(d) “Board” means the Board of Directors of the Company.     (e) “Cause” means the Executive’s: (i) willful and continued failure to substantially performthe Executive’s duties with the Company (other than as a result of physical or mental disability)after a written demand for substantial performance is deliver to the Executive by the Company,which demand specifically identifies the manner in which the Company believes that the Executivehas not substantially performed the Executive’s duties and that has not been cured within fifteen(15) days following receipt by the Executive of the written demand; (ii) commission of a felony(other than a traffic-related offense) that in the written determination of the Company is likelyto cause or has caused material injury to the Company’s business; (iii) dishonesty with respect toa significant matter relating to the Company’s business; or (iv) material breach of any agreementby and between the Executive and the Company, which material breach has not been cured withinfifteen (15) days following receipt by the Executive of written notice from the Company identifyingsuch material breach.     (f) “Change of Control” means: (i) a dissolution or liquidation of the Company; (ii) a sale ofall or substantially all the assets of the Company; (iii) a merger, recapitalization,reorganization, consolidation or other similar transaction (a “Business Combination”) in whichbeneficial ownership of securities of the Company representing at least thirty-five percent (35%)of the combined voting power entitled to vote in the election of directors has changed; (iv) areverse merger in which the Company is the surviving corporation but the shares of the common stockof the Company outstanding immediately before the merger are converted by virtue of the merger intoother property, whether in the form of securities, cash or otherwise, and in which beneficialownership of securities of the Company representing at least thirty-five percent (35%) of thecombined voting power entitled to vote in the election of directors has changed; (v) an acquisitionby any person, entity or group within the meaning of Section 13(d) or 14(d) of the Exchange Act, orany comparable successor provisions (excluding any employee benefit plan, or related trust,sponsored or maintained by the Company or subsidiary of the Company or other entity controlled bythe Company) of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under theExchange Act, or comparable successor rule) of securities of the Company representing at leastthirty-five percent (35%) of the combined voting power entitled to vote in the election ofdirectors; (vi) in the event that the individuals who are members of the Incumbent Board cease forany reason to constitute at least fifty percent (50%) of the Board; (vii) a sale of substantiallyall the assets of the Company’s protein pharmaceutical business; or (viii) the consummation by theCompany of a Business Combination with respect to which all or substantially all of the individualsand entities who were the beneficial owners of the combined voting power of the then outstandingsecurities of the Company entitled to vote generally in the election of directors immediately priorto such Business Combination do not, following consummation of all transactions intended toconstitute part of such Business Combination, beneficially own, directly or indirectly, at leastsixty-five percent (65%) of the voting securities of the Company (or the corporation, businesstrust or other entity resulting from or being the surviving entity in such Business Combination).     (g) “Code” means the Internal Revenue Code of 1986, as amended.
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     (h) “Committee” means the Finance Committee of the Board or such other committee as appointedby the Board to administer this Agreement.     (i) “Company” means Maxygen, Inc., a Delaware corporation.     (j) “Company-Paid Coverage” has the meaning given thereto in Section 3(a).     (k) “Confidential Information, Secrecy and Invention Agreement” has the meaning given theretoin Section 5(b).     (l) “Disability” means Executive (i) is unable to engage in any substantial gainful activityby reason of any medically determinable physical or mental impairment which can be expected toresult in death or can be expected to last for a continuous period of not less than twelve (12)months, or (ii) is, by reason of any medically determinable physical or mental impairment which canbe expected to last for a continuous period of not less than twelve (12) months, receiving incomereplacement benefits for a period of not less than three (3) months under an accident and healthplan covering Company employees.     (m) “Effective Date” means the date first above written.     (n) “Employee Agreement and Release” has the meaning given thereto in Section 5(c).     (o) “Exchange Act” means the Securities Exchange Act of 1934, as amended.     (p) “Excise Tax” has the meaning given thereto in Section 4.     (q) “Executive” means the person identified in the introductory paragraph of this Agreement.     (r) “Good Reason” means: (i) any material reduction of the Executive’s duties, authority orresponsibilities relative to the Executive’s duties, authority, or responsibilities as in effectimmediately before such reduction, except if agreed to in writing by the Executive; (ii) areduction by the Company in the base salary of the Executive, or of twenty-five percent (25%) ormore in the Target Bonus opportunity of such Executive, as in effect immediately before suchreduction, except if agreed to in writing by the Executive; (iii) the relocation of the Executiveto a facility or a location more than thirty (30) miles from the Executive’s then present businesslocation, except if agreed to in writing by the Executive; (iv) a material breach by the Company ofany provision of this Agreement or (v) any failure of the Company to obtain the assumption of thisAgreement by any successor or assign of the Company; provided, however, that such events shall notconstitute grounds for a Good Reason termination unless the Executive has provided notice to theCompany of the existence of the one or more of the above conditions within ninety (90) days of itsinitial existence and the Company has been provided at least thirty (30) days to remedy thecondition.
