Exhibit 10.10

 

AFFYMAX, INC.

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (“Agreement”) is entered into by and between ARLENE
MORRIS (“Executive”) and AFFYMAX, INC. (the “Company”), effective as of
December 17, 2008 (the “Effective Date”).

 

WHEREAS, the Company retains the services of Executive pursuant to that certain
Employment Agreement dated June 10, 2003 (the “Employment Agreement”) and the
Company and Executive hereby wish to amend and restate the Employment Agreement
in its entirety as provided herein;

 

WHEREAS, the Company desires to continue to employ Executive to provide personal
services to the Company, and wishes to continue to provide Executive with
certain compensation and benefits in return for her services;

 

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

 

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

 

1.             EMPLOYMENT BY THE COMPANY.

 

1.1          Position.  Subject to terms set forth herein, the Company agrees to
continue to employ Executive in the position of Chief Executive Officer (“CEO”)
and Executive hereby continues to accept such employment which commenced as of
July 9, 2003 (the “Employment Date”).  During the term of her employment with
the Company, Executive will devote her best efforts and substantially all of her
business time and attention to the business of the Company (except for vacation
periods and reasonable periods of illness or other incapacity as permitted by
the Company’s general employment policies).  The Company will provide Executive
with reasonable administrative support, and agrees to offer employment to
Executive’s current administrative assistant.

 

1.2          Duties and Location.  Executive shall perform such duties as are
customarily associated with her position as CEO, consistent with the bylaws of
the Company and as required by the Company’s Board of Directors (the “Board”). 
Executive will report to the Board.  Executive’s primary office location shall
be the Company’s corporate headquarters, currently located in Palo Alto,
California.  The Company reserves the right to reasonably require Executive to
perform her duties at places other than its corporate headquarters from time to
time, and to require reasonable business travel.

 

1.3          Policies and Procedures.  The employment relationship between the
parties shall be governed by the general employment policies and practices of
the Company, which the Company may change from time to time, and Executive will
be expected to abide by such Company policies and practices.

 

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2.             COMPENSATION AND BENEFITS.

 

2.1          Base Salary.  As of the Effective Date, Executive shall receive,
for services to be rendered hereunder, a base salary at an annualized rate of
$511,218, less standard payroll deductions and withholdings and payable in
accordance with the Company’s regular payroll schedule.  Such salary shall be
reviewed annually and may be increased as approved by the Board.

 

2.2          Bonus Potential.  Executive shall be eligible to receive an annual
incentive bonus to be paid less standard payroll deductions and withholdings. 
The Board will reasonably determine the amount of the bonus, if any, based on
the Company’s attainment of specific corporate objectives and on Executive’s
attainment of personal objectives, to be established in the reasonable
discretion of the Board after consultation with Executive.  As of the Effective
Date, Executive’s target bonus potential will be fifty percent (50%) of
Executive’s base salary.  Each year, the Board will determine Executive’s target
bonus potential as a percentage of Executive’s base salary.

 

2.3          Equity Awards.  The Board will grant equity awards to Executive in
its sole discretion.

 

2.4          Employee Benefits.  Executive shall be entitled to all benefits,
including but not limited to health and disability benefits, for which Executive
is eligible under the terms and conditions of the standard Company benefits
plans which may be in effect from time to time and provided by the Company to
its officers.  Details about these benefits are set forth in summary plan
descriptions and other materials available to Executive.  In addition, Executive
will accrue paid time off at the rate of five (5) weeks per full year of
employment, in accordance with the terms, conditions and limitations of the
Company’s paid time off policies.  Executive will begin to accrue paid time off
effective as of the Employment Date.

 

2.5          Prior Employment Agreement.    The Company acknowledges the
obligations to Executive pursuant to Sections 2.2 (Bonus Potential), 2.3
(Signing Bonus), 2.4 (Stock Option Grant) and 2.5 (Employee Benefits) of the
Employment Agreement.

 

3.             PROPRIETARY INFORMATION AGREEMENT.

 

As a condition of her employment, Executive agrees to execute and abide by the
Company’s Proprietary Information and Inventions Agreement (the “Proprietary
Information Agreement”) attached hereto as Exhibit A.

