Exhibit 10.26

PONIARD PHARMACEUTICALS, INC.

KEY EMPLOYEE SEVERANCE AGREEMENT

This Key Employee Severance Agreement (this “Agreement”), dated as of July 11,
2006, is entered into by and between PONIARD PHARMACEUTICALS, INC., a Washington
corporation (as supplemented by Section 10, the “Company”), and Mike Jackson
(the “Employee”).

The Board of Directors of the Company (the “Board”) has determined that it is in
the best interests of the Company and its shareholders to ensure that the
Company will have the continued dedication of the Employee, notwithstanding the
fact that the Employee does not have any form of traditional employment contract
or other assurance of job security. The Board believes it is imperative to
diminish any distraction of the Employee arising from the personal uncertainty
and insecurity that arises in the absence of any assurance of job security by
providing the Employee with reasonable compensation and benefit arrangements in
the event of termination of the Employee’s employment by the Company under
certain defined circumstances.

In order to accomplish these objectives, the Board has caused the Company to
enter into this Agreement.

1.   Term

The initial term of this Agreement (the “Initial Term”) shall be for a period of
one (1) year from the date of this Agreement as first appearing; provided,
however, that this Agreement shall automatically renew for successive additional
one (1) year periods (“Renewal Terms”), unless notice of nonrenewal is given by
either party to the other party at least nine (9) months prior to the end of the
Initial Term or any Renewal Term. The “Term” of this Agreement shall be the
Initial Term plus all Renewal Terms and, if applicable, the duration of the
Employment Period. At the end of the Term, this Agreement shall terminate
without further action by either the Company or the Employee.

2.   Employment

The Employee and the Company acknowledge that, except as may otherwise be
provided under any other written agreement between the Employee and the Company,
the employment of the Employee by the Company or by any affiliated or successor
company is “at will” and may be terminated by either the Employee or the Company
or its affiliated companies at any time with or without cause, subject to the
termination payments prescribed herein.

3.   Attention and Effort

During any period of time that the Employee remains in the employ of the
Company, and excluding any periods of vacation and sick leave to which the
Employee is entitled, the Employee will devote all his productive time, ability,
attention and effort to the business and affairs of the Company and the
discharge of the responsibilities assigned to him hereunder, and will seek to
perform faithfully and efficiently such responsibilities. It shall not be a
violation of this Agreement for the Employee to (a) serve on corporate, civic or
charitable boards or committees, (b) deliver lectures, fulfill speaking
engagements or teach at educational institutions, (c) manage personal
investments, or (d) engage in activities permitted by the policies of the
Company or as specifically permitted by the Company, so long as such activities
do not significantly interfere with the performance of the Employee’s
responsibilities in accordance with this Agreement. It is expressly understood
and agreed that to the extent any such activities have been conducted by the
Employee prior to the Term, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) during the Term shall
not thereafter be deemed to interfere with the performance of the Employee’s
responsibilities to the Company.

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4.   Termination

During the Term, employment of the Employee may be terminated as follows, but,
in any case, the nondisclosure provisions set forth in Section 7 hereof shall
survive the termination of this Agreement and the termination of the Employee’s
employment with the Company:

4.1   By the Company or the Employee

At any time during the Term, the Company may terminate the employment of the
Employee with or without Cause (as defined below), and the Employee may
terminate his employment for Good Reason (as defined below) or for any reason,
upon giving Notice of Termination (as defined below).

4.2   Automatic Termination

This Agreement and the Employee’s employment shall terminate automatically upon
the death or Total Disability of the Employee. The term “Total Disability” as
used herein shall mean the Employee’s inability (with such accommodation as may
be required by law and which places no undue burden on the Company), as
determined by a physician selected by the Company and acceptable to the
Employee, to perform the Employee’s essential duties for a period or periods
aggregating twelve (12) weeks in any three hundred sixty-five (365) day period
as a result of physical or mental illness, loss of legal capacity or any other
cause beyond the Employee’s control, unless the Employee is granted a leave of
absence by the Board.

