**Exhibit10.28**

 

April 26, 2004

 

 

Mr.Gerald McMahon

52212th Avenue

San Francisco, CA 94118

 

Dear Jerry:

 

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

 

## **1.**              Position

## ** **

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

 

(b)  Executive shall devote his full businesstime, ability and attention to the business of the Company and shall not engagein or perform duties for any other person which interferes with performance ofhis duties hereunder.  Executive is expectedto work on average three (3) full business days per week at the Company’soffices in Seattle, Washington, subject to any substantial travel and otherobligations being performed on behalf of the Company outside of the Seattlearea.  Executive may hold board ofdirector positions with outside civic organizations and may spend a reasonableamount of time fulfilling the duties of those positions and 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 acommercial entity will be subject to prior approval of the Board; however, theCompany acknowledges and agrees that Executive has previously disclosed hisappointment to the board of directors of Trellis Bioscience, Inc.

 

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

 

## **2.**              Term

## ** **

Executive shall commenceemployment 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 andsubject to the provisions of Sections 11, 12, 13, 14 and 15 hereof survivingtermination of this Agreement.

 

## **3.**              Annual Salary

## ** **

Executive’s annualizedbase salary shall be Three Hundred Seventy-Five Thousand Dollars ($375,000),payable in accordance with the Company’s standard payroll procedures, ascompensation for services hereunder (including services as a member of theCompany’s Board of Directors).  Executive’sbase salary will be subject to increase or decrease thereafter at the solediscretion of the Board; provided, however, that it is recognized that anydecrease in Executive’s base salary below (a) the base salary in effect onthe 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) thebase salary then in effect is a trigger pursuant to Section 8.7(e)/5.1 ofthe Change of Control attached hereto as Exhibit B after a “Change ofControl.”

 

## **4.**              Cash Bonuses

## ** **

Executive shall beeligible to receive annual cash bonuses up to 50% of Executive’s annual basesalary, at

 

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the discretion of theBoard.

 

## **5.**              Equity-BasedIncentive Compensation

## ** **

On the day that theshareholders approve the Company’s 2004 Incentive Compensation Plan (the “Plan”),which will be after the Commencement Date, Executive will be granted a ten-yearstock option under the terms of the Plan to purchase 550,000 shares of theCompany’s common stock, which option will vest as to 137,500 shares on thefirst anniversary of the Commencement Date with the Company and thereafter inequal amounts monthly over the next three years (the “Option”).  To the extent permitted by applicable law, aportion 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 beequal to the closing price reported by Nasdaq SmallCap Market on the date ofgrant.  Executive’s participation in theCompany’s stock option plan(s) is conditioned upon his not rendering servicesfor or engaging in any business competitive with the Company as provided in Section 12hereof.

 

## **6.**              Group/FringeBenefits

## ** **

Subject to the specificconditions in this Agreement and the attached Exhibits, Executive mayparticipate in the benefit programs provided by the Company on terms no lessfavorable to Executive than the terms offered to other senior executives of theCompany.  Executive will accrue vacationat the rate of four (4) weeks per year, the administration thereof (*e.g.*, year-to-year accumulation and benefits, if any, attermination) to be in accordance with the policies of the Company.

 

The Company shallreimburse Executive for all reasonable travel, entertainment or other expenseshe incurs in furtherance of or in connection with the performance of his dutieshereunder, including but not limited to reasonable expenses connected withweekly travel to the Company’s headquarters, and expenses related to rent andother reasonable expenses connected with the establishment of an office spaceapproved by the Board in the San Francisco area, in accordance with the Company’sexpense reimbursement policy as in effect from time to time.  Domestic business travel shall be reimbursedat coach fare rates and international travel at business class rates.

 

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

 

**7.****              Inventionsand Proprietary Information**

 

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

 

## **8.**              Termination;Termination Benefits

## ** **

Either Executive or theCompany may terminate this Agreement and Executive’s employment with theCompany at any time upon thirty (30) days’ prior written notice.  Simultaneous with the execution of thisletter, the Company and Executive will execute the Severance Agreement andChange of Control Agreement attached hereto as Exhibits A and B,respectively, which will be effective as of the Commencement Date and whichprovide certain termination benefits in the event of termination of employmentwithout cause.

