Exhibit
10.28


 


April 26, 2004


 


 


Mr.
Gerald McMahon


522
12th Avenue


San Francisco, CA 
94118


 


Dear Jerry:


 


On behalf of NeoRx
Corporation, a Washington corporation (the “Company”), I am very pleased to
extend to you an offer to join the Company as Chief Executive Officer.  Subject to your agreement, evidenced by
countersigning this letter, this letter agreement (this “Agreement”) sets forth
the terms and conditions of your employment by the Company:


 


1.              Position


 


(a)  You (“Executive”) shall be the Chief Executive
Officer of the Company.  In this
position, Executive shall have overall charge and responsibility for the
business and affairs of the Company. 
Executive will report to the Board of Directors of the Company (the “Board”).


 


(b)  Executive shall devote his full business
time, ability and attention to the business of the Company and shall not engage
in or perform duties for any other person which interferes with performance of
his duties hereunder.  Executive is expected
to work on average three (3) full business days per week at the Company’s
offices in Seattle, Washington, subject to any substantial travel and other
obligations being performed on behalf of the Company outside of the Seattle
area.  Executive may hold board of
director positions with outside civic organizations and may spend a reasonable
amount of time fulfilling the duties of those positions and engage in other
outside activities permitted by the policies of the Company or as specifically
permitted by the Board, so long as such activities do not interfere with the
performance of the Executive’s duties hereunder.  Service on a board of directors for a
commercial entity will be subject to prior approval of the Board; however, the
Company acknowledges and agrees that Executive has previously disclosed his
appointment to the board of directors of Trellis Bioscience, Inc.


 


(c)  The employment relationship between the
Company and Executive shall also be governed by the general employment policies
and procedures of the Company, except that when the terms of this Agreement
differ from or are in conflict with the Company’s general employment policies
or procedures, this Agreement shall control.


 


2.              Term


 


Executive shall commence
employment with the Company on or about May 11, 2004 (“Commencement Date”).  The term of this Agreement shall be four (4)
years from the Commencement Date, subject to termination as provided herein and
subject to the provisions of Sections 11, 12, 13, 14 and 15 hereof surviving
termination of this Agreement.


 


3.              Annual Salary


 


Executive’s annualized
base salary shall be Three Hundred Seventy-Five Thousand Dollars ($375,000),
payable in accordance with the Company’s standard payroll procedures, as
compensation for services hereunder (including services as a member of the
Company’s Board of Directors).  Executive’s
base salary will be subject to increase or decrease thereafter at the sole
discretion of the Board; provided, however, that it is recognized that any
decrease in Executive’s base salary below (a) the base salary in effect on
the date of this Agreement, which is set forth above, is a trigger pursuant to Section 5.7(a)
of the Severance Agreement attached hereto as Exhibit A or (b) the
base salary then in effect is a trigger pursuant to Section 8.7(e)/5.1 of
the Change of Control attached hereto as Exhibit B after a “Change of
Control.”


 


4.              Cash Bonuses


 


Executive shall be
eligible to receive annual cash bonuses up to 50% of Executive’s annual base
salary, at


 


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the discretion of the
Board.


 


5.              Equity-Based
Incentive Compensation


 


On the day that the
shareholders approve the Company’s 2004 Incentive Compensation Plan (the “Plan”),
which will be after the Commencement Date, Executive will be granted a ten-year
stock option under the terms of the Plan to purchase 550,000 shares of the
Company’s common stock, which option will vest as to 137,500 shares on the
first anniversary of the Commencement Date with the Company and thereafter in
equal amounts monthly over the next three years (the “Option”).  To the extent permitted by applicable law, a
portion of the Option will be treated as an incentive stock option (“ISO”)
pursuant to Section 422 of the Internal Revenue Code (the “Code”).  The exercise price for the Option will be
equal to the closing price reported by Nasdaq SmallCap Market on the date of
grant.  Executive’s participation in the
Company’s stock option plan(s) is conditioned upon his not rendering services
for or engaging in any business competitive with the Company as provided in Section 12
hereof.


 


6.              Group/Fringe
Benefits


 


Subject to the specific
conditions in this Agreement and the attached Exhibits, Executive may
participate in the benefit programs provided by the Company on terms no less
favorable to Executive than the terms offered to other senior executives of the
Company.  Executive will accrue vacation
at the rate of four (4) weeks per year, the administration thereof (e.g., year-to-year accumulation and benefits, if any, at
termination) to be in accordance with the policies of the Company.


 


The Company shall
reimburse Executive for all reasonable travel, entertainment or other expenses
he incurs in furtherance of or in connection with the performance of his duties
hereunder, including but not limited to reasonable expenses connected with
weekly travel to the Company’s headquarters, and expenses related to rent and
other reasonable expenses connected with the establishment of an office space
approved by the Board in the San Francisco area, in accordance with the Company’s
expense reimbursement policy as in effect from time to time.  Domestic business travel shall be reimbursed
at coach fare rates and international travel at business class rates.


 


The Company shall pay
Executive’s expenses incurred for legal counsel in connection with negotiating
this Agreement, not to exceed Seven Thousand Dollars ($7,000) in total.


 


7.              Inventions
and Proprietary Information


 


At commencement of
employment, Executive will execute the “Invention and Proprietary Information
Agreement” attached hereto as Exhibit C (the “Invention Agreement”).


 


8.              Termination;
Termination Benefits


 


Either Executive or the
Company may terminate this Agreement and Executive’s employment with the
Company at any time upon thirty (30) days’ prior written notice.  Simultaneous with the execution of this
letter, the Company and Executive will execute the Severance Agreement and
Change of Control Agreement attached hereto as Exhibits A and B,
respectively, which will be effective as of the Commencement Date and which
provide certain termination benefits in the event of termination of employment
without cause.


