**Exhibit 10.26**

** **

**NEORX CORPORATIONCHANGE OF CONTROL AGREEMENT**

 

 

This Change ofControl Agreement (VP) (this “***Agreement***”), dated as of May 11, 2004, is enteredinto by and between NEORX CORPORATION, a Washington corporation (assupplemented by Section 13, the “Company”), and GERALD MCMAHON (the “***Executive***”).

 

The Board ofDirectors of the Company (the “***Bo2ard***”) has determined that it is in the best interestsof the Company and its shareholders to ensure that the Company will have thecontinued dedication of the Executive, notwithstanding the possibility, threator occurrence of a Change of Control (as defined in Section 1 hereof) of theCompany.  The Board believes it isimperative to diminish the inevitable distraction of the Executive arising fromthe personal uncertainties and risks created by a pending or threatened Changeof Control, to encourage the Executive’s full attention and dedication to theCompany currently and in the event of any threatened or pending Change ofControl, and to provide the Executive with reasonable compensation and benefitarrangements upon a Change of Control.

 

In order toaccomplish these objectives, the Board has caused the Company to enter intothis Agreement.

 

1.             Definitions

 

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

 

1.2           “***Change of Control Date***” shall mean the firstdate 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 secondanniversary of such date.

 

1.4           “Offer Letter” shall mean the offerletter dated April 26, 2004 establishing Executive’s employment with theCompany and to which a copy of this Agreement is attached.

 

1.5           “***Severance Agreement***” shall mean the KeyExecutive Severance Agreement, dated as of the date hereof, between theparties, as it may be amended from time to time, that provides for certainbenefits related to termination of the Executive’s employment that areunrelated to a Change of Control.

 

2                        Term

 

The initialterm of this Agreement (“Initial ***Term***”) shall be for a period of four (4)years from the date of this Agreement as first appearing above; provided,however, that this Agreement shall automatically renew for successiveadditional two (2) year periods (“Renewal Terms”) unless notice of nonrenewalis given by either party to the other at least ninety (90) days prior to theend of the Initial Term or any Renewal Term, and provided further that if aChange in Control occurs during the Term, the Term shall automatically extendfor the duration of the Employment Period. The “Term” of this Agreement shall be the Initial Term plus all RenewalTerms and, if applicable, the duration of the Employment Period.  At the end of the Term, this Agreement shallterminate without further action by either the Company or the Executive.

 

3.                     Employment

 

3.1           Employment Period

 

During theEmployment Period, the Company hereby agrees to continue the Executive in itsemploy, and the Executive hereby agrees to remain in the employ of the Company,in accordance with the terms and provisions

 

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of this Agreement; provided,however, that either the Company or the Executive may terminate the employmentrelationship subject to the terms of this Agreement.

 

3.2           Position and Duties

 

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

 

3.3           Location

 

During theEmployment Period, the Executive’s services shall be performed as described inthe Offer Letter.

 

3.4           Employment at Will

 

The Executiveand the Company acknowledge that, except as may otherwise be provided under anyother written agreement between the Executive and the Company, the employmentof the Executive by the Company is “at will” and may be terminated by eitherthe Executive or the Company at any time with or without cause.  Moreover, if prior to the Change of ControlDate, the Executive’s employment with the Company 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 paymentsthat would have been required during the Employment Period pursuant toSection 8 hereof by terminating the Executive prior to the EmploymentPeriod where such termination is carried out in anticipation of a Change ofControl and the principal motivating purpose is to avoid liability for suchtermination payments.

 

4.                                       Attentionand Effort

 

During theEmployment Period, and excluding any periods of vacation and sick leave towhich the Executive is entitled, the Executive will devote all of hisproductive time, ability, attention and effort to the business and affairs ofthe Company and the discharge of the responsibilities assigned to himhereunder, and will use his reasonable best efforts to perform faithfully andefficiently such responsibilities.  Itshall not be a violation of this Agreement for the Executive to hold board ofdirector positions with outside civic organizations or to spend a reasonableamount of time fulfilling the duties of those positions, or to engage in otheroutside activities permitted by the policies of the Company or as specificallypermitted by the Board, so long as such activities do not interfere with theperformance of the Executive’s duties hereunder.  Service on a board of directors for a commercial entity will besubject to prior approval of the Board; however, the Company acknowledges andagrees that Executive has previously disclosed his appointment to the board ofdirectors of Trellis Bioscience, Inc. It is expressly understood and agreed that such activities specificallyapproved or acquiesced in during the Employment Period shall not be deemed tointerfere with the performance of the Executive’s responsibilities to theCompany.

