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.


 

















 


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 (11⁄2) 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


 


14

















 


EXHIBIT B


 


RELEASE AGREEMENT


 


15