ARYX THERAPEUTICS, INC. EMPLOYMENT AGREEMENT

Exhibit 10.11

THIS EMPLOYMENT AGREEMENT (“Agreement”) is entered into as of September 30, 2005 (the “Effective Date”), by and between Xxxxx X. Xxxxxx, 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.

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

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.

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.

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

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.

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 Xxxxx 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.

9.11 Exhibits.

Exhibit A – Proprietary Information and Inventions Agreement

Exhibit B – Release Agreement

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

ARYX THERAPEUTICS, INC.


By:	/s/ Xxxxx Xxxxxx
Xxxxx Xxxxxx
Vice President Corporate Affairs


XXXXX XXXXXX, M.D.


/s/ Xxxxx Xxxxxx

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

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 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 Xxxxx 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 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/ Xxxxx X. Xxxxxx
(Signature)

XXXXX X. XXXXXX
(Printed Name)

ACCEPTED AND AGREED TO:

ARYX THERAPEUTICS

By:	/s/ Xxxxx Xxxxxx

Title:	VP Corp Affairs

0000 Xxxxxx Xxx
(Xxxxxxx)

XXXXX XXXXX XX 00000

Dated: 5/13/04

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/ Xxxxx X. Xxxxxx
	(PRINTED NAME OF EMPLOYEE)

	Date:
WITNESSED BY:

/s/ Xxxxx Xxxxxx
(PRINTED NAME OF REPRESENTATIVE)

A-1

EXHIBIT B

TO:		ARYx Therapeutics

FROM:		Xxxxx X. Xxxxxx

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 Xxxx Xxxxxxxxxxxx, Xxx Xxxxxx, Xxxxxxx Xxxxx, Xxxxx X. Scammells. Xxxxx X. Xxxxxx, Xxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxxxx - Date of Patent: May 20, 1997.

2. EP Patent No. 441,763B1 “HEPARIN BINDING GROWTH FACTOR” Inventors Xxxxxx X. Xxxxx, Xxx-Xxxxx Xx, Xxx X. Xxxxxx, Xxxxx X. Xxxxxx - Date of Patent: May 21, 1997.

3. U.S. Patent No. 5,668,139 “A1 ADENOSINE RECEPTOR AGONISTS AND ANTAGONISTS” Inventors; Xxxx Xxxxxxxxxxxx, Xxx Xxxxxx, Xxxxxxx Xxxxx, Xxxxx X. Scammells, Xxxxx X. Xxxxxx, Xxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxxxx- 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 Xxxx Xxxxxxxxxxxx, Xxx Xxxxxx, Xxxxxxx Xxxxx, Xxxxx X. Scammells, Xxxxx X. Xxxxxx Xxxx X. Xxxxxxx - Date of Patent: April 7, 1998.

5. U.S. Patent No. 5,998,387 “METHOD FOR USING A.SUB.1 ADENOSINE RECEPTOR AGONISTS” Inventors Xxxx Xxxxxxxxxxxx, Xxx Xxxxxx, Xxxxxxx Xxxxx, Xxxxx X. Scammells, Xxxxx X. Xxxxxx, Xxxx X. Xxxxxxx - Date of Patent: December 7, 1999

6. EP Patent No. 725,782B1 “A1 ADENOSINE RECEPTOR AGONISTS AND ANTIAGOINISTS” Inventors Xxxx Xxxxxxxxxxxx, Xxx Xxxxxx, Xxxxxxx Xxxxx, Xxxxx X. Scammells, Xxxxx X. Xxxxxx, Xxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxxxx - Date of Patent: December 15, 1999

7. U.S. Patent No. 6,087,375 “METHODS OF TREATING OR PREVENTING THROMBOSES” Inventors Xxxxxxxxx X. Xxxxxx, Xxxx Xxxxx, Xxxxx X. Xxxxxx - Date of Patent: July 11, 2000

8. U.S. Patent No. 6,114,3444 “NOVEL LONG-ACTING LOCAL ANESTHETICS” Inventors Xxxxxx Xxxxxxxx, Xxxxx X. Xxxxxx - 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 Xxxxxx Xxxxxxxx, Xxxxx X. Xxxxxx - Date of Patent: November 13, 2001.

10. U.S. Patent No. 6,362,223 “ENANTIOMERIC COMPOUNDS FOR TREATMENT OF CARDIAC ARRHYTHMIAS AND METHOD OF USE” Inventors Xxxxxx Xxxxxxxx. Xxxxx X. Xxxxxx - 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 Xxxxxx Xxxxxxxx, Xxxxx X. Xxxxxx - Date of Patent: April 16, 2002.

