Exhibit 10.3

 

NEORX CORPORATION

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT dated as of February 1, 2006 (“Securities Agreement”),
is made by and among NeoRx Corporation, a Washington corporation (“Grantor”),
and the secured parties listed on the signature pages hereto (each, a “Secured
Party” and, collectively, the “Secured Parties”).

 

RECITALS

 

A.            Each Secured Party has made and has agreed to make certain
advances of money and to extend certain financial accommodation to Grantor as
evidenced by those certain convertible promissory notes of even date herewith
executed by Grantor in favor of each Secured Party pursuant to that certain Note
and Warrant Purchase Agreement (the “Purchase Agreement”) of even date herewith
by and between Grantor and the Secured Parties, (each, a “Note” and,
collectively, the “Notes”), such advances and financial accommodations being
referred to herein as the “Loans”.

 

B.            The Secured Parties are willing to make the Loans to Grantor, but
only upon the condition, among others, that Grantor shall have executed and
delivered to the Secured Parties this Security Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in order to induce the Secured Parties to make the Loans and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound, Grantor hereby
represents, warrants, covenants and agrees as follows:

 

1.             DEFINED TERMS.  When used in this Security Agreement the
following terms shall have the following meanings (such meanings being equally
applicable to both the singular and plural forms of the terms defined):

 

“Bankruptcy Code” means Title 11 of the United States Code, as amended or
modified from time to time.

 

“Collateral” shall have the meaning assigned to such term in Section 2 of this
Security Agreement.

 

“Contracts” means all contracts (including any customer, vendor, supplier,
service or maintenance contract), leases, licenses, undertakings, purchase
orders, permits, franchise agreements or other agreements (other than any right
evidenced by Chattel Paper, Documents or Instruments), whether in written or
electronic form, in or under which Grantor now holds or hereafter acquires any
right, title or interest, including, without limitation, with respect to an
Account, any agreement relating to the terms of payment or the terms of
performance thereof.

 

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“Copyright License” means any agreement, whether in written or electronic form,
in which Grantor now holds or hereafter acquires any interest, granting any
right in or to any Copyright or Copyright registration (whether Grantor is the
licensee or the licensor thereunder) including, without limitation, licenses
pursuant to which Grantor has obtained the exclusive right to use a copyright
owned by a third party.

 

“Copyrights” means all of the following now owned or hereafter acquired or
created (as a work for hire for the benefit of Grantor) by Grantor or in which
Grantor now holds or hereafter acquires or receives any right or interest, in
whole or in part: (a) all copyrights, whether registered or unregistered, held
pursuant to the laws of the United States, any State thereof or any other
country; (b) registrations, applications, recordings and proceedings in the
United States Copyright Office or in any similar office or agency of the United
States, any State thereof or any other country; (c) any continuations, renewals
or extensions thereof; (d) any registrations to be issued in any pending
applications, and shall include any right or interest in and to work protectable
by any of the foregoing which are presently or in the future owned, created or
authorized (as a work for hire for the benefit of Grantor) or acquired by
Grantor, in whole or in part; (e) prior versions of works covered by copyright
and all works based upon, derived from or incorporating such works; (f) income,
royalties, damages, claims and payments now and hereafter due and/or payable
with respect to copyrights, including, without limitation, damages, claims and
recoveries for past, present or future infringement; (g) rights to sue for past,
present and future infringements of any copyright; and (h) any other rights
corresponding to any of the foregoing rights throughout the world.

 

“Event of Default” means (i) any failure by Grantor forthwith to pay or perform
any of the Secured Obligations, (ii) any breach by Grantor of any warranty,
representation, or covenant set forth herein and (iii) any default or event of
default under any Note; provided however, that each of the foregoing events
shall only constitute an Event of Default upon the expiration of any cure period
related to such event.

 

“Intellectual Property” means any intellectual property, in any medium, of any
kind or nature whatsoever, now or hereafter owned or acquired or received by
Grantor or in which  Grantor now holds or hereafter acquires or receives any
right or interest, and shall include, in any event, any Copyright, Trademark,
Patent, trade secret, customer list, internet domain name (including any right
related to the registration thereof), proprietary or confidential information,
mask work, source, object or other programming code, invention (whether or not
patented or patentable), technical information, procedure, design, knowledge,
know-how, software, data base, data, skill, expertise, recipe, experience,
process, model, drawing, material or record.

 

“License” means any Copyright License, Patent License, Trademark License or
other license of rights or interests, whether in-bound or out-bound, whether in
written or electronic form, now or hereafter owned or acquired or received by
Grantor or in which Grantor now holds or hereafter acquires or receives any
right or interest, and shall include any renewals or extensions of any of the
foregoing thereof.

 

“Lien” means any mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.

 

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“Patent License” means any agreement, whether in written or electronic form, in
which Grantor now holds or hereafter acquires any interest, granting any right
with respect to any invention on which a Patent is in existence (whether Grantor
is the licensee or the licensor thereunder).

 

“Patents” means all of the following in which Grantor now holds or hereafter
acquires any interest: (a) all letters patent of the United States or any other
country, all registrations and recordings thereof and all applications for
letters patent of the United States or any other country, including, without
limitation, registrations, recordings and applications in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof or any other country; (b)all reissues, divisions,
continuations, renewals, continuations-in-part or extensions thereof; (c) all
petty patents, divisionals and patents of addition; (d) all patents to issue in
any such applications; (e) income, royalties, damages, claims and payments now
and hereafter due and/or payable with respect to patents, including, without
limitation, damages, claims and recoveries for past, present or future
infringement; and (f) rights to sue for past, present and future infringements
of any patent.