 


9.              Death or Disability


 


This Agreement and
Executive’s employment relationship with the Company shall immediately
terminate upon Executive’s death or 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 Executive, to perform the duties set forth hereunder 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 Executive’s control, unless Executive is granted a leave of
absence by the Board.  The benefits to be
provided Executive in connection with such termination will be consistent with
the policies of the Company for other senior Executives of the Company.


 


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10.       Binding of Successors


 


The Company will be
required to have any successor to all or substantially all of its business
and/or assets expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession had taken place.


 


11.       Nonsolicitation


 


During the term of his
employment and for one (1) year thereafter, Executive will not, directly or
indirectly, recruit, solicit or induce in any way any employee, advisor or
consultant of the Company to terminate his or her relationship with the
Company, to engage in activities competitive with the Company or not to provide
future services to the Company.  During
the term of Executive’s employment and for one (1) year thereafter, he will
not, directly or indirectly, solicit, induce or encourage in any way any
strategic partners, customers, suppliers or vendors to terminate or reduce
there relationship with the Company or not to enter into any business or
relationship with the Company.


 


12.       Noncompetition


 


During the term of
Executive’s employment, he will not engage in any activities competitive with
the Company except as approved by the Board.


 


In the event Executive,
for his benefit or the benefit of others, within one (1) year after termination
of employment with the Company and without the Company’s written consent (a)
engages in or supervises research or development with respect to the same or
reasonably similar projects (e.g., type of product and indication, such as STR
product for use in myeloma transplantation) on which he was performing or
supervising research or development for the Company or (b) directly or
indirectly is employed by or involved with any business unit developing or
exploiting any products or services that are similar with respect to the same
or reasonably similar products or services (e.g. the STR product for use in
myeloma transplantation)  (i) being
developed or exploited by the Company during his employment and (ii) on
which he worked or about which he learned Proprietary Information (as defined
in the Invention Agreement) during his employment with the Company, then any
outstanding stock options then held by Executive and the exercise by Executive
of any stock options within one (1) year of termination of employment shall be rescinded
and Executive shall be obligated to return (less the exercise price) any stock
purchased pursuant such exercise and any proceeds realized from the sale of
such stock.  Acceptance by the Company of
such benefits of recission and repayment shall be without prejudice to any
other rights and remedies that the Company may have for breach of the
provisions of this Section 12, including, but not limited to, injunctive
relief enforcing the restrictions, to the extent allowed by applicable law.


 


13.       Taxes


 


The Company may deduct
and withhold from any payments to be made to Executive hereunder any amounts
required to be deducted and withheld by the Company under the provisions of any
statute, law, regulation or ordinance now or hereafter enacted.  Executive will work reasonably with the
Company to structure any salary, bonus or other compensation in such a fashion
to qualify for tax deductibility under Section 162(m) of the Internal
Revenue Code while preserving the economic benefit intended to be received by Executive.


 


14.       Indemnification


 


Except to the extent
inconsistent with the Company’s Certification of Incorporation or Bylaws, and
to the maximum extent extended to other officers and directors of the Company,
the Company will indemnify and hold harmless Executive to the fullest extent
permitted by law with respect to Executive’s service as an officer and director
of the Company.


 


15.       Governing Law and Venue


 


This Agreement shall be
governed by and construed in accordance with the laws of the State of Washington
(regardless of its choice-of-law provisions). 
Executive irrevocably consents to the jurisdiction and venue of the
state and federal courts located in King County, Washington, and agrees not to
bring any action, or seek to remove or transfer, any action relating to this
Agreement in or to any other court, other than a state or federal court located
in King County, Washington.


 


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16.       Entire Agreement


 


This Agreement, the
Change of Control Agreement, the Severance Agreement, the Invention Agreement
and the Stock Option Agreement together set forth the entire agreement and
understanding between Executive and the Company and supersede and cancel any
prior understandings, agreements or representations by or between the parties,
written or oral.  This Agreement may not
be amended, modified, changed or discharged in any respect except as agreed in
writing signed by the parties.


 


17.       No Conflict


 


Executive represents and
warrants that this Agreement and his performance hereunder does not and will
not breach or conflict with any agreement to which Executive is or becomes a
party.


 


18.       Successors and Assigns


 


The services and duties
to be performed by Executive hereunder are personal and may not be
assigned.  This Agreement shall be
binding upon and inure to the benefit of the Company, its successors and
assigns and Executive, his heirs and representatives.


 


19.       Waiver


 


Failure by either party
to insist upon strict adherence to any one or more of the provisions of this
Agreement on one or more occasions shall not be construed as a waiver, nor
shall it deprive that party of the right to require strict compliance
thereafter.


 


20.       Severability


 


Whenever possible, each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law. 
If any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or the interpretation of this Agreement in any other jurisdiction.


 


21.       Attorneys’ Fees


 


If it becomes necessary
to pursue or defend any legal proceeding, 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.


 


*     *     *


 


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We are pleased to have
you joining the Company.  If the
foregoing is acceptable to you, please sign the enclosed copy of this letter
and return it to me.


 


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  NEORX CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jack Bowman

  	
   

  
	
   

  	
   

  	
  Jack Bowman, Chairman
  of

  
	
   

  	
   

  	
  the Board and Chief
  Executive Officer

  
	
   

  	
   

  
	
  Agreed and Accepted:

  	
   

  
	
   

  	
   

  
	
  /s/Gerald McMahon

  	
   

  	
   

  
	
  Gerald McMahon

  	
   

  
	
  Dated: April 26, 2004

  	
   

  
					



 


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