 

4.             OUTSIDE ACTIVITIES.

 

4.1          Non-Company Activities.  Except with the prior written consent of
the Board, Executive will not during the term of this Agreement undertake or
engage in any other employment, occupation or business enterprise, other than
ones in which Executive is a passive investor, provided that Executive agrees
not to become engaged in any other business activity which, in the reasonable
judgment of the Board, is likely to interfere with Executive’s ability to
discharge her duties and responsibilities to the Company.  Executive may engage
in

 

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civic and not-for-profit activities, and participate in trade or professional
organizations, so long as such activities do not materially interfere with the
performance of her duties hereunder.

 

4.2          No Adverse Interests.  Except as permitted by Section 4.3, during
her employment Executive agrees not to acquire, assume, participate in, or
render services to, directly or indirectly, any position, investment or interest
known by her to be adverse or antagonistic to the Company, its business or
prospects, financial or otherwise.

 

4.3          Noncompetition.  During the term of her 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 her to compete with the Company, anywhere throughout the world, in any
line of business engaged in (or planned to be engaged in) by the Company;
provided, however, that anything above to the contrary notwithstanding,
Executive may own, as a passive investor, securities of any competitor
corporation, so long as her direct holdings in any one such corporation shall
not in the aggregate constitute more than one percent (1%) of the voting stock
of such corporation.

 

5.             NONINTERFERENCE.       While employed by the Company, and for one
(1) year immediately following the employment termination date, Executive agrees
not to interfere with the business of the Company by directly or indirectly
soliciting,  inducing, encouraging, or otherwise causing any employee of the
Company to terminate his or her employment in order to become an employee,
consultant or independent contractor to or for any other person or entity.

 

6.             THIRD PARTY AGREEMENTS AND INFORMATION.  Executive represents and
warrants that Executive’s employment by the Company will not conflict with any
prior employment or consulting agreement or other agreement with any third
party, and that Executive will perform her duties to the Company without
violating any such agreement.  Executive represents and warrants that Executive
does not possess confidential information arising out of prior employment,
consulting, or other third party relationships, which would be utilized in
connection with Executive’s employment by the Company, except as expressly
authorized by that third party.  During Executive’s employment by the Company,
Executive will use in the performance of Executive’s duties only information
which is generally known and used by persons with training and experience
comparable to Executive’s own, common knowledge in the industry, otherwise
legally in the public domain, or obtained or developed by the Company or by
Executive in the course of Executive’s work for the Company.

 

7.             TERMINATION OF EMPLOYMENT.

 

7.1          At-Will Relationship.  Executive’s employment relationship is
at-will.  Either Executive or the Company may terminate the employment
relationship at any time, with or without cause or advance notice.

 

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7.2          Involuntary Termination.  In the event of an Involuntary
Termination (defined below), and provided that Executive first properly executes
and does not revoke or attempt to revoke a general release of all known and
unknown claims in favor of the Company, and its affiliates, employees, and
agents in a form acceptable to the Company, Executive shall be entitled to
receive the following severance benefits (the “Severance Benefits”): (i) a lump
sum cash severance payment equal to twelve (12) months of Executive’s then
current annual base salary, less applicable withholdings and deductions; (ii) if
Executive timely elects continued Company-provided group health insurance
coverage pursuant to the federal COBRA law, the Company will pay Executive’s
COBRA premiums sufficient to maintain her group health insurance coverage in
effect as of the date of the Involuntary Termination for twelve (12) months
following the Involuntary Termination, provided that the Company’s obligation to
continue to pay Executive’s COBRA premiums hereunder will cease upon Executive’s
eligibility for group health insurance coverage through a new employer; and
(iii) Executive will have the ability to exercise any vested stock option shares
granted to Executive by the Company until one (1) year following the date of the
Involuntary Termination or the expiration of the term of any such option,
whichever occurs earlier.  Executive’s entitlement to receive the Severance
Benefits is not conditioned on the occurrence of a Corporate Transaction.

 

7.3          Other Resignation or Termination.  If Executive’s employment ends
due to a resignation or termination that does not qualify as an Involuntary
Termination, Executive shall be entitled to receive her base salary, and her
accrued but unused paid time off earned through the date of termination; and
Executive will not be entitled to receive any additional compensation or
benefits (including the Severance Benefits), with the exception of any vested
rights she may have under the terms of a written ERISA-qualified benefit plan
(e.g., 401(k) account).