 

“Permitted Lien” means: (a) any Liens existing on the date of this Security
Agreement and set forth on Schedule A attached hereto; (b) Liens for taxes,
fees, assessments or other governmental charges or levies, either not delinquent
or being contested in good faith by appropriate proceedings; (c) Liens (i) upon
or in any Equipment acquired or held by Grantor to secure the purchase price of
such Equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such Equipment or (ii) existing on such Equipment at the time of
its acquisition, provided that the Lien is confined solely to the Equipment so
acquired, improvements thereon and the Proceeds of such Equipment; (d) leases or
subleases and licenses or sublicenses granted to others and existing as of the
date of this Security Agreement; (e) any right, title or interest of a licensor
under a license existing as of the date of this Security Agreement; (f) Liens
arising from judgments, decrees or attachments; (g) easements, reservations,
rights-of-way, restrictions, minor defects or irregularities in title and other
similar Liens affecting real property not interfering in any material respect
with the ordinary conduct of the business of Grantor; (h) Liens in favor of
customs and revenue authorities arising as a matter of law to secure payment of
customs duties in connection with the importation of goods; (i) Liens arising
solely by virtue of any statutory or common law provision relating to banker’s
liens, rights of setoff or similar rights and remedies as to deposit accounts or
other funds maintained with a creditor depository institution; (j) Liens on
equipment and other personal property (including proceeds thereof and accessions
thereto) securing capital or operating lease obligations, including without
limitation sale and lease-back transactions; and (k) Liens, not otherwise
permitted, which Liens do not in the aggregate exceed $100,000 at any one time.

 

“Pro Rata” means, as to any Secured Party at any time, the percentage equivalent
at such time of such Secured Party’s aggregate unpaid principal amount of Loans,
divided by the combined aggregate unpaid principal amount of all Loans of all
Secured Parties.

 

“Required Lenders” means any Secured Party or group of Secured Parties holding
at least sixty percent (60%) of the outstanding and unpaid principal amount
under all Loans of all Secured Parties.

 

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“Secured Obligations” means (a) the obligation of Grantor to repay the Secured
Parties all of the unpaid principal amount of, and accrued interest on
(including any interest that accrues after the commencement of bankruptcy), the
Loans and (b) the obligation of Grantor to pay any fees, costs and expenses of
Secured Party under Section 6(c) hereof.

 

“Security Agreement” means this Security Agreement and all Schedules hereto, as
the same may from time to time be amended, modified, supplemented or restated.

 

“Trademark License” means any agreement, whether in written or electronic form,
in which Grantor now holds or hereafter acquires any interest, granting any
right in and to any Trademark or Trademark registration (whether Grantor is the
licensee or the licensor thereunder).

 

“Trademarks” means any of the following in which Grantor now holds or hereafter
acquires any interest: (a) any trademarks, tradenames, corporate names, company
names, business names, trade styles, service marks, logos, other source or
business identifiers, prints and labels on which any of the foregoing have
appeared or appear, designs and general intangibles of like nature, now existing
or hereafter adopted or acquired, all registrations and recordings thereof and
any applications in connection therewith, including, without limitation,
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country (collectively, the “Marks”); (b) any
reissues, extensions or renewals thereof; (c) the goodwill of the business
symbolized by or associated with the Marks; (d) income, royalties, damages,
claims and payments now and hereafter due and/or payable with respect to the
Marks, including, without limitation, damages, claims and recoveries for past,
present or future infringement; and (e) rights to sue for past, present and
future infringements of the Marks.

 

“UCC” means the Uniform Commercial Code as the same may from time to time be in
effect in the State of California (and each reference in this Security Agreement
to an Article thereof (denoted as a Division of the UCC as adopted and in effect
in the State of California) shall refer to that Article (or Division, as
applicable) as from time to time in effect, which in the case of Article 9 shall
include and refer to Revised Article 9 from and after the date Revised Article 9
shall become effective in the State of California); provided, however, in the
event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of the Secured Parties’ security interest in
any Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of California, the term “UCC” shall mean the
Uniform Commercial Code (including the Articles thereof) as in effect at such
time in such other jurisdiction for purposes of the provisions hereof relating
to such attachment, perfection or priority and for purposes of definitions
related to such provisions.

 

In addition, the following terms shall be defined terms having the meaning set
forth for such terms in the UCC: “Account” (including health-care-insurance
receivables), “Account Debtor”, “Chattel Paper” (including tangible and
electronic chattel paper), “Commercial Tort Claims”, “Commodity Account”,
“Deposit Account”, “Documents”, “Equipment” (including all accessions and
additions thereto), “Fixtures”, “General Intangible” (including payment
intangibles and software), “Instrument”, “Inventory” (including all goods held
for sale or lease or to be furnished under a contract of service, and including
returns and repossessions), “Investment

 

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Property” (including securities and securities entitlements), “Letter-of-Credit
Right” (whether or not the letter of credit is evidenced by a writing), “Payment
Intangibles”, “Proceeds”, “Promissory Notes”, “Securities Account”, and
“Supporting Obligations”. Each of the foregoing defined terms shall include all
of such items now owned, or hereafter acquired, by Grantor.