12. U.S. Patent No. 6,387,914 “ULTRASHORT ACTING HYPNOTIC BARBITURATE” Inventors Xxxxxx Xxxxxxxx, Xxxxx X. Xxxxxx - Date of Patent: May 14, 2002.

13. U.S. Patent No. 6,437.092 “CONJUGATES OF OPIOIDS AND ENDOGENOUS CARRIERS” Inventors Xxxx X. Xxxxx, Xxxxxxxxx Xxxxxx, Xxxxxx Xxxxxx, Xxxxx X. Xxxxxx – Date of Patent: August 20, 2002

14. U.S. Patent No. 6,448,381 “DNA ENCODING HEPARIN-BINDING GROWTH FACTOR” Inventors Xxxxxx X. Xxxxx, Xxx-Xxxxx Xx, Xxx X. Xxxxxx, Xxxxx X. Xxxxxx - 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 Xxxx X. Xxxxx, Xxxxxxxxx Xxxxxx, Xxxxxx Xxxxxx, Xxxxx X. Xxxxxx – 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 Xxxxxx Xxxxxxxx, Xxxxx X. Xxxxxx, Xxxx Xxxxxxx, Xxxxx Xxxxxx - Date of Patent: April 22, 2003.

17. US Patent No. 6,602,981 “ANTINOCICEPTIVE AGENT DERIVATIVE” Inventors Xxxx X. Xxxxx, Xxxxxxxxx X. Xxxxxx, Xxxxxx X. Xxxxxx, Xxxxx X. Xxxxxx – Date of Patent: August 5, 2003.

18. US Patent No. 6,608,097 “MATERIALS AND METHODS FOR THE TREATMENT OF HYPERTENSION AND ANGINA’ Inventors Xxxxxx Xxxxxxxx. Xxxxx X. Xxxxxx, Xxxx Xxxxxxx, Xxxxxxxx Xxxxx - 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 Xxxx X. Xxxxx. Xxxxxxxxx X. Xxxxxx, Xxxxxx X. Xxxxxx, Xxxxx X. Xxxxxx – Date of Patent; August 26, 2003.

20. US Patent No. 6,680,387 ‘MATERIALS AND METHODS FOR THE TREATMENT OF DIABETES, HYPERLIPIDEMIA, HYPERCHOLESTEROLEMIA, AND ATHEROSCLEROSIS” Inventors Xxxxxx Xxxxxxxx, Xxxxx X. Xxxxxx – Date of Patent; January 20, 2004

21. US Patent No. 6,683,086 “ULTRASHORT ACTING HYPNOTIC BARBITURATES” Inventors Xxxxxx Xxxxxxxx, Xxxxx X. Xxxxxx – 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 Xxxxxx Xxxxxxxx, Xxxxx X. Xxxxxx – Date of Patent: January 27, 2004

PENDING–

23. Canadian application “HEPARIN BINDING GROWTH FACTOR - PTN cDNA” Inventors Xxxxxx X. Xxxxx, Xxx-Xxxxx Xx, Xxx X. Xxxxxx, Xxxxx X. Xxxxxx - Filing Date January 7, 1991.

24. Japanese application “HEPARIN BINDING GROWTH FACTOR - PTN cDNA” Inventors Xxxxxx X. Xxxxx, Xxx-Xxxxx Xx, Xxx X. Xxxxxx, Xxxxx X. Xxxxxx - Filing Date January 7, 1991.

25. EPO application “NOVEL A1 ADENOSINE RECEPTOR AGONISTS AND ANTAGONISTS” Inventors Xxxx Xxxxxxxxxxxx, Xxx Xxxxxx, Xxxxxxx Xxxxx, Xxxxx X. Scammells, Xxxxx X. Xxxxxx, Xxxx X. Xxxxxxx, Xxxxxx X. Xxxxxxxxx - Filing Date June 6,1995.

26. U.S. application “HEPARIN BINDING GROWTH FACTOR - PTN RECOMBINANT PROTEIN” Inventors Xxxxxx X. Xxxxx, Xxx-Xxxxx Xx, Xxx X. Xxxxxx, Xxxxx X. Xxxxxx - Filing Date June 6, 1995, Serial No. 08/465,936.

27. U.S. application “LOCALIZED DELIVERY OF THERAPEUTICS AND DIAGNOSTICS” Inventors Xxxx Xxxxx, Xxxxxxxxx Xxxxxx, Xxxxx X. Xxxxxx - Filing Date March 23, 1998.