4.3   Notice of Termination

Any termination by the Company or by the Employee during the Term shall be
communicated by Notice of Termination to the other party given in accordance
with Section 9 hereof. The term “Notice of Termination” shall mean a written
notice that (a) indicates the specific termination provision in this Agreement
relied upon and (b) to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Employee’s employment under the provision so indicated. The failure by the
Employee or the Company to set forth in the Notice of Termination any fact or
circumstance that contributes to a showing of Good Reason or Cause shall not
waive any right of the Employee or the Company hereunder or preclude the
Employee or the Company from asserting such fact or circumstance in enforcing
the Employee’s or the Company’s rights hereunder.

4.4   Date of Termination

“Date of Termination” means (a) if the Employee’s employment is terminated by
reason of death, the last day of the calendar month in which the Employee’s
death occurs, (b) if the Employee’s employment is terminated by reason of Total
Disability, immediately upon a determination by the Company of the Employee’s
Total Disability, and (c) in all other cases, ten (10) days after the date of
personal delivery or mailing of the Notice of Termination. The Employee’s
employment and performance of services will continue during such ten (10) day
period; provided, however, that the Company may, upon notice to the Employee and
without reducing the Employee’s compensation during such period, excuse the
Employee from any or all of his duties during such period.

5.   Termination Payments

In the event of termination of the Employee’s employment during the Term, all
compensation and benefits shall terminate, except as specifically provided in
this Section 5.

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5.1   Termination by the Company Other Than for Cause or by the Employee for
Good Reason

If during the Term the Company terminates the Employee’s employment other than
for Cause or the Employee terminates his employment for Good Reason, the
Employee shall be entitled to:

(a)   receive payment of the following accrued obligations (the “Accrued
Obligations”):

(i)    the Employee’s then current annual base salary through the Date of
Termination to the extent not theretofore paid; and

(ii)   any compensation previously deferred by the Employee (together with
accrued interest or earnings thereon, if any) and any accrued vacation pay that
would be payable under the Company’s standard policy, in each case to the extent
not theretofore paid;

(b)   for six (6) months after the Date of Termination or until the Employee
qualifies for comparable medical and dental insurance benefits from another
employer, whichever occurs first, the Company shall pay the Employee’s premiums
for health insurance benefit continuation for the Employee and his family
members, if applicable, that the Company provides to the Employee under the
provisions of the federal Consolidated Omnibus Budget Reconciliation Act of
1985, as amended (“COBRA”), to the extent that the Company would have paid such
premiums had the Employee remained employed by the Company (such continued
payment is hereinafter referred to as “COBRA Continuation”); and

(c)   an amount as severance pay equal to fifty percent (50%) of the Employee’s
then current annual base salary for the fiscal year in which the Date of
Termination occurs, subject to payment as set forth in Sections 5.5 and 5.9
hereof.

5.2   Termination for Cause or Other Than for Good Reason

If during the Term the Employee’s employment shall be terminated by the Company
for Cause or by the Employee for other than Good Reason, this Agreement shall
terminate without further obligation on the part of the Company to the Employee,
other than the Company’s obligation to pay the Employee the Accrued Obligations
to the extent theretofore unpaid.

5.3   Expiration of Term

In the event the Employee’s employment is not terminated prior to expiration of
the Term, this Agreement shall terminate without further obligation on the part
of the Company to the Employee.

5.4   Termination Because of Death or Total Disability

If the Employee’s employment is terminated during the Term by reason of the
Employee’s death or Total Disability, this Agreement shall terminate
automatically without further obligation on the part of the Company to the
Employee or his legal representatives under this Agreement, other than the
Company’s obligation to pay the Employee the Accrued Obligations (which shall be
paid to the Employee’s estate or beneficiary, as applicable in the case of the
Employee’s death) and to provide COBRA Continuation.

5.5   Payment Schedule

All payments of Accrued Obligations, or any portion thereof payable pursuant to
this Section 5, shall be made to the Employee within ten (10) working days of
the Date of Termination. Any severance payments payable to the Employee pursuant
to Section 5.1(c) shall be made to the Employee in the form of salary
continuation, payable at normal payroll intervals during the six (6) month
period following the Date of Termination.