 

2.             GRANT OF SECURITY INTEREST.  As collateral security for the full,
prompt, complete and final payment and performance when due (whether at stated
maturity, by acceleration or otherwise) of all the Secured Obligations and in
order to induce the Secured Parties to cause the Loans to be made, Grantor
hereby assigns, conveys, mortgages, pledges, hypothecates and transfers to the
Secured Parties, and hereby grants to the Secured Parties, a security interest
in all of Grantor’s right, title and interest in, to and under the following,
whether now owned or hereafter acquired, (all of which being collectively
referred to herein as the “Collateral”):

 

(a)           All Accounts of Grantor;

 

(b)           All Chattel Paper of Grantor;

 

(c)           All Commercial Tort Claims of Grantor;

 

(d)           All Contracts of Grantor;

 

(e)           All Deposit Accounts of Grantor;

 

(f)            All Documents of Grantor;

 

(g)           All Equipment of Grantor;

 

(h)           All Fixtures of Grantor;

 

(i)            All General Intangibles of Grantor, including, without
limitation, Payment Intangibles, all Copyrights, Patents, Trademarks, Licenses,
designs, drawings, technical information, marketing plans, customer lists, trade
secrets, proprietary or confidential information, inventions (whether or not
patentable), procedures, know-how, models and data;

 

(j)            All Instruments of Grantor, including, without limitation,
Promissory Notes;

 

(k)           All Inventory of Grantor;

 

(l)            All Investment Property of Grantor;

 

(m)          All Letter-of Credit Rights of Grantor;

 

(n)           All Supporting Obligations of Grantor;

 

(o)           All property of Grantor held by any Secured Party, or any other
party for whom any Secured Party is acting as agent hereunder, including,
without limitation, all property of every-description now or hereafter in the
possession or custody of or in transit to any Secured

 

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Party or such other party for any purpose, including, without limitation,
safekeeping, collection or pledge, for the account of Grantor, or as to which
Grantor may have any right or power;

 

(p)           All other goods and personal property of Grantor, wherever
located, whether tangible or intangible, and whether now owned or hereafter
acquired, existing, leased or consigned by or to Grantor; and

 

(q)           To the extent not otherwise included, all Proceeds of each of the
foregoing and all accessions to, substitutions and replacements for and rents,
profits and products of each of the foregoing.

 

Notwithstanding the foregoing provisions of this Section 2, the grant,
assignment and transfer of a security interest as provided herein shall not
extend to, and the term “Collateral” shall not include:  (a) ”intent-to-use”
trademarks at all times prior to the first use thereof, whether by the actual
use thereof in commerce, the recording of a statement of use with the United
States Patent and Trademark Office or otherwise or (b) any Investment Property
of Grantor consisting of any ownership interest in NeoRx Manufacturing Group,
Inc. or any goods, personal property, rights or other assets (tangible or
intangible) of NeoRx Manufacturing Group, Inc. or (c) any Contract, Instrument
or Chattel Paper in which Grantor has any right, title or interest if and to the
extent such Contract, Instrument or Chattel Paper includes a provision
containing a restriction on assignment such that the creation of a security
interest in the right, title or interest of Grantor therein would be prohibited
and would, in and of itself, cause or result in a default thereunder enabling
another person party to such Contract, Instrument or Chattel Paper to enforce
any remedy with respect thereto; provided that the foregoing exclusion shall not
apply if (i) such prohibition has been waived or such other person has otherwise
consented to the creation hereunder of a security interest in such Contract,
Instrument or Chattel Paper or (ii) such prohibition would be rendered
ineffective pursuant to Sections 9-407(a) or 9-408(a) of the UCC, as applicable
and as then in effect in any relevant jurisdiction, or any other applicable law
(including the Bankruptcy Code) or principles of equity); provided further that
immediately upon the ineffectiveness, lapse or termination of any such
provision, the Collateral shall include, and Grantor shall be deemed to have
granted a security interest in, all its rights, title and interests in and to
such Contract, Instrument or Chattel Paper as if such provision had never been
in effect; and provided further that the foregoing exclusion shall in no way be
construed so as to limit, impair or otherwise affect any Secured Party’s
unconditional continuing security interest in and to all rights, title and
interests of Grantor in or to any payment obligations or other rights to receive
monies due or to become due under any such Contract, Instrument or Chattel Paper
and in any such monies and other proceeds of such Contract, Instrument or
Chattel Paper.

 

3.             RIGHTS OF SECURED PARTIES; COLLECTION OF ACCOUNTS.

 

(a)           Notwithstanding anything contained in this Security Agreement to
the contrary, Grantor expressly agrees that it shall remain liable under each of
its Contracts and each of its Licenses to observe and perform all the conditions
and obligations to be observed and performed by it thereunder and that it shall
perform all of its duties and obligations thereunder, all in accordance with and
pursuant to the terms and provisions of each such Contract or License.  No
Secured Party shall have any obligation or liability under any Contract or
License by reason of or arising out of this Security Agreement or the granting
to the Secured Parties of a lien

 

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therein or the receipt by any Secured Party of any payment relating to any
Contract or License pursuant hereto, nor shall any Secured Party be required or
obligated in any manner to perform or fulfill any of the obligations of Grantor
under or pursuant to any Contract or License, or to make any payment, or to make
any inquiry as to the nature or the sufficiency of any payment received by it or
the sufficiency of any performance by any party under any Contract or License,
or to present or file any claim, or to take any action to collect or enforce any
performance or the payment of any amounts which may have been assigned to it or
to which it may be entitled at any time or times.

 

(b)           The Secured Parties authorize Grantor to collect its Accounts. 
Upon the occurrence and during the continuance of any Event of Default, at the
request of the Required  Lenders, Grantor shall deliver all original and other
documents evidencing and relating to the performance of labor or service which
created such Accounts, including, without limitation, all original orders,
invoices and shipping receipts.

