Document:

Exhibit 4.1

 

IRREVOCABLE AGREEMENT
TO CONVERT SERIES B CONVERTIBLE PREFERRED STOCK

 

This Irrevocable Agreement to Convert Series B Convertible
Preferred Stock (the “Agreement”) is made as of February 1, 2006 by
and among NeoRx Corporation, a Washington corporation (the “Company”), the
holders of shares of Series B Convertible Preferred Stock listed on Exhibit A
attached hereto (individually, a “Preferred Holder” and collectively,
the “Preferred Holders”) and the Purchasers (as defined below).

 

RECITALS

 

WHEREAS, pursuant to a Securities Purchase Agreement of
even date herewith among the Company and the purchasers (collectively, the “Purchasers”)
named therein (the “Purchase Agreement”), in form attached hereto as Exhibit B,
the Company desires to sell to such Purchasers shares of the Company’s Common
Stock (“Common Stock”) and warrants to purchase shares Common Stock (the
“Equity Financing”);

 

WHEREAS, to provide the Company with additional
resources to conduct its business and pursue shareholder approval of the
transactions contemplated by the Purchase Agreement, pursuant to the terms and
conditions of a Note and Warrant Purchase Agreement of even date herewith among
the Company and the Purchasers, in form attached hereto as Exhibit C,
the Purchasers have agreed to provide a convertible loan to the Company and the
Company shall issue to the Purchasers convertible notes and warrants to
purchase shares of Common Stock (the “Bridge Financing”);

 

WHEREAS, a condition to the Purchaser’s obligations
under the Purchase Agreement is that the Company and the Preferred Holders enter into this Agreement for the purpose of setting forth
the terms and conditions pursuant to which each of the Preferred Holders agrees
to convert all of the outstanding shares of Series B Convertible Preferred
Stock of the Company (“Series B Preferred”) into shares of the
Company’s Common Stock pursuant to the provisions of Sections 5(a) and (c) of
the Designation of Rights and Preferences of Series B Convertible
Preferred Stock of the Company (“Series B Preferred Designation of
Rights and Preferences”), which is incorporated into and a part of the Company’s
Amended and Restated Articles of Incorporation (the “Amended Articles”);

 

WHEREAS, each Preferred Holder is the holder and owner
of record of that number of shares of Series B Preferred listed opposite
its name on Exhibit A hereto; and

 

WHEREAS, the Company and the Preferred Holders desire
to facilitate the consummation of the Bridge Financing and the Equity Financing
by irrevocably agreeing to the terms and conditions set forth below pursuant to
which all outstanding shares of Series B Preferred will be voluntarily
converted by the holder thereof into shares of Common Stock.

 

 

AGREEMENT

 

The parties agree as follows:

 

1.             Consent to Conversion.   Each Preferred Holder hereby agrees to execute
and deposit with the Company simultaneously herewith a written shareholder
conversion notice in the form attached hereto as Exhibit D (the “Consent”)
to the voluntary conversion (the “Conversion”) of all of the outstanding
shares of Series B Preferred held or beneficially owned by such Preferred
Holder into shares of the Company’s Common Stock pursuant to and as provided in
the provisions of Sections 5(a) and (c) (subject in all cases to the
limitations of Sections 5(i) and 5(h)) of the Series B
Preferred Designation of Rights and Preferences, which is incorporated into and
a part of the Amended Articles.  In the
event the Closing of the Equity Financing does not occur, this Agreement and
the Consents shall be of no further force or effect. The Consent shall be
subject to completion and delivery on the Preferred Holder’s behalf by the
Attorney-in-Fact as set forth in Section 3 below.  The Conversion shall be effective immediately
after the Closing (as defined in the Purchase Agreement) of the Equity
Financing upon the terms set forth in Exhibit B hereto (or any changes
approved in advance by each of the Preferred Holders (the “Conversion Date”)).  Each Preferred Holder hereby acknowledges and
agrees that the number of shares of Common Stock that such Preferred Holder is
entitled to be issued upon the Conversion, including, without limitation, after
giving effect to any anti-dilution adjustments to the shares of Series B
Preferred in accordance with the Amended Articles and the Series B
Preferred Designation of Rights and Preferences upon the issuance of the
Transaction Securities (as defined in the Purchase Agreement), are as set forth
opposite such Preferred Holder’s name on Exhibit E hereto.

 

2.             Agreement.   Each
of the Preferred Holders hereby agrees to vote, if necessary, all of the shares
of the Company’s Series B Preferred (now or hereafter beneficially owned
by such Preferred Holder), including on an as-converted basis as a single
voting class with the Company’s Common Stock, to execute any other consents and
to take any such other actions as may be necessary to effect the Conversion,
all in accordance with the terms of this Agreement and the Amended Articles and
to the extent permitted by Nasdaq.  Within two (2) business
days after the Conversion Date, each Preferred Holder hereby agrees to deliver
and surrender to the Company the original certificate representing the Series B
Preferred that was converted pursuant to the Conversion.  At or prior to the Closing (as defined in the
Purchase Agreement), the Attorney-in Fact (as defined below) hereby agrees to
take all actions set forth in Section 3 below and to deliver and release
to the Company fully completed and executed Consents on behalf of each
Preferred Holder.  The Company hereby
agrees to issue the shares of Common Stock to the Preferred Holders (and
certificates therefor) as set forth on Exhibit E hereto upon the
Conversion promptly and in accordance with the provisions of Section 5(c) of
the Series B Preferred Designation of Rights and Preferences and the
Amended Articles and to otherwise comply in all respects with the provisions of
such charter documents, including, without limitation, Section 10 of the Series B
Preferred Designation of Rights and Preferences.  The Company and the Preferred Holders hereby
agree that upon the Conversion the shares of Series B Preferred so
converted shall not be reissued by the Company and shall be retired and
cancelled.

 

3.             Irrevocable Agency.  Each Preferred Holder hereby irrevocably
appoints the Perkins Coie LLP, counsel to the Company (the “Attorney-in-Fact”),
as its agent and attorney-in-fact

 

2

 

in its name, place and
stead, with full power and authority to act, including full power of
substitution, in the name of, for and on behalf of each Preferred Holder
relating to any matters arising in connection with, or related to the following
actions and omissions to: (i) fill in the effective date of the Conversion
in the Consent based upon the Conversion Date specified in Section 1 and (ii) deliver
and release the fully completed and executed Consent on behalf of such
Preferred Holder to the Company on or after the Conversion Date for the limited
purpose of consenting to and causing the Conversion as set forth herein, to the
same extent and with the same effect as the undersigned might or could do under
any applicable laws governing the rights and powers of shareholders of a Washington
corporation.  It is understood and agreed
that the Consent and this irrevocable appointment relates solely to the
Conversion to be effected in accordance with this Agreement and does not
authorize the Attorney-in-Fact to take any other action with respect to any
other matters.  The Company is entitled
to rely on any action or decision taken by the Attorney-in-Fact within the
scope of the appointment specifically set forth herein.  This Agreement and the agency appointment
contained herein are coupled with an interest and may not be revoked during the
term of this Agreement.  The
Attorney-in-Fact may not delegate, assign or otherwise transfer its obligations
hereunder to another person or entity without the prior written consent of the
Company, the Preferred Holders, and the Purchasers holding at least 60% in
interest of the convertible notes issued in the Bridge Financing.

 

4.             Representations, Warranties and Covenants.

 

(a)           By the Preferred Holders.  Each Preferred Holder hereby represents and
warrants that such Preferred Holder (a) owns the shares of the Series B
Preferred set forth on Exhibit A attached hereto, (b) has full
power to enter into this Agreement and has not, prior to the date of this
Agreement, executed or delivered any proxy or entered into any other voting or
agency agreement or similar arrangement with respect to the matter set forth
herein, (c) will not transfer, assign, encumber or otherwise dispose of
any shares of Series B Preferred prior to the earlier of the Conversion or
the termination of this Agreement as set forth in Section 5 hereof and will
not take any other action inconsistent with the purposes and provisions of this
Agreement and (d) believes such Preferred Holder has received all the
information it considers necessary or appropriate for deciding whether to effect
the Conversion with respect to such Preferred Holder’s shares of Series B
Preferred and such Preferred Holder has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the Conversion,
the sale and issuance of the Transaction Securities (as defined in the Purchase
Agreement) and the business, properties, prospects and financial condition of
the Company.

 

(b)           By the Company.  The Company represents and warrants, as of
the date hereof and as of the Conversion Date, that (i) the Company has
filed a Registration Statement on Form S-3, as amended (No. 333-11344)
(the “Registration Statement”) with the Securities and Exchange
Commission (the “Commission”) relating to the shares of Common Stock
issuable upon conversion of the Series B Preferred and exercise of the
warrants to purchase shares of common stock (the “Warrants”) granted
pursuant to that certain Preferred Stock and Warrant Purchase Agreement dated
as of December 3, 2003, by and among the Company and the buyers named
therein (the “Registrable Securities”); (ii) the Registration
Statement is currently effective with the Commission, and the Company has no
knowledge that any stop order suspending its effectiveness has been issued or
that any proceedings for that purpose are pending before, or

 

3

 

threatened by, the
Commission;  (iii) the Registrable
Securities are available for resale by the Preferred Holders under the Securities
Act of 1933 (the “Securities Act”) pursuant to the Registration
Statement, subject to compliance by the Preferred Holders with the prospectus
delivery or other requirements under Rule 144 of the Securities Act; (iv) the
Registration Statement complies in all material respects with the requirements
of the Securities Act and the rules and regulations of the Commission
promulgated thereunder applicable to the Registration Statement; (v) the
Registration Statement does not and, at the time it was filed, each document
incorporated by reference in the Registration Statement did not, contain any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and (vi) the Registrable Securities upon issuance will be
validly issued, fully paid and non-assessable and will not be subject to
preemptive or other similar rights of shareholders of the Company.  The Company will not, by any voluntary
action, avoid or seek to avoid the observance or performance of any of the
terms to be performed under this Agreement by the Company, but will at all
times in good faith assist in the carrying out of all the provisions of this
Agreement and in the taking of all such actions as may be reasonably necessary
to protect the rights of the parties to this Agreement against impairment.

 

5.             Termination.  This Agreement (including the Appointment of
the Attorney-in- Fact pursuant to Section 3 hereof) shall terminate upon
the earlier to occur of: (i) the occurrence of any event pursuant to which
all of the outstanding shares of Series B Preferred are converted into
shares of the Company’s Common Stock, (ii) the consummation of a Liquidation
(as defined in Section 3(d) of the Amended Articles) or (iii) June 1,
2006.

 

6.             Miscellaneous.

 

(a)           Entire Agreement.  This Agreement and the exhibits hereto
constitute the entire agreement between the parties hereto pertaining to the
subject matter hereof, and any and all other written or oral agreements
relating to the subject matter hereof existing between the parties hereto are
expressly canceled.

 

(b)           Successors and Assigns.  The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties.  Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.

 

(c)           Amendments and Waivers.  Any term hereof may be amended or waived only
with the written consent of the Company, the Preferred Holders, and the Purchasers
holding at least 60% in interest of the convertible notes issued in the Bridge
Financing.

 

(d)           Notices.  Any notice required or permitted by this
Agreement shall be in writing and shall be deemed sufficient on the date of
delivery, when delivered personally or by overnight courier or sent by fax, or
48 hours after being deposited in the U.S. mail, as certified or registered
mail, with postage prepaid, and addressed to the party to be notified at such
party’s

 

4

 

address or fax number as
set forth on the signature page or on Exhibit A hereto or in
the Purchase Agreement, or as subsequently modified by written notice.

 

(e)           Severability.  If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. 
In the event that the parties cannot reach a mutually agreeable and
enforceable replacement for such provision, then (a) such provision shall
be excluded from this Agreement, (b) the balance of the Agreement shall be
interpreted as if such provision were so excluded and (c) the balance of
the Agreement shall be enforceable in accordance with its terms.

 

(f)            Governing Law.  This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Washington, without giving effect to principles of conflicts of law.

 

(g)           Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.

 

(h)           Titles and Subtitles.  The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

 

(i)            Specific Enforcement.  It is agreed and understood that monetary
damages would not adequately compensate an injured party to this Agreement for
the breach of the provisions of this Agreement by any other party hereto, that
the terms of this Agreement shall be specifically enforceable, and that any
breach or threatened breach of this Agreement shall be the proper subject of a
temporary or permanent injunction or restraining order.  Further, each party hereto waives any claim
or defense that there is an adequate remedy of law for such breach or
threatened breach.

 

(j)            Confidentiality.  With the exception of the information in
Schedules A and B, which shall remain confidential at all times (except to the
extent disclosure of such information is required by law or the rules of
the Commission or Nasdaq), each Preferred Holder agrees to treat and hold as
confidential the terms of this Agreement and the transactions contemplated
hereby until such time as the Bridge Financing and Equity Financing have been
publicly disclosed pursuant to Section 4.4 of the Purchase Agreement.

