METHODS FOR THE TREATMENT OF DIABETES, HYPERLIPIDEMIA, HYPERCHOLESTEROLEMIA,
AND ATHEROSCLEROSIS” Inventors Pascal Druzgala, Peter G.
Milner – Date of Patent; January 20, 2004

 

21.   US Patent No. 6,683,086 “ULTRASHORT ACTING
HYPNOTIC BARBITURATES” Inventors Pascal Druzgala, Peter G.
Milner – Date of Patent: January 27, 2004

 

22.   US Patent No. 6,683,195 “NOVEL ENANTIMERIC
COMPOUNDS FOR THE TREATMENT OF CARDIAC ARRHYTHMIAS AND METHODS OF USE” Inventors
Pascal Druzgala, Peter G. Milner – Date of Patent:
January 27, 2004

 

PENDING–

 

23.   Canadian application “HEPARIN BINDING GROWTH
FACTOR - PTN cDNA” Inventors Thomas F. Deuel, Yue-Sheng Li, Ned R. Siegel, Peter G. Milner - Filing Date January 7, 1991.

 

24.   Japanese application “HEPARIN BINDING GROWTH
FACTOR - PTN cDNA” Inventors Thomas F. Deuel, Yue-Sheng Li, Ned R. Siegel, Peter G. Milner - Filing Date January 7, 1991.

 

25.   EPO application “NOVEL A1 ADENOSINE RECEPTOR
AGONISTS AND ANTAGONISTS” Inventors Luiz Belardinelli, Ray Olsson, Stephen
Baker, Peter J. Scammells, Peter G. Milner,
Jurg R. Pfister, George F. Schreiner - Filing Date June 6,1995.

 

26.   U.S. application “HEPARIN BINDING GROWTH
FACTOR - PTN RECOMBINANT PROTEIN” Inventors Thomas F. Deuel, Yue-Sheng Li, Ned
R. Siegel, Peter G. Milner - Filing Date June
6, 1995, Serial No. 08/465,936.

 

27.   U.S. application “LOCALIZED DELIVERY OF
THERAPEUTICS AND DIAGNOSTICS” Inventors Alan Ezrin, Dominique Bridon, Peter G. Milner - Filing Date March 23, 1998.

 

28.   US application “LOCAL DRUG DELIVERY OF
THROMBIN INHIBITOR” Inventors Alan Ezrin, Peter G. Milner,
Dominique Bridon, Angelica Fleser -Filing Date May 20, 1998.

 

29.   U.S. application “LOCAL DELIVERY OF LONG
LASTING THERAPEUTIC AND DIAGNOSTIC AGENTS” Inventors Alan Ezrin, Peter G. Milner, Dominique Bridon, Angelica Fleser - Filing
Date May 21. 1998.

 

4

 

30.   U.S. application “METHOD OF
PROMOTING MITOGENESIS OF MAMMALIAN CELLS USING HEPARIN-BINDING GROWTH FACTOR” Inventors Thomas F. Deuel,
Yue-Sheng Li, Ned R. Siegel, Peter G. Milner
- Filing Date June 24, 1998,
Serial No. 09/104,048.

 

31.   PCT application “NOVEL
CONJUGATES OF OPIOIDS AND ENDOGENOUS CARRIERS” Inventors Peter G.
Milner, Alan Ezrin, Dominique Bridon, Darren Holmes - Filing Date
November 6, 1998, Serial 60/064,705.

 

32.   U.S. application “LOCALIZED
DELIVERY OF LONG LASTING THERAPEUTIC AND DIAGNOSTIC AGENTS” Inventors Alan
Ezrin, Peter G. Milner, Dominique Bridon,
Angelica Fleser, Darren Holmes - Filing Date November 6, 1998.

 

33.   PCT application “LOCAL
DELIVERY OF LONG LASTING THERAPEUTIC AGENTS” Inventors Alan M. Ezrin, Peter G. Milner, Dominique
P. Bridon, and Darren L. Holmes - Filing Date March 23, 1999.

 

34.   U.S. Provisional application
“PULMONARY DELIVERY FOR BIOCONJUGATION” Inventors Alan M. Ezrin, Peter G. Milner - Filing Date September 7, 1999.

 

35.   U.S. Provisional application
“LONG LASTING FUSION PEPTIDE INHIBITORS OF VIRAL INFECTION” Inventors Dominique
P. Bridon, Robert P. DuFresne, Nissab Boudjellab, Darren L. Holmes. Xicai
Huang, Peter G. Milner - Filing Date September 10, 1999.