 

5.                                       Compensation

 

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

 

5.1           Salary

 

The Executiveshall receive an annual base salary (the “***Annual Base Salary***”), at least equal to theannual salary established by the Compensation Committee of the Board (the “***Compensation Committee***”)for the fiscal year in which the Change of Control Date occurs.  The Annual Base Salary shall be paid insubstantially equal installments and at the same intervals as the salaries ofother executives of the Company are paid. The Compensation Committee shall review the Annual Base Salary at leastannually and shall determine in good faith and consistent with any generallyapplicable Company policy any increases for future years.

 

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5.2           Bonus

 

In addition tothe Annual Base Salary, the Executive shall be awarded, for each fiscal yearending during the Employment Period, an annual bonus (the “***Annual Bonus***”) incash at least equal to the average annualized (for any fiscal year consistingof less than twelve (12) full months) bonus paid or payable (including byreason of any deferral and including the value of any stock awards and thecompensation expense disclosed in the Company’s financial statements for thegrant of any stock options) to the Executive by the Company in respect of thethree fiscal years (or less if the Executive has worked at the Company lessthan three years) immediately preceding the fiscal year in which the Change ofControl Date occurs.  Each Annual Bonusshall be paid no later than ninety (90) days after the end of the fiscal yearfor which the Annual Bonus is awarded, unless the Executive shall elect todefer the receipt of the Annual Bonus.

 

6.                                       Benefits

 

6.1           Incentive, Retirement and WelfareBenefit Plans; Vacation

 

During theEmployment Period, the Executive shall be entitled to participate, subject toand in accordance with applicable eligibility requirements, in such fringebenefit programs as shall be generally made available to other executives ofthe Company from time to time during the Employment Period by action of theBoard (or any person or committee appointed by the Board to determine fringebenefit programs and other emoluments), including, without limitation, paidvacations; any stock purchase, savings or retirement plan, practice, policy orprogram; and all welfare benefit plans, practices, policies or programs (including,without limitation, medical, prescription, dental, disability, salarycontinuance, employee life, group life, accidental death and travel accidentinsurance plans or programs).

 

6.2           Expenses

 

During theEmployment Period, the Executive shall be entitled to receive promptreimbursement for all reasonable employment expenses incurred by him inaccordance with the policies, practices and procedures of the Company and itsaffiliated companies in effect for the executives of the Company during theEmployment Period.

 

7.                                       Termination

 

During theEmployment Period, employment of the Executive may be terminated as follows,but, in any case, the nondisclosure provisions set forth in Sections 10.1and 10.2 hereof and certain obligations under the Invention Agreement (asdefined in Section 10.3 hereof) and the Offer Letter shall survive thetermination of this Agreement and the termination of the Executive’s employmentwith the Company:

 

7.1           By the Company or the Executive

 

At any timeduring the Employment Period, the Company may terminate the employment of theExecutive with or without Cause (as defined below), and the Executive mayterminate his employment for Good Reason (as defined below) or for any reason,upon giving the Notice of Termination (as defined below).

 

7.2           Automatic Termination

 

This Agreementand the Executive’s employment during the Employment Period shall terminateautomatically upon the death or Total Disability of the Executive.  The term “***Total Disability***” as used herein shallmean the Executive’s inability (with such accommodation as may be required bylaw and which places no undue burden on the Company), as determined by aphysician selected by the Company and acceptable to the Executive, to performthe duties set forth in Section 3.2 hereof for a period or periodsaggregating twelve (12) weeks in any three hundred sixty-five (365) day periodas a result of physical or mental illness, loss of legal capacity or any othercause beyond the Executive’s control, unless the Executive is granted a leaveof absence by the Board.  The Executiveand the Company hereby acknowledge that the duties specified inSection 3.2 hereof are essential to the Executive’s position and thatExecutive’s ability to perform those duties is the essence of this Agreement.