 

## **9.**              Death or Disability

## ** **

This Agreement andExecutive’s employment relationship with the Company shall immediatelyterminate upon Executive’s death or the Executive’s inability (with suchaccommodation as may be required by law and which places no undue burden on theCompany), as determined by a physician selected by the Company and acceptableto Executive, to perform the duties set forth hereunder 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 Executive’s control, unless Executive is granted a leave ofabsence by the Board.  The benefits to beprovided Executive in connection with such termination will be consistent withthe policies of the Company for other senior Executives of the Company.

 

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## **10.**       Binding of Successors

## ** **

The Company will berequired to have any successor to all or substantially all of its businessand/or assets expressly assume and agree to perform this Agreement in the samemanner and to the same extent that the Company would be required to perform ifno such succession had taken place.

 

## **11.**       Nonsolicitation

## ** **

During the term of hisemployment and for one (1) year thereafter, Executive will not, directly orindirectly, recruit, solicit or induce in any way any employee, advisor orconsultant of the Company to terminate his or her relationship with theCompany, to engage in activities competitive with the Company or not to providefuture services to the Company.  Duringthe term of Executive’s employment and for one (1) year thereafter, he willnot, directly or indirectly, solicit, induce or encourage in any way anystrategic partners, customers, suppliers or vendors to terminate or reducethere relationship with the Company or not to enter into any business orrelationship with the Company.

 

## **12.**       Noncompetition

## ** **

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

 

In the event Executive,for his benefit or the benefit of others, within one (1) year after terminationof employment with the Company and without the Company’s written consent (a)engages in or supervises research or development with respect to the same orreasonably similar projects (e.g., type of product and indication, such as STRproduct for use in myeloma transplantation) on which he was performing orsupervising research or development for the Company or (b) directly orindirectly is employed by or involved with any business unit developing orexploiting any products or services that are similar with respect to the sameor reasonably similar products or services (e.g. the STR product for use inmyeloma transplantation)  (i) beingdeveloped or exploited by the Company during his employment and (ii) onwhich he worked or about which he learned Proprietary Information (as definedin the Invention Agreement) during his employment with the Company, then anyoutstanding stock options then held by Executive and the exercise by Executiveof any stock options within one (1) year of termination of employment shall be rescindedand Executive shall be obligated to return (less the exercise price) any stockpurchased pursuant such exercise and any proceeds realized from the sale ofsuch stock.  Acceptance by the Company ofsuch benefits of recission and repayment shall be without prejudice to anyother rights and remedies that the Company may have for breach of theprovisions of this Section 12, including, but not limited to, injunctiverelief enforcing the restrictions, to the extent allowed by applicable law.

 

## **13.**       Taxes

## ** **

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

 

## **14.**       Indemnification

## ** **

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

 

## **15.**       Governing Law and Venue

## ** **

This Agreement shall begoverned 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 thestate and federal courts located in King County, Washington, and agrees not tobring any action, or seek to remove or transfer, any action relating to thisAgreement in or to any other court, other than a state or federal court locatedin King County, Washington.

 

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## **16.**       Entire Agreement

## ** **

This Agreement, theChange of Control Agreement, the Severance Agreement, the Invention Agreementand the Stock Option Agreement together set forth the entire agreement andunderstanding between Executive and the Company and supersede and cancel anyprior understandings, agreements or representations by or between the parties,written or oral.  This Agreement may notbe amended, modified, changed or discharged in any respect except as agreed inwriting signed by the parties.

 

## **17.**       No Conflict

## ** **

Executive represents andwarrants that this Agreement and his performance hereunder does not and willnot breach or conflict with any agreement to which Executive is or becomes aparty.

 

## **18.**       Successors and Assigns

## ** **

The services and dutiesto be performed by Executive hereunder are personal and may not beassigned.  This Agreement shall bebinding upon and inure to the benefit of the Company, its successors andassigns and Executive, his heirs and representatives.

 

## **19.**       Waiver

## ** **

Failure by either partyto insist upon strict adherence to any one or more of the provisions of thisAgreement on one or more occasions shall not be construed as a waiver, norshall it deprive that party of the right to require strict compliancethereafter.

 

## **20.**       Severability

## ** **

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

 

## **21.**       Attorneys’ Fees

## ** **

If it becomes necessaryto pursue or defend any legal proceeding, in order to resolve a dispute arisingunder this Agreement, the prevailing party in any such proceeding shall beentitled to recover its reasonable costs and attorneys’ fees.

 

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We are pleased to haveyou joining the Company.  If theforegoing is acceptable to you, please sign the enclosed copy of this letterand 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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