Exhibit 10.3


 


PONIARD PHARMACEUTICALS, INC.


CHANGE OF CONTROL AGREEMENT


 


This
Change of Control Agreement (this “Agreement”), dated
as of February 5, 2010, is entered into by and between PONIARD
PHARMACEUTICALS, INC., a Washington corporation (as supplemented by
Section 13 hereof, the “Company”),
and Michael S. Perry, DVM, Ph.D. (the “Executive”).


 


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 Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control
(as defined in Section 1 hereof) of the Company.  The Board believes it is imperative to
diminish the inevitable distraction of the Executive arising from the personal
uncertainties and risks created by a pending or threatened Change of Control,
to encourage the Executive’s full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with reasonable compensation and benefit arrangements
upon a Change of Control.


 


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


 


1.             Definitions


 


1.1           “Change
of Control” shall have the definition set forth in Appendix A
hereto, which is hereby incorporated by reference.


 


1.2           “Change
of Control Date” shall mean the first date on which a Change of
Control occurs.


 


1.3           “Employment
Period” shall mean the two (2) year period commencing on
the Change of Control Date and ending on the second anniversary of such date.


 


1.4           “Severance
Agreement” shall mean the Key Executive Severance Agreement,
dated as of the date hereof, between the parties, as it may be amended from
time to time, that provides for certain benefits related to termination of the
Executive’s employment that are unrelated to a Change of Control.


 


2.             Term


 


The
initial term of this Agreement (“Initial Term”)
shall be for a period commencing on the date of this Agreement and ending on
February 23, 2011; 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 at least ninety (90) days
prior to the end of the Initial Term or any Renewal Term; and provided,
further, that if a Change of Control occurs during the Term, the Term shall
automatically extend for the duration of the


 

















 


Employment
Period.  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 Executive.


 


3.             Employment


 


3.1          Employment
Period


 


During
the Employment Period, the Company hereby agrees to continue the Executive in
its employ or in the employ of its affiliated companies, and the Executive
hereby agrees to remain in the employ of the Company or its affiliated
companies, in accordance with the terms and provisions of this Agreement;
provided, however, that either the Company or the Executive may terminate the
employment relationship subject to the terms of this Agreement.


 


3.2          Position and
Duties


 


During
the Employment Period, the Executive’s position, authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at any time during
the ninety (90) day period immediately preceding the Change of Control Date.


 


3.3          Location


 


During
the Employment Period, the Executive’s services shall be performed at the
Company’s offices on the Change of Control Date at which the Executive was
employed or any office that is subsequently designated by the Company and is
less than thirty (30) miles from such location.


 


3.4          Employment at
Will


 


The
Executive and the Company acknowledge that, except as may otherwise be provided
under any other written agreement between the Executive and the Company, the employment
of the Executive by the Company or its affiliated companies is “at will” and
may be terminated by either the Executive or the Company or its affiliated
companies at any time with or without cause. 
Moreover, if prior to the Change of Control Date, the Executive’s
employment with the Company or its affiliated companies terminates for any
reason, then the Executive shall have no further rights under this Agreement;
provided, however, that the Company may not avoid liability for any termination
payments that would have been required during the Employment Period pursuant to
Section 8 hereof by terminating the Executive prior to the Employment
Period where such termination is carried out in anticipation of a Change of
Control and the principal motivating purpose is to avoid liability for such
termination payments.


 


4.             Attention and Effort


 


During
the Employment Period, and excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive will devote all of the
Executive’s productive time, ability, attention and effort to the business and
affairs of the Company and the discharge of the


 


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responsibilities
assigned to the Executive hereunder, and will use the Executive’s reasonable
best efforts to perform faithfully and efficiently such responsibilities.  It shall not be a violation of this Agreement
for the Executive 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 Executive’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 Executive prior to the
Employment Period, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) during the Employment Period
shall not thereafter be deemed to interfere with the performance of the
Executive’s responsibilities to the Company.