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5.6   Cause

For purposes of this Agreement, “Cause” means cause given by the Employee to the
Company and shall include, without limitation, the occurrence of one or more of
the following events:

(a)   a clear refusal to carry out any material lawful duties of the Employee or
any directions of the Board or senior management of the Company reasonably
consistent with those duties;

(b)   persistent failure to carry out any lawful duties of the Employee or any
directions of the Board or senior management reasonably consistent with those
duties; provided, however, that the Employee has been given reasonable notice
and opportunity to correct any such failure;

(c)   violation by the Employee of a state or federal criminal law involving the
commission of a crime against the Company or any other criminal act involving
moral turpitude;

(d)   current abuse by the Employee of alcohol or controlled substances;
deception, fraud, misrepresentation or dishonesty by the Employee; or any
incident materially compromising the Employee’s reputation or ability to
represent the Company with investors, customers or the public; or

(e)   any other material violation of any provision of this Agreement by the
Employee, subject to the notice and opportunity to cure requirements of
Section 8 hereof.

5.7   Good Reason

For purposes of this Agreement, “Good Reason” means:

(a)   reduction of the Employee’s annual base salary to a level below the level
in effect on the date of this Agreement, regardless of any change in the
Employee’s duties or responsibilities;

(b)   the assignment to the Employee of any duties materially inconsistent with
the Employee’s position, authority, duties or responsibilities or any other
action by the Company the results in a material diminution in such position,
authority, duties or responsibilities, excluding for this purpose an isolated
and inadvertent action not taken in bad faith and that is remedied by the
Company promptly after receipt of notice thereof given by the Employee;

(c)   the Company’s requiring the Employee to be based at any office or location
more than fifty (50) miles from the Seattle, Washington;

(d)   any failure by the Company to comply with and satisfy Section 10 hereof,
provided, however, that the Company’s successor has received at least ten
(10) days’ prior written notice from the Company or the Employee of the
requirements of Section 10 hereof; or

(e)   any other material violation of any provision of this Agreement by the
Company, subject to the notice and opportunity to cure requirements of Section 8
hereof.

5.8   General Release of Claims

As a condition to the payment contemplated by Section 5.1(c), the Employee shall
execute a general release of claims against the Company in a form satisfactory
to the Company in its sole discretion. By way of example and not limitation, the
general release of claims will include any claims for wages, bonuses, employment
benefits, or damages of any kind whatsoever, arising out of any contracts,
express or implied, any covenant of good faith and fair dealing, express or
implied, any theory of wrongful discharge, any legal restriction on the
Company’s right to terminate employment, or any federal, state or other
governmental statute or ordinance, including, without limitation, Title VII of
the Civil Rights Act of 1964, the federal Age Discrimination in Employment Act,
the Americans with Disabilities Act, the Family and Medical

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Leave Act, the Washington Law Against Discrimination, or any other legal
limitation on the employment relationship.

5.9   Dispute regarding existence of Good Reason for Termination

In the event the Company disputes whether Good Reason existed for the Employee
to terminate his employment for Good Reason, the Company shall pay salary
continuation as provided in Section 5.5 until the earliest of (i) settlement by
the parties, (ii) determination by arbitration in accordance with Section 14
hereof that Good Reason did not exist, and (iii) completion of the payments
required by Section 5.5 and Section 5.1(c) hereof. If, pursuant to Section 14
hereof, an arbitrator determines that Good Reason did not exist, the arbitrator
shall also decide whether the Employee had a reasonable, good-faith basis for
claiming that there was Good Reason to terminate. If the arbitrator determines
that there was not such a basis, the Employee shall be obligated to repay
promptly to the Company the salary continuation payments; if the arbitrator
determines that there was such a basis, the Employee shall not be obligated to
repay the salary continuation.

6.   Representations, Warranties and Other Conditions

In order to induce the Company to enter into this Agreement, the Employee
represents and warrants to the Company as follows:

6.1   Health

The Employee is in good health and knows of no physical or mental disability
that, with any accommodation that may be required by law and that places no
undue burden on the Company, would prevent him from fulfilling his obligations
hereunder. The Employee agrees, if the Company requests, to submit to reasonable
periodic medical examinations by a physician or physicians designated, paid for
and arranged by the Company. The Employee agrees that the examination’s medical
report shall be provided to the Company.