 

(c)           Any Secured Party may at any time, upon the occurrence and during
the continuance of any Event of Default and the written consent of the Required
Lenders, notify Account Debtors of Grantor, parties to the Contracts of Grantor,
obligors in respect of Instruments of Grantor and obligors in respect of Chattel
Paper of Grantor that the Accounts and the right, title and interest of Grantor
in and under such Contracts, Instruments and Chattel Paper have been assigned to
the Secured Parties and that payments shall be made directly to Secured
Parties.  Upon the request of the Required Lenders, Grantor shall so notify such
Account Debtors, parties to such Contracts, obligors in respect of such
Instruments and obligors in respect of such Chattel Paper.  Upon the occurrence
and during the continuance of any Event of Default, any Secured Party may, in
its name or in the name of other Secured Parties, communicate with such Account
Debtors, parties to such Contracts, obligors in respect of such Instruments and
obligors in respect of such Chattel Paper to verify with such parties, to such
Secured Party’s satisfaction, the existence, amount and terms of any such
Accounts, Contracts, Instruments or Chattel Paper.

 

4.             REPRESENTATIONS AND WARRANTIES.  Grantor hereby represents and
warrants to the Secured Parties that:

 

(a)           Except for the security interest granted to the Secured Parties
under this Security Agreement and Permitted Liens, and other than joint
ownership in any of the Collateral described on Schedule D attached hereto,
Grantor is the sole legal and equitable owner of each item of the Collateral in
which it purports to grant a security interest hereunder.

 

(b)           No effective security agreement, financing statement, equivalent
security or lien instrument or continuation statement covering all or any part
of the Collateral exists, except such as may have been filed by Grantor in favor
of the Secured Parties pursuant to this Security Agreement and except for
Permitted Liens.

 

(c)           Grantor’s taxpayer identification number is, and chief executive
office, principal place of business, and the place where Grantor maintains its
records concerning the Collateral are presently located at the address set forth
on the signature page hereof. The Collateral, other than Deposit Accounts,
Securities Accounts, Commodity Accounts and motor

 

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vehicles and other mobile goods of the type contemplated in Section 9103(3)(a)
of the UCC, is presently located at such address and at such additional
addresses set forth on Schedule B attached hereto.

 

(d)           The name and address of each depository institution at which
Grantor maintains any Deposit Account and the account number and account name of
each such Deposit Account is listed on Schedule C attached hereto.  The name and
address of each securities intermediary or commodity intermediary at which
Grantor maintains any Securities Account or Commodity Account and the account
number and account name is listed on Schedule C attached hereto.  Grantor agrees
to amend Schedule C upon Required Lenders’ request to reflect the opening of any
additional Deposit Account, Securities Account or Commodity Account, or closing
or changing the account name or number on any existing Deposit Account,
Securities Account, or Commodity Account.

 

(e)           All Copyrights, Copyright Licenses, Patents, Patent Licenses,
Trademarks and Trademark Licenses now owned or held by Grantor are listed on
Schedule D attached hereto.

 

5.             COVENANTS.  Unless the Required Lenders otherwise consents (which
consent shall not be unreasonably withheld), Grantor covenants and agrees with
the Secured Parties that from and after the date of this Security Agreement and
until the Secured Obligations have been performed and paid in full:

 

5.1          Disposition of Collateral.  Except as permitted under Section
4.10(e) or Section 4.11 of the Securities Purchase Agreement, Grantor shall not
sell, lease, transfer or otherwise dispose of any of the Collateral (each, a
“Transfer”), or contract to do so, including, without limitation, the granting
of Licenses or other interests in any of Grantor’s Copyrights, Copyright
Licenses, Patents, Patent Licenses, Trademarks and Trademark Licenses other than
(a) the sale of Inventory in the ordinary course of business, (b) the disposal
of worn-out or obsolete Equipment and (c) Transfers of Collateral for fair
market value as determined by Grantor in its good faith judgment, not exceeding
$100,000 in the aggregate in any fiscal year.

 

5.2          Change of Jurisdiction of Organization, Relocation of Business. 
Grantor shall not change its jurisdiction of organization or relocate its chief
executive office, principal place of business or its records from such
address(es) provided to the Secured Parties pursuant to Section 4(c) above
without at least thirty (30) days prior notice to the Secured Parties.

 

5.3          Limitation on Liens on Collateral.  Grantor shall not, directly or
indirectly, create, permit or suffer to exist, and shall take commercially
reasonable actions to defend the Collateral against and take such other action
as is necessary to remove, any Lien on the Collateral, except (a) Permitted
Liens and (b) the Lien granted to the Secured Parties under this Security
Agreement.

 

5.4          Insurance.  Grantor shall maintain insurance policies insuring the
Collateral against loss or damage from such risks and in such amounts and forms
consistent with its prior practice.

 

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5.5          Taxes, Assessments, Etc.  Grantor shall pay promptly when due all
property and other taxes, assessments and government charges or levies imposed
upon, and all claims (including claims for labor, materials and supplies)
against, the Equipment, Fixtures or Inventory, except to the extent the validity
or amount thereof is being contested in good faith and adequate reserves are
being maintained in connection therewith.

 

5.6          Defense of Intellectual Property.  Grantor shall use commercially
reasonable efforts to (i) protect, defend and maintain the validity and
enforceability of all Copyrights, Copyrights Licenses, Patents, Patent Licenses,
Trademarks and Trademark Licenses material to Grantor’s business and (ii) detect
infringements of all Copyrights, Copyright Licenses, Patents, Patent Licenses,
Trademarks and Trademark Licenses material to Grantor’s business and Grantor
shall not permit any Copyright, Copyright License, Patent, Patent License,
Trademark or Trademark License material to Grantor’s business to lapse, be
abandoned or to otherwise terminate unless Grantor’s board of directors in the
exercise of its reasonable judgment and in good faith determines that any of the
foregoing is of inconsequential value.