 


5.             Compensation


 


As
long as the Executive remains employed by the Company during the Employment
Period, the Company agrees to pay or cause to be paid to the Executive, and the
Executive agrees to accept in exchange for the services rendered hereunder by
the Executive, the following compensation:


 


5.1          Salary


 


The
Executive shall receive an annual base salary (the “Annual
Base Salary”), at least equal to the annual salary established
by the Board or the Compensation Committee of the Board (the “Compensation
Committee”) or the Chief Executive Officer for the fiscal year
in which the Change of Control Date occurs. 
The Annual Base Salary shall be paid in substantially equal installments
and at the same intervals as the salaries of other executives of the Company
are paid.  The Board or the Compensation
Committee or the Chief Executive Officer shall review the Annual Base Salary at
least annually and shall determine in good faith and consistent with any
generally applicable Company policy any increases for future years.


 


5.2          Bonus


 


In
addition to the Annual Base Salary, the Executive shall be awarded, for each
fiscal year ending during the Employment Period, an annual performance bonus
(the “Annual Performance Bonus”) in
cash at least equal to the average annualized (for any fiscal year consisting
of less than twelve (12) full months) bonus paid or payable to the Executive by
the Company and its affiliated companies in respect of the Executive’s
performance during the three fiscal years (or such shorter period of
employment) immediately preceding the fiscal year in which the Change of
Control Date occurs.  Each Annual
Performance Bonus shall be paid in the fiscal year following the fiscal year
for which the Annual Performance Bonus is awarded, but no later than the
fifteenth day of the third month of such subsequent fiscal year, unless the
Executive shall elect to defer the receipt of the Annual Performance Bonus in
accordance with the terms of the Company’s deferred compensation program.


 


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6.             Benefits


 


6.1          Incentive,
Retirement and Welfare Benefit Plans; Vacation


 


As
long as the Executive remains employed by the Company during the Employment
Period, the Executive shall be entitled to participate, subject to and in
accordance with applicable eligibility requirements, in such fringe benefit
programs as shall be generally made available to other executives of the
Company and its affiliated companies from time to time during the Employment
Period by action of the Board (or any person or committee appointed by the
Board to determine fringe benefit programs and other emoluments), including,
without limitation, paid vacations; any stock purchase, savings or retirement
plan, practice, policy or program; and all welfare benefit plans, practices, policies
or programs (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans or programs).


 


6.2          Expenses


 


As
long as the Executive remains employed by the Company during the Employment
Period, the Executive shall be entitled to receive prompt reimbursement for all
reasonable employment expenses incurred by the Executive in accordance with the
policies, practices and procedures of the Company and its affiliated companies
in effect for the executives of the Company and its affiliated companies during
the Employment Period.  Without
limitation on the foregoing, reimbursement shall be made no later than the end
of the fourth month of the year following the year in which the expense was
incurred.


 


7.             Termination


 


During
the Employment Period, employment of the Executive may be terminated as
follows, but, in any case, the nondisclosure provisions set forth in
Section 10 hereof shall survive the termination of this Agreement and the
termination of the Executive’s employment with the Company:


 


7.1          Termination by
the Company or the Executive


 


At
any time during the Employment Period, the Company may terminate the employment
of the Executive with or without Cause (as defined below), and the Executive
may terminate the Executive’s employment for Good Reason (as defined below) or
for any reason, upon giving a Notice of Termination (as defined below).


 


7.2          Automatic
Termination


 


This
Agreement and the Executive’s employment during the Employment Period shall
terminate automatically upon the death or Total Disability of the
Executive.  The term “Total
Disability” as used herein shall mean the Executive’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 Executive, to perform the duties set forth in
Section 3.2 hereof for a period or periods aggregating twelve (12) weeks in
any three


 


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hundred
sixty-five (365) day period as a result of physical or mental illness, loss of
legal capacity or any other cause beyond the Executive’s control, unless the
Executive is granted a leave of absence by the Board.  The Executive and the Company hereby
acknowledge that the duties specified in Section 3.2 hereof are essential
to the Executive’s position and that the Executive’s ability to perform those duties
is the essence of this Agreement.