 

7.3           Notice of Termination

 

Anytermination by the Company or by the Executive during the Employment Periodshall be communicated by the Notice of Termination to the other party given inaccordance with Section 12 hereof. The

 

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term “***Notice of Termination***”shall mean a written notice that (a) indicates the specific terminationprovision in this Agreement relied upon and (b) to the extent applicable,sets forth in reasonable detail the facts and circumstances claimed to providea basis for termination of the Executive’s employment under the provision soindicated.  The failure by the Executiveor the Company to set forth in the Notice of Termination any fact orcircumstance that contributes to a showing of Good Reason or Cause shall notwaive any right of the Executive or the Company hereunder or preclude theExecutive or the Company from asserting such fact or circumstance in enforcingthe Executive’s or the Company’s rights hereunder.

 

7.4           Date of Termination

 

During theEmployment Period, “***Dateof Termination***” means (a) if the Executive’s employment isterminated by reason of death, at the end of the calendar month in which theExecutive’s death occurs, (b) if the Executive’s employment is terminatedby reason of Total Disability, immediately upon a determination by theCompany 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 ofTermination.  The Executive’s employmentand performance of services will continue during such ten (10) day period;provided, however, that the Company may, upon notice to the Executive andwithout reducing the Executive’s compensation during such period, excuse theExecutive from any or all of his duties during such period.

 

8.                                       TerminationPayments

 

In the eventof termination of the Executive’s employment during the Employment Period, allcompensation and benefits set forth in this Agreement shall terminate except asspecifically provided in this Section 8.

 

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

 

If during theEmployment Period the Company terminates the Executive’s employment other thanfor Cause or the Executive terminates his employment for Good Reason, theExecutive shall be entitled to:

 

(a)           receive payment of the followingaccrued obligations (the “***AccruedObligations***”):

 

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

 

(ii)           the product of (x) the AnnualBonus payable with respect to the fiscal year in which the Date of Terminationoccurs and (y) a fraction the numerator of which is the number of days in thecurrent fiscal year through the Date of Termination, and the denominator ofwhich is three hundred sixty-five (365); provided that, in the event that theExecutive is entitled to an amount in respect of the Annual Bonus underSection 8.1(c), he shall receive the amount payable underSection 8.1(c) first and the amount payable under thisSection 8.1(a)(ii) only to the extent it exceeds the amount payable underSection 8.1(c); and

 

(iii)          any compensation previously deferredby the Executive (together with accrued interest or earnings thereon, if any)and any accrued vacation pay that would be payable under the Company’s standardpolicy, in each case to the extent not theretofore paid;

 

(b)           for one year after the Date ofTermination or until the Executive qualifies for comparable medical and dentalinsurance benefits from another employer, whichever occurs first, the Companyshall pay the Executive’s premiums for health insurance benefit continuationfor the Executive and his family members, if applicable, which the Companyprovides to the Executive under the provisions of the federal ConsolidatedOmnibus Budget Reconciliation Act of 1985, as amended (“***COBRA***”), to theextent that the Company would have paid such premiums had the Executiveremained employed by the Company (such continued payment is hereinafterreferred to as “***COBRAContinuation***”);

 

(c)           an amount equal to fifty percent(50%) of the Annual Bonus that would have been paid to the Executive for thefiscal year in which the Date of Termination falls but for the termination ofthe Executive’s employment;

 

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

 

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

 

8.2           Termination by the Company for Causeor by the Executive Other Than for Good Reason

If during theEmployment Period the Executive’s employment shall be terminated by the Companyfor Cause or by the Executive for other than Good Reason, this Agreement shallterminate without further obligation on the part of the Company to theExecutive, other than the Company’s obligation to pay the Executive(a) the Annual Base Salary through the Date of Termination, (b)  theamount of any compensation previously deferred by the Executive, and(c) any accrued vacation pay that would be payable under the Company’sstandard policy, in each case to the extent theretofore unpaid.

 

8.3           Expiration of Term

 

In the eventthe Executive’s employment is not terminated prior to expiration of the Term,this Agreement shall terminate without further obligation on the part of theCompany to the Executive, other than the Company’s obligation to pay theExecutive the product of (a) the Annual Bonus payable with respect to thefiscal year in which the Term expired and (b) a fraction the numerator ofwhich is the number of days in the current fiscal year through the end of theTerm and the denominator of which is three hundred sixty-five (365).