 

7.4          Termination for Death or Disability.  If Executive’s employment
terminates due to Executive’s death or Disability (defined below), Executive
will be entitled to: (i) receive any accrued but unused paid time off and salary
earned through the date of termination of employment; (ii) the vesting of
Executive’s then-outstanding equity awards will be accelerated so that upon the
termination, Executive is vested in an additional twenty-five percent (25%) of
the shares subject to such equity awards, if any such amount remains unvested;
and (iii) Executive will have the ability to exercise any of Executive’s vested
stock option shares until one (1) year following the termination date or the
expiration of the term of any such option, whichever occurs earlier.  In such
event, Executive shall be entitled to no additional compensation or benefits
(including the Severance Benefits), except as may be required by law or in
accordance with the Company’s benefit plans.  In the event that Executive’s
employment is terminated due to Disability, the benefits provided under this
Section 7.4 shall be conditioned upon the Company’s receipt of a general
release, which Executive has executed and does not revoke or attempt to revoke,
of all claims known and unknown, in favor of the Company and its affiliates,
employees, and agents, in a form acceptable to the Company.

 

7.5          Involuntary Termination Following a Corporate Transaction.  In the
event of an Involuntary Termination within twelve (12) months immediately
following a Corporate Transaction (defined below), in lieu of the Severance
Benefits (provided in Section 7.2 herein), Executive will receive the following
benefits (the

 

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“Corporate Transaction Benefits”):  (i) a lump sum cash severance payment equal
to eighteen (18) months of Executive’s then current annual base salary, less
applicable withholdings and deductions; (ii) a lump sum cash severance payment
equal to one and a half (1½) times Executive’s annual target bonus potential,
less applicable withholdings and deductions; (iii) if Executive timely elects
continued Company-provided group health insurance coverage pursuant to federal
COBRA law, the Company will pay Executive’s COBRA premiums sufficient to
maintain her group health insurance coverage in effect as of the date of the
Involuntary Termination for twelve (12) months following the Involuntary
Termination, provided that the Company’s obligation to continue to pay
Executive’s COBRA premiums hereunder will cease immediately upon Executive’s
eligibility for equivalent group health insurance coverage through a new
employer; (iv) Executive will have the ability to exercise any vested stock
option shares granted to Executive by the Company until one (1) year following
the date of the Involuntary Termination or the expiration of the term of any
such option, whichever occurs earlier; and (v) the vesting of all of Executive’s
outstanding equity awards shall be accelerated so that they vest in full and the
Company’s right to repurchase any earlier exercised shares, if applicable, shall
lapse.  As a condition precedent to Executive’s receipt of the Corporate
Transaction Benefits, Executive must properly execute, and not revoke or attempt
to revoke, a general release of all known and unknown claims in favor of the
Company, and its affiliates, employees, agents, and successors in a form
acceptable to the Company or the successor entity, as applicable.

 

7.6          Definitions.  For the purposes of this Agreement, the following
definitions shall apply:

 

(a)           Corporate Transaction.  A “Corporate Transaction” shall mean any
of the following:

 

(i)            a merger, consolidation or other reorganization approved by the
Company’s stockholders, unless securities representing more than fifty percent
(50%) of the total combined voting power of the voting securities of the
successor corporation are immediately thereafter beneficially owned, directly or
indirectly and in substantially the same proportion, by the persons who
beneficially owned the Company’s outstanding voting securities immediately prior
to such transaction;

 

(ii)           the sale, transfer or other disposition of all or substantially
all of the Company’s assets approved by the Company’s stockholders; or

 

(iii)         a majority of the Board consists of individuals other than
“Incumbent Directors,” which term means the members of the Board on the
Employment Date; provided that any individual becoming a director subsequent to
such date whose election or nomination for election was supported by at least
one-half (1/2) of the directors who then comprised the Incumbent Directors shall
be considered to be an Incumbent Director.

 

(b)           Involuntary Termination.  Involuntary Termination means the
termination of Executive’s employment resulting in a “separation from service”
with the Company within the meaning of Treasury Regulation
Section 1.409A-1(h) (without

 

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regard to any permissible alternative definition thereunder) by reason of any of
the following:

 

(i)            Executive’s involuntary dismissal or discharge by the Company for
reasons other than for Misconduct; or

 

(ii)           Executive’s voluntary resignation following (A) a material
reduction in Executive’s duties, responsibilities or authority or the level of
management to which she reports, (B) a reduction in Executive’s base
compensation by more than ten percent (10%), (C) a reduction in Executive’s
target bonus potential pursuant to Section 2.2 hereof by more than twenty
percent (20%), or (D) a relocation of Executive’s primary office location by
more than thirty-five (35) miles, provided and only if such reduction or
relocation is effected by the Company without Executive’s consent; provided,
further, that such an Involuntary Termination based on one or more of the
foregoing conditions may not occur unless: (x) Executive provides the Company
with written notice (the “Constructive Termination Notice”) that Executive
believes that a condition described in this Section 7.6(b)(ii) has occurred,
(y) the Constructive Termination Notice is given within ninety (90) days
following the date of the initial occurrence of the condition, and (z) the
Company does not rescind or cure the conduct giving rise to the condition
described in this Section 7.6(b)(ii) within thirty (30) days following receipt
by the Company of the Constructive Termination Notice.

