Ceo Employment Agreement

EXHIBIT 10.9

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 June 10, 2003 (the "Effective Date").

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

WHEREAS, Executive wishes 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 employ Executive in the position of Chief Executive Officer ("CEO") and Executive hereby accepts such employment to commence as of July 1,2003 (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. Executive shall receive, for services to be rendered hereunder, a base salary at an annualized rate of $385,000, 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. At the first meeting of the Board following the Employment Date, currently scheduled to occur on or about July 22, 2003, the Board will determine and approve the specific corporate objectives and Executive's personal objectives for the calendar year 2003; once

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determined and approved, such specific corporate objectives and Executive's personal objectives will be attached to this Agreement as Exhibit B. For the 2003 calendar year, Executive's target bonus potential will be equal to thirty-three percent (33%) of Executive's base salary, prorated based on the Employment Date. Upon the closing of a Financing (as defined herein), Executive's target bonus potential will be increased to forty percent (40%) of Executive's base salary. Bonuses paid for the 2003 and 2004 calendar years, if any, regardless of whether a Financing has occurred, each will be provided as follows: seventy-five percent (75%) of the bonus will be paid as cash compensation, and twenty-five percent (25%) will be provided as an award of Company Common Stock with a fair market value (as determined by the Board) equivalent to twenty-five percent (25%) of the bonus amount awarded. No bonus shall be deemed earned until the Board confirms such bonus in writing. For the purposes of this Agreement, "Financing" shall mean the Company's first preferred stock financing after the Effective Date of this Agreement with aggregate proceeds of at least $35,000,000, provided that the Financing price of the Company's preferred stock is at least 20% above the Series C price.

2.3 Signing Bonus. Executive will receive a signing bonus in the amount of $100,000, less standard payroll deductions and withholdings. The signing bonus will be paid in Executive's first paycheck or at the same time that Executive receives her first paycheck.

2.4 Stock Option Grant. Subject to Board approval, the Company will grant to Executive under the Affymax, Inc. 2001 Stock Option/Stock Issuance Plan ("the Plan") an option (the "Option") to purchase the number of shares equal to four percent (4%) of the Company's total outstanding common stock and common stock equivalents, including stock options granted but not exercised, as of the Effective Date of this Agreement. The Option will be granted at an exercise price equal to the fair market value of the Common Stock, as determined by the Board, at the time of the Board's approval of the grant. The Option will be subject to the terms and conditions of the Plan and Executive's grant agreement, which shall reflect the terms in this paragraph. As specified therein, upon the Company's receipt of the requisite cash payment by Executive, the Option shall be immediately exercisable for all or any portion of the option shares. Any such shares under the Option shall be subject to repurchase by the Company, at the option exercise price paid per share, until Executive vests in those shares. The Option shares vest, and the Company's repurchase rights shall lapse, as follows: (i) twenty-five percent (25%) of the Option shares will vest upon Executive's completion of one (1) year of service with the Company after the Employment Date; and (ii) the remaining Option shares will vest in thirty-six (36) equal monthly installments upon Executive's completion of each additional month of service thereafter. Executive acknowledges that there are no further commitments on behalf of the Company to grant to Executive any additional option grants. The Board may consider granting additional option grants at its sole discretion.

2.5 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, and will earn paid time off in 2003 on a prorated basis in accordance with the Company's paid time off policies

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.

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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 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 through 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 ay 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.

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 nine

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(9) 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 nine (9) 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 employeer, 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 stock options and/or restricted shares, as applicable, will be accelerated so that upon the termination, Executive is vested in an additional twenty-five percent (25%) of such shares, 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 ...