6.2   No Violation of Other Agreements

The Employee represents that neither the execution nor the performance of this
Agreement by the Employee will violate or conflict in any way with any other
agreement by which the Employee may be bound.

7.   Nondisclosure; Return of Materials

7.1   Nondisclosure

Except as required by his employment with the Company, the Employee will not, at
any time during the term of employment by the Company, or at any time
thereafter, directly, indirectly or otherwise, use, communicate, disclose,
disseminate, lecture upon or publish articles relating to any confidential,
proprietary or trade secret information without the prior written consent of the
Company. The Employee understands that the Company will be relying on this
covenant in continuing the Employee’s employment, paying his compensation,
granting him any promotions or raises, or entrusting him with any information
that helps the Company compete with others.

7.2   Return of Materials

All documents, records, notebooks, notes, memoranda, drawings or other documents
made or compiled by the Employee at any time while employed by the Company, or
in his possession, including any and all copies thereof, shall be the property
of the Company and shall be held by the Employee in trust and

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solely for the benefit of the Company, and shall be delivered to the Company by
the Employee upon termination of employment or at any other time upon request by
the Company.

8.   Notice and Cure of Breach

Whenever a breach of this Agreement by either party is relied upon as
justification for any action taken by the other party pursuant to any provision
of this Agreement, other than clause (a), (b), (c) or (d) of Section 5.6 hereof,
before such action is taken, the party asserting the breach of this Agreement
shall give the other party at least twenty (20) days’ prior written notice of
the existence and the nature of such breach before taking further action
hereunder and shall give the party purportedly in breach of this Agreement the
opportunity to correct such breach during the twenty (20) day period.

9.   Form of Notice

Every notice required by the terms of this Agreement shall be given in writing
by serving the same upon the party to whom it was addressed personally or by
registered or certified mail, return receipt requested, at the address set forth
below or at such other address as may hereafter be designated by notice given in
compliance with the terms hereof:

If to the Employee:

Mike Jackson

 

11719 NE 105th Lane

 

Kirkland, WA 98033-5039

 

 

If to the Company:

Poniard Pharmaceuticals, Inc.

 

300 Elliott Avenue West, Suite 500

 

Seattle, Washington 98119

 

Attn: Chief Employee Officer

 

 

With a copy to:

Perkins Coie LLP

 

1201 Third Avenue, 40th Floor

 

Seattle, Washington 98101-3099

 

Attn: James R. Lisbakken

 

Except as set forth in Section 4.4 hereof, if notice is mailed, such notice
shall be effective upon mailing.

10.   Assignment

This Agreement is personal to the Employee and shall not be assignable by the
Employee.

The Company shall assign to and require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all the business and/or assets of the Company to assume expressly
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place. As used in this Agreement, the “Company” shall mean Poniard
Pharmaceuticals, Inc. and any affiliated company or successor to its business
and/or assets as aforesaid that assumes and agrees to perform this Agreement by
contract, operation of law or otherwise; and as long as such successor assumes
and agrees to perform this Agreement, the termination of the Employee’s
employment by one such entity and the immediate hiring and continuation of the
Employee’s employment by the succeeding entity shall not be deemed to constitute
a termination or trigger any severance obligation under this Agreement. All the
terms and provisions of this Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and permitted assigns.

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11.   Waivers

No delay or failure by any party hereto in exercising, protecting or enforcing
any of its rights, titles, interests or remedies hereunder, and no course of
dealing or performance with respect thereto, shall constitute a waiver thereof.
The express waiver by a party hereto of any right, title, interest or remedy in
a particular instance or circumstance shall not constitute a waiver thereof in
any other instance or circumstance. All rights and remedies shall be cumulative
and not exclusive of any other rights or remedies.

12.   Amendments In Writing

No amendment, modification, waiver, termination or discharge of any provision of
this Agreement, or consent to any departure therefrom by either party hereto,
shall in any event be effective unless the same shall be in writing,
specifically identifying this Agreement and the provision intended to be
amended, modified, waived, terminated or discharged and signed by the Company
and the Employee, and each such amendment, modification, waiver, termination or
discharge shall be effective only in the specific instance and for the specific
purpose for which given. No provision of this Agreement shall be varied,
contradicted or explained by any oral agreement, course of dealing or
performance or any other matter not set forth in an agreement in writing and
signed by the Company and the Employee.