 

(k)           Independent Nature of Preferred Holders’
Obligations and Rights. The obligations of each Preferred Holder
under this Agreement are several and not joint with the obligations of any
other Preferred Holder, and no Preferred Holder shall be responsible in any way
for the performance of the obligations of any other Preferred Holder under this
Agreement. Nothing contained herein or therein and no action taken by any
Preferred Holder pursuant hereto or thereto, shall be deemed to constitute the
Preferred Holder as a partnership, an association, a joint venture or any other
kind of entity, or create a presumption that the Preferred Holders are in any
way acting in concert or as a group, or are deemed affiliates (as such term is
defined under the Exchange Act) with respect to such obligations or the
transactions contemplated by this

 

5

 

Agreement.  Each Preferred Holder confirms that it has
independently participated in the negotiation of the transaction contemplated
hereby with the advice of its own counsel and advisors.  Each Preferred Holder shall be entitled to
independently protect and enforce its rights, including without limitation the
rights arising out of this Agreement, and it shall not be necessary for any
other Preferred Holder to be joined as an additional party in any proceeding
for such purpose.

 

[Signature Pages Follow]

 

6

 

IN WITNESS WHEREOF, the undersigned hereby execute
this Irrevocable Agreement to Convert Series B Convertible Preferred Stock
on the date first set forth above.

 

 

	
   

  	
  THE
  COMPANY

  
	
   

  	
   

  
	
   

  	
  NEORX
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Gerald McMahon

  	
   

  
	
   

  	
  Gerald
  McMahon

  
	
   

  	
  Chairman
  and Chief Executive Officer

  

 

 

Signature Page to Irrevocable Agreement to Convert Series B Convertible
Preferred Stock

 

 

IN WITNESS WHEREOF, the
undersigned hereby execute this Irrevocable Agreement to Convert Series B
Convertible Preferred Stock on the date first set forth above.

 

 

	
   

  	
  PREFERRED HOLDER

  
	
   

  	
   

  
	
   

  	
  ROYAL BANK OF CANADA

  
	
   

  	
  By its agent

  
	
   

  	
  RBC Capital Markets Corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/STEVEN C. MILKE

  	
   

  
	
   

  	
  Name:

  	
  Steven C. Milke

  	
   

  
	
   

  	
  Managing
  Director

  
	
   

  	
  By:

  	
  /S/JOSEF MUSKATEL

  	
   

  
	
   

  	
  Name:

  	
  Joseph Muskatel

  	
   

  
	
   

  	
   

  	
  Director and Senior Counsel

  	
   

  
					

 

 

Signature Page to Irrevocable Agreement to Convert Series B
Convertible Preferred Stock

 

 

IN WITNESS WHEREOF, the
undersigned hereby execute this Irrevocable Agreement to Convert Series B
Convertible Preferred Stock on the date first set forth above.

 

 

	
   

  	
  PREFERRED HOLDER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/LARRY GOLDFARB

  	
   

  
	
   

  	
  Name:

  	
  LARRY GOLDFARB

  	
   

  
	
   

  	
  Its:

  	
  MANAGING PARTNER

  	
   

  
						

 

 

Signature Page to Irrevocable Agreement to Convert Series B
Convertible Preferred Stock

 

 

IN WITNESS WHEREOF, the
undersigned hereby execute this Irrevocable Agreement to Convert Series B
Convertible Preferred Stock on the date first set forth above.

 

 

	
   

  	
  PREFERRED HOLDER

  
	
   

  	
  T ROWE PRICE ASSOCIATES, INC.

  
	
   

  	
  As Registered Investment
  Adviser to the T. 

  Rowe Price Funds listed in Exhibits A and B

  
	
   

  	
  RBC Capital Markets Corporation

  
	
   

  	
  By:

  	
  /S/ JAY S. MARKOWITZ

  	
   

  
	
   

  	
  Name:

  	
  JAY S. MARKOWITZ

  	
   

  
	
   

  	
  Its:

  	
  VICE PRESIDENT

  	
   

  
						

 

 

Signature Page to Irrevocable Agreement to Convert Series B
Convertible Preferred Stock

 

 

IN WITNESS WHEREOF, the
undersigned hereby execute this Irrevocable Agreement to Convert Series B
Convertible Preferred Stock on the date first set forth above.

 

 

	
   

  	
  PREFERRED HOLDER

  
	
   

  	
  SDS CAPITAL GROUP SPC,
  LTD.

  	
   

  
	
   

  	
  By:

  	
  /S/ STEVE DERBY

  	
   

  
	
   

  	
  Name:

  	
  STEVE DERBY

  	
   

  
	
   

  	
  Its:

  	
  DIRECTOR

  	
   

  
						

 

 

Signature Page to Irrevocable Agreement to Convert Series B
Convertible Preferred Stock

 

 

IN WITNESS WHEREOF, the undersigned hereby execute
this Irrevocable Agreement to Convert Series B Convertible Preferred Stock
on the date first set forth above.

 

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DEERFIELD
  SPECIAL SITUATIONS FUND,

  LTD.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/DARREN LEVINE

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  DARREN LEVINE

  	
   

  
	
   

  	
   

  
	
   

  	
  Its:

  	
  CFO

  	
   

  
						

 

Signature Page to Irrevocable Agreement to Convert Series B Convertible
Preferred Stock

 

 

IN WITNESS WHEREOF, the undersigned hereby execute
this Irrevocable Agreement to Convert Series B Convertible Preferred Stock
on the date first set forth above.

 

 

	
   

  	
  PURCHASER

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DEERFIELD SPECIAL
  SITUATIONS FUND

  INTERNATIONAL, LTD.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /S/DARREN LEVINE

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:  DARREN LEVINE

  
	
   

  	
   

  
	
   

  	
  Its:  CFO

  	
   

  
						

 

 

SIGNATURE PAGE TO IRREVOCABLE AGREEMENT TO CONVERT
SERIES B CONVERTIBLE

PREFERRED STOCK

 

 

IN WITNESS WHEREOF, the undersigned hereby execute
this Irrevocable Agreement to Convert Series B Convertible Preferred Stock
on the date first set forth above.

 

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ABINGWORTH BIOVENTURES IV

  EXECUTIVES LP

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/JAMES ABELL

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  ABINGWORTH
  MANAGEMENT LTD

  JAMES ABELL

  	
   

  
	
   

  	
   

  
	
   

  	
  Its:

  	
  DIRECTOR

  	
   

  
						

 

Signature Page to Irrevocable Agreement to Convert Series B Convertible
Preferred Stock

 

 

IN WITNESS WHEREOF, the undersigned hereby execute
this Irrevocable Agreement to Convert Series B Convertible Preferred Stock
on the date first set forth above.

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ABINGWORTH
  BIOEQUITIES MASTER FUND LTD

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ JAMES ABELL

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  ABINGWORTH
  MANAGEMENT LTD JAMES ABELL

  	
   

  
	
   

  	
   

  
	
   

  	
  Its:

  	
  DIRECTOR

  	
   

  
						

 

Signature Page to
Irrevocable Agreement to Convert Series B Convertible Preferred Stock

 

 

IN WITNESS WHEREOF, the undersigned hereby execute this
Irrevocable Agreement to Convert Series B Convertible Preferred Stock on
the date first set forth above.

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ABINGWORTH BIOVENTURES III LP

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ JAMES ABELL

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  JAMES ABELL ABINGWORTH MANAGEMENT LTD

  	
   

  
	
   

  	
   

  
	
   

  	
  Its:

  	
  DIRECTOR

  	
   

  
						

 

Signature Page to
Irrevocable Agreement to Convert Series B Convertible Preferred Stock

 

 

 

IN WITNESS WHEREOF, the undersigned hereby execute
this Irrevocable Agreement to Convert Series B Convertible Preferred Stock
on the date first set forth above.

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
  Bay
  City Capital Management IV, LLC

  
	
   

  	
  General
  Partner of:

  
	
   

  	
  Bay
  City Capital Fund IV Co-Investment

  
	
   

  	
  Fund,
  L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /S/ CARL GOLDFISCHER

  	
   

  
	
   

  	
  By:
  Bay City Capital LLC, its Manager

  
	
   

  	
  By:
  Carl Goldfischer, Manager and Managing

  Director

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  Bay
  City Capital

  
	
   

  	
   

  	
  750
  Battery Street, Suite 400

  
	
   

  	
   

  	
  San
  Francisco, CA 94111

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Bay
  City Capital Management IV, LLC

  
	
   

  	
  General
  Partner of:

  
	
   

  	
  Bay
  City Capital Fund IV, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /S/ CARL GOLDFISCHER

  	
   

  
	
   

  	
  By:
  Bay City Capital LLC, its Manager

  
	
   

  	
  By:
  Carl Goldfischer, Manager and Managing Director

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  Bay
  City Capital

  
	
   

  	
   

  	
  750
  Battery Street, Suite 400

  
	
   

  	
   

  	
  San
  Francisco, CA 94111

  
						

 

Signature Page to Irrevocable Agreement to Convert Series B
Convertible Preferred Stock

 

 

IN WITNESS WHEREOF, the undersigned hereby execute
this Irrevocable Agreement to Convert Series B Convertible Preferred Stock
on the date first set forth above.

 

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
    MPM
  ASSET MANAGEMENT

  
	
   

  	
  INVESTORS
  2005 BVIII LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ NICHOLAS J. SIMON

  	
   

  
	
   

  	
  Name:
  Nicholas J. Simon

  
	
   

  	
  Title:
  Manager

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  The
  John Hancock Tower

  
	
   

  	
   

  	
  200
  Clarendon Street, 54th Floor

  
	
   

  	
   

  	
  Boston,
  MA 02116

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MPM
  BIOEQUITIES MASTER FUND, LP

  
	
   

  	
   

  
	
   

  	
  By:
  MPM BioEquities GP, L.P., its General

  Partner

  
	
   

  	
   

  
	
   

  	
  By:
  MPM BioEquities GP LLC, its General

  Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/
  KURT VON EMSTER

  	
   

  
	
   

  	
   

  	
  Manager

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  The
  John Hancock Tower

  
	
   

  	
   

  	
  200
  Clarendon Street, 54th Floor

  
	
   

  	
   

  	
  Boston,
  MA 02116

  
							

 

Signature Page to Irrevocable Agreement to Convert Series B
Convertible Preferred Stock

 

 

IN WITNESS WHEREOF, the undersigned hereby execute
this Irrevocable Agreement to Convert Series B Convertible Preferred Stock
on the date first set forth above.

 

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
  MPM
  BIOVENTURES III GMBH & CO.

  BETEILIGUNGS KG

  
	
   

  	
   

  
	
   

  	
  By:
  MPM BioVentures III GP, L.P., in its

  capacity as the Managing Limited Partner

  
	
   

  	
  By:
  MPM BioVentures III LLC, its General

  Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/
  NICHOLAS J. SIMON

  	
   

  
	
   

  	
  Name:
  Nicholas J. Simon

  
	
   

  	
  Title:
  Series A Member

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  The
  John Hancock Tower

  
	
   

  	
   

  	
  200
  Clarendon Street, 54th Floor

  
	
   

  	
   

  	
  Boston,
  MA 02116

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MPM
  BIOEQUITIES III PARALLEL FUND L.P.

  
	
   

  	
   

  
	
   

  	
  By:
  MPM BioVentures III GP, L.P., its

  General Partner

  
	
   

  	
  By:
  MPM BioVentures III LLC, its

  General Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/
  NICHOLAS J. SIMON

  	
   

  
	
   

  	
  Name:
  Nicholas J. Simon

  
	
   

  	
  Title:
  Series A Member

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  The
  John Hancock Tower

  
	
   

  	
   

  	
  200
  Clarendon Street, 54th Floor

  
	
   

  	
   

  	
  Boston,
  MA 02116

  
							

 

Signature Page to Irrevocable Agreement to Convert Series B
Convertible Preferred Stock

 

 

IN WITNESS WHEREOF, the undersigned hereby execute
this Irrevocable Agreement to Convert Series B Convertible Preferred Stock
on the date first set forth above.

 

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
     MPM
  BIOVENTURES III, L.P.

  
	
   

  	
   

  
	
   

  	
  By:
  MPM BioVentures III GP, L.P., its

  General Partner

  
	
   

  	
  By:
  MPM BioVentures III LLC, its

  General Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/
  NICHOLAS J. SIMON

  	
   

  
	
   

  	
  Name:
  Nicholas J. Simon

  
	
   

  	
  Title:
  Series A Member

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  The
  John Hancock Tower

  
	
   

  	
   

  	
  200
  Clarendon Street, 54th Floor

  
	
   

  	
   

  	
  Boston,
  MA 02116

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MPM
  BIOVENTURES III-QP, L.P.