 


7.3          Notice of
Termination


 


Any
termination by the Company or by the Executive during the Employment Period
shall be communicated by a Notice of Termination to the other party given in
accordance with Section 12 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 Executive’s employment under the provision so
indicated.  The failure by the Executive
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 Executive or the Company hereunder or preclude the
Executive or the Company from asserting such fact or circumstance in enforcing
the Executive’s or the Company’s rights hereunder.


 


7.4          Date of
Termination


 


During
the Employment Period, “Date of Termination” means
(a) if the Executive’s employment is terminated by reason of death, the
last day of the calendar month in which the Executive’s death occurs,
(b) if the Executive’s employment is terminated by reason of Total
Disability, immediately upon a determination by the Company of the
Executive’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 Executive’s employment
and performance of services will continue during such ten (10) day period;
provided, however, that the Company may, upon notice to the Executive and
without reducing the Executive’s compensation during such period, excuse the
Executive from any or all of the Executive’s duties during such period.  Notwithstanding
anything contained in this Agreement to the contrary, the date on which a
“separation from service” (“Separation
from Service”) pursuant to Section 409A of the Internal
Revenue Code of 1986, as amended (“Code
Section 409A”), occurs shall be the “Date of Termination”
or termination of employment for purposes of determining the timing of payments
under this Agreement to the extent necessary to have such payments and benefits
under this Agreement be exempt from the requirements of Code Section 409A
or comply with the requirements of Code Section 409A.


 


8.             Termination Payments


 


In
the event of termination of the Executive’s employment during the Employment
Period, all compensation and benefits set forth in this Agreement shall
terminate except as specifically provided in this Section 8.


 


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8.1          Termination by
the Company Other Than for Cause or by the Executive for Good Reason


 


If
during the Employment Period the Company terminates the Executive’s employment
other than for Cause or the Executive terminates the Executive’s employment for
Good Reason, the Executive shall be entitled to:


 


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


 


(i)            the Annual Base Salary
through the Date of Termination to the extent not theretofore paid;


 


(ii)           the product of (x) the
Annual Performance Bonus payable with respect to the fiscal year in which the
Date of Termination occurs and (y) a fraction the numerator of which is
the number of days in the current fiscal year through the Date of Termination,
and the denominator of which is three hundred sixty-five (365);


 


(iii)          any compensation previously
deferred by the Executive (together with accrued interest or earnings thereon,
if any); and


 


(iv)          any accrued vacation pay
that would be payable under the Company’s standard policy, in each case to the
extent not theretofore paid;


 


(b)           have the Company pay, for
one (1) year after the Date of Termination or until the Executive
qualifies for comparable medical and dental insurance benefits from another
employer, whichever occurs first, the Executive’s premiums for health insurance
benefit continuation for the Executive and the Executive’s family members, if
applicable, that the Company provides to the Executive 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 Executive remained employed by the Company (such
continued payment is hereinafter referred to as “COBRA
Continuation”);


 


(c)           an amount as severance pay
equal to one (1) times the Annual Performance Bonus payable with respect
to the fiscal year in which the Date of Termination occurs;


 


(d)           an amount as severance pay
equal to one (1) times the Annual Base Salary for the fiscal year in which
the Date of Termination occurs; and


 


(e)           immediate vesting of all
outstanding stock options previously granted to the Executive by the Company.


 


8.2          Termination
for Cause or Other Than for Good Reason


 


If
during the Employment Period the Executive’s employment shall be terminated by
the Company for Cause or by the Executive for other than Good Reason, this
Agreement shall terminate without further obligation on the part of the Company
to the Executive, other than the


 


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Company’s
obligation to pay the Executive (a) the Annual Base Salary through the
Date of Termination, (b)  the amount of any compensation previously
deferred by the Executive in accordance with the terms of the Company’s
deferred compensation program, and (c) any accrued vacation pay that would
be payable under the Company’s standard policy, in each case to the extent
theretofore unpaid.