 

5.7          Further Assurances.  At any time and from time to time, upon the
written request of the Required Lenders, and at the sole expense of Grantor,
Grantor shall promptly and duly execute and deliver any and all such further
instruments and documents and take such further commercially reasonable action
as the Required Lenders may reasonably deem necessary to obtain the full
benefits of this Security Agreement, including, without limitation,
(a) executing, delivering and causing to be filed any financing or continuation
statements (including “in lieu” continuation statements) under the UCC with
respect to the security interests granted hereby, (b) at the Required Lenders’
reasonable request, placing the interest of the Secured Parties as lienholder on
the certificate of title (or similar evidence of ownership) of any vehicle,
watercraft or other Equipment constituting Collateral owned by Grantor which is
covered by a certificate of title (or similar evidence of ownership),
(c) executing and delivering and using commercially reasonable efforts to cause
the applicable depository institution, securities intermediary, commodity
intermediary or issuer or nominated party under a letter of credit to execute
and deliver a collateral control agreement with respect to any Deposit Account,
Securities Account or Commodity Account or Letter-of-Credit Right in or to which
Grantor has any right or interest and (d) at the Required Lenders’ reasonable
request, using commercially reasonable efforts to obtain acknowledgments from
bailees having possession of any Collateral and waivers of liens from landlords
and mortgagees of any location where any of the Collateral may from time to time
be stored or located.  Grantor also hereby authorizes the Secured Parties to
file any such financing or continuation statement (including “in lieu”
continuation statements) without the signature of Grantor.

 

6.             RIGHTS AND REMEDIES UPON DEFAULT.  Upon the occurrence of any
Event of Default and while such Event of Default is continuing:

 

(a)           Upon the written consent of the Required Lenders, the Secured
Parties may exercise in addition to all other rights and remedies granted to it
under this Security Agreement and the Purchase Agreement all rights and remedies
of a secured party under the UCC.  Without limiting the generality of the
foregoing, Grantor expressly agrees that in any such event the Secured Parties,
without demand of performance or other demand, advertisement or notice of any
kind (except the notice specified below of time and place of public or private
sale)

 

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to or upon  Grantor or any other person, may (i) reclaim, take possession,
recover, store, maintain, finish, repair, prepare for sale or lease, shop,
advertise for sale or lease and sell or lease (in the manner provided herein)
the Collateral, and in connection with the liquidation of the Collateral and
collection of the accounts receivable pledged as Collateral, use any Trademark,
Copyright, or process used or owned by Grantor and (ii) forthwith collect,
receive, appropriate and realize upon the Collateral, or any part thereof, and
may forthwith sell, lease, assign, give an option or options to purchase or sell
or otherwise dispose of and deliver said Collateral (or contract to do so), or
any part thereof, in one or more parcels at public or private sale or sales, at
any exchange or broker’s board or at any Secured Party’s offices or elsewhere at
such prices as it may deem commercially reasonable, for cash or on credit or for
future delivery without assumption of any credit risk.  Grantor further agrees,
at the Required Lender’s request, to assemble its Collateral and make it
available to the Secured Parties at places which the Secured Parties shall
reasonably select, whether at Grantor’s premises or elsewhere.  The Secured
Parties shall apply the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale as provided in Section 6(e), below, with
Grantor remaining liable for any deficiency remaining unpaid after such
application.  Grantor agrees that the Secured Parties need not give more than
twenty (20) days’ notice of the time and place of any public sale or of the time
after which a private sale may take place and that such notice is reasonable
notification of such matters.

 

(b)           As to any Collateral constituting certificated securities or
uncertificated securities, if, at any time when Secured Parties shall determine
to exercise its right to sell the whole or any part of such Collateral
hereunder, such Collateral or the part thereof to be sold shall not, for any
reason whatsoever, be effectively registered under Securities Act of 1933, as
amended (as so amended the “Act”), the Secured Parties may, in their discretion
(subject only to applicable requirements of law), sell such Collateral or part
thereof by private sale in such manner and under such circumstances as the
Secured Parties may deem necessary or advisable, but subject to the other
requirements of this Section 6(b), and shall not be required to effect such
registration or cause the same to be effected.  Without limiting the generality
of the foregoing, in any such event the Secured Parties may, in their
discretion, (i) in accordance with applicable securities laws, proceed to make
such private sale notwithstanding that a registration statement for the purpose
of registering such Collateral or part thereof could be or shall have been filed
under the Act; (ii) approach and negotiate with a single possible purchaser to
effect such sale; and (iii) restrict such sale to a purchaser who will represent
and agree that such purchaser is purchasing for its own account, for investment,
and not with a view to the distribution or sale of such Collateral or part
thereof.  In addition to a private sale as provided above in this Section 6(b),
if any of such Collateral shall not be freely distributable to the public
without registration under the Act at the time of any proposed sale hereunder,
then the Secured Parties shall not be required to effect such registration or
cause the same to be effected but may, in their discretion (subject only to
applicable requirements of law), require that any sale hereunder (including
a sale at auction) be conducted subject to such restrictions as the Secured
Parties may, in their discretion, deem necessary or appropriate in order that
such sale (notwithstanding any failure so to register) may be effected in
compliance with the Bankruptcy Code and other laws affecting the enforcement of
creditors’ rights and the Act and all applicable state securities laws.