 

8.4           Termination Because of Death or TotalDisability

 

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

 

8.5           Payment Schedule

 

All paymentsof Accrued Obligations, or any portion thereof payable pursuant to thisSection 8, shall be made to the Executive within ten (10) working days ofthe Date of Termination.  Any paymentspayable to the Executive pursuant to Section 8.1(c) and (d) hereof shallbe made to the Executive in a lump sum within ten (10) working days of theDate of Termination.

 

8.6           Cause

 

For purposesof this Agreement, “***Cause***”means cause given by the Executive to the Company and shall include, withoutlimitation, the occurrence of one (1) or more of the following events:

 

(a)           a clear refusal to carry out anymaterial lawful duties of the Executive or any directions of the Board, allreasonably consistent with the duties described in Section 3.2 hereof;

 

(b)           persistent failure to carry out anylawful duties of the Executive described in Section 3.2 hereof or anydirections of the Board reasonably consistent with the duties herein set forthto be performed by the Executive, provided, however, that the Executive hasbeen given reasonable notice and opportunity to correct any such failure;

 

(c)           violation by the Executive of a stateor federal criminal law involving the commission of a crime against the Companyor any other criminal act involving moral turpitude;

 

(d)           current abuse by the Executive ofalcohol or controlled substances; deception, fraud, misrepresentation ordishonesty by the Executive; or any incident materially compromising theExecutive’s reputation or ability to represent the Company with investors,customers or the public; or

 

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(e)           any other material violation of anyprovision of this Agreement by the Executive, subject to the notice andopportunity-to-cure requirements of Section 11 hereof.

 

8.7           Good Reason

 

For purposesof this Agreement, “***GoodReason***” means

 

(a)           the assignment to the Executive ofany duties materially inconsistent with the Executive’s position, authority,duties or responsibilities as contemplated by Section 3.2 hereof or anyother action by the Company that results in a material diminution in suchposition, authority, duties or responsibilities, excluding for this purpose anisolated and inadvertent action not taken in bad faith and that is remedied bythe Company promptly after receipt of notice thereof given by the Executive;

 

(b)           any failure by the Company to complywith any of the provisions of Section 5 or Section 6 hereof, otherthan an isolated and inadvertent failure not taken in bad faith and that isremedied by the Company promptly after receipt of notice thereof given by theExecutive;

 

(c)           the Company’s requiring the Executiveto be based at any office or location more than thirty (30) miles from theCompany’s current location in Seattle, Washington or from the city of SanFrancisco, California;

 

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

 

(e)           any other material violation of anyprovision of this Agreement by the Company, subject to the notice andopportunity-to-cure requirements of Section 11 hereof.

 

8.8           Excess Parachute Limitation

 

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

 

9.                                       Representations,Warranties and Other Conditions

 

In order toinduce the Company to enter into this Agreement, the Executive represents andwarrants to the Company as follows:

 

9.1           Health

 

The Executiveis in good health and knows of no physical or mental disability that, with anyaccommodation that may be required by law and that places no undue burden onthe Company, would prevent him from fulfilling his obligations hereunder.  The Executive agrees, if the Companyrequests, to submit to reasonable periodic medical examinations by a physicianor physicians designated by, paid for and arranged by the Company. TheExecutive agrees that the examination’s medical report shall be provided to theCompany.

 

9.2           No Violation of Other Agreements

 

The Executiverepresents that neither the execution nor the performance of this Agreement bythe Executive will violate or conflict in any way with any other agreement bywhich the Executive may be bound.

 

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10.                                 Nondisclosure;Return of Materials

 

10.1         Nondisclosure

 

Except asrequired by his employment with the Company, the Executive will not, at anytime 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 ortrade secret information without the prior written consent of the Company.  The Executive understands that the Companywill be relying on this Agreement in continuing the Executive’s employment,paying his compensation, granting him any promotions or raises, or entrustinghim 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 orcompiled by the Executive at any time, or in his possession, including any andall copies thereof, shall be the property of the Company and shall be held bythe Executive in trust and solely for the benefit of the Company, and shall bedelivered to the Company by the Executive upon termination of employment or atany other time upon request by the Company.

 

10.3         Invention and Proprietary InformationAgreement

 

The partieshave executed concurrently herewith the NeoRx Corporation Invention andProprietary Information Agreement, in the form attached to the Offer Letter asExhibit C (“Invention Agreement”) and acknowledge that their respectiveobligations thereunder shall apply to the entire period of Executive’semployment with the Company and shall survive the execution of this Agreement,the termination of this Agreement and the termination of the Executive’semployment with the Company.

