Exhibit 10.26


 


NEORX CORPORATION

CHANGE OF CONTROL AGREEMENT


 


 


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


 


The Board of
Directors of the Company (the “Bo2ard”) 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           “Offer Letter” shall mean the offer
letter dated April 26, 2004 establishing Executive’s employment with the
Company and to which a copy of this Agreement is attached.


 


1.5           “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 of four (4)
years from the date of this Agreement as first appearing above; provided,
however, that this Agreement shall automatically renew for successive
additional two (2) 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 in 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, and the Executive hereby agrees to remain in the employ of the Company,
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 as described in
the Offer Letter.


 


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 is “at will” and may be terminated by either
the Executive or the Company at any time with or without cause.  Moreover, if prior to the Change of Control
Date, 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 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 his
productive time, ability, attention and effort to the business and affairs of
the Company and the discharge of the responsibilities assigned to him
hereunder, and will use his reasonable best efforts to perform faithfully and
efficiently such responsibilities.  It
shall not be a violation of this Agreement for the Executive to hold board of
director positions with outside civic organizations or to spend a reasonable
amount of time fulfilling the duties of those positions, or to 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. 
It is expressly understood and agreed that such activities specifically
approved or acquiesced in during the Employment Period shall not 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 him, 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 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 in
substantially equal installments and at the same intervals as the salaries of
other executives of the Company are paid. 
The Compensation Committee 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 bonus (the “Annual 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 (including by
reason of any deferral and including the value of any stock awards and the
compensation expense disclosed in the Company’s financial statements for the
grant of any stock options) to the Executive by the Company in respect of the
three fiscal years (or less if the Executive has worked at the Company less
than three years) immediately preceding the fiscal year in which the Change of
Control Date occurs.  Each Annual Bonus
shall be paid no later than ninety (90) days after the end of the fiscal year
for which the Annual Bonus is awarded, unless the Executive shall elect to
defer the receipt of the Annual Bonus.


 


6.                                       Benefits


 


6.1           Incentive, Retirement and Welfare
Benefit Plans; Vacation


 


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 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


 


During the
Employment Period, the Executive shall be entitled to receive prompt
reimbursement for all reasonable employment expenses incurred by him in
accordance with the policies, practices and procedures of the Company and its
affiliated companies in effect for the executives of the Company during the
Employment Period.


 


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 Sections 10.1
and 10.2 hereof and certain obligations under the Invention Agreement (as
defined in Section 10.3 hereof) and the Offer Letter shall survive the
termination of this Agreement and the termination of the Executive’s employment
with the Company:


 


7.1           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 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 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 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
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 the 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, at the end 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 his duties during such period.


 


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.


 


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 his 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
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); provided that, in the event that the
Executive is entitled to an amount in respect of the Annual Bonus under
Section 8.1(c), he shall receive the amount payable under
Section 8.1(c) first and the amount payable under this
Section 8.1(a)(ii) only to the extent it exceeds the amount payable under
Section 8.1(c); and


 


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


 


(b)           for one 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 Company
shall pay the Executive’s premiums for health insurance benefit continuation
for the Executive and his family members, if applicable, which 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 equal to fifty percent
(50%) of the Annual Bonus that would have been paid to the Executive for the
fiscal year in which the Date of Termination falls but for the termination of
the Executive’s employment;


 

















 


(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 by the Company for Cause
or by the Executive 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 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, 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 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).


 


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 his 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, shall be made to the Executive within ten (10) working days of
the Date of Termination.  Any payments
payable to the Executive pursuant to Section 8.1(c) and (d) hereof shall
be made to the Executive in a lump sum within ten (10) working days of the
Date of Termination.


 


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:


 


(a)           a clear refusal to carry out any
material lawful duties of the Executive or any directions of the Board, 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 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 more than thirty (30) miles from the
Company’s current location in Seattle, Washington or from the city of San
Francisco, California;


 


(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, subject to the notice and
opportunity-to-cure requirements of Section 11 hereof.


 


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 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
Section 4999 of the Code 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
he is obligated to make the excise tax payment.  The determination of whether and to what extent any payments or
benefits would be “excess parachute payments” and the date by which any excise
tax shall be due, shall be determined in writing by recognized tax counsel
selected by the Company and reasonably acceptable to the Executive.


 


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 him from fulfilling his 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 the 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 agreement by
which the Executive may be bound.


 

















 


10.                                 Nondisclosure;
Return of Materials


 


10.1         Nondisclosure


 


Except as
required by his 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 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 his compensation, granting him any promotions or raises, or entrusting
him 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 his 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.


 


10.3         Invention and Proprietary Information
Agreement


 


The parties
have executed concurrently herewith the NeoRx Corporation Invention and
Proprietary Information Agreement, in the form attached to the Offer Letter as
Exhibit C (“Invention Agreement”) and acknowledge that their respective
obligations thereunder shall apply to the entire period of Executive’s
employment with the Company and shall survive the execution of this Agreement,
the termination of this Agreement and the termination of the Executive’s
employment with 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:

  	
   

  	
  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 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
NeoRx Corporation and any successor to its business and/or assets as aforesaid
that assumes and agrees to perform this Agreement by 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.


 


16.                                 Applicable
Law and Venue


 


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.  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.


 


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 to 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.


 

















 


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 22 hereof, this Agreement constitutes the entire
agreement between the Company and the Executive with respect to the subject
matter hereof, and all prior 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 Invention Agreement and the Offer Letter to which it and this
Agreement are Exhibits, shall continue in full force and effect to the extent
not specifically superseded herein.


 


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.                                 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.


 


22.                                 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; and


 


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


 


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


 

















 


	
   

  	
  NEORX CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ Jack L. Bowman

  	
   

  
	
   

  	
   

  	
  Name: Jack L. Bowman

  
	
   

  	
   

  	
  Its: Executive Chairman

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ Gerald McMahan

  	
   

  
	
   

  	
   

  	
  Name: Gerald McMahon

  



 

















 


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 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 (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 (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 and 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.