 

10

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(c)           Grantor also agrees to pay all fees, costs and expenses of the
Secured Parties, including, without limitation, reasonable attorneys’ fees,
incurred in connection with the enforcement of any of its rights and remedies
hereunder.

 

(d)           Grantor hereby waives presentment, demand, protest or any notice
(to the maximum extent permitted by applicable law) of any kind in connection
with this Security Agreement or any Collateral.

 

(e)           The Proceeds of any sale, disposition or other realization upon
all or any part of the Collateral shall be distributed by the Secured Parties in
the following order of priorities:

 

FIRST, to each Secured Party in an amount sufficient to pay in full the
reasonable costs of such Secured Party in connection with such sale, disposition
or other realization, including all fees, costs, expenses, liabilities and
advances incurred or made by any Secured Party in connection therewith,
including, without limitation, reasonable attorneys’ fees;

 

SECOND, to the Secured Parties in amounts proportional to the Pro Rata share of
the then unpaid Secured Obligations of each Secured Party; and

 

FINALLY, upon payment in full of the Secured Obligations, to Grantor or its
representatives, in accordance with the UCC or as a court of competent
jurisdiction may direct.

 

(f)            The costs of enforcing or pursuing any right or remedy hereunder,
including without limitation any repossession, sale, possession and management
(including, without limitation, reasonable attorneys’ fees), and distribution
shall be borne Pro Rata by the Secured Parties.  Each Secured Party shall
reimburse the other Secured Parties, as applicable, for its Pro Rata share of
all such costs promptly upon demand.

 

7.             ACTIONS BY THE SECURED PARTIES AND AMENDMENTS.  All actions,
omissions and decisions of the Secured Parties hereunder or any amendment of
this Security Agreement (each called herein an “Act of the Secured Parties”)
shall be determined by and require the written consent of the Required Lenders. 
Each Secured Party shall take such actions and execute such documents as may be
necessary to confirm or accomplish any Act of the Secured Parties.

 

8.             UNEQUAL PAYMENT BY GRANTOR.  Each Secured Party agrees that if it
shall obtain or receive, through the exercise of any right granted to the
Secured Parties under this Security Agreement, under the Notes and Purchase
Agreement or by applicable law, including, but not limited to any right of
set-off, any secured claim under Section 506 of the Bankruptcy Code or any other
security or interest, any payment or payments greater than its Pro Rata share of
all Loans, as measured immediately prior to the receipt of such payment or
payments, then (a) such Secured Party shall promptly purchase at par (and shall
be deemed to have thereupon purchased) from other Secured Parties, a
participation in the Loans of such other Secured Parties, so that each Secured
Party shall have received payments in proportion to its Pro Rata share
immediately prior to such transactions and (b) such other adjustments shall be
made from time to time as shall be equitable to ensure that the Secured Parties
share the benefits of such payment on a Pro Rata basis.  The term “Loan” as used
in this paragraph shall include accrued interest thereon.

 

11

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9.             INDEMNITY.  Grantor agrees to defend, indemnify and hold harmless
the Secured Parties and their officers, employees, and agents against (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Security
Agreement and (b) all losses or expenses in any way suffered, incurred, or paid
by any Secured Party as a result of or in any way arising out of, following or
consequential to transactions between any Secured Party and Grantor, whether
under this Security Agreement or otherwise (including without limitation,
reasonable attorneys fees and expenses), except for losses arising from or out
of such Secured Party’s gross negligence or willful misconduct.

 

10.          REINSTATEMENT.  This Security Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against Grantor for liquidation or reorganization, should Grantor become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of Grantor’s
property and assets, and shall continue to be effective or be reinstated, as the
case may be, if at any time payment and performance of the Secured Obligations,
or any part thereof, is, pursuant to applicable law, rescinded or reduced in
amount, or must otherwise be restored or returned by any obligee of the Secured
Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or
otherwise, all as though such payment or performance had not been made.  In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Secured Obligations shall be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.

 

11.          MISCELLANEOUS.

 

11.1        Waivers; Modifications.  None of the terms or provisions of this
Security Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by Grantor and the Required Lenders.  Each
Secured Party acknowledges that because this Security Agreement may be amended
with the consent of the Required Lenders, each Secured Party’s rights hereunder
may be amended or waived without such Secured Party’s consent.

 

11.2        Termination of this Security Agreement.  Subject to Section 10
hereof, this Security Agreement shall terminate upon the payment and performance
in full of the Secured Obligations.  Upon the termination of this Agreement,
Grantor is authorized to file such termination statements or other instruments
it deems reasonably necessary to evidence the termination of the security
interest granted pursuant to this Security Agreement and the Secured Parties
agree to cooperate with such reasonable requests as Grantor may make in
connection therewith.

 

11.3        Successor and Assigns.  This Security Agreement and all obligations
of Grantor hereunder shall be binding upon the successors and assigns of
Grantor, and shall, together with the rights and remedies of the Secured Parties
hereunder, inure to the benefit of the Secured Parties, any future holder of any
of the indebtedness and their respective successors and assigns.  No sales of
participations, other sales, assignments, transfers or other dispositions of any
agreement governing or instrument evidencing the Secured Obligations or any
portion

 

12

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thereof or interest therein shall in any manner affect the lien granted to the
Secured Parties hereunder.