  
	
   

  	
   

  
	
   

  	
  By:
  MPM BioVentures III GP, L.P., its

  General Partner

  
	
   

  	
  By:
  MPM BioVentures III LLC, its

  General Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/
  NICHOLAS J. SIMON

  	
   

  
	
   

  	
  Name:
  Nicholas J. Simon

  
	
   

  	
  Title:
  Series A Member

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  The
  John Hancock Tower

  
	
   

  	
   

  	
  200
  Clarendon Street, 54th Floor

  
	
   

  	
   

  	
  Boston,
  MA 02116

  
							

 

Signature Page to Irrevocable Agreement to Convert Series B
Convertible Preferred Stock

 

 

IN WITNESS WHEREOF, the undersigned hereby execute
this Irrevocable Agreement to Convert Series B Convertible Preferred Stock
on the date first set forth above.

 

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ STEVEN BLOOM

  	
   

  
	
   

  	
  Name:
  Steven Bloom

  
	
   

  	
  Title:
  Managing Director, Sagamore Hill Capital

  Management, on behalf of Sagamore Hill Hub

  Fund, Ltd.

  
	
   

  	
   

  
	
   

  	
  One
  Manhattanville Road

  
	
   

  	
   

  
	
   

  	
  Purchase,
  NY 10577

  
				

 

Signature Page to Irrevocable Agreement to Convert Series B
Convertible Preferred Stock

 

 

IN WITNESS WHEREOF, the undersigned hereby execute
this Irrevocable Agreement to Convert Series B Convertible Preferred Stock
on the date first set forth above.

 

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SHEPHERD
  INVESTMENTS

  INTERNATIONAL, LTD.

  	
   

  
	
   

  	
   

  
	
   

  	
  BY:
  STARK OFFSHORE MANAGEMENT, LLC

  
	
   

  	
  ITS
  INVESTMENT MANAGER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ MICHAEL A. ROTH

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
  Michael A. Roth

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  Managing Member

  	
   

  	
   

  
							

 

Signature Page to Irrevocable Agreement to Convert Series B
Convertible Preferred Stock

 

 

IRREVOCABLE AGREEMENT TO CONVERT SERIES B
CONVERTIBLE

PREFERRED STOCK

 

IN WITNESS WHEREOF, the undersigned hereby execute
this Irrevocable Agreement to Convert Series B Convertible Preferred Stock
on the date first set forth above.

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
  T.
  ROWE PRICE ASSOCIATES, INC., AS

  REGISTERED INVESTMENT ADVISER TO

  THE PARTICIPATING T. ROWE PRICE

  ACCOUNTS IN EXHIBIT B

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ DARRELL N. BRAMAN

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Darrell
  N. Braman

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Vice
  President and Associate Legal Counsel

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  100
  East Pratt Street

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Baltimore,
  MD 21202

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Phone:
  410-345-2013

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile:
  410-345-6575

  	
   

  

 

 

SIGNATURE PAGE – IRREV
AGMT TO CONVERT SERIES B CONVERTIBLE PREFERRED STOCK

T. ROWE PRICE ASSOCIATES, INC. - PURCHASER

 

 

EXHIBIT A

 

	
  Name and Address of
  Series B Holder

  	
   

  	
  Shares of Series B

  Preferred Beneficially

  Owned

  
	
   

  	
   

  	
   

  
	
  SDS Capital Group SPC,
  LTD.

  

  c/o SDS Capital Group

  53
  Forest Avenue

  Old Greenwich, CT 06870

  Attn:
  Steve Derby

  Scott Derby

  	
   

  	
  330

  
	
   

  	
   

  	
   

  
	
  BayStar Capital II, LP

  

  c/oBayStar Capital Management, LLC

  80
  E. Sir Francis Drake Blvd., Suite 2B

  Lakespur, CA 94939

  Attention:
  Lawrence Goldfarb

  Michael Randall

  	
   

  	
  170

  
	
   

  	
   

  	
   

  
	
  Royal Bank of Canada

  

  c/o RBC Capital Markets Corporation

  One
  Liberty Plaza

  165 Broadway

  New York, NY 10006

  Attn:       Josef
  Muskatel

  Director and Senior Counsel

  Derivatives

  Tel:         (212)
  858-7492

  Fax:         (212)
  428-3062

  	
   

  	
  1,000

  

 

 

	
  Name and Address of
  Series B Holder

  	
   

  	
  Shares of Series B

  Preferred Beneficially

  Owned

  
	
   

  	
   

  	
   

  
	
  T. Rowe Price Health
  Sciences Fund, Inc.

  Nominee
  name: Lobstercrew & Co.

   

  State Street Bank

  New
  York Settlements

  DTC/NY Window

  55 Water Street

  New York, NY 10041

  Attn: Robert Mendez

   

  Copy to:

  Darrell
  N. Braman, Vice President

  T. Rowe Price Associates, Inc.

  100 E. Pratt Street

  Baltimore, MD 20202

  	
   

  	
  45

  
	
   

  	
   

  	
   

  
	
  TD Mutual Funds – TD
  Health Sciences Fund

  Nominee
  name: Mac & Co.

   

  Physical Deliveries New
  York

  Mellon
  Securities Trust Co.

  120 Broadway, 13th Floor

  New York, NY 10271

   

  Copy to:

  Darrell
  N. Braman, Vice President

  T. Rowe Price Associates, Inc.

  100 E. Pratt Street

  Baltimore, MD 20202

  	
   

  	
  13

  

 

 

	
  Name and Address of
  Series B Holder

  	
   

  	
  Shares of Series B

  Preferred Beneficially

  Owned

  
	
   

  	
   

  	
   

  
	
  Valic Company I—Health
  Sciences Fund

  Nominee
  name: Squidrig & Co.

   

  State Street Bank

  2
  Avenue de Lafayette, 5 Northwest

  Boston, MA 02110

   

  Copy to:

  Darrell
  N. Braman, Vice President

  T. Rowe Price Associates, Inc.

  100 E. Pratt Street

  Baltimore, MD 20202

  	
   

  	
  5

  
	
   

  	
   

  	
   

  
	
  John Hancock
  Trust-Health Sciences Trust

  Nominee
  name: Lamppost & Co.

   

  State Street Bank

  2
  Avenue de Lafayette, 5 Northwest

  Boston, MA 02110

   

  Copy to:

  Darrell
  N. Braman, Vice President

  T. Rowe Price Associates, Inc.

  100 E. Pratt Street

  Baltimore, MD 20202

  	
   

  	
  6

  

 

 

	
  Name and Address of
  Series B Holder

  	
   

  	
  Shares of Series B

  Preferred Beneficially

  Owned

  
	
   

  	
   

  	
   

  
	
  IDEX Mutual Funds-IDEX
  T. Rowe Price Health Sciences

  Nominee
  name: Hare & Co.

   

  Bank of New York

  One
  Wall Street

  Window A

  New York, NY 10286

   

  Copy to:

  Darrell
  N. Braman, Vice President

  T. Rowe Price Associates, Inc.

  100 E. Pratt Street

  Baltimore, MD 20202

  	
   

  	
  3

  
	
   

  	
   

  	
   

  
	
  Raytheon Company
  Combined DB/DC Master Trust –

  Health
  Sciences

  Nominee name: BOST & Co.

   

  Mellon
  Securities Trust Co.

  120 Broadway, 13th Floor

  New York, NY 10271

   

  Copy to:

  Darrell
  N. Braman, Vice President

  T. Rowe Price Associates, Inc.

  100 E. Pratt Street

  Baltimore, MD 20202

  	
   

  	
  3

  
	
   

  	
   

  	
   

  
	
  TOTAL

  	
   

  	
  1,575

  

 

 

EXHIBIT B

 

SECURITIES
PURCHASE AGREEMENT

 

 

EXHIBIT C

 

NOTE AND
WARRANT PURCHASE AGREEMENT

 

 

EXHIBIT D

 

FORM OF
SHAREHOLDER CONVERSION NOTICE

 

(To be executed by the registered Holder in order to
convert shares of Convertible Preferred Stock)

 

The undersigned hereby
irrevocably elects to convert the number of shares of Series B Convertible
Preferred Stock (the “Convertible Preferred Stock”) indicated below into shares
of common stock, par value $0.02 per share (the “Common Stock”), of NeoRx
Corporation, a Washington corporation (the “Corporation”), according to the
Designation of Rights and Preferences of the Convertible Preferred Stock and
the conditions hereof, as of the date written below. The undersigned hereby
requests that certificates for the shares of Common Stock to be issued to the
undersigned pursuant to this Shareholder Conversion Notice be issued in the
name of, and delivered to, the undersigned or its designee as indicated below.
If the shares of Common Stock are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto. A copy of the certificate representing the Convertible
Preferred Stock being converted is attached hereto.

 

	
   

  
	
  Date of
  Conversion (Date of Notice)

  

 

	
   

  

Number of shares of Convertible Preferred Stock owned
prior to Conversion

 

	
   

  

Number of shares of Convertible Preferred Stock to be
Converted

 

	
  US$10,000.00

  
	
  Stated Value of Convertible Preferred Stock to be
  Converted

  

 

	
  $0.00

  
	
  Amount of accumulated and unpaid dividends on shares
  of Convertible Preferred Stock to be Converted

  

 

	
   

  

Number of shares of Common Stock to be Issued
(including conversion of declared but unpaid dividends on shares of Convertible
Preferred Stock to be Converted)

 

	
  $1.65

  
	
  Applicable Conversion Value

  

 

	
   

  

Number of shares of Convertible Preferred Stock owned
subsequent to Conversion

 

Conversion Information:[NAME OF HOLDER]

 

	
   

  	
   

  

 

 

Address of Holder:

	
   

  	
   

  
	
   

  	
   

  

Issue Common Stock to (if different than above):

	
  Name:

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Tax ID #:

  	
   

  	
   

  
					

 

The undersigned
represents, subject to the accuracy of information filed under the Securities
Act and the Exchange Act by the Corporation with respect to the outstanding
Common Stock of the Corporation, as of the date hereof that, after giving
effect to the conversion of Preferred Shares pursuant to this Shareholder
Conversion Notice, the undersigned will not exceed the “Beneficial Ownership
Cap” contained in Section 5(h) of the Designation of Rights and
Preferences of the Convertible Preferred Stock.

 

 

	
   

  	
   

  
	
  Name of Holder

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  
	
  Title:

  
			

 

 

EXHIBIT E

 

	
  Name and Address of
  Series B Holder

  	
   

  	
  Shares of Common Stock

  To Be Beneficially Owned

  Upon the Conversion

  
	
   

  	
   

  	
   

  
	
  SDS Capital Group SPC,
  LTD.

   

  c/o SDS Capital Group

  53
  Forest Avenue

  Old Greenwich, CT 06870

  Attn:
  Steve Derby

  Scott Derby

  	
   

  	
  2,000,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  BayStar Capital II, LP

   

  c/oBayStar Capital
  Management, LLC

  80
  E. Sir Francis Drake Blvd., Suite 2B

  Lakespur, CA 94939

  Attention:
  Lawrence Goldfarb

  Michael Randall

  	
   

  	
  1,030,303

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Royal Bank of Canada

   

  c/o RBC Capital Markets
  Corporation

  One
  Liberty Plaza

  165 Broadway

  New York, NY 10006

  Attn:       Josef
  Muskatel

  Director and Senior Counsel

  Derivatives

  Tel:         (212)
  858-7492

  Fax:         (212)
  428-3062

  	
   

  	
  6,060,606

  	
   

  

 

 

	
  Name and Address of
  Series B Holder

  	
   

  	
  Shares of Common Stock

  To Be Beneficially Owned

  Upon the Conversion

  
	
   

  	
   

  	
   

  
	
  T. Rowe Price Health
  Sciences Fund, Inc.

  Nominee
  name: Lobstercrew & Co.

   

  State Street Bank

  New
  York Settlements

  DTC/NY Window

  55 Water Street

  New York, NY 10041

  Attn: Robert Mendez

   

  Copy to:

  Darrell
  N. Braman, Vice President

  T. Rowe Price Associates, Inc.

  100 E. Pratt Street

  Baltimore, MD 20202

  	
   

  	
  272,727

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TD Mutual Funds – TD
  Health Sciences Fund

  Nominee
  name: Mac & Co.

   

  Physical Deliveries New
  York

  Mellon
  Securities Trust Co.

  120 Broadway, 13th Floor

  New York, NY 10271

   

  Copy to:

  Darrell
  N. Braman, Vice President

  T. Rowe Price Associates, Inc.

  100 E. Pratt Street

  Baltimore, MD 20202

  	
   

  	
  78,788

  	
   

  

 

 

	
  Name and Address of
  Series B Holder

  	
   

  	
  Shares of Common Stock

  To Be Beneficially Owned

  Upon the Conversion

  
	
   

  	
   

  	
   

  
	
  Valic Company I—Health
  Sciences Fund

  Nominee
  name: Squidrig & Co.

   

  State Street Bank

  2
  Avenue de Lafayette, 5 Northwest

  Boston, MA 02110

   

  Copy to:

  Darrell
  N. Braman, Vice President

  T. Rowe Price Associates, Inc.

  100 E. Pratt Street

  Baltimore, MD 20202

  	
   

  	
  30,303

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  John Hancock
  Trust-Health Sciences Trust

  Nominee
  name: Lamppost & Co.