 

11.                                 Noticeand Cure of Breach

 

Whenever abreach of this Agreement by either party is relied upon as justification forany action taken by the other party pursuant to any provision of thisAgreement, other than clause (a), (b), (c) or (d) of Section 8.6hereof, before such action is taken, the party asserting the breach of thisAgreement shall give the other party at least twenty (20) days’ prior writtennotice of the existence and the nature of such breach before taking furtheraction hereunder and shall give the party purportedly in breach of thisAgreement the opportunity to correct such breach during the twenty (20) dayperiod.

 

12.                                 Formof Notice

 

Every noticerequired by the terms of this Agreement shall be given in writing by servingthe same upon the party to whom it was addressed personally or by registered orcertified mail, return receipt requested, at the address set forth below or atsuch other address as may hereafter be designated by notice given in compliancewith the terms hereof:

 
| If to the  Executive: |   | Gerald  McMahon                     |
|-----------------------|--------|-------------------------------------|
|                  |   | 522 12th  Avenue                    |
|                  |   | San  Francisco, CA  94118      |
|                  |   |                                |
| If to the  Company:   |   | NeoRx  Corporation                  |
|                  |   | 300 Elliott  Avenue West, Suite 500 |
|                  |   | Seattle,  Washington  98119    |
|                  |   | Attn:  Corporate Secretary     |
|                  |   |                                |
| With a copy  to:      |   | Perkins Coie  LLP                   |
|                  |   | 1201 Third  Avenue, 40th Floor      |
|                  |   | Seattle,  Washington 98101-3099     |
|                  |   | Attn:  James R. Lisbakken      |

 

Except as setforth in Section 7.4 hereof, if notice is mailed, such notice shall beeffective upon mailing.

 

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13.                                 Assignment

 

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

 

The Companyshall assign to and require any successor (whether direct or indirect, bypurchase, merger, consolidation or otherwise) to all or substantially all thebusiness and/or assets of the Company to assume expressly and agree to performthis Agreement in the same manner and to the same extent that the Company wouldbe required to perform it if no such succession had taken place.  As used in this Agreement, “***Company***” shall meanNeoRx Corporation and any successor to its business and/or assets as aforesaidthat assumes and agrees to perform this Agreement by operation of law, orotherwise.  All the terms and provisionsof this Agreement shall be binding upon and inure to the benefit of and beenforceable by the parties hereto and their respective successors and permittedassigns.

14.                                 Waivers

 

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

 

15.                                 AmendmentsIn Writing

 

No amendment,modification, waiver, termination or discharge of any provision of thisAgreement, or consent to any departure therefrom by either party hereto, shallin any event be effective unless the same shall be in writing, specificallyidentifying 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 shallbe effective only in the specific instance and for the specific purpose forwhich given.  No provision of thisAgreement shall be varied, contradicted or explained by any oral agreement,course of dealing or performance or any other matter not set forth in anagreement in writing and signed by the Company and the Executive.

 

16.                                 ApplicableLaw and Venue

 

This Agreementshall in all respects, including all matters of construction, validity andperformance, be governed by, and construed and enforced in accordance with, thelaws of the State of Washington, without regard to any rules governingconflicts of laws.  Executiveirrevocably consents to the jurisdiction and venue of the state and federalcourts 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 toany other court, other than a state or federal court located in King County,Washington.

 

17.                                 Arbitration;Attorneys’ Fees

 

Except inconnection with enforcing Section 10 hereof, for which legal and equitableremedies may be sought in a court of law, any dispute arising under thisAgreement shall be subject to arbitration. The arbitration proceeding shall be conducted in accordance with theCommercial Arbitration Rules of the American Arbitration Association (the “***AAA Rules***”) then ineffect, conducted by one arbitrator either mutually agreed upon or selected inaccordance with the AAA Rules.  Thearbitration shall be conducted in King County, Washington, under thejurisdiction of the Seattle office of the American ArbitrationAssociation.  The arbitrator shall haveauthority only to interpret and apply the provisions of this Agreement, andshall have no authority to add to, subtract from or otherwise modify the termsof this Agreement.  Any demand forarbitration must be made within sixty (60) days of the event(s) giving rise tothe claim that this Agreement has been breached.  The arbitrator’s decision shall be final and binding, and eachparty agrees to be bound to by the arbitrator’s award, subject only to anappeal therefrom in accordance with the laws of the State of Washington.  Either party may obtain judgment upon thearbitrator’s award in the Superior Court of King, County, Washington.