 

36.   U.S. Provisional application
“MATERIALS AND METHODS FOR THE TREATMENT OF DIABETES” Inventors Pascal J.
Druzgala, Peter G. Milner - Filing Date April 24, 2000

 

37.   PCT application “PROTECTION
OF ENDOGENOUS THERAPEUTIC PEPTIDES FROM PEPTIDASE ACTIVITY THROUGH CONJUGATION
TO BLOOD COMPONENTS” Inventors Dominique Bridon, Alan M. Ezrin, Peter G. Milner, Darren L. Holmes, Karen Thibaudeau. - Filing Date May 17, 2000

 

38.   PCT application “METHODS AND
COMPOSITIONS FOR PRODUCING LONG LASTING ANTINEOPLASTIC AGENTS” Inventors
Dominique P. Bridon, Rogert Leger, Xicai Huang, Peter G.
Milner, Damon Smith and Alan M. Ezrin - Filing Date September 7,
2000.

 

39.   PCT application “PULMONARY
DELIVERY FOR BIOCONJUGATION” Inventors Alan M. Ezrin, Angelica Fleser, Martin
Robitaille, Peter G. Milner, and Dominique P. Bridon - Filing
Date September 7, 2000.

 

5

 

EXHIBIT B

 

RELEASE AGREEMENT

 

I understand that my
employment with ARYX THERAPEUTICS, INC.
(the “Company”)
terminated effective            ,
      (the “Separation Date”). The Company has agreed
that if I choose to sign this Release Agreement (“Release”), the Company will pay me
certain severance benefits (minus the standard withholdings and deductions)
pursuant to the terms of the Employment Agreement (the “Agreement”) entered
into and effective as of February   , 2005, between myself and the
Company, and any agreements incorporated therein by reference. I understand
that I am not entitled to such severance benefits unless I sign this Release
and allow it to become effective. I understand that, regardless of whether I
sign this Release, the Company will pay me all of my accrued salary and
vacation through the Separation Date, to which I am entitled by law.

 

In consideration for the
severance benefits I am receiving under the Agreement, I hereby generally
release the Company and its officers, directors, agents, attorneys, employees,
shareholders, parents, subsidiaries, and affiliates from any and all claims,
liabilities, demands, causes of action, attorneys’ fees, damages, or
obligations of every kind and nature, whether they are now known or unknown,
arising at any time prior to or on the date I sign this Release. This general
release includes, but is not limited to: (a) all claims arising out of or in
any way related to my employment with the Company or the termination of that
employment; (b) all claims related to my compensation or benefits from the
Company, including salary, bonuses, commissions, vacation pay, expense
reimbursements, severance pay, fringe benefits, stock, stock options, or any
other ownership interests in the Company; (c) all claims for breach of
contract, wrongful termination, and breach of the implied covenant of good
faith and fair dealing (including, but not limited to, any claims based on or
arising from the Agreement); (d) all tort claims, including claims for
fraud, defamation, emotional distress, and discharge in violation of public
policy; and (e) all federal, state, and local statutory claims, including
claims for discrimination, harassment, retaliation, attorneys’ fees, or other
claims arising under the federal Civil Rights Act of 1964 (as amended), the
federal Americans with Disabilities Act of 1990, the federal Age Discrimination
in Employment Act of 1967 (as amended), and the California Fair Employment and
Housing Act (as amended). Notwithstanding the release in the preceding
sentence, I am not releasing any right of indemnification I may have for any
liabilities arising from my actions within the course and scope of my
employment with the Company or within the course and scope of my role as a
member of the Board of Directors of the Company.

 

In releasing claims unknown
to me at present, I am waiving all rights and benefits under Section 1542 of
the California Civil Code, and any law or legal principle of similar effect in
any jurisdiction:  “A general
release does not extend to claims which the creditor does not know or suspect
to exist in his favor at the time of executing the release, which if known by
him must have materially affected his settlement with the debtor.”

 

If I am forty (40) years
of age or older as of the Separation Date, I acknowledge that I am knowingly
and voluntarily waiving and releasing any rights I may have under the federal
Age Discrimination in Employment Act of 1967, as amended (“ADEA”). I also
acknowledge that the consideration given for the waiver in the above paragraphs
is in addition to anything of value to which I was already entitled. I have
been advised by this writing, as required by the ADEA that:  (a) my waiver and release do not apply to any
claims that may arise after the date that I sign this Release; (b) I should
consult with an attorney prior to executing this Release (although I may choose
voluntarily not to do so); (c) I have twenty-one (21) days within which to
consider this Release (although I may choose voluntarily to sign this Release
earlier); (d) I have seven (7)

 

 

days following the date
that I sign this Release to revoke the Release by providing written notice of
revocation to the Company’s Chief Executive Officer; and (e) this Release will
not be effective until the eighth day after this Release has been signed both
by me and by the Company (“Effective
Date”).

 

Agreed:

 

	
  PETER G. MILNER, M.D.

  	
   

  	
  ARYX
  THERAPEUTICS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ David Nagler

  	
   

  
	
   

  	
   

  	
  Print Name:

  	
  DAVID NAGLER

  	
   

  
	
   

  	
   

  	
  Print Title:

  	
  VP Corp Affairs

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  	
  Date:

  	
  9/30/05

  	
   

  
										

 

2

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