 


8.3          Expiration of
Term


 


In
the event the Executive’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 Executive, other than the Company’s obligation to pay the
Executive the product of (a) the Annual Performance Bonus payable with
respect to the fiscal year in which the Term expired and (b) a fraction
the numerator of which is the number of days in the current fiscal year through
the end of the Term and the denominator of which is three hundred sixty-five
(365).  Such payment will be made in the
fiscal year following the fiscal year in which the Term expired no later than
the fifteenth day of the third month of such subsequent fiscal year.


 


8.4          Termination
Because of Death or Total Disability


 


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


 


8.5          Payment
Schedule


 


All
payments of Accrued Obligations, or any portion thereof payable pursuant to
this Section 8, other than deferred compensation pursuant to
Section 8.1(a)(iii) hereof, shall be made to the Executive within ten
(10) working days of the Date of Termination.  Deferred compensation pursuant to
Section 8.1(a)(iii) hereof shall be payable pursuant to the terms of
the deferred compensation program.  Any
severance payments payable to the Executive pursuant to Sections 8.1(c) and 8.1(d) hereof
shall be made to the Executive in a lump sum within ten (10) working
days of the Date of Termination. 
Notwithstanding the preceding
provisions of this Section 8, if any payment or benefit pursuant to this
Agreement constitutes a “deferral of compensation” subject to Code
Section 409A (after taking into account, to the maximum extent possible,
any applicable exemptions) (a “409A Payment”)
treated as payable to a Specified Employee (as defined in Section 21.1
hereof) upon Separation from Service, the provisions of Section 21.1
hereof shall apply.  Section 8.9
hereof must be satisfied to receive payments and benefits under this Agreement.


 


8.6          Cause


 


For
purposes of this Agreement, “Cause” means cause
given by the Executive to the Company and shall include, without limitation,
the occurrence of one (1) or more of the following events:


 


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(a)           a clear refusal to carry out
any material lawful duties of the Executive or any directions of the Board or
senior management of the Company, all reasonably consistent with the duties
described in Section 3.2 hereof;


 


(b)           persistent failure to carry
out any lawful duties of the Executive described in Section 3.2 hereof or
any directions of the Board or senior management reasonably consistent with the
duties herein set forth to be performed by the Executive; provided, however,
that the Executive has been given reasonable notice and opportunity to correct
any such failure;


 


(c)           violation by the Executive 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
Executive of alcohol or controlled substances; deception, fraud,
misrepresentation or dishonesty by the Executive; or any incident materially
compromising the Executive’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 Executive, subject to the notice and
opportunity-to-cure requirements of Section 11 hereof.


 


8.7          Good Reason


 


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


 


(a)           the assignment to the
Executive of any duties materially inconsistent with the Executive’s position,
authority, duties or responsibilities as contemplated by Section 3.2
hereof or any other action by the Company that 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
Executive;


 


(b)           any failure by the Company
to comply with any of the provisions of Section 5 or Section 6
hereof, other than an isolated and inadvertent failure not taken in bad faith
and that is remedied by the Company promptly after receipt of notice thereof
given by the Executive;


 


(c)           the Company’s requiring the
Executive to be based at any office or location other than that described in
Section 3.3 hereof;


 


(d)           any failure by the Company
to comply with and satisfy Section 13 hereof; provided, however, that the
Company’s successor has received at least ten (10) days’ prior written
notice from the Company or the Executive of the requirements of Section 13
hereof; or


 


(e)           any other material violation
of any provision of this Agreement by the Company;


 


provided,
however, that the Executive has notified the Company of such assignment,
failure, situation or violation within ninety (90) days of its occurrence and
there has been compliance with the notice and opportunity-to-cure requirements
of Section 11 hereof.