 

If it becomesnecessary to pursue or defend any legal proceeding, whether in arbitration orcourt, in order to resolve a dispute arising under this Agreement, theprevailing party in any such proceeding shall be entitled to recover itsreasonable costs and attorneys’ fees.

 

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18.                                 Severability

 

If anyprovision of this Agreement shall be held invalid, illegal or unenforceable inany jurisdiction, for any reason, including, without limitation, the durationof such provision, its geographical scope or the extent of the activitiesprohibited or required by it, then, to the full extent permitted by law,(a) all other provisions hereof shall remain in full force and effect insuch jurisdiction and shall be liberally construed in order to carry out theintent of the parties hereto as nearly as may be possible, (b) suchinvalidity, illegality or unenforceability shall not affect the validity,legality or enforceability of any other provision hereof, and (c) anycourt or arbitrator having jurisdiction thereover shall have the power toreform such provision to the extent necessary for such provision to beenforceable under applicable law.

 

19.                                 EntireAgreement

 

Except asdescribed in Section 22 hereof, this Agreement constitutes the entireagreement between the Company and the Executive with respect to the subjectmatter hereof, and all prior or contemporaneous oral or written communications,understandings or agreements between the Company and the Executive with respectto such subject matter are hereby superseded and nullified in their entireties,except that the Invention Agreement and the Offer Letter to which it and thisAgreement are Exhibits, shall continue in full force and effect to the extentnot specifically superseded herein.

 

20.                                 Withholding

 

The Companymay withhold from any amounts payable under this Agreement such federal, stateor local taxes as shall be required to be withheld pursuant to any applicablelaw or regulation.

 

21.                                 Counterparts

 

This Agreementmay be executed in counterparts, each of which counterparts shall be deemed anoriginal, but all of which together shall constitute one and the sameinstrument.

 

22.                                 CoordinationWith Severance Agreement

 

The SeveranceAgreement that the parties are entering into contemporaneously with thisAgreement provides for certain forms of severance and benefit payments in theevent of termination of the Executive’s employment.  This Agreement is in addition to the Severance Agreement and inno way supersedes or nullifies the Severance Agreement.  Nevertheless, it is possible thattermination of employment by the Company or by the Executive may fall withinthe scope of both agreements.  In suchevent, payments made to the Executive under Section 8.1 hereof shall becoordinated with payments made to the Executive under Section 5.1 of theSeverance Agreement as follows:

 

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

 

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

 

(c)           The severance payment required underSection 8.1(d) hereof shall be paid first, in which case the severance paymentrequired under Section 5.1(c) of the Severance Agreement need not beprovided.

 

IN WITNESSWHEREOF, the parties have executed and entered into this Agreement effective onthe date first set forth above.

 

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|   | **NEORX CORPORATION** |
|--------|-----------------------|
|   |                  |
|   |                  |
|   | By:                   |    /s/ Jack L. Bowman |   |
|   |                  | Name: Jack L. Bowman |
|   |                  | Its: Executive Chairman |
|   |                  |
|   |                  |
|   | **EXECUTIVE**         |
|   |                  |
|   |                  |
|   | By:                   |    /s/ Gerald McMahan |   |
|   |                  | Name: Gerald McMahon |

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# **APPENDIX A**

 

For purposesof this Agreement, a “***Changeof Control***” shall mean:

 