   

  State Street Bank

  2
  Avenue de Lafayette, 5 Northwest

  Boston, MA 02110

   

  Copy to:

  Darrell
  N. Braman, Vice President

  T. Rowe Price Associates, Inc.

  100 E. Pratt Street

  Baltimore, MD 20202

  	
   

  	
  36,364

  	
   

  

 

 

	
  Name and Address of
  Series B Holder

  	
   

  	
  Shares of Common Stock

  To Be Beneficially Owned

  Upon the Conversion

  
	
   

  	
   

  	
   

  
	
  IDEX Mutual Funds-IDEX
  T. Rowe Price Health Sciences

  Nominee name: Hare &
  Co.

   

  Bank of New York

  One
  Wall Street

  Window A

  New York, NY 10286

   

  Copy to:

  Darrell
  N. Braman, Vice President

  T. Rowe Price Associates, Inc.

  100 E. Pratt Street

  Baltimore, MD 20202

  	
   

  	
  18,182

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Raytheon Company
  Combined DB/DC Master Trust –

  Health
  Sciences

  Nominee name: BOST & Co.

   

  Mellon
  Securities Trust Co.

  120 Broadway, 13th Floor

  New York, NY 10271

   

  Copy to:

  Darrell
  N. Braman, Vice President

  T. Rowe Price Associates, Inc.

  100 E. Pratt Street

  Baltimore, MD 20202

  	
   

  	
  18,182

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TOTAL

  	
   

  	
  9,545,455Exhibit 10.1

 

SECURITIES
PURCHASE AGREEMENT

 

This SECURITIES PURCHASE
AGREEMENT (this “Agreement”),
dated and effective as of February 1, 2006, is made by and among NeoRx
Corporation, a Washington corporation (the “Company”),
and the Purchasers listed on Exhibit A hereto, together with their permitted
transferees (each, a “Purchaser”
and collectively, the “Purchasers”).

 

RECITALS:

 

A.            The
Company and the Purchasers are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Section 4(2) of
the Securities Act and/or Regulation D under the Securities Act or Regulation S
thereunder.

 

B.            The
Purchasers desire to purchase and the Company desires to sell, subject to
shareholder approval and other the terms and conditions stated in this
Agreement, up to a maximum of $65,000,000 of Common Stock and warrants to
purchase Common Stock of the Company.

 

C.            Concurrent
with execution of this Agreement, the Purchasers have extended a Bridge Loan to
the Company in order to enable the Company to continue operations pending
closing of the transactions contemplated by this Agreement and in connection
therewith will issue the Bridge Notes and Bridge Warrants.

 

D.            As
set forth herein, the Company has agreed to provide certain registration rights
with respect to the Shares, the Warrant Shares and the Bridge Warrant Shares
under the Securities Act and the rules and regulations promulgated
thereunder, and applicable state securities laws.

 

E.             The
capitalized terms used herein and not otherwise defined have the meanings given
them in Article 8.

 

AGREEMENT

 

In consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Purchasers (severally and not jointly) hereby agree as follows:

 

ARTICLE 1

PURCHASE AND SALE OF SECURITIES

 

1.1          Purchase and Sale of Securities. 
At the Closing, the Company will issue and sell to each Purchaser, and
each Purchaser will, severally and not jointly, purchase from the Company the
number of shares of Common Stock (the “Shares”)
and the number of warrants (the “Warrants”) to purchase shares of Common Stock set forth
opposite such Purchaser’s

 

1

 

name
on Exhibit A hereto (the Shares and
the Warrants referred to collectively as the “Securities”).  The purchase price for each Security shall be
$0.70 (the “Purchase Price”).  For each one Share purchased by a Purchaser,
such Purchaser shall receive a Warrant to purchase 0.50 of a share of Common
Stock at an exercise price per share equal to $0.77, which represents 110% of
the Purchase Price, pursuant to a Warrant substantially in the form attached as
Exhibit B hereto.  In addition, at the Closing, the Company will
deliver Shares to each Purchaser upon conversion and pursuant to the terms of
the Bridge Note held by such Purchaser.

 

1.2          Payment. 
At the Closing, each Purchaser will pay, severally and not jointly, the
aggregate Purchase Price set forth opposite its name on Exhibit A
hereto by wire transfer of immediately available funds in accordance
with wire instructions provided by the Company to the Purchasers prior to the
Closing and by the cancellation of indebtedness under the Bridge Loan.  The Company will instruct its transfer agent
to deliver to each Purchaser at Closing a certificate evidencing the number of
Shares set forth on Exhibit A in the name of such Purchaser, or in the name
of a nominee designated by such Purchaser, and will deliver to each
Purchaser Warrants to purchase the Warrant Shares set forth on Exhibit A in the name of such Purchaser, or in the name of a nominee designated by
such Purchaser, against delivery of the aggregate Purchase Price on the
Closing Date.

 

1.3          Adjustment.  The number of Shares to be purchased by the Purchasers
at the Closing pursuant to Sections 1.1 and 1.2, the Purchase Price and the per
share exercise price and number of Warrant Shares shall be proportionately
adjusted for any subdivision or combination of Common Stock (by stock split,
reverse stock split, dividend, reorganization, recapitalization or otherwise).

 

1.4          Closing Date.  The closing of the transaction contemplated by this
Agreement (the “Closing”) will take place on
the first Business Day after the satisfaction or waiver (subject to applicable
law and requirements of Nasdaq) of the conditions set forth in Article 5
(excluding conditions that, by their nature, cannot be satisfied until the
Closing Date), unless this Agreement has been terminated pursuant to its terms
or unless another time or date for the Closing is agreed to in writing by the
Company and the Purchasers who have agreed to purchase at least 60% in interest
of the aggregate Securities to be purchased at Closing (the actual time and
date of the Closing being referred to herein as the “Closing
Date”).  The Closing will
be held at the offices of Perkins Coie LLP, 1201 Third Avenue, Suite 4800,
Seattle, Washington 98101 or at such other time and place as shall be agreed
upon by the Company and the Purchasers who have agreed to purchase at least 60%
in interest of the aggregate Securities to be purchased at Closing.

 

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as specifically contemplated by this Agreement
or as set forth in the Disclosure Schedules, which Disclosure Schedules shall
be deemed a part hereof, the Company hereby represents and warrants as follows:

 

2

 

2.1          Organization and Qualification. 
Each of the Company and its Subsidiary is duly incorporated, validly
existing and in good standing under the laws of the State of Washington, with
full corporate power and authority to conduct its business as currently
conducted as disclosed in the SEC Documents. 
The Company owns all of the capital stock of each Subsidiary free and
clear of any and all liens, security interest and any other encumbrances or
restrictions, and all the outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights.  Each of
the Company and its Subsidiary is duly qualified to do business and is in good
standing in each jurisdiction in which the nature of the business conducted by
it or property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, would not
have a Material Adverse Effect and, to the Company’s knowledge, no proceeding
has been instituted in any such jurisdiction revoking, limiting or curtailing,
or seeking to revoke, limit or curtail, such corporate power and authority or
qualification.  The Company has no
Subsidiary other than NeoRx Manufacturing Group, Inc., a Washington
corporation, which is wholly owned by the Company.

 

2.2          Authorization; Enforcement. 
The Company has all requisite corporate power and corporate authority to
enter into and to perform its obligations under this Agreement and the
Warrants, the Bridge Loan Agreement, the Bridge Notes, the Security Agreement
and the Bridge Warrants (and each of the other agreements entered into by the
parties hereto in connection with the Offering) (collectively, the “Related Agreements”) to consummate
the transactions contemplated hereby and thereby and to issue the Securities,
the Warrant Shares, the Bridge Notes, the Bridge Warrants and the Bridge
Warrant Shares (collectively, the “Transaction Securities”)
in accordance with the terms hereof and thereof.  The execution, delivery and performance of
this Agreement and the Related Agreements by the Company and the consummation
by it of the transactions contemplated hereby and thereby in accordance with
the respective terms hereof and thereof (including the issuance of the
Transaction Securities) have been duly authorized by all necessary corporate
proceedings on the part of the Company, except for the shareholder approval
referred to in Section 5.1(b) of this Agreement, which is subject to
Sections 4.5 and 4.6 hereof.  The
execution, delivery and performance of the Bridge Loan Agreement, the Bridge
Notes, the Security Agreement and the Bridge Warrants by the Company and the
consummation by it of the transactions contemplated thereby (including the
issuance of the Bridge Warrants and the Bridge Warrant Shares) shall not
require any approval of the Company’s shareholders.  This Agreement and the Related Agreements
have been duly executed by the Company and, when delivered in accordance with
the terms hereof and thereof, will constitute legal, valid and binding obligations
of the Company enforceable against the Company in accordance with their
respective terms, except as enforceability may be limited by Section 9-408
of Revised Article 9 of the Uniform Commercial Code, applicable
bankruptcy, insolvency, reorganization, or moratorium or similar laws affecting
creditors’ and contracting parties’ rights generally and except as
enforceability may be subject to general principles of equity and except as
rights to indemnity and contribution may be limited by applicable laws or
public policy underlying such laws.

 

2.3          Capitalization.  The fully-diluted capitalization of the
Company (giving effect to (i) the conversion of all Series B Convertible
Preferred Stock to Common Stock at a Conversion Rate of 6060.6061 per share pursuant
to the Series B Conversion Agreement (the “Conversion”),
which Conversion is to be effected concurrently with the Closing and (ii) any

 

3

 

anti-dilution
adjustments to securities of the Company that are triggered by the purchase and
sale of the Transaction Securities) is as set forth in Section 2.3
of the Disclosure Schedules.  All of the
issued and outstanding shares of capital stock of the Company and its
Subsidiary are validly issued, fully paid, and nonassessable.  Except for the Offering and the Conversion
and as set forth in Section 2.3 of the Disclosure Schedules, there
are no outstanding options, warrants, rights to subscribe to, or securities,
rights or obligations convertible into or exchangeable or excercisable for, or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock of the Company or its Subsidiary or any options, warrants, rights or
other instruments convertible into or exchangeable for, Common Stock of the Company
or any Subsidiary.  The Company’s Amended
and Restated Articles of Incorporation, as amended (the “Articles
of Incorporation”), as in effect on the date hereof, and the
Company’s Amended and Restated Bylaws (the “Bylaws”) as in effect on the date hereof,
are each filed as exhibits to the SEC Documents.  Except for the Offering and the Conversion
and as set forth in Schedule 2.3 of the Disclosure Schedules, there
are no shareholder agreements, voting agreements or other similar agreements
with respect to the Common Stock to which the Company or its Subsidiary is a
party.

 

2.4          Issuance of Securities. 
The Securities, the Bridge Notes and the Bridge Warrants are all duly
authorized, and all of the shares of Common Stock issuable upon exercise of the
Warrants (the “Warrant
Shares”) and all of the shares of Common Stock issuable upon
exercise of the Bridge Warrants (the “Bridge Warrant Shares”) when issued in
accordance with the terms of this Agreement and the Bridge Loan Agreement (and
in case of the Warrant Shares, the Warrants and in the case of the Bridge
Warrant Shares, the Bridge Warrants), will be validly issued, fully paid and
non-assessable and, except for antidilution adjustments described in Section 2.3
of the Disclosure Schedules, will not be subject to preemptive rights or other
similar rights of shareholders of the Company. 
Assuming the accuracy of all representations and warranties of the
Purchasers set out in Article 3, the offer and issuance by the Company of
the Transaction Securities is exempt from registration under the Securities Act
and all applicable Blue Sky laws.

 

2.5          No Conflicts; Government Consents
and Permits.

 

(a)           The execution, delivery and performance
of this Agreement and the Related Agreements by the Company and the consummation
by the Company of the transactions contemplated hereby and thereby (including
the issuance of the Transaction Securities) will not (i) conflict with or
result in a violation of any provision of its Articles of Incorporation or
Bylaws; (ii) except as described or referred to in Section 2.5(a) of
the Disclosure Schedules, violate or conflict with, or result in a breach of
any provision of, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of notice, consent, termination, amendment, acceleration or cancellation
of, any agreement, indenture, or instrument to which the Company or its
Subsidiary is a party, or (iii) subject to receipt of Required Approvals
and the Required Shareholder Approval, result in a violation of any law, rule,
regulation, order, judgment or decree (including United States federal and
state securities laws and regulations and regulations of any self-regulatory
organizations to which the Company or its securities are subject) applicable to
the Company or its Subsidiary, except in the case of clauses (ii) and (iii) only,
for such conflicts, breaches, defaults, and violations as would not have a
Material Adverse Effect.

 

4

 

Except
as set forth in Section 2.5(a) of the Company Disclosure
Schedule, the execution, delivery and performance of this Agreement and the
Related Agreements by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including the issuance of the
Transaction Securities) will not be deemed a change of control under any
agreement, instrument or indenture to which the Company or its Subsidiary is a
party.