 

(c)           Misconduct.  Misconduct means the commission of any act of fraud,
embezzlement or dishonesty by Executive, any material breach of the Proprietary
Information and Inventions Agreement, or any other intentional misconduct by
Executive Adversely affecting the business or affairs of the Company (or any
parent, subsidiary or affiliate) in a material manner.  The foregoing definition
shall not in any way preclude or restrict the right of the Company (or any
parent or subsidiary) to discharge or dismiss Executive or any other person in
the service of the Company (or any parent or subsidiary) for any other acts or
omissions, but such other acts or omissions shall not be deemed, for purposes of
this Agreement, to constitute grounds for termination for Misconduct.

 

(d)           Disability.  Disability means a physical or mental infirmity which
impairs Executive’s ability to substantially perform her duties under this
Agreement and which continues for a period of at least one hundred eighty (180)
consecutive days.

 

8.             TAX PROVISIONS.

 

8.1          Gross-Up Payment.

 

(a)           Subject to the possible limitation set forth in
Section 8.1(b) below, if any payment or benefit received or to be received by
Executive in connection with a Corporate Transaction or otherwise (“Payment”)
would subject Executive to the excise tax (the “Excise Tax”) imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), then
Executive shall be entitled to receive an additional payment from the Company,
in an amount not to exceed five hundred thousand dollars ($500,000) (the
“Gross-Up Payment”), such that after the payment of all taxes (including,
without limitation, any income or employment taxes, any interest or penalties
imposed with respect to such

 

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taxes, and 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 (i) paid federal income taxes at the highest marginal
rate of federal income taxation for the calendar year in which the Gross-Up
Payment is to be made; (ii) paid federal employment taxes at Executive’s actual
marginal rate for the calendar year in which the Gross-Up Payment is to be made;
and (iii) 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. 
Notwithstanding any other provision in Section 8.1, the aggregate amount of the
Gross-Up Payment shall not exceed five hundred thousand dollars ($500,000).

 

(b)           Notwithstanding the foregoing, the amount of the Payment when
aggregated with the Gross-Up Payment (the “Total Parachute Payments”) shall be
equal to the Reduced Amount.  The “Reduced Amount” shall be either (i) the
largest portion of the Total Parachute Payments that would result in no portion
of the Total Parachute Payments being subject to the Excise Tax, or (ii) the
largest portion, up to and including the total, of the Total Parachute Payments,
whichever amount referenced in the foregoing (i) or (ii), after taking into
account all applicable federal, state and local employment taxes, income taxes,
and the Excise Tax, results in Executive’s receipt of the greatest economic
benefit notwithstanding that all or some portion of the Total Parachute Payments
may be subject to the Excise Tax. If a reduction in payments or benefits
constituting “parachute payments” is necessary so that the Total Parachute
Payments equals the Reduced Amount, reduction shall occur in a manner necessary
to provide Executive with the greatest economic benefit.  If more than one
manner of reduction of payments or benefits necessary to arrive at the Reduced
Amount yields the greatest economic benefit, the payments and benefits shall be
reduced pro rata.

 

(c)           The independent registered public accounting firm engaged by the
Company for general audit purposes as of the day prior to the effective date of
the event described in Section 280G(b)(2)(A)(i) of the Code shall make all
determinations required to be made under this Section 8.1.  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 such event,
the Company shall appoint a 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 (the “Accounting Firm”) required to be made
hereunder.  The 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 such other time as requested by the Company or
Executive.  Any good faith determinations of the Accounting Firm made hereunder
shall be final, binding and conclusive upon the Company and Executive.