28. US application “LOCAL DRUG DELIVERY OF THROMBIN INHIBITOR” Inventors Xxxx Xxxxx, Xxxxx X. Xxxxxx, Xxxxxxxxx Xxxxxx, Xxxxxxxx Xxxxxx -Filing Date May 20, 1998.

29. U.S. application “LOCAL DELIVERY OF LONG LASTING THERAPEUTIC AND DIAGNOSTIC AGENTS” Inventors Xxxx Xxxxx, Xxxxx X. Xxxxxx, Xxxxxxxxx Xxxxxx, Xxxxxxxx Xxxxxx - Filing Date May 21. 1998.

30. U.S. application “METHOD OF PROMOTING MITOGENESIS OF MAMMALIAN CELLS USING HEPARIN-BINDING GROWTH FACTOR” Inventors Xxxxxx X. Xxxxx, Xxx-Xxxxx Xx, Xxx X. Xxxxxx, Xxxxx X. Xxxxxx - Filing Date June 24, 1998, Serial No. 09/104,048.

31. PCT application “NOVEL CONJUGATES OF OPIOIDS AND ENDOGENOUS CARRIERS” Inventors Xxxxx X. Xxxxxx, Xxxx Xxxxx, Xxxxxxxxx Xxxxxx, Xxxxxx Xxxxxx - Filing Date November 6, 1998, Serial 60/064,705.

32. U.S. application “LOCALIZED DELIVERY OF LONG LASTING THERAPEUTIC AND DIAGNOSTIC AGENTS” Inventors Xxxx Xxxxx, Xxxxx X. Xxxxxx, Xxxxxxxxx Xxxxxx, Xxxxxxxx Xxxxxx, Xxxxxx Xxxxxx - Filing Date November 6, 1998.

33. PCT application “LOCAL DELIVERY OF LONG LASTING THERAPEUTIC AGENTS” Inventors Xxxx X. Xxxxx, Xxxxx X. Xxxxxx, Xxxxxxxxx X. Xxxxxx, and Xxxxxx X. Xxxxxx - Filing Date March 23, 1999.

34. U.S. Provisional application “PULMONARY DELIVERY FOR BIOCONJUGATION” Inventors Xxxx X. Xxxxx, Xxxxx X. Xxxxxx - Filing Date September 7, 1999.

35. U.S. Provisional application “LONG LASTING FUSION PEPTIDE INHIBITORS OF VIRAL INFECTION” Inventors Xxxxxxxxx X. Xxxxxx, Xxxxxx X. XxXxxxxx, Nissab Boudjellab, Xxxxxx X. Xxxxxx. Xicai Xxxxx, Xxxxx X. Xxxxxx - Filing Date September 10, 1999.

36. U.S. Provisional application “MATERIALS AND METHODS FOR THE TREATMENT OF DIABETES” Inventors Xxxxxx X. Xxxxxxxx, Xxxxx X. Xxxxxx - Filing Date April 24, 2000

37. PCT application “PROTECTION OF ENDOGENOUS THERAPEUTIC PEPTIDES FROM PEPTIDASE ACTIVITY THROUGH CONJUGATION TO BLOOD COMPONENTS” Inventors Xxxxxxxxx Xxxxxx, Xxxx X. Xxxxx, Xxxxx X. Xxxxxx, Xxxxxx X. Xxxxxx, Xxxxx Xxxxxxxxxx. - Filing Date May 17, 2000

38. PCT application “METHODS AND COMPOSITIONS FOR PRODUCING LONG LASTING ANTINEOPLASTIC AGENTS” Inventors Xxxxxxxxx X. Xxxxxx, Xxxxxx Xxxxx, Xicai Xxxxx, Xxxxx X. Xxxxxx, Xxxxx Xxxxx and Xxxx X. Xxxxx - Filing Date September 7, 2000.

39. PCT application “PULMONARY DELIVERY FOR BIOCONJUGATION” Inventors Xxxx X. Xxxxx, Xxxxxxxx Xxxxxx, Xxxxxx Xxxxxxxxxx, Xxxxx X. Xxxxxx, and Xxxxxxxxx X. Xxxxxx - Filing Date September 7, 2000.

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:

XXXXX X. XXXXXX, M.D.	ARYX THERAPEUTICS, INC.


	By:	/s/ Xxxxx Xxxxxx
	Print Name:				XXXXX XXXXXX
	Print Title:			VP Corp Affairs
Dated:	Date:		9/30/05

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ARYX THERAPEUTICS, INC. EMPLOYMENT AGREEMENT

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