 


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8.8          Excess Parachute Limitation


 


If
any portion of the payments or benefits for the Executive under this Agreement,
the Severance Agreement, or any other agreement or benefit plan of the Company
(including a stock option plan) would be characterized as an “excess parachute
payment” to the Executive under Section 280G of the Internal Revenue Code
of 1986, as amended (the “Code”), the Executive shall
be paid any excise tax that the Executive owes under Code Section 4999 as
a result of such characterization, such excise tax to be paid to the Executive
at least ten (10) days prior to the date that the Executive 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 Executive. 
Without limitation on the foregoing, the payments made pursuant to this Section 8.8
shall be made no later than the end of the year following the year in which the
Executive remits such excise tax to the Internal Revenue Service.


 


8.9          General
Release of Claims


 


As
a condition to receiving the payments and benefits under this Section 8
other than Accrued Obligations set forth in Sections 8.1(a)(i) and 8.1(a)(iv) hereof,
the Executive shall execute (and not later revoke) a general release and waiver
of all claims against the Company, which release and waiver shall be in a form
acceptable to the Company, in its reasonable discretion, and delivered to the
Company no later than the seventh day of the third month of the fiscal year
following the year in which the Date of Termination occurs.  To the extent any payment or benefit is a
409A Payment, the provisions of Section 21.3 hereof shall apply.


 


9.             Representations,
Warranties and Other Conditions


 


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


 


9.1          Health


 


The
Executive 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 the Executive from fulfilling the
Executive’s obligations hereunder.  The
Executive agrees, if the Company requests, to submit to reasonable periodic
medical examinations by a physician or physicians designated by, paid for and
arranged by the Company.  The Executive
agrees that each examination’s medical report shall be provided to the Company.


 


9.2          No Violation of Other Agreements


 


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


 


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10.          Nondisclosure;
Return of Materials


 


10.1        Nondisclosure


 


Except
as required by the Executive’s employment with the Company, the Executive 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 of the Company without the prior
written consent of the Company.  The
Executive understands that the Company will be relying on this Agreement in
continuing the Executive’s employment, paying the Executive’s compensation,
granting the Executive any promotions or raises, or entrusting the Executive
with any information that helps the Company compete with others.


 


10.2        Return of Materials


 


All
documents, records, notebooks, notes, memoranda, drawings or other documents
made or compiled by the Executive at any time, or in the Executive’s
possession, including any and all copies thereof, shall be the property of the
Company and shall be held by the Executive in trust and solely for the benefit
of the Company, and shall be delivered to the Company by the Executive upon termination
of employment or at any other time upon request by the Company.


 


11.          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 8.6
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.


 


12.          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 Executive:

  	
  Michael S. Perry, DVM,
  Ph.D.

  
	
   

  	
  [address]

  
	
   

  	
   

  
	
  If
  to the Company:

  	
  Poniard
  Pharmaceuticals, Inc.

  
	
   

  	
  300 Elliott Avenue West,
  Suite 500

  
	
   

  	
  Seattle, Washington 98119

  
	
   

  	
  Attn: Chief Executive
  Officer

  



 


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  With
  a copy to:

  	
  Perkins Coie LLP

  
	
   

  	
  1201 Third Avenue,
  Suite 4800

  
	
   

  	
  Seattle, Washington
  98101-3099

  
	
   

  	
  Attn: James R.
  Lisbakken

  



 


Except as set forth in Section 7.4
hereof, if notice is mailed, such notice shall be effective upon mailing.


 


13.          Assignment


 


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


 


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, “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.  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.


 


14.          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.


 


15.          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 Executive, 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 Executive.


 


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16.          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.


 


17.          Arbitration;
Attorneys’ Fees


 


Except
in connection with enforcing Section 10 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 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.  To the extent necessary to prevent the Executive
from being subject to any additional tax pursuant to Code Section 409A(a)(1)(B),
any amounts payable to the Executive pursuant to this paragraph shall be paid
in no event later than the year following the year during which such costs and
fees were incurred.


 


18.          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 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.