 

(d)           As a result of the uncertainty in the application of Section

 

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4999 of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made (“Underpayment”), consistent with the
calculations required to be made hereunder.  If the Company exhausts its
remedies pursuant to Section 8.1(e) hereof and Executive thereafter is required
to make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred, and any such Underpayment,
together with any additional penalties or interest thereon, shall be promptly
paid by the Company to or for the benefit of Executive.

 

(e)           Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of a Gross-Up Payment.  Such notification shall be given as soon as
practicable but no later than ten (10) business days after Executive is informed
in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid.  Executive shall
not pay such claim prior to the expiration of the thirty (30)-day period
following the date on which Executive has given such notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due).  If the Company notifies Executive in writing prior to the
expiration of such period that it desires to contest such claim, Executive
shall:

 

(i)            Give the Company any information reasonably requested by the
Company relating to such claim;

 

(ii)           Take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company;

 

(iii)         Cooperate with the Company in good faith in order effectively to
contest such claim; and

 

(iv)          Permit the Company to participate in any proceedings relating to
such claim; provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold Executive harmless, on
an after-tax basis, for any Excise Tax or federal, state, and local income and
employment tax (including interest and penalties with respect thereto) imposed
as a result of such representation and payment of costs and expenses.  Without
limitation on the foregoing provisions of this Section 8.1(e), the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct Executive to pay the tax claimed and sue
for a refund or contest the claim in any permissible manner, and Executive
agrees to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that if the Company
directs Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to Executive, on an interest-free basis, and
shall indemnify and hold Executive harmless, on an after-tax basis, from any
Excise Tax or federal, state, and local income and

 

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employment tax (including interest or penalties with respect thereto) imposed
with respect to such advance or with respect to any imputed income with respect
to such advance; and provided, further, Executive shall not be required to
extend the statute of limitations relating to the payment of taxes for the
taxable year of Executive with respect to which such contested amount is claimed
to be due, other than an extension limited solely to such contested amount.
Furthermore, the Company’s control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.

 

(f)            If, after the receipt by Executive of any amount paid by the
Company relating to a Gross-up Payment pursuant to Section 8.1(a) hereof or
advanced by the Company pursuant to Section 8.1(e) hereof, Executive becomes
entitled to receive any refund with respect to such amounts, Executive shall
(subject to the Company’s complying with the requirements of
Section 8.1(e) hereof) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto).  If, after the receipt by Executive of an amount advanced by the
Company pursuant to Section 8.1(e) hereof, a determination is made that
Executive shall not be entitled to any refund with respect to such claim and the
Company does not notify Executive in writing of its intent to contest such
denial of refund prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid, and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.

 

(g)           If, pursuant to regulations issued under Section 280G or 4999 of
the Code, the Company and Executive are required to make a preliminary
determination of the amount of an excess parachute payment and thereafter a
redetermination of the Excise Tax is required or the Company is permitted to
make a recalculation with regard to stock options and elects to do so under the
applicable regulations, the parties shall request the Accounting Firm to make
such redetermination.  If as a result of such redetermination an additional
Gross-Up Payment is required, the amount thereof shall be paid by the Company to
Executive within ten (10) business days of the receipt of the Accounting Firm’s
determination.  If the redetermination of the Excise Tax results in a reduction
of the Excise Tax, Executive shall take such steps as the Company may reasonably
direct in order to obtain a refund of the excess Excise Tax paid.  If the
Company determines that any suit or proceeding is necessary or advisable in
order to obtain such refund, the provisions of Section 8.1(e) hereof relating to
the contesting of a claim shall apply to the claim for such refund, including,
without limitation, the provisions concerning legal representation, cooperation
by Executive, participation by the Company in the proceedings and
indemnification by the Company.  Upon receipt of any such refund, Executive
shall promptly pay the amount of such refund to the Company.  If the amount of
the income taxes otherwise payable by Executive in respect of the year in which
Executive makes such payment to the Company is reduced as a result of such
payment, Executive shall, no later than the filing of the income tax return in
respect of such year, pay the amount of such tax benefit to the Company.  In the
event there is a subsequent redetermination of Executive’s income taxes
resulting in a reduction of such tax benefit, the Company shall, promptly after
receipt of notice of such reduction, pay to Executive the amount of such
reduction.  If the Company objects to the

 

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calculation or recalculation of the tax benefit, as described in the preceding
two sentences, the Accounting Firm shall make the final determination of the
appropriate amount.  Executive shall not be obligated to pay to the Company the
amount of any further tax benefits that may be realized by her as a result of
paying to the Company the amount of the initial tax benefit.