13.   Applicable Law

This Agreement shall in all respects, including all matters of construction,
validity and performance, be governed by, and construed and enforced in
accordance with, the laws of the State of Washington, without regard to any
rules governing conflicts of laws.

14.   Arbitration; Attorneys’ Fees

Except in connection with enforcing Section 7 hereof, for which legal and
equitable remedies may be sought in a court of law, any dispute arising under
this Agreement shall be subject to arbitration. The arbitration proceeding shall
be conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the “AAA Rules”) then in effect, conducted by one
(1) arbitrator either mutually agreed upon or selected in accordance with the
AAA Rules. The arbitration shall be conducted in King County, Washington, under
the jurisdiction of the Seattle office of the American Arbitration Association.
The arbitrator shall have authority only to interpret and apply the provisions
of this Agreement, and shall have no authority to add to, subtract from or
otherwise modify the terms of this Agreement. Any demand for arbitration must be
made within sixty (60) days of the event(s) giving rise to the claim that this
Agreement has been breached. The arbitrator’s decision shall be final and
binding, and each party agrees to be bound by the arbitrator’s award, subject
only to an appeal therefrom in accordance with the laws of the State of
Washington. Either party may obtain judgment upon the arbitrator’s award in the
Superior Court of King County, Washington.

If it becomes necessary to pursue or defend any legal proceeding, whether in
arbitration or court, in order to resolve a dispute arising under this
Agreement, the prevailing party in any such proceeding shall be entitled to
recover its reasonable costs and attorneys’ fees.

15.   Severability

If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any jurisdiction, for any reason, including, without
limitation, the duration of such provision, its geographical scope or the extent
of the activities prohibited or required by it, then, to the full extent
permitted by law, (a) all other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in order to carry
out the intent of the parties hereto as nearly as may be possible, (b) such
invalidity, illegality

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or unenforceability shall not affect the validity, legality or enforceability of
any other provision hereof, and (c) any court or arbitrator having jurisdiction
thereover shall have the power to reform such provision to the extent necessary
for such provision to be enforceable under applicable law.

16.   Excess Parachute Payments

If any portion of the payments or benefits under this Agreement or any other
agreement or benefit plan of the Company (including stock options) would be
characterized as an “excess parachute payment” to the Employee under
Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), the
Employee shall be paid any excise tax that the Employee owes under Section 4999
of the Code as a result of such characterization, such excise tax to be paid to
the Employee at least ten (10) days prior to the date that he is obligated to
make the excise tax payment. The determination of whether and to what extent any
payments or benefits would be “excess parachute payments” and the date by which
any excise tax shall be due, shall be determined in writing by recognized tax
counsel selected by the Company and reasonably acceptable to the Employee.

17.   Entire Agreement

Except as described in Section 16 hereof, this Agreement constitutes the entire
agreement between the Company and the Employee with respect to the subject
matter hereof, and all prior or contemporaneous oral or written communications,
understandings or agreements between the Company and the Employee with respect
to such subject matter, are hereby superseded and nullified in their entireties,
except that the Proprietary Information and Invention Agreement between the
Employee and the Company shall continue in full force and effect to the extent
not superseded by Section 10 hereof.

18.   Withholding

The Company may withhold from any amounts payable under this Agreement such
federal, state or local taxes as shall be required to be withheld pursuant to
any applicable law or regulation.

19.   Counterparts

This Agreement may be executed in counterparts, each of which counterpart shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

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IN WITNESS WHEREOF, the parties have executed and entered into this Agreement
effective on the date first set forth above.

PONIARD PHARMACEUTICALS, INC.

 

By:

/s/ GERALD MCMAHON

 

 

 

Name:

Gerald McMahon

 

 

 

Its:

Chief Executive Officer

 

 

EMPLOYEE

 

By:

/s/ MIKE JACKSON

 

 

 

Name: Mike Jackson

 

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