 

(b)           The Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with,
any court or governmental agency or any regulatory or self regulatory agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement or any of the Related Documents in accordance with the terms hereof
and thereof, or to issue and sell the Transaction Securities in accordance with
the terms hereof and thereof, other than such as have been made or obtained,
and except for (i) the registration of the Shares, the Warrant Shares and
the Bridge Warrant Shares under the Securities Act pursuant to Section 6
hereof, (ii) any filings required to be made under U.S federal or state or
foreign securities laws, (iii) any required filings, notifications or approvals
required by Nasdaq, (iv) any filings required under the Security Agreement
necessary to perfect the security interest granting thereunder; and (v) the
filing with the Washington Secretary of State of Articles of Amendment to
effectuate the amendment of the Company’s Articles of Amendment (collectively,
the “Required Approvals”).

 

(c)           Each of the Company and its Subsidiary
has all franchises, permits, licenses, and any similar authority necessary for
the conduct of its business as now being conducted by it as described in the
SEC Documents, except for such franchise, permit, license or similar authority,
the lack of which would not reasonably be expected to have a Material Adverse
Effect (“Material Permits”). Neither
the Company nor its Subsidiary has received any actual notice of any proceeding
relating to revocation or modification of any Material Permit.

 

2.6          SEC Documents, Financial
Statements.  The Company has filed all reports required to
be filed by it under the Securities Act and the Exchange Act for the two years
preceding the date hereof (all of the foregoing filed at least ten (10) days
prior to the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents (other than exhibits)
incorporated by reference therein, being hereinafter referred to as the “SEC Documents”)) on a timely basis
or has received a valid extension of such time of filing and has filed any such
SEC Document prior to the expiration of any such extension.  The Company has delivered to the Purchasers
or their respective representatives true, correct and complete copies of the
SEC Documents not available on the EDGAR system.   As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act or the Securities Act, as the case may be, and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.  As of their respective
dates, the Financial Statements and the related notes complied as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto.  The Financial Statements and the related
notes have been prepared in accordance with accounting principles generally
accepted in the United States, consistently applied, during the periods
involved (except (i) as may be otherwise

 

5

 

indicated
in the Financial Statements or the notes thereto, or (ii) in the case of
unaudited interim statements, to the extent they may not include footnotes, may
be condensed or summary statements or may conform to the SEC’s rules and
instructions for Reports on Form 10-Q) and fairly present in all material
respects the consolidated financial position of the Company as of the dates
thereof and the consolidated results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal year-end
audit adjustments).  No other information
provided by or on behalf of the Company to the Purchasers which is not included
in the SEC Documents contains any untrue statement of a material fact or omits
to state any material fact necessary in order to make the statements therein,
in the light of the circumstance under which they are or were made, not
misleading.

 

2.7          Disclosure Controls and
Procedures.  The Company has established and maintains
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) that are effective in all material respects to ensure that material
information relating to the Company, including any consolidated Subsidiaries,
is made known to its chief executive officer and chief financial officer by
others within those entities.  The
Company’s certifying officers have evaluated the effectiveness of the Company’s
controls and procedures as of the end of the period covered by the most
recently filed quarterly or annual periodic report under the Exchange Act (such
date, the “Evaluation Date”).  The Company presented in its most recently
filed quarterly or annual periodic report under the Exchange Act the
conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date.  Since the Evaluation
Date, there have been no significant changes in the Company’s internal controls
(as such term is defined in Item 307(b) of Regulation S-K under the
Exchange Act) or, to the Company’s knowledge, in other factors that could
significantly affect the Company’s internal controls.

 

2.8          Accounting Controls.  The
Company maintains a system of accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance
with management’s general or specific authorization, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles as applied in the
United States and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management’s general or specific
authorization, and (iv) the recorded accountability for assets is compared
with existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.

 

2.9          Absence of Litigation. 
Except as set forth in Section 2.9 of the Disclosure
Schedules, there is no action, suit, proceeding or investigation before or by
any court, public board, government agency, self-regulatory organization or
body pending or, to the Company’s knowledge, threatened against the Company or
its Subsidiary that if determined adversely to the Company or its Subsidiary
would have a Material Adverse Effect. Neither the Company or its Subsidiary,
nor any director or officer thereof is, or within the last nine years has been,
the subject of any action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty relating
to the Company.  There has not been, and
to the knowledge of the Company, there is not pending or contemplated, any
investigation by the SEC involving the Company or its Subsidiary or any
director or officer thereof.  The Company
has not received any stop order or other order suspending the

 

6

 

effectiveness
of any registration statement filed by the Company under the Exchange Act or
the Securities Act and, to the Company’s knowledge, the SEC has not issued any
such order.

 

2.10        Intellectual Property Rights. The Company and its Subsidiary solely
own, or have sufficient rights to use and otherwise exercise and exploit and
license, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and other similar rights
necessary or material for use in connection with (or otherwise used or
anticipated to be used in)  their
respective businesses as currently being conducted as described in the SEC
Documents, as previously conducted and as proposed to be conducted
(collectively, the “Intellectual Property Rights”).  Neither the Company nor any Subsidiary has
received any notice (including any offer of a license) that any past, current
or proposed activity of (or any Intellectual Property Rights used, exploited or
exercised by) the Company or any Subsidiary may violate or infringe upon the
rights of any Person and neither has any reason to anticipate that any such
notice may be forthcoming (or that there is or may be any basis therefor).  Except as set forth in the SEC Documents, to
the knowledge of the Company, all the Intellectual Property Rights are
enforceable and there is no existing or expected infringement (or challenge) by
another Person of (or to) any of the Intellectual Property Rights.  All current and former employees and consultants
of the Company or its Subsidiary have enforceable agreements assigning to the
Company or its Subsidiary all intellectual property and related rights that may
arise (have arisen) or be (or have been) used in connection with any activities
of such person or entity for or on behalf of the Company or its Subsidiary. All
current Intellectual Property Rights (along with application, prosecution and
maintenance status) and all contracts and understandings currently in effect
relating thereto are listed on the Section 2.10 of the Disclosure
Schedule; there is not (and is not expected to be) any breach or basis for
termination or diminution of rights under or with respect to any such agreement
or understanding.  Except as set forth in
Section 2.10 of the Disclosure Schedules, to the Company’s
knowledge, all persons who have had access to a Company trade secrets or
confidential information have signed a customary non-disclosure and non-use
agreement not containing a “residuals” clause or similar provision.

 

2.11        Placement Agent. 
Except as set forth in Section 2.11 of the Disclosure
Schedules, the Company has taken no action that would give rise to any claim by
any person for brokerage commissions, placement agent’s fees or similar
payments relating to this Agreement or the transactions contemplated hereby.

 

2.12        Investment Company. 
The Company is not and, after giving effect to the offering and sale of
the Securities, will not be an “investment
company” as such term is defined in the Investment Company Act of 1940,
as amended (the “Investment Company Act”).  The Company shall conduct its business in a
manner so that it will not become subject to the Investment Company Act.

 

2.13        No Material Adverse Change. 
Except as set forth in Section 2.13 of the Disclosure
Schedule, except for cash expenditures in the ordinary course of business and
except for liabilities, limitations, restrictions and obligations arising from
or in connection with this Agreement and the Related Agreements, there has not,
since the filing date of the Company’s Form 10-Q for the quarter ended September 30,
2005, been any change in the assets, business, properties, prospects, financial
condition or results of operations of the Company or its

 

7

 

Subsidiaries
that would have a Material Adverse Effect. 
Since the filing date the Company’s Form 10-Q for the quarter dated
September 30, 2005, except as set forth in Section 2.13 of the
Disclosure Schedules, (i) there has not been any dividend or distribution
of any kind declared, set aside for payment, paid or made by the Company on any
class of capital stock, (ii) the Company has not sustained any material
loss or interference with the Company’s business from fire, explosion, flood or
other calamity, whether or not covered by insurance, or from any labor
disturbance or dispute or any action, order or decree of any court or
arbitrator or governmental or regulatory authority, (iii) the Company has
not waived any material rights with respect to any indebtedness, payments or
other rights in excess of $100,000 owed to it and (iv) the Company has not
incurred any material liabilities except in the ordinary course of business
that involve obligations (contingent or otherwise) and except for liabilities
arising from or in connection with this Agreement and the Related Agreements.  The Company has not taken any steps to seek
protection pursuant to any bankruptcy law nor does the Company have any
knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings.

 

2.14        Nasdaq Capital Market. 
The only securities exchange or automated quotation system or market on
which the Common Stock is listed the Nasdaq Capital Market, and, there have
been no past proceedings, other than proceedings that have been satisfactorily
resolved, and there are no proceedings pending, or to the best of Company’s
knowledge threatened, to revoke or suspend such listing.  Except as described in Section 2.14
of the Disclosure Schedules, the Company is in compliance with the requirements
of Nasdaq Capital Market for continued listing of the Common Stock thereon.

 

2.15        Acknowledgment Regarding
Purchasers’ Purchase of Transaction Securities. The Company acknowledges and
agrees that each of the Purchasers is acting solely in the capacity of an arm’s
length purchaser with respect to this Agreement and the Related Agreements and
the transactions contemplated hereby and thereby. The Company further
acknowledges that no Purchaser is acting as a financial advisor or fiduciary of
the Company (or in any similar capacity with respect to the Company) with
respect to this Agreement and the Related Agreements and the transactions
contemplated hereby and thereby and any advice given by any Purchaser or any of
their respective representatives or agents to the Company in connection with
this Agreement and the Related Agreements and the transactions contemplated
hereby and thereby is merely incidental to such Purchaser’s purchase of the
Transaction Securities. The Company further represents to each Purchaser that
the Company’s decision to enter into this Agreement and the Related Agreements
has been based on the independent evaluation of the transactions contemplated
hereby and thereby by the Company and its representatives.

 

2.16        Accountants. KPMG LLP, which the Company expects will express its opinion with respect to
the audited financial statements and schedules to be included as a part of the
Registration Statement prior to the filing of the Registration Statement, are
an independent public accounting firm as required by the Securities Act.

 

2.17        Insurance. The Company and its Subsidiary are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as the Company believes are prudent and customary
for a company (i) in the business and stage of development and locations
in which the Company and its Subsidiary are engaged and (ii) with

 

8

 

the
resources of the Company and its Subsidiary. 
The Company has not received any written notice that the Company or its
Subsidiary will not be able to renew its existing insurance coverage as and
when such coverage expires.  All of such
policies are in full force and effect and are valid and enforceable in
accordance with their terms, and the Company has complied with all material
terms and conditions of such policies, including premium payments.  The Company believes it will be able to
obtain similar coverage at reasonable cost from similar insurers as may be
necessary to continue its business.

 

2.18        Foreign
Corrupt Practices. Neither the Company, nor to the Company’s
knowledge, any director, officer, agent, employee or other person acting on
behalf of the Company has, in the course of its actions for, or on behalf of,
the Company (i) used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity; (ii) made
any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; (iii) violated or is in
violation of in any material respect any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made or received any unlawful
bribe, rebate, payoff, influence payment, kickback or other unlawful payment to
or from any foreign or domestic government official or employee.

 

2.19        No Integration; General
Solicitation.  Neither the Company nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause the Offering to be
integrated with any prior offering by the Company for purposes of the
Securities Act or any applicable shareholder approval provisions including,
without limitation, under the rules and regulations of any exchange or
quotation system on which any of the securities of the Company are listed or
designated.  Neither the Company nor any
of its affiliates, nor any person acting on its or their behalf, has offered or
sold, or authorized the offer or sale of, any of the Transaction Securities by
any form of general solicitation or general advertising within the meaning of Rule 502(c) under
the Securities Act.  The Company has not
publicly distributed and will not publicly distribute prior to the Closing Date
any offering material in connection with the Offering.  The Company has offered the Transaction
Securities for sale only to the Purchasers and certain other “accredited
investors” within the meaning of Rule 501 under the Securities Act and
Persons who are not “US persons” within the meaning of Rule 902(k) under
the Securities Act.  The Company shall
not directly or indirectly take, and shall not permit any of its directors, or officers
indirectly to take, any action (including any offering or sale to any Person of
the Transaction Securities) that will make unavailable the exemption from
registration under the Securities Act being relied upon by the Company for the
offer and sale to the Purchasers of the Transaction Securities as contemplated
by this Agreement and the Related Agreements.

 

2.20        No Registration Rights. No person has the right to (i) prohibit,
delay or suspend the Company from filing the Registration Statement and fully
performing its obligations with respect thereto as contemplated hereunder or (ii) require
the Company to register any securities for sale under the Securities Act by
reason of the filing of the Registration Statement and no other registration
rights exist with respect to the issuance or registration of securities by the
Company under the Securities Act which have not been satisfied.  The granting and performance of the
registration rights under this Agreement will not violate or conflict with, or

 

9

 

result
in a breach of any provision of, or constitute a default under, any agreement,
indenture, or instrument to which the Company and its Subsidiary is a party.