 

(h)           In the event that the Excise Tax is subsequently determined to be
less than initially determined, Executive shall repay to the Company at the time
that the amount of such reduction in Excise Tax is determined (but, if
previously paid to the taxing authorities, not prior to the time the amount of
such reduction is refunded to Executive or otherwise realized as a benefit by
Executive) the portion of the Gross-Up Payment that would not have been paid if
the Excise Tax as subsequently determined had been applied initially in
calculating the Gross-Up Payment, with the amount of such repayment determined
by the Accounting Firm; provided that the amount of required repayment by
Executive shall be reduced, as the Accounting Firm may determine, in order to
avoid putting Executive in a worse after-tax position than Executive would have
enjoyed had the amount of Excise Tax been correctly determined in the first
instance, such determination to be made on a basis consistent with the intention
of this Section 8.1, which is to make Executive whole on an after-tax basis on
account of any Excise Tax (including related interest and penalties) up to an
aggregate amount of five hundred thousand dollars ($500,000).  Executive and the
Company shall each have the right at all times to have the Accounting Firm
review and confirm or revise earlier calculations.

 

8.2          Compliance with Section 409A.  All payments provided under this
Agreement are intended to constitute separate payments for purposes of Treasury
Regulation Section 1.409A-2(b)(2).  Any lump sum cash severance payment pursuant
to Sections 7.2 or 7.5 shall be paid as soon as practicable following
Executive’s Involuntary Termination, but in event no later than March 15th of
the calendar year following such Involuntary Termination.  It is the intention
of the preceding sentence to apply the “short-term deferral rule” set forth in
Treasury Regulation Section 1.409A-1(b)(4) to such payments.  Amounts paid in
connection with group health insurance coverage pursuant to COBRA under Sections
7.2(ii) or 7.5(ii) pursuant are intended to be paid pursuant to the exception
provided by Treasury Regulation Section 1.409A-1(b)(9)(v)(B).  Amounts paid
pursuant to Sections 8.1(a), 8.1(d) and 8.1(h) shall be paid as soon as
practicable, but no later than the end of Executive’s taxable year next
following Executive’s taxable year in which Executive remits the related taxes. 
Amounts paid pursuant to Sections 8.1(e) and 8.1(g) shall be paid no later than
the end of Executive’s taxable year following the Executive’s taxable year in
which the taxes that are the subject of the audit or litigation are remitted to
the taxing authority, or where as a result of such audit or litigation no taxes
are remitted, the end of Executive’s taxable year following Executive’s taxable
year in which the audit is completed or there is a final and nonappealable
settlement or other resolution of the litigation.

 

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 certified or
registered mail, return receipt requested, to the Company at its primary office
location and to Executive at her address as listed on the

 

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Company’s payroll.

 

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 general intent of the parties insofar as possible.

 

9.3          Waiver.  No waiver of any term or provision of this Agreement shall
be valid unless such waiver is in writing and signed by the party against whom
enforcement of the waiver is sought.  In the case of the Company, such waiver
must be signed by at least one (1) member of the Board.  In addition, if either
party should waive any breach of any provisions of this Agreement, 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          Complete Agreement.  This Agreement, including all exhibits and
agreements expressly incorporated by reference, constitutes the complete, final,
and exclusive embodiment of the entire agreement between Executive and the
Company with regard to the subject matter hereof, and supersedes all prior and
contemporaneous written or oral agreements, understandings, promises, or
representations related to such subject matter.  It is entered into without
reliance on any promise or representation other than those expressly contained
herein, and it cannot be modified or amended except in a written instrument
approved by the Board and signed by Executive and a duly authorized member of
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.  The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof nor to
affect the meaning thereof.

 

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

 

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

 

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9.9          Right To Work.  As required by law, this Agreement is subject to
satisfactory proof of Executive’s right to work in the United States.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year
written below.

 

 

AFFYMAX, INC.

 

 

 

 

 

 

 

 

 

 

 

By:

/s/ Paul B. Cleveland

 

 

Date:

12-18-08

 

 

Paul B. Cleveland

 

 

 

 

 

Executive Vice President, Corporate Development

 

 

 

and Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ARLENE MORRIS

 

 

 

 

 

 

 

 

 

/s/ Arlene M. Morris

 

 

Date:

12-17-2008

 

Signature

 

 

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EXHIBIT A

 

PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT

 

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EXHIBIT B

 

RELEASE AGREEMENT

 

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