 


19.          Entire
Agreement


 


Except
as described in Section 23 hereof, this Agreement constitutes the entire
agreement between the Company and the Executive with respect to the subject
matter hereof, and all prior 


 


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or contemporaneous oral or written communications,
understandings or agreements between the Company and the Executive with respect
to such subject matter are hereby superseded and nullified in their entireties,
except that the Proprietary Information and Invention Agreement between the
Company and the Executive shall continue in full force and effect to the extent
not superseded by Section 10 hereof.


 


20.          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.


 


21.          409A
Interpretation Provision


 


The
parties intend that this Agreement and the payments and benefits provided
hereunder be exempt from the requirements of Code Section 409A to the
maximum extent possible, whether pursuant to the short-term deferral exception
described in Treasury Regulation Section 1.409A-1(b)(4), the involuntary
separation pay plan exception described in Treasury Regulation Section 1.409A-1(b)(9)(iii),
or otherwise.  To the extent Code Section 409A
is applicable to this Agreement, the parties intend that this Agreement comply
with the deferral, payout and other limitations and restrictions imposed under
Code Section 409A.  Notwithstanding
anything herein to the contrary, this Agreement is intended to be interpreted
and operated to the fullest extent possible so that the payments and benefits
under this Agreement either shall be exempt from the requirements of  Code Section 409A or shall comply with
the requirements of such provision; provided, however, that notwithstanding
anything to the contrary in this Agreement in no event shall the Company be
liable to the Executive for or
with respect to any taxes, penalties or interest that may be imposed upon the Executive pursuant to Code Section 409A.


 


21.1        Payments to Specified Employees


 


To
the extent that any payment or benefit pursuant to this Agreement constitutes a
409A Payment treated as payable upon Separation from Service, then, if on the
date of the Executive’s
Separation from Service, the Executive is
a Specified Employee, then to the extent required for the Executive not to incur additional
taxes pursuant to Code Section 409A, no such 409A Payment shall be made to
the Executive earlier than the
earlier of (a) six (6) months after the Executive’s Separation from Service or (b) the date of the
Executive’s death.  Should this Section 21
result in the delay of benefits, any such benefit shall be made available to
the Executive by the Company
during such delay period at the Executive’s
expense.  Should this Section 21.1
result in a delay of payments or benefits to the Executive, on the first day any such payments or benefits may be
made without incurring additional tax pursuant to Code Section 409A (the “409A Payment Date”), the Company
shall make such payments and provide such benefits as provided for in this
Agreement, provided that any amounts that would have been payable earlier but
for the application of this Section 21.1 as well as reimbursement of the
amount the Executive paid for
benefits pursuant to the preceding sentence, shall be paid in a lump sum on the
409A Payment Date.  For purposes of this Section 21.1,
the term “Specified Employee” shall
have the meaning 


 


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set forth in Code Section 409A, as determined
in accordance with the methodology established by the Company.


 


21.2        Reimbursements


 


For
purposes of complying with Code Section 409A and without extending the
payment timing otherwise provided in this Agreement, taxable reimbursements
under this Agreement, subject to the following sentence and to the extent
required to comply with Code Section 409A, will be made no later than the
end of the calendar year following the calendar year the expense was
incurred.  To the extent required to
comply with Code Section 409A, any taxable reimbursements and any in-kind
benefit under this Agreement will be subject to the following:  (a) payment of such reimbursements or
in-kind benefits during one calendar year will not affect the amount of such
reimbursements or in-kind benefits provided during any other calendar year
(other than for medical reimbursement arrangements as excepted under Treasury
Regulation Section 1.409A-3(i)(1)(iv)(B) solely because the
arrangement provides for a limit on the amount of expenses that may be
reimbursed under such arrangement over some or all of the period the
arrangement remains in effect); (b) such right to reimbursements or
in-kind benefits is not subject to liquidation or exchange for another form of
compensation to the Executive;
and (c) the right to reimbursements under this Agreement will be in effect
for the lesser of the time specified in this Agreement or ten (10) years
plus the lifetime of the Executive.  Any taxable reimbursements or in-kind
benefits shall be treated as not subject to Code Section 409A to the
maximum extent provided by Treasury Regulation Section 1.409A-1(b)(9)(v) or
otherwise under Code Section 409A.