 

2.21        Taxes.  The Company and
its Subsidiaries has filed (or has obtained an extension of time within which
to file) all necessary federal, state and foreign income and franchise tax
returns and has paid all taxes shown as due on such tax returns, except where
the failure to so file or the failure to so pay would not have a Material
Adverse Effect.  Each of the Company and
its Subsidiaries has complied in all material respects with all applicable
legal requirements relating to the payment and withholding of taxes and, within
the time and in the manner prescribed by law, has withheld from wages, fees and
other payments and paid over to the proper governmental or regulatory
authorities all amounts required.

 

2.22        Real
and Personal Property.  Except
as set forth in Section 2.22 of the Disclosure Schedules, the
Company and its Subsidiary have good and marketable title to, or have valid
rights to lease or otherwise use, all items of real and personal property that
are material to the business of the Company and its Subsidiary, free and clear
of all liens, encumbrances, claims and defects and imperfections of title
except those that (i) do not materially interfere with the use of such
property by the Company and the Subsidiary or (ii) would not have a
Material Adverse Effect.

 

2.23        Poison Pill. The Company has taken (or will prior to
the Closing, if the Closing is the event that would trigger such matters) all
necessary action in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company’s
Articles of Incorporation or the laws of its state of incorporation that is or
could be applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under this
Agreement and the Related Agreements.

 

2.24        No Manipulation of Stock. The Company has not taken, nor will it take,
directly or indirectly any action designed to stabilize or manipulate of the
price of the Common Stock or any security of the Company to facilitate the sale
or resale of any of the Shares, the Warrant Shares or the Bridge Warrant Shares.

 

2.25        Related Party Transactions. 
Except with respect to the transactions that are contemplated hereby or
in the Related Agreements to the extent an affiliate of any director or officer
of the Company purchases Transaction Securities in the Offering and except with
respect to transactions involving amounts less than $60,000, all transactions,
including, without limitation, any contract, agreement or other arrangement
providing for the furnishing of services, providing for rental of real estate
or personal property or otherwise involving payments or obligations, that have
occurred between or among the Company, on the one hand, and any of its officers
or directors, or any affiliate or affiliates of any such executive officer or
director, on the other hand, prior to the date hereof have been disclosed in
the SEC Documents in accordance with the requirements of Item 404 of Regulation
S-K under the Securities Act.

 

2.26        Form S-3 Eligibility. 
The Company is eligible to register the resale of its Common Stock by
the Purchasers under Form S-3 promulgated under the Securities Act, and
the Company hereby covenants and agrees to use commercially reasonable efforts
to maintain

 

10

 

its
eligibility to use Form S-3 until the Registration Statement covering the
resale of the Shares, the Warrant Shares and the Bridge Warrant Shares have
been filed with, and declared effective by, the SEC.

 

2.27        Vote Required.  The
votes of the holders of any class or series of the Company’s capital stock necessary
to approve the issuance of the Securities and any other transactions
contemplated by this Agreement or the Related Agreements that are required to
be approved by the shareholders under applicable laws, rules and
regulations and the rules of Nasdaq are (i) with respect to the
Offering,  the affirmative vote of a majority of the total votes cast at
the Shareholders’ Meeting by the holders of the outstanding Common Stock (with
no separate class vote or series vote of the Preferred Stock); and (ii) with
respect to the amendment to the Company’s Articles of Incorporation to increase
the number of authorized and unissued shares of Common Stock as further
described in Section 4.5 hereof, the affirmative vote of a majority of the
votes entitled to be cast at the Shareholders’ Meeting by each of (a) the
holders of the outstanding shares of Common Stock and Series B Convertible
Preferred Stock, voting as a single voting group, and (b) the holders of
the outstanding shares of Common Stock, voting as a separate voting group (all
required votes collectively, the “Required Shareholder
Approval”).  Under the rules of
Nasdaq, the holders of the outstanding shares of Series B Convertible
Preferred Stock are not entitled to participate in the vote on the Offering contemplated
by clause (i) above.  The holders of
Series B Convertible Preferred Stock are entitled to participate in the
vote on the Articles of Incorporation contemplated by clause (ii) above as
set forth therein.

 

2.28        Contracts.

 

(a)           Except
for contracts filed as exhibits to the SEC Documents (“Material
Contracts”) and except for this Agreement and the Related
Agreements, the Company does not have any agreements, contracts and commitments
that are material to the business, financial condition, assets, prospects or
operations of the Company (“Other Material Contracts”).

 

(b)           The
Company does not have any employment agreements, or any other similar
agreements that contain any severance or termination pay liabilities or
obligations of the Company in connection with the transactions contemplated by
this Agreement and the Related Agreements.

 

(c)           Except
as set forth in Section 2.28(c) of the Disclosure Schedules,
no material purchase contract or purchase commitment of the Company continues
for a period of more than twelve (12) months or is in excess of the normal,
ordinary and usual requirements of business.

 

(d)           Except
as set forth in Section 2.28(d) of the Disclosure Schedules,
the Company is not in default under or in violation of, nor to the Company’s
knowledge, is there any valid basis for any claim of default under or violation
of, any Material Contract or any Other Material Contract.

 

(e)           Except
as set forth in Section 2.28(e) of the Disclosure Schedules
and other than pursuant to the Bridge Loan and the Bridge Notes, the Company
does not have any debt obligations for borrowed money, including any guarantee
of or agreement to acquire any such debt obligation of others, or any power of
attorney outstanding or any obligation or liability

 

11

 

(whether absolute, accrued, contingent or otherwise)
as guarantor, surety, co-signer, endorser, co-maker, indemnitor or otherwise
with respect to the obligation of any corporation, partnership, joint venture,
association, organization or other entity.

 

(f)            All
agreements, contracts and commitments required to be filed by the Company under
the Exchange Act or the Securities Act have been filed in a timely manner with
the SEC.

 

(g)           The
Company is not restricted by agreement from carrying on its business anywhere
in the world.

 

2.29        Board Approval and
Recommendation to Shareholders.  Prior to the
date of this Agreement, the Company’s Board of Directors, at a meeting duly
called and held, has (a) determined that the Offering is fair to,
advisable and in the best interests of the Company and the shareholders of the
Company, (b) approved the Offering and this Agreement and the Related
Agreements and (c) resolved to recommend that the shareholders of the
Company approve the issuance of the Securities and any other transactions
contemplated by this Agreement and the Related Agreements that are required to
be approved by the shareholders under applicable laws, rules and
regulations and the rules of Nasdaq. 
The action taken by the Company’s Board of Directors constitutes
approval of the Offering under the provisions of Chapter 23B.19 of the
Washington Business Corporation Act (the “WBCA”) such
that Chapter 23B.19 of the WBCA does not apply to the Offering, and such
approval has not been amended, rescinded or modified.

 

2.30        Sarbanes-Oxley Act. 
The Company is in compliance with any and all applicable requirements of
the Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and
any and all applicable rules and regulations promulgated by the SEC
thereunder that are effective as of the date hereof, except where such
noncompliance would not have a Material Adverse Effect.

 

2.31        Books and Records. The books of account, minute books,
stock record books and other records of the Company and its Subsidiary are
complete and correct in all material respects and have been maintained in
accordance with sound business practices and the requirements of Section 13(b)(2) of
the Exchange Act, including an adequate system of internal controls. The minute
books of the Company and its Subsidiary contain accurate and complete records
of all meetings held of, and corporate action taken by, the shareholders, the
Company’s and Subsidiary’s Board of Directors and committees of the Company’s and
the Subsidiary’s Board of Directors, and no meeting of any of such
shareholders, the Company’s and the Subsidiary’s Board of Directors or such
committees has been held for which minutes have not been prepared and are not
contained in such minute books.

 

2.32        Employee Benefit Plans; Employee
Matters.  The consummation of the transactions
contemplated by this Agreement and the Related Agreements will not (i) entitle
any current or former employee or other service provider of the Company or its
Subsidiary to severance benefits or any other payment, compensation or benefit
(including forgiveness of indebtedness), except as expressly provided by this
Agreement, or (ii) accelerate the time of payment or vesting, or increase
the amount of compensation or benefit due any such employee or service
provider, alone or in conjunction with any other possible event (including
termination of employment).  The Company and
its Subsidiary is in compliance in all material respects with

 

12

 

all
currently applicable laws and regulations respecting employment, discrimination
in employment, terms and conditions of employment, wages, hours and
occupational safety and health and employment practices, and is not engaged in
any unfair labor practice.  To the
Company’s knowledge, no employees of the Company or its Subsidiary are in
violation of any term of any material employment contract, patent disclosure
agreement, noncompetition agreement, or any restrictive covenant to a former
employer relating to the right of any such employee to be employed by the
Company (or its Subsidiary) because of the nature of the business conducted or
presently proposed to be conducted by the Company or its Subsidiary or to the
use of trade secrets or proprietary information of others. No key employee of
the Company or its Subsidiary has given written notice to the Company or its
Subsidiary, and the Company is not otherwise aware, that any such key employee
intends to terminate his or her employment with the Company or its Subsidiary.

 

2.33        Environmental Laws. 
The Company is not in violation of any applicable statute, law or
regulation relating to the environment or occupational health and safety,
violation of which would have a Material Adverse Effect.  None of the premises or any properties owned,
occupied or leased by the Company or its Subsidiary have been used by the
Company or its Subsidiary, or to the Company’s knowledge, by any other Person
to manufacture, treat, store, or dispose of any substance that have been designated
to be a “hazardous substance” under applicable environmental laws in violation
of any applicable environmental laws, violation of which would have a Material
Adverse Effect.

 

2.34        Regulatory Compliance. 
As to each of the products of the Company and its Subsidiary, including,
without limitation, products or compounds currently under research and/or
development by the Company or its Subsidiary, subject to the jurisdiction of
the FDA under the Federal Food, Drug and Cosmetic Act and the regulations thereunder
(“FDCA”) (each such product, a “Life Science Product”), such Life
Science Product is being researched, developed, manufactured, tested,
distributed, studied and/or marketed in compliance in all material respects
with all applicable requirements under the FDCA and similar laws and
regulations applicable to such Life Science Product, including those relating
to investigational use, premarket approval, good manufacturing practices,
labeling, advertising, record keeping, filing of reports and security.  Neither the Company nor its Subsidiary has
received any notice or other communication from the FDA or any other federal,
state or foreign governmental entity (i) contesting the premarket approval
of, the uses of or the labeling and promotion of any Life Science Product or (ii) otherwise
alleging any violation by the Company of any law, regulation or other legal
provision applicable to a Life Science Product. 
Neither the Company nor its Subsidiary, nor to the Company’s knowledge,
any officer, employee or agent of the Company or its Subsidiary has, with
respect to a Life Science Product, (i) made an untrue statement of a
material fact or fraudulent statement to the FDA or other federal, state or
foreign governmental entity performing similar functions or (ii) failed to
disclose a material fact required to be disclosed to the FDA or such other
federal, state or foreign governmental entity.

 

13

 

ARTICLE 3

PURCHASER’S REPRESENTATIONS AND WARRANTIES

 

Each Purchaser represents and warrants to the Company,
severally and not jointly, with respect to itself and its purchase hereunder,
that:

 

3.1          Investment Purpose.  The Purchaser is purchasing the Transaction Securities
for its own account for investment and not with a present view toward the
public sale or distribution thereof and has no intention of selling or
distributing any of such Transaction Securities or any arrangement or
understanding with any other persons regarding the sale or distribution of such
Transaction Securities except as contemplated by this Agreement or the Related
Agreements and in compliance with the Securities Act.  The Purchaser will not, directly or
indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) any of
the Transaction Securities except in accordance with the provisions of this
Agreement or the Related Agreements and in compliance with applicable
securities laws.  In making the
representation herein, however, the Purchaser does not agree to hold any of the
Transaction Securities for any minimum or other specified term and reserves the
right to dispose of the Transaction Securities at any time in compliance with
the Securities Act.

 

3.2          Purchaser Status; Questionnaires.  At the time Purchaser was offered the
Transaction Securities, it was, and at the date hereof it is, and on each date
on which it exercises any Warrants or Bridge Warrants, it will be either:  (i) an “accredited investor” as defined
in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) and (a)(8) under the
Securities Act or (ii) a person who is not a “US person” (as defined in Rule 902(k)
under the Securities Act (a “Non-US Person”).  All information provided by the Purchaser to
the Company and/or the Placement Agent in connection with the Purchaser’s
purchase of the Transaction Securities, including but not limited to the
information provided in the Pre-Closing Securities Ownership Questionnaire
attached hereto as Exhibit D,
was accurate and correct when provided or delivered and is accurate and correct
as of the date hereof.