(a)           A “***Board Change***” that, for purposes of thisAgreement, shall have occurred if a majority (excluding vacant seats) of theseats 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 “***IncumbentDirector***” is a member of the Board who has been either(i) nominated by a majority of the directors of the Company then in officeor (ii) appointed by directors so nominated, but excluding, for thispurpose, any such individual whose initial assumption of office occurs as aresult of either an actual or threatened election contest (as such terms areused in Rule 14a-11 of Regulation 14A promulgated under the SecuritiesExchange Act of 1934, as amended (the “***Exchange Act***”)) or other actual or threatenedsolicitation of proxies or consents by or on behalf of a Person (as hereinafterdefined) 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 theExchange Act) (a “***Person***”)of beneficial ownership (within the meaning of Rule 13d-3 promulgated under theExchange Act) of (i) twenty percent (20%) or more of either (A) thethen outstanding shares of Common Stock of the Company (the “***Outstanding Company Common Stock***”)or (B) the combined voting power of the then outstanding voting securitiesof the Company entitled to vote generally in the election of directors (the “***Outstanding Company VotingSecurities***”), in the case of either (A) or (B) of thisclause (i), which acquisition is not approved in advance by a majority of theIncumbent Directors, or (ii) thirty-three percent (33%) or more of either(A) the Outstanding Company Common Stock or (B) the OutstandingCompany Voting Securities, in the case of either (A) or (B) of this clause(ii), which acquisition is approved in advance by a majority of the IncumbentDirectors; provided, however, that the following acquisitions shall notconstitute a Change of Control: (x) any acquisition by the Company, (y) any acquisition by anyemployee benefit plan (or related trust) sponsored or maintained by the Companyor any corporation controlled by the Company, or (z) any acquisition byany corporation pursuant to a reorganization, merger or consolidation, if,following such reorganization, merger or consolidation, the conditionsdescribed in clauses (i), (ii) and (iii) of subsection (c) of thisAppendix A are satisfied; or

 

(c)           Approval by the shareholders of theCompany 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 outstandingshares of common stock of the corporation resulting from such reorganization,merger or consolidation and the combined voting power of the then outstandingvoting securities of such corporation entitled to vote generally in theelection of directors is then beneficially owned, directly or indirectly, byall or substantially all the individuals and entities who were the beneficialowners, respectively, of the Outstanding Company Common Stock and theOutstanding Company Voting Securities immediately prior to such reorganization,merger or consolidation in substantially the same proportion as their ownershipimmediately prior to such reorganization, merger or consolidation of theOutstanding Company Common Stock and the Outstanding Company Voting Securities,as the case may be, (ii) no Person (excluding the Company, any employeebenefit plan (or related trust) of the Company or such corporation resulting fromsuch reorganization, merger or consolidation and any Person beneficiallyowning, immediately prior to such reorganization, merger or consolidation,directly or indirectly, thirty-three percent (33%) or more of the OutstandingCompany Common Stock or the Outstanding Company Voting Securities, as the casemay be) beneficially owns, directly or indirectly, thirty-three percent (33%)or more of, respectively, the then outstanding shares of common stock of thecorporation resulting from such reorganization, merger or consolidation or thecombined voting power of the then outstanding voting securities of suchcorporation entitled to vote generally in the election of directors, and(iii) at least a majority of the members of the board of directors of thecorporation resulting from such reorganization, merger or consolidation werethe Incumbent Directors at the time of the execution of the initial agreementproviding for such reorganization, merger or consolidation; or

 

(d)           Approval by the shareholders of theCompany of (i) a complete liquidation or dissolution of the Company or(ii) the sale or other disposition of all or substantially all the assetsof the Company, other than to a corporation with respect to which immediatelyfollowing such sale or other disposition, (A) more than sixty percent(60%) of, respectively, the then outstanding shares of common stock of suchcorporation and the combined voting power of the then outstanding votingsecurities of such corporation entitled to vote generally in the election of

 

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directors is then beneficiallyowned, directly or indirectly, by all or substantially all the individuals andentities who were the beneficial owners, respectively, of the OutstandingCompany Common Stock and the Outstanding Company Voting Securities immediatelyprior to such sale or other disposition in substantially the same proportion astheir ownership, immediately prior to such sale or other disposition, of theOutstanding Company Common Stock and the Outstanding Company Voting Securities,as the case may be, (B) no Person (excluding the Company, any employeebenefit plan (or related trust) of the Company or such corporation and anyPerson beneficially owning, immediately prior to such sale or otherdisposition, directly or indirectly, thirty-three percent (33%) or more of theOutstanding Company Common Stock or the Outstanding Company Voting Securities,as the case may be) beneficially owns, directly or indirectly, thirty-threepercent (33%) or more of, respectively, the then outstanding shares of commonstock of such corporation and the combined voting power of the then outstandingvoting securities of such corporation entitled to vote generally in theelection of directors, and (C) at least a majority of the members of theboard of directors of such corporation were approved by a majority of theIncumbent Directors at the time of the execution of the initial agreement oraction of the Board providing for such sale or other disposition of theCompany’s assets.

 

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