 

11.4        Governing Law.  In all respects, including all matters of
construction, validity and performance, this Security Agreement and the Secured
Obligations arising hereunder shall be governed by, and construed and enforced
in accordance with, the laws of the State of California, without regard to the
principles thereof regarding conflict of laws, except to the extent that the UCC
provides for the application of the law of Grantor’s state.

 

[Signature pages follow.]

 

13

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IN WITNESS WHEREOF, each of the parties hereto has caused this Security
Agreement to be executed and delivered by its duly authorized officer on the
date first set forth above.

 

 

ADDRESS OF GRANTOR

NEORX CORPORATION

 

 

 

 

300 Elliott Avenue West, Suite 500

 

/s/  Gerald McMahon

 

Seattle, WA  98119

 

Gerald McMahon

 

 

Chairman and Chief Executive Officer

 

 

 

 

TAXPAYER IDENTIFICATION NUMBER OF
GRANTOR

JURISDICTION OF ORGANIZATION OF
GRANTOR 

 

 

91-1261311

 

Washington

 

--------------------------------------------------------------------------------

 

 

ACCEPTED AND ACKNOWLEDGED BY:

 

 

 

SECURED PARTIES

 

 

 

DEERFIELD SPECIAL SITUATIONS FUND,
LTD.

 

 

 

 

 

 

By:

/s/ DARREN LEVINE

 

 

 

 

 

 

Name:

DARREN LEVINE

 

 

Title:

CFO

 

 

--------------------------------------------------------------------------------

 

 

ACCEPTED AND ACKNOWLEDGED BY:

 

 

 

SECURED PARTIES

 

 

 

DEERFIELD SPECIAL SITUATIONS
FUND INTERNATIONAL, LTD.

 

 

 

 

 

 

By:

/s/ DARREN LEVINE

 

 

 

 

Name:

DARREN LEVINE

 

 

Title:

CFO

 

 

--------------------------------------------------------------------------------

 

 

ACCEPTED AND ACKNOWLEDGED BY:

 

 

 

SECURED PARTIES

 

 

 

 

 

MPM BIOVENTURES III, L.P.

 

 

 

By:   MPM BioVentures III GP, L.P., its
General Partner

 

By:   MPM BioVentures III LLC, its General
Partner

 

 

 

By:

/s/  Nicholas J. Simon

 

 

Name:

Nicholas J. Simon

 

Title:

Series A Member

 

 

 

Address:

The John Hancock Tower

 

 

200 Clarendon Street, 54th Floor

 

 

Boston, MA 02116

 

 

 

MPM BIOVENTURES III-QP, L.P.

 

 

 

By:   MPM BioVentures III GP, L.P., its
General Partner

 

By:   MPM BioVentures III LLC, its General
Partner

 

 

 

By:

/s/  Nicholas J. Simon

 

 

Name:

Nicholas J. Simon

 

Title:

Series A Member

 

 

 

 

 

Address:

The John Hancock Tower

 

 

200 Clarendon Street, 54th Floor

 

 

Boston, MA 02116

 

 

SIGNATURE PAGE TO SECURITY AGREEMENT

 

--------------------------------------------------------------------------------

 

 

ACCEPTED AND ACKNOWLEDGED BY:

 

 

 

SECURED PARTIES

 

 

 

 

 

MPM BIOVENTURES III GMBH & CO.
BETEILIGUNGS KG

 

 

 

By:   MPM BioVentures III GP, L.P., in its
capacity as the Managing Limited Partner

 

By:   MPM BioVentures III LLC, its General
Partner

 

 

 

By:

/s/  Nicholas J. Simon

 

 

Name:

Nicholas J. Simon

 

Title:

Series A Member

 

 

 

 

 

Address:

The John Hancock Tower

 

 

200 Clarendon Street, 54th Floor

 

 

Boston, MA 02116

 

 

 

MPM BIOVENTURES III PARALLEL
FUND, L.P.

 

 

 

By:   MPM BioVentures III GP, L.P., its
General Partner

 

By:   MPM BioVentures III LLC, its General
Partner

 

 

 

By:

/s/  Nicholas J. Simon

 

 

Name:

Nicholas J. Simon

 

Title:

Series A Member

 

 

 

 

 

Address:

The John Hancock Tower

 

 

200 Clarendon Street, 54th Floor

 

 

Boston, MA 02116

 

 

SIGNATURE PAGE TO SECURITY AGREEMENT

 

--------------------------------------------------------------------------------

 

 

ACCEPTED AND ACKNOWLEDGED BY:

 

 

 

SECURED PARTIES

 

 

 

 

 

MPM ASSET MANAGEMENT INVESTORS
2005 BVIII LLC

 

 

 

By:

/s/  Nicholas J. Simon

 

 

Name:

Nicholas J. Simon

 

Title:

Manager

 

 

 

Address:

The John Hancock Tower

 

 

200 Clarendon Street, 54th Floor

 

 

Boston, MA 02116

 

 

 

MPM BIOEQUITIES MASTER FUND, LP

 

 

 

By:   MPM BioEquities GP, L.P., its General
Partner

 

By:   MPM BioEquities GP LLC, its General
Partner

 

 

 

 

 

By:

/s/ Kurt Von Emster

 

 

 

Manager

 

 

 

 

 

Address:

The John Hancock Tower

 

 

200 Clarendon Street, 54th Floor

 

 

Boston, MA 02116

 

 

SIGNATURE PAGE TO SECURITY AGREEMENT

 

--------------------------------------------------------------------------------

 

 

ACCEPTED AND ACKNOWLEDGED BY:

 

 

 

SECURED PARTIES

 

 

 

 

 

Bay City Capital Management IV, LLC

 

General Partner of:

 

Bay City Capital Fund IV Co-Investment
Fund, L.P.