 

3.3          Reliance on Exemptions. 
The Purchaser understands that the Transaction Securities are being
offered and sold to it in reliance upon specific exemptions from or non-application
of the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and the
Purchaser’s compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Purchaser set forth herein in order
to determine the availability of such exemptions and the eligibility of the
Purchaser to acquire the Transaction Securities.

 

3.4          Information. 
The Purchaser acknowledges that is has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and
conditions of the offering of the Transaction Securities and the merits and
risks of investing in the Transaction Securities; (ii) access to
information about the Company and its financial condition, results of
operations, businesses, properties, management and prospects sufficient to
enable it to evaluate its investment, including, without limitation, the
Company’s SEC Documents, and the Purchaser

 

14

 

has
had the opportunity to review the SEC Documents; and (iii) the opportunity
to obtain such additional information that the Company possesses or can acquire
without unreasonable effort or expense that is necessary to make an informed
investment decision with respect to the investment.  Neither such inquiries nor any other due
diligence investigation conducted by such Purchaser or any of its advisors or
representatives shall modify, amend or affect such Purchaser’s right to rely on
the Company’s and Subsidiary’s representations, warranties and covenants
contained herein or in the Related Agreements.

 

3.5          Acknowledgement of Risk.

 

(a)           The Purchaser acknowledges and
understands that its investment in the Transaction Securities involves a
significant degree of risk, including, without limitation, (i) the Company
has a history of operating losses and requires substantial funds in addition to
the proceeds from the sale of the Transaction Securities; (ii) an
investment in the Company is speculative, and only Purchasers who can afford
the loss of their entire investment should consider investing in the Company
and the Transaction Securities; (iii) the Purchaser may not be able to
liquidate its investment; (iv) transferability of the Transaction
Securities is limited; (v) in the event of a disposition of the
Transaction Securities, the Purchaser could sustain the loss of its entire
investment; and (vi) the Company has not paid any dividends on its Common
Stock since inception and does not anticipate the payment of dividends in the
foreseeable future.  Such risks are more
fully set forth in the SEC Documents.

 

(b)           The Purchaser is able to bear the
economic risk of holding
the Transaction Securities for an indefinite period, and has knowledge and
experience in financial and business matters such that it is capable of
evaluating the risks of the investment in the Transaction Securities.

 

(c)           The Purchaser has, in connection with the
Purchaser’s decision to purchase the Transaction Securities and with respect to
all matters relating to this Agreement and the Related Agreements and the
transactions contemplated hereby and thereby, relied solely upon the
advice of such Purchaser’s own counsel and has not relied upon or consulted any
counsel to the Placement Agent or counsel to the Company.

 

(d)           The Purchaser is not purchasing the
Transaction Securities as a result of any form of general solicitation or
general advertising within the meaning of Rule 502(c) under the
Securities Act.

 

3.6          Governmental Review. 
The Purchaser understands that no United States federal or state or
foreign agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the Transaction Securities or an
investment therein.

 

3.7          Transfer or Resale. 
The Purchaser understands that:

 

(a)           the Transaction Securities have not been
and are not being registered under the Securities Act (other than as
contemplated in Article 6 of this Agreement) or any applicable state
securities laws and, consequently, the Purchaser may have to bear the risk of
owning the Transaction Securities for an indefinite period of time because the
Transaction

 

15

 

Securities
may not be transferred unless (i) the resale of the Transaction Securities
is registered pursuant to an effective registration statement under the
Securities Act or exempt from the registration requirements of the Securities Act
under Rule 144 thereunder; or (ii) the Purchaser has delivered to the
Company an opinion of counsel to the Purchaser (in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect
that the Transaction Securities to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration, provided that no
opinion shall be required by the Company in the case of transfers under Rule 144;
and

 

(b)           except as set forth in Article 6 of
this Agreement, neither the Company nor any other person is under any
obligation to register the resale of any Transaction Securities under the
Securities Act or any state or foreign securities laws or to comply with the
terms and conditions of any exemption thereunder.

 

3.8          Legends.

 

(a)           The Purchaser understands the
certificates representing the Transaction Securities will bear a restrictive
legend in substantially the following form (and a stop-transfer order may be
placed against transfer of the certificates for such securities):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE OF THE UNITED STATES IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”) OR REGULATION S THEREUNDER, AND ACCORDINGLY, MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED, TRANSFERRED OR ASSIGNED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

 

(b)           The Purchaser may request that the
Company remove, and the Company agrees to authorize the removal of any legend
from the Transaction Securities (i) following any sale of the Transaction
Securities pursuant to an effective Registration Statement, or (ii) if
such Transaction Securities are eligible for sale under Rule 144(k) or otherwise
under Rule 144 under the Securities Act or under any no-action letter
issued by the SEC.  Following the time a legend
is no longer required for any Transaction Securities hereunder, the Company
will, no later than two Business Days following the delivery by a Purchaser to
the Company or the Company’s transfer agent of a legended certificate
representing such Transaction Securities, accompanied by such additional
information as the Company or the Company’s transfer agent may reasonably
request, deliver or cause to be delivered to such Purchaser a certificate
representing such Transaction Securities that is free from all restrictive and
other legends.

 

16

 

(c)           Notwithstanding anything
herein to the contrary, the Company acknowledges and agrees that the Company
will not require an opinion of counsel in connection with the transfer by a
Purchaser of any Transaction Securities to an Affiliate of such Purchaser.

 

3.9          Authorization; Enforcement. 
The Purchaser is duly organized, validly existing and in good standing
under the laws of its jurisdiction of formation and has the requisite power and
authority to enter into this Agreement and the Related Agreements and to
consummate the transactions contemplated hereby and thereby.  The Purchaser has taken all necessary action
to authorize the execution, delivery and performance of this Agreement and the
Related Agreements.  Upon the execution
and delivery of this Agreement and the Related Agreements, this Agreement and
the Related Agreements shall constitute a valid and binding obligation of the
Purchaser enforceable in accordance with its terms, except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors’ and contracting parties’ rights generally
and except as enforceability may be subject to general principles of equity and
except as rights to indemnity and contribution may be limited by applicable
securities laws or public policy underlying such laws.

 

3.10        Residency. 
The Purchaser is a resident of the jurisdiction set forth next to such
Purchaser’s name on the signature pages hereto.

 

3.11        No Short Sales. 
Between the time the Purchaser learned about the Offering and the public
announcement of the Offering, the Purchaser has not engaged in any short sales
or similar transactions with respect to the Common Stock, nor has the
Purchaser, directly or indirectly, caused any Person to engage in any short
sales or similar transactions with respect to the Common Stock.

 

3.12        Brokers.  The Purchaser has not engaged any brokers, finders or
agents and has not incurred, and will not incur, directly or indirectly, any
liability for brokerage for finder’s fees or agent’s commissions or any similar
charges in connection with this Agreement and the Related Agreements.

 

3.13        Additional Representations by
Non-US Persons.  Each Purchaser who is a Non-US Person
further represents and warrants to the Company, severally and not jointly, with
respect to itself and its purchase hereunder that: (i) the Purchaser’s
principal address is outside of the United States; (ii) the Purchaser was
located outside the United States at the time any offer to buy the Securities
was made to it and at the time the buy order was originated by the Purchaser; (iii) the
Purchaser is not an “affiliate” (as defined in Rule 144) of the Company or
acting on behalf of an affiliate of the Company; and (iv) the Purchaser is
an “accredited investor” as defined in Rule 501(a) of Regulation D
under the Securities Act.  Each Purchaser
who is a Non-US Person hereby expressly agrees not to engage in hedging
transactions with regard to the Securities unless in compliance with the
Securities Act and the terms of this Agreement.

 

17

 

ARTICLE 4

COVENANTS

 

4.1          Reporting Status and Public
Information.  The Company’s Common Stock is registered
under Section 12 of the Exchange Act. 
During the Registration Period, the Company agrees to use commercially
reasonable efforts to (a) timely file all documents with the SEC, (b) make
and keep public information available, as those terms are understood and
defined in Rule 144 under the Securities Act, at all times, (c) file
with the SEC in a timely manner all reports and other documents required of the
Company under the Exchange Act and (d) so long as a Holder owns any
Registrable Securities, furnish to such Holder, upon any reasonable request, a
written statement by the Company as to its compliance with Rule 144 under
the Securities Act, and of the Exchange Act, a copy of the most recent annual
or quarterly report of the Company, and such other reports and documents of the
Company as such Holder may reasonably request in availing itself of any rule or
regulation of the SEC allowing a Holder to sell any such securities without
registration. The Company will not terminate its status as an issuer required
to file reports under the Exchange Act even if the Exchange Act or the rules and
regulations thereunder would permit such termination.

 

4.2          Expenses. 
The Company and each Purchaser is liable for, and will pay, its own
expenses incurred in connection with the negotiation, preparation, execution
and delivery of this Agreement, including, without limitation, attorneys’ and
consultants’ fees and expenses. 
Notwithstanding the foregoing, the Company shall, at the Closing,
reimburse the Purchaser’s reasonable fees and disbursements of counsels for the
Purchasers relating to the preparation and negotiation of this Agreement and
the Related Agreements and the consummation of the transactions contemplated
herein and thereby, up to an aggregate maximum of $125,000.

 

4.3          Financial Information. 
The financial statements of the Company to be included in any documents
filed with the SEC will be prepared in accordance with accounting principles
generally accepted in the United States, consistently applied (except (i) as
may be otherwise indicated in such financial statements or the notes thereto,
or (ii) in the case of unaudited interim statements, to the extent they
may not include footnotes, may be condensed or summary statements or may
conform to the SEC’s rules and instructions for Reports on Form 10-Q),
and will fairly present in all material respects the consolidated financial
position of the Company and consolidated results of its operations and cash flows
as of, and for the periods covered by, such financial statements (subject, in
the case of unaudited statements, to normal year-end audit adjustments).

 

4.4          Securities Laws Disclosure;
Publicity. Except as may be required by law or the rules of
the SEC or Nasdaq, neither the Company nor any Subsidiary shall use the name
of, or make reference to, any Purchaser or any of its Affiliates in any press
release or in any public manner (including any reports or filings made by the
Company under the Exchange Act) without such Purchaser’s prior written consent,
which consent shall not be unreasonably withheld.  On or before 9:30 a.m.,
New York local time, on February 2, 2006, the Company shall issue a press
release disclosing the transactions contemplated hereby and by the Related
Agreements. Such initial press release shall be approved by MPM Capital.  On or before February 4, 2006, the
Company shall file a Current Report on Form 8-K with the SEC

 

18

 

describing the terms of the transactions
contemplated by this Agreement and the Related Agreements and including as
exhibits to such Current Report on Form 8-K this Agreement and the Bridge
Loan Agreement and the forms of Warrants, Bridge the Bridge Notes and Bridge
Warrants, in the form required by the Exchange Act.  Thereafter, so long as this Agreement is in
effect, neither the Company nor the Purchasers shall issue any press release or
otherwise making any public statements with respect to this Agreement or the
Related Agreements or the transactions contemplated hereby or thereby without
the prior consent of the other party, which consent shall not be unreasonably
withheld; provided, however, that the Company, on the one hand, and the
Purchasers, on the other hand, may, without the prior consent of the other
party, issue a press release or make such public statement as may, upon the
advice of counsel, be required by law or the rules of the SEC or Nasdaq if
it has used all reasonable efforts to consult with the other party.

 

4.5          Shareholders’ Meeting.  The Company shall, in accordance with the laws of the
State of Washington, its Articles of Incorporation and its Bylaws use its
reasonable best efforts to convene a meeting of holders of its Shareholders
(the “Shareholders’ Meeting”)
within thirty (30) Business Days (or such other time period that is mutually
agreed to by the Company and the holders of at least 60%-in-interest of the aggregate
principal amount of the Bridge Notes issued to the Purchasers) after the date
the Proxy Statement is first mailed to shareholders of the Company for the
purpose of seeking the Required Shareholder Approval of the sale and issuance
of the Securities and the other transactions contemplated by this Agreement and
the Related Agreements and an amendment to the Company’s Articles of
Incorporation to increase the authorized and unissued shares of Common Stock in
an amount sufficient to permit the issuance of the Shares and the Warrant
Shares and Bridge Warrant Shares issuable upon exercise of the Warrants and the
Bridge Warrants (collectively, the “Transaction Approval”).  Subject to its fiduciary obligations under
applicable law, the Board of Directors of the Company shall recommend to the
Company’s shareholders that the shareholders vote in favor of the Transaction
Approval (the “Company Recommendation”) and
shall not (i) withdraw, modify or qualify (or propose to withdraw, modify
or qualify) in any manner adverse to the Purchasers such recommendation in
favor of the Transaction Approval or (ii) take any action or make any
statement in connection with the Shareholders’ Meeting inconsistent with such
recommendation in favor of the Transaction Approval (a “Change
in the Company Recommendation”); provided, however, that the
Board of Directors of the Company may make a Change in the Company
Recommendation pursuant to Section 4.10 hereof and to effect any action
permitted by Sections 9.1 and 9.2 hereof. 
Notwithstanding any Change in the Company Recommendation, the Company
shall nonetheless cause the Shareholders’ Meeting to be convened and a vote to
be taken, and nothing contained herein shall be deemed to relieve the Company
of such obligation unless this Agreement is terminated pursuant to Sections 9.1
and 9.2.