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     (s) “Incumbent Board” means the individuals who, as of the Effective Date, are members of theBoard. If the election, or nomination for election by the Company’s stockholders, of any newdirector is approved by a vote of at least fifty percent (50%) of the Incumbent Board, such newdirector shall be considered as a member of the Incumbent Board.     (t) “Section 16 Officer” means an “officer” of the Company, as defined in Rule 16a-1(f)promulgated under the Exchange Act, designated as such by action of the Board.     (u) “Target Bonus” means the Executive’s target bonus for the then current fiscal year, as setby the Board or the appropriate committee thereof.3. Severance Benefits in the Event of a Change of Control.     (a) If within eighteen (18) months following the date of a Change of Control of the Companyeither (A) the Company terminates the Executive’s employment other than for Cause, death orDisability or (B) the Executive terminates his or her employment with the Company voluntarily withGood Reason, then in each case, subject to Section 4 and Section 5: (i) the Executive shall beentitled to receive, within ten (10) days following the effectiveness of the release of claimsreferred to in Section 5, a lump sum payment equal to three times the Executive’s yearly basesalary in effect on the date of termination (without giving effect to any reduction in base salarysubsequent to a Change of Control that constitutes Good Reason), (ii) each of the Executive’soutstanding stock options, all stock subject to repurchase or forfeiture, including withoutlimitation, restricted stock, restricted stock units and performance shares awards, and anyoptions, stock subject to repurchase or forfeiture, awards or purchases held in the name of anestate planning vehicle for the benefit of the Executive or his or her immediate family, shall havetheir vesting and exercisability schedule accelerate in full (or, as applicable, the correspondingrepurchase or forfeiture right shall lapse in full) as of the date of termination; (iii) if on thedate of termination the Executive is covered by any Company-paid health, disability, accidentand/or life insurance plans or programs, the Company shall provide to the Executive benefitssubstantially similar to those that the Executive was receiving immediately prior to the date oftermination (the “Company-Paid Coverage”), with any premiums related to such coverage paid by theCompany no later than thirty (30) days following the premium due date; and (iv) thepost-termination exercise period of Executive’s outstanding stock option and stock appreciationright awards shall automatically be extended to the later of (A) the fifteenth day of the thirdmonth following the date at which the stock option or stock appreciation right would otherwise haveexpired but for this extension, based on the terms of the stock option or stock appreciation righton its grant date, or (B) December 31 of the calendar year in which the stock option or stockappreciation right would otherwise have expired but for this extension, based on the terms of thestock option or stock appreciation right on its grant date; provided, however, that in the eventCode Section 409A permit a longer extension without resulting in the imposition of an additionaltax under Code Section 409A, the stock option or stock appreciation right shall provide for suchgreater post-termination exercise period; provided, further, that in no event shall the term of thestock option or stock appreciation right be extended longer than its original maximum term. Ifsuch
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coverage included the Executive’s spouse and/or dependents immediately prior to the date oftermination, such spouse and/or dependents shall also be covered at Company expense. Company-PaidCoverage shall continue until the earlier of (x) three (3) years from the date of termination, or(y) the date that the Executive and his or her spouse and/or dependents become covered underanother employer’s health, disability, accident and/or life insurance plans or programs thatprovides the Executive and his or her spouse and/or dependents with comparable benefits and levelsof coverage; provided, however that such coverage, premium payments, or reimbursements (to theextent Employee pays the premiums in the interim) shall be delayed six months and one day fromEmployee’s termination date (and then paid in full in arrears) to the extent required to avoid theimposition of additional tax under Code Section 409A.     (b) If within eighteen (18) months following the date of a Change of Control of the Companythe Executive’s employment with the Company is terminated as a result of death or Disability, thenin each case, subject to Section 4 and Section 5: (i) each of the Executive’s outstanding stockoptions, all stock subject to repurchase or forfeiture, including without limitation restrictedstock, restricted stock units, performance shares awards, and any options, stock subject torepurchase or forfeiture, awards or purchases held in the name of an estate planning vehicle forthe benefit of the Executive or his or her immediate family, shall have their vesting andexercisability schedule accelerated such that vesting (or, as applicable, the correspondingrepurchase or forfeiture right lapsing) shall occur as if the vesting (or lapsing) had occurred ona monthly basis from the last date of vesting (or lapse) to the date of termination; and (ii) theCompany will provide the Executive with health, disability, accident and/or life insurance benefitsas described in Section 3(a)(iii).     (c) In no event shall the Executive be obligated to seek other employment or take any otheraction to mitigate the amounts payable or benefits provided to the Executive under this Agreement,nor shall any such payments or benefits be reduced by any earnings or benefits that the Employeemay receive from any other source.     (d) The Executive’s employment shall be deemed to have been terminated following a Change ofControl by the Company without Cause or by the Executive with Good Reason if the Executive’semployment is terminated prior to a Change of Control without Cause at the direction of a personwho has entered into an agreement with the Company the consummation of which will constitute aChange of Control or if the Executive terminates his or her employment with Good Reason prior to aChange of Control if the circumstances or event that constitutes Good Reason occurs at thedirection of such person.     (e) If the Change of Control is the result of the circumstances described in subsection (vii)of Section 2(f) then, subject to Section 4 and 5 hereof, the benefits described in Section 3(a)shall be payable to the Executive upon cessation of employment with the Company (for any reason)that occurs after the earlier to occur of (x) twelve (12) months after the Change of Control and(y) disposition of all or substantially all the remaining assets of the Company.
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     (f) If the Executive is eligible for severance benefits pursuant to this Article 3, then theExecutive shall be eligible for and considered for a bonus for the calendar year in which theExecutive’s employment terminates at the same time other employees are considered for a bonus forsuch calendar year even though the Executive will no longer be an employee of the Company at thattime; provided, however, any such bonus shall be pro-rated based on the effective date of theExecutive’s termination.     (g) Notwithstanding any contrary provision of the Agreement, if the Company determines, in itsgood faith judgment, that Section 409A of the Code shall result in the imposition of additional taxon any payment or benefit otherwise due to the Executive under the Agreement during the six (6)month period following the Executive’s termination date, all such payments or benefits shall accrueduring the six (6) month period and shall become payable in a lump sum payment on the date six (6)months and one (1) day following the Executive’s termination date. All subsequent payments orbenefits, if any, shall be paid as provided in the Agreement.4. Parachute Payments; Excise Tax.          In the event that the severance, acceleration of stock options and other benefits payable tothe Executive as a result of a Change of Control of the Company (i) constitute “parachute payments”within the meaning of Section 280G (as it may be amended or replaced) of the Code and (ii) but forthis Section 4, would be subject to the excise tax imposed by Section 4999 (as it may be amended orreplaced) of the Code (the “Excise Tax”), then the Executive’s benefits payable in connectiontherewith shall be either be     (a) delivered in full, or     (b) delivered as to such lesser extent that would result in no portion of such benefits beingsubject to the Excise Tax,whichever of the foregoing amounts, taking into account the applicable federal, state and localincome taxes and the Excise Tax, results in the receipt by the Executive on an after-tax basis, ofthe greatest amount of benefits, notwithstanding that all or some portion of such benefits may betaxable under the Excise Tax. Unless the Company and the Executive otherwise agree in writing, anydetermination required under this Section 4 shall be made in writing in good faith by a “Big Four”national accounting firm selected by the Company (the “Accountants”). In the event of a reductionin benefits hereunder, the Executive shall be given the choice of which benefits to reduce. Forpurposes of making the calculations required by this Section 4, the Accountants may make reasonableassumptions and approximations concerning applicable taxes and may rely on reasonable, good faithinterpretations concerning the application of the Code.     The Company and the Executive shall furnish to the Accountants such information and documentsas the Accountants may reasonably request in order to make a determination under this Section 4.The Company shall bear all costs the Accountants may reasonably incur in connection with anycalculations contemplated by this Section 4.5. Limitations and Conditions on Benefits.