 

 

 

/s/ Carl S. Goldfisher

 

 

By: Bay City Capital LLC, its Manager

 

By: Carl S. Goldfisher, M.D., a Managing
Director

 

 

 

 

 

Address:

Bay City Capital

 

 

750 Battery Street, Suite 400

 

 

San Francisco, CA 94111

 

 

 

 

 

Bay City Capital Management IV, LLC

 

General Partner of:

 

Bay City Capital Fund IV, L.P.

 

 

 

 

 

/s/ Carl S. Goldfisher

 

 

By: Bay City Capital LLC, its Manager

 

By: Carl S. Goldfisher, M.D., a Managing
Director

 

 

 

 

 

Address:

Bay City Capital

 

 

750 Battery Street, Suite 400

 

 

San Francisco, CA 94111

 

 

SIGNATURE PAGE TO SECURITY AGREEMENT

 

--------------------------------------------------------------------------------

 

 

ACCEPTED AND ACKNOWLEDGED BY:

 

 

 

SECURED PARTIES

 

 

 

 

 

SMITHFIELD FIDUCIARY LLC

 

 

 

 

 

By:

/s/ Adam J. Chill

 

 

 

 

Name:  Adam J. Chill

 

 

 

Title:  Authorized Signatory

 

 

SIGNATURE PAGE TO SECURITY AGREEMENT

 

--------------------------------------------------------------------------------

 

 

ACCEPTED AND ACKNOWLEDGED BY:

 

 

 

SECURED PARTIES

 

 

 

 

 

 

 

 

 

 

By:

/s/ Steven Bloom

 

 

 

 

 

 

Name:  Steven Bloom

 

Title:  Managing Director, Sagamore Hill Capital

 

Management, on behalf of Sagamore Hill Hub

 

Fund, Ltd.

 

 

 

One Manhattanville Road

 

 

 

Purchase, NY 10577

 

 

SIGNATURE PAGE TO SECURITY AGREEMENT

 

--------------------------------------------------------------------------------

 

 

ACCEPTED AND ACKNOWLEDGED BY:

 

 

 

SECURED PARTIES

 

 

 

 

 

SHEPHERD INVESTMENTS INTERNATIONAL, LTD.

 

 

 

BY: STARK OFFSHORE MANAGEMENT, LLC ITS

 

 

 

INVESTMENT MANAGER

 

 

 

 

 

By:

/s/ Michael A. Roth

 

 

 

 

Name:

Michael A. Roth

 

 

 

 

Title:

Managing Member

 

 

 

SIGNATURE PAGE TO SECURITY AGREEMENT

 

--------------------------------------------------------------------------------

 

NEORX CORPORATION

SECURITY AGREEMENT

 

 

 

ACCEPTED AND ACKNOWLEDGED BY:

 

 

 

SECURED PARTIES

 

 

 

 

 

T. ROWE PRICE ASSOCIATES, INC., AS
REGISTERED INVESTMENT ADVISER TO THE
PARTICIPATING T. ROWE PRICE ACCOUNTS
IN SCHEDULE A

 

 

 

 

 

By:

/s/ Kris H. Jenner

 

 

 

 

Name:

Kris H. Jenner

 

 

 

 

Title:

Vice President

 

 

 

SIGNATURE PAGE TO SECURITY AGREEMENT

 

--------------------------------------------------------------------------------

 

 

ACCEPTED AND ACKNOWLEDGED BY:

 

 

 

SECURED PARTIES

 

 

 

ABINGWORTH BIOVENTURES IV
EXECUTIVES L.P.

 

 

 

 

 

 

 

 

By:

/s/ James Abell

 

 

 

 

 

 

Abingworth Management Ltd.

 

Name:

James Abell

 

 

 

 

Title:

Director

 

 

 

SIGNATURE PAGE TO SECURITY AGREEMENT

 

--------------------------------------------------------------------------------

 

 

ACCEPTED AND ACKNOWLEDGED BY:

 

 

 

SECURED PARTIES

 

 

 

 

 

/s/ James Abell

 

 

 

 

 

ABINGWORTH BIOVENTURES MASTER

 

 

FUND LTD ACTING BI ITS MANAGER,

 

By:

ABINGWORTH MANAGEMENT LTD.

 

 

 

 

 

Name:

James Abell

 

 

 

 

Title:

Director

 

 

 

SIGNATURE PAGE TO SECURITY AGREEMENT

 

--------------------------------------------------------------------------------

 

 

ACCEPTED AND ACKNOWLEDGED BY:

 

 

 

SECURED PARTIES

 

 

 

ABINGWORTH BIOVENTURES IV LP

 

 

 

 

 

 

By:

/s/ James Abell

 

 

 

 

 

ABINGWORTH MANAGEMENT LTD.

 

Name:

James Abell

 

 

 

 

Title:

Director

 

 

 

SIGNATURE PAGE TO SECURITY AGREEMENT

 

--------------------------------------------------------------------------------

 

SCHEDULE A

 

LIENS EXISTING ON THE DATE OF THIS SECURITY AGREEMENT

 

--------------------------------------------------------------------------------

 

SCHEDULE B

 

LOCATION OF COLLATERAL

 

--------------------------------------------------------------------------------

 

SCHEDULE C

 

DEPOSIT ACCOUNTS, SECURITIES ACCOUNTS AND COMMODITY ACCOUNTS

 

--------------------------------------------------------------------------------

 

SCHEDULE D

 

INTELLECTUAL PROPERTY

 

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