 

4.6          Proxy Statement.  The Company shall, as promptly as practicable
following the date hereof, but in no event later than February 14, 2006, prepare
and file with the SEC proxy materials (including a proxy statement and a proxy
card) meeting the requirements of Section 14 of the Exchange Act and the
related rules and regulations thereunder promulgated by the SEC (the “Proxy Statement”) to solicit
Transaction Approval.  The Company shall
use its reasonable best efforts to cause the Proxy Statement to be cleared by
the SEC as promptly as reasonably practicable after such filing, and thereafter
cause the Proxy Statement, in definitive

 

19

 

form,
to be promptly mailed to the shareholders of the Company.  Each Purchaser shall promptly furnish in
writing to the Company such information relating to such Purchaser and its
investment in the Company as the Company may reasonably request for inclusion
in the Proxy Statement. The Company shall keep the Purchasers apprised of the
status of matters relating to the Proxy Statement and the Shareholders’
Meeting, including promptly furnishing the Purchasers and their counsel with
copies of notices or other communications related to the Proxy Statement, the
Shareholders’ Meeting or the transactions contemplated hereby received by the
Company from the SEC or Nasdaq.

 

4.7          Sales by Purchasers. 
Each Purchaser agrees that it will comply with the prospectus delivery
requirements of the Securities Act as applicable to it in connection with the
sales of Registrable Securities pursuant to the Registration Statement or
otherwise comply with the requirements for an exemption from registration under
the Securities Act and the rules and regulations promulgated
thereunder.  No Purchaser will make any
sale, transfer, pledge or other disposition of the Securities in violation of
U.S. federal or state or foreign securities laws or the terms of this
Agreement.

 

4.8          Reservation of Common Stock. 
As of the date hereof, the Company has reserved, and the Company shall
continue to reserve and keep available at all times, free of preemptive rights,
a sufficient number of shares of Common Stock for the purpose of enabling the
Company to issue the Bridge Warrant Shares and the shares of Common Stock that
may be issuable in the event of conversion of the Bridge Notes, and as of the
Closing Date, the Company has reserved, and the Company shall continue to reserve
and keep available at all times, free and clear of preemptive rights, a
sufficient number of shares of Common Stock for the purpose of enabling the
Company to issue the Shares and the Warrant Shares pursuant to this Agreement
and the Related Agreements.

 

4.9          Delivery of Warrant Shares. 
The Company covenants to each Purchaser that, upon exercise of the
Warrant(s) and the Bridge Warrant(s) held by such Purchaser, it shall use its
commercially reasonable efforts to cause the Warrant Shares and the Bridge
Warrant Shares to be issued and promptly delivered to such Purchaser in
accordance with the Articles of Incorporation; provided, however, that such
issuance and delivery shall occur no later than ten (10) Business Days
after the Company’s receipt of the Purchaser’s surrender of the Warrant(s) and
the Bridge Warrant(s) that such Purchaser desires to exercise, accompanied by
the notice of exercise and the exercise price in accordance with the terms of
the Warrants and Bridge Warrants.

 

4.10        No Solicitation.

 

(a)           During
the period from the date of this Agreement until the earlier of the Closing or
the effective date of termination of this Agreement pursuant to Sections 9.1
and 9.2, the Company shall not take, cause or permit (and shall use its
reasonable best efforts to ensure that none of its officers, directors, agents
or representatives takes, causes or permits) any person to take, directly or indirectly,
any of the following actions with any third party:  (i) solicit, knowingly encourage,
initiate or participate in any negotiations, inquiries or discussions with
respect to any offer or proposal to acquire all or 10% or more of the business,
assets or capital shares of the Company (excluding non-exclusive licenses
entered into in the ordinary course of

 

20

 

business), whether by merger, consolidation, other
business combination, purchase of capital stock, purchase of assets, license,
lease, tender or exchange offer or otherwise (each of the foregoing, an “Alternative Proposal”), (ii) disclose,
in connection with an Alternative Proposal, any nonpublic information
concerning Company’s business or properties or afford to any third party access
to its properties, books or records, except in the ordinary course of business
and as required by law or regulation or pursuant to a governmental request for
information, (iii) enter into or execute any agreement providing for an
Alternative Proposal or (iv) make or authorize any public statement,
recommendation or solicitation in support of any Alternative Proposal or any
offer or proposal relating to an Alternative Proposal, other than with respect
to the Offering; provided, however, that, in each case, if and to the extent
that (i) the Shareholders’ Meeting has not yet occurred, (ii) the
Board of Directors of the Company believes in good faith, after consultation
with the Company’s legal counsel (and, in order for the Company to withhold,
withdraw, modify or change in a manner adverse to the Purchasers or effect a
Change in the Company Recommendation, the Company’s financial advisor), that
such Alternative Proposal is a Superior Proposal (as defined hereafter), and (iii) the
Board of Directors of the Company believes in good faith, after consultation
with the Company’s counsel, that the failure to participate in such
negotiations or discussions, disclose such nonpublic information, provide such
access to its properties, books or records, enter into any agreement providing
for such Alternative Proposal or make or authorize any public statement,
recommendation or solicitation in support of any Alternative Proposal or any
offer or proposal relating to an Alternative Proposal would constitute a breach
of the fiduciary duties of the Board of Directors of the Company under
applicable law, then the Company may participate in discussions or negotiations
regarding such Alternative Proposal (but only to the extent that such information
was previously provided to the Purchasers prior to the execution of this
Agreement or is provided to the Purchasers concurrently therewith), provide
non-public information with respect to the Company, afford access to the
properties, books or records of the Company, enter into any agreement relating
to such Alternative Proposal or make or authorize any public statement,
recommendation or solicitation in support of any Alternative Proposal or any
offer or proposal relating to an Alternative Proposal, as applicable.

 

(b)           In
the event that the Company is contacted by any third party expressing an
interest in discussing an Alternative Proposal, the Company will promptly, but
in no event later than twenty-four (24) hours following the Company’s knowledge
of such contact, notify the Purchasers in writing of such contact and the
identity of the third party so contacting the Company and shall promptly, but
in no event later than twenty-four (24) hours, advise the Purchasers of any
material modification or proposed modification thereto.

 

(c)           Nothing
contained in this Agreement shall prohibit the Company or the Board of
Directors of the Company from taking and disclosing to the Company’s
shareholders a position with respect to an unsolicited bona fide tender or exchange
offer by a third party pursuant to Rule 14e-2(a) of the Exchange Act
or from making any disclosure required by applicable law.

 

(d)           For purposes of this Agreement, a “Superior Proposal” means an
Alternative Proposal which (i) is on terms (including conditions to
consummation of the contemplated transaction) which the Board of Directors of
the Company in its reasonable good faith judgment (after consultation with and
based on the written advice of its financial advisor) believes to be more favorable
to its shareholders from a financial point of view than the Offering and the

 

21

 

transactions
contemplated by this Agreement and the Related Agreements and (ii) that is
not attributable to a material breach by the Company of Section 4.10(a) hereof.

 

(e)           Nothing
in this Section 4.10 shall prohibit the Company and its representatives
from continuing their current efforts to sell or lease Company intellectual
property relating to STR, Annexim and humanized antibody technology
(collectively, the “Non-Core Technologies”) and
to sell or lease the Company’s manufacturing facility and related assets
located in Denton, Texas. 
Notwithstanding the foregoing, in connection with the security interest
in the Non-Core Technologies granted to the Purchasers pursuant to the Security
Agreement, the Company will open a separate bank account for the sole purpose
of depositing and maintaining any and all funds received from any Person in
connection with or arising from the sale or license of any of the Non-Core
Technologies (the “Non-Core
Technology Funds”).  The
Company shall maintain the Non-Core Technology Funds in such separate bank
account and shall not commingle the Non-Core Technology Funds with any other
funds or assets.  The Company shall not
use or withdraw funds from such account during the period from the date of this
Agreement until the earlier of the Closing or the effective date of termination
of this Agreement pursuant to Sections 9.1 and 9.2.

 

4.11        Third Party Offer.

 

(a)           During the period from the date of this
Agreement until the Closing or the effective date of termination of this
Agreement, if the Company intends to seek any financing or to seek any
transaction not in the ordinary course of business consistent with past
practice that would qualify as an Alternative Proposal but for the 10%
threshold specified in Section 4.10(a) or is approached by any third
party with any offer to provide such financing or transaction that the Company
does not immediately and unconditionally reject (a “Third
Party Offer”), the Company shall first endeavor to negotiate
with the Purchasers, for a period not to exceed fifteen (15) Business Days, a
financing or transaction comparable to the Third Party Offer. The Company and
the Purchasers shall negotiate in good faith with respect to such financing or
transaction, but nothing in this Agreement shall be construed to require the
Purchasers to provide, on the one hand, or the Company to accept, on the other
hand, any such financing or transaction; provided, however, that if the Company
receives a Third Party Offer, the Company shall notify the Purchasers of the
amount of such offer and all the other material terms of such offer and, if the
Purchasers, within the fifteen (15) Business Day period specified above, offer
to provide financing to, or enter into a transaction with, the Company in the
amount, as applicable, and on terms no less favorable than those contained in
the Third Party Offer, the Company shall accept the Purchasers’ offer, if it
accepts any offer.  For the avoidance of
doubt, the parties hereto agree that any Third Party Offer involving the right
of a person other than the Purchasers or their affiliates to (i) purchase
or acquire less than 10% of the business, properties or other assets or capital
stock or other equity interests in the Company, whether by share issuance,
equity or convertible debt financing, sale of stock or assets, merger,
consolidation, other business combination, tender offer, exchange offer,
recapitalization, reorganization, liquidation, dissolution, license agreement,
mortgage, lease or other transaction involving the Company, any division or
operating or principal business unit or the intellectual property of the
Company, on the one hand, and any other Person, on the other hand or (ii) enter
into any transaction, that if consummated, would result in any Person (or the
shareholders of such Person) beneficially owning securities representing less
than 10% of the total voting power

 

22

 

of the
Company (or of the surviving parent entity in such transaction) shall be deemed
a Third Party Offer and not an Alternative Proposal.

 

(b)           Nothing in this Section 4.11 shall
prohibit the Company and its representatives from continuing their current
efforts to, subject to compliance with the terms and conditions of Section 4.10(e),
sell or license the Non-Core Technologies and sell or lease the Company’s
manufacturing facility and related assets located in Denton, Texas.

 

4.12        Operation of Business.  During
the period from the date of this Agreement until the earlier of the Closing or
the effective date of termination of this Agreement pursuant to Sections 9.1
and 9.2, except as contemplated by this Agreement and the Related Agreements,
the Company shall carry on its business in the ordinary course in substantially
the same manner as heretofore conducted and, to the extent consistent with such
business, use its commercially reasonable efforts consistent with past practice
and policies to preserve intact its present business organizations, keep
available the services of its present officers, consultants and employees and
preserve its relationships with customers, suppliers and others having business
dealings with it.  The Company shall
promptly notify the Purchasers of any event or occurrence or emergency which is
not in the ordinary course of business of the Company.

 

4.13        Efforts to Satisfy Conditions. 
Each party shall use its commercially reasonable efforts to satisfy each
of the conditions to be satisfied by it as provided in Article 5 of this
Agreement.

 

ARTICLE 5

 

CONDITIONS
TO CLOSING

 

5.1          Conditions to
Obligations of the Company.  The Company’s
obligation to complete the purchase and sale of the Securities and deliver such
stock certificate(s) and Warrants to each Purchaser is subject to the
fulfillment or waiver as of the Closing Date of the following conditions:

 

(a)           Receipt of Purchase Price.  The Company shall have received payment of
the Purchase Price, as set forth opposite such Purchaser’s name on Exhibit A hereto, for the Securities being purchased
hereunder.  The Purchase Price shall be
paid in immediately available funds, in US dollars, and by the cancellation of
indebtedness under the Bridge Loan.

 

(b)           Shareholder Approval.  The Company shall have received the
Transaction Approval.

 

(c)           Representations and Warranties.  The representations
and warranties made by each Purchaser in Article 3 shall be true and
correct in all material respects when made and as of the Closing Date.

 

(d)           Covenants.  All covenants, agreements and conditions
contained in this Agreement and the Related Agreements to be performed by the
Purchasers on or prior to the Closing Date shall have been performed or
complied with in all material respects.

 

23

 

(e)           Blue Sky.  The Company shall have obtained
all necessary blue sky law permits and qualifications, or secured exemptions
therefrom, required by any state or foreign or other jurisdiction for the offer
and sale of the Securities.

 

(f)            Nasdaq Qualification.  The Shares and the Warrant Shares