 


21.3        Release


 


Subject
to Section 21.1 hereof, (a) to the extent that the Executive is required to execute and
deliver a release to receive a 409A Payment and (b) this Agreement provides
for such 409A Payment to be provided prior to the 55th day following the Executive’s Separation from Service,
such 409A Payment will be provided upon the 55th day following the Executive’s Separation from Service,
provided that the release in the form acceptable to the Company, in its
reasonable discretion, has been executed, delivered and effective prior to such
time.  To the extent there is a delay in
providing a 409A Payment because of the provisions of this Section 21.3,
interest for the delay and the opportunity for the Executive to pay for benefits in the interim with subsequent
reimbursement from the Company shall be provided in a manner consistent with
that set forth in Section 21.1 hereof. 
If a release is required for a 409A Payment and such release is not
executed, delivered and effective by the 55th day following the Executive’s Separation from Service,
such 409A Payment shall not be provided to the Executive to the extent that providing such 409A Payment would
cause such 409A Payment to fail to comply with Code Section 409A.


 


21.4        No Acceleration; Separate Payments


 


No
409A Payment payable under this Agreement shall be subject to acceleration or
to any change in the specified time or method of payment, except as otherwise
provided under this Agreement and consistent with Code Section 409A.  If under this Agreement, a 409A Payment is 


 


14

















 


to be paid in two or more installments, for purposes
of Section 409A, each installment shall be treated as a separate payment.


 


22.          Counterparts


 


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


 


23.          Coordination
With Severance Agreement


 


The
Severance Agreement that the parties are entering into contemporaneously with
this Agreement provides for certain forms of severance and benefit payments in
the event of termination of the Executive’s employment.  This Agreement is in addition to the
Severance Agreement and in no way supersedes or nullifies the Severance
Agreement.  Nevertheless, it is possible
that termination of employment by the Company or by the Executive may fall
within the scope of both agreements.  In
such event, payments made to the Executive under Section 8.1 hereof shall
be coordinated with payments made to the Executive under Section 5.1 of
the Severance Agreement as follows:


 


(a)           Accrued Obligations under
this Agreement shall be paid first, in which case Accrued Obligations need not
be paid under the Severance Agreement;


 


(b)           COBRA Continuation under
this Agreement shall be provided first, in which case COBRA Continuation need
not be provided under the Severance Agreement;


 


(c)           the severance payment
required under Section 8.1(d) hereof shall be paid first in
connection with a Change of Control that constitutes a change in ownership or
effective control of the Company or in the ownership of a substantial portion
of the assets of the Company within the meaning of subsection (a)(2)(A)(v) of
Code Section 409A, in which case only that portion of any severance
payment required under Section 5.1(c) of the Severance Agreement that
is in excess of the severance payment required under Section 8.1(d) hereof
shall be paid in accordance with the provisions of the Severance Agreement; and


 


(d)           the severance payment
required under Section 8.1(d) hereof (and paid pursuant to Section 8.5
hereof) need not be paid to the extent a severance payment is made under Section 5.1(c) of
the Severance Agreement in connection with a Change of Control that does not
constitute a change in ownership or effective control of the Company or in the
ownership of a substantial portion of the assets of the Company within the
meaning of subsection (a)(2)(A)(v) of Code Section 409A, i.e., the
credit from Section 5.1(c) of the Severance Agreement is applied to
the amount due under Section 8.1(d) hereof and therefore only that
portion of any severance payment required under Section 8.1(d) hereof
that is in excess of the total severance payment required under Section 5.1(c) of
the Severance Agreement shall be paid in accordance with the provisions of this
Agreement.


 


15

















 


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/ Anna Lewak Wight

  
	
   

  	
   

  	
  Name: Anna Lewak Wight

  
	
   

  	
   

  	
  Its: Vice President, Legal

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael S. Perry

  
	
   

  	
   

  	
  Name: Michael S. Perry, DVM, Ph.D.