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          The benefits and payments provided under this Agreement shall be subject to the followingterms and limitations:     (a) Withholding Taxes. The Company shall withhold required foreign, federal, stateand local income and employment taxes from any payments hereunder.     (b) Confidential Information, Secrecy and Invention Agreement Prior to Receipt ofBenefits. The Executive shall have executed and delivered to the Company, a standard form ofthe Company’s confidential information, secrecy and invention agreement, a copy of the current formof which is attached as **Exhibit A**(the “Confidential Information, Secrecy and InventionAgreement”), prior to the receipt or provision of any benefits (including the accelerationbenefits) under this Agreement. Additionally, the Executive agrees that all documents, records,apparatus, equipment and other physical property that is furnished to or obtained by the Executivein the course of his or her employment with the Company shall be and shall remain the sole propertyof the Company. The Executive agrees not to make or retain copies, reproductions or summaries ofany such property, except as otherwise necessary while acting in the normal course of business. Inthe event of any material breach by the Executive of the Confidential Information, Secrecy andInvention Agreement that is not cured within thirty (30) days of notice of such breach to theExecutive, all benefits payable under Section 4 of this Agreement shall immediately terminate.     (c) Employee Agreement and Release Prior to Receipt of Benefits. If the Executive’semployment with the Company terminates involuntarily other than for Cause, death or Disability, orthe Executive terminates his or her employment with the Company voluntarily with Good Reason, thenprior to, and as a condition of the receipt of any benefits (including the acceleration benefits)under this Agreement on account of such termination, the Executive shall, as of the date of suchtermination, execute an employee agreement and release in the form attached as **Exhibit B**(the“Employee Agreement and Release”) prior to receipt of benefits. Such Employee Agreement andRelease shall specifically relate to all the Executive’s rights and claims in existence at the timeof such execution and shall confirm the Executive’s obligations under the Company’s standard formof Confidential Information, Secrecy and Invention Agreement. If and only if the Executive iscovered by the federal Age Discrimination in Employment Act of 1967, as amended (“ADEA”) (currentlyall those 40 years of age or over on the date of termination), the Executive has twenty-one (21)days to consider whether to execute such Employee Agreement and Release and the Executive mayrevoke such Employee Agreement and Release within seven (7) days after execution of such EmployeeAgreement and Release. In the event the Executive is covered by ADEA and does not execute suchEmployee Agreement and Release within the twenty-one (21) days specified above, or if the Executiverevokes such Employee Agreement and Release within the seven (7) day period specified above, nobenefits (including the acceleration benefits) under Section 3 of this Agreement shall be payableor made available to the Executive on account of a termination.     6. Termination. Prior to a Change of Control of the Company, this Agreement shallautomatically terminate on the date the Executive ceases to be a Section 16 Officer,
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as evidenced by action of the Board removing the Executive as a Section 16 Officer orotherwise; provided, however, that if the Executive ceases to be a Section 16 Officer prior to aChange of Control at the direction of a person who has entered into an agreement with the Companythe consummation of which will constitute a Change of Control, this Agreement shall not terminatedue to the change in status of the Executive.     7. At-Will Employment. The Company and the Executive acknowledge that theExecutive’s employment is and shall continue to be at-will, as defined under applicable law. ThisAgreement shall not be construed as creating an express or implied contract of employment betweenthe Executive and the Company. The Executive shall not have any right to be retained in theemployment of the Company.     8. Notices. Any notice provided under this Agreement shall be in writing and shallbe deemed to have been effectively given (i) upon receipt when delivered personally, (ii) one dayafter sending when sent by express mail service (such as Federal Express), or (iii) five (5) daysafter sending when sent by regular mail to the following address:In the case of the Company:Maxygen, Inc.