  



 


16

















 


APPENDIX A


 


For
purposes of this Agreement, a “Change of Control”
shall mean:


 


(a)           A “Board
Change” that, for purposes of this Agreement, shall have
occurred if a majority (excluding vacant seats) of the seats on the Board are
occupied by individuals who were neither (i) nominated by a majority of
the Incumbent Directors nor (ii) appointed by directors so nominated.  An “Incumbent Director”
is a member of the Board who has been either (i) nominated by a majority
of the directors of the Company then in office or (ii) appointed by
directors so nominated, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in former Rule 14a-11
of Regulation 14A promulgated under the Securities Exchange Act of 1934,
as amended (the “Exchange Act”)) or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person (as hereinafter defined) other than the Board; or


 


(b)           The acquisition by any
individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act) (a “Person”) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of (i) twenty percent (20%) or more of either (A) the
then outstanding shares of Common Stock of the Company (the “Outstanding
Company Common Stock”) or (B) the combined voting power of
the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the “Outstanding
Company Voting Securities”), in the case of either
subclause (A) or (B) of this clause (i), which acquisition is
not approved in advance by a majority of the Incumbent Directors, or (ii) thirty-three
percent (33%) or more of either (A) the Outstanding Company Common Stock
or (B) the Outstanding Company Voting Securities, in the case of either
subclause (A) or (B) of this clause (ii), which acquisition is
approved in advance by a majority of the Incumbent Directors; provided,
however, that the following acquisitions shall not constitute a Change of
Control:  (x) any acquisition by the
Company, (y) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company, or (z) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, following such reorganization,
merger or consolidation, the conditions described in clauses (i), (ii) and
(iii) of subsection (c) of this Appendix A are satisfied; or


 


(c)           Approval by the shareholders
of the Company of a reorganization, merger or consolidation, in each case,
unless, immediately following such reorganization, merger or consolidation, (i) more
than sixty percent (60%) of, respectively, the then outstanding shares of
common stock of the corporation resulting from such reorganization, merger or
consolidation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and the Outstanding
Company Voting Securities immediately prior to such reorganization, merger or
consolidation in substantially the same 


 

















 


proportion as their ownership immediately prior to
such reorganization, merger or consolidation of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding the Company, any employee benefit plan (or related trust) of
the Company or such corporation resulting from such reorganization, merger or
consolidation and any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, thirty-three
percent (33%) or more of the Outstanding Company Common Stock or the
Outstanding Company Voting Securities, as the case may be) beneficially owns,
directly or indirectly, thirty-three percent (33%) or more of, respectively,
the then outstanding shares of common stock of the corporation resulting from
such reorganization, merger or consolidation or the combined voting power of
the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors, and (iii) at least a majority of
the members of the board of directors of the corporation resulting from such
reorganization, merger or consolidation were the Incumbent Directors at the
time of the execution of the initial agreement providing for such
reorganization, merger or consolidation; or


 


(d)           Approval by the shareholders
of the Company of (i) a complete liquidation or dissolution of the Company
or (ii) the sale or other disposition of all or substantially all the
assets of the Company, other than to a corporation with respect to which
immediately following such sale or other disposition, (A) more than sixty
percent (60%) of, respectively, the then outstanding shares of common stock of
such corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and the Outstanding
Company Voting Securities immediately prior to such sale or other disposition
in substantially the same proportion as their ownership, immediately prior to
such sale or other disposition, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding the Company, any employee benefit plan (or related trust) of the
Company or such corporation and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or indirectly, thirty-three
percent (33%) or more of the Outstanding Company Common Stock or the
Outstanding Company Voting Securities, as the case may be) beneficially owns,
directly or indirectly, thirty-three percent (33%) or more of, respectively,
the then outstanding shares of common stock of such corporation or the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors, and (C) at least
a majority of the members of the board of directors of such corporation were
approved by a majority of the Incumbent Directors at the time of the execution
of the initial agreement or action of the Board providing for such sale or
other disposition of the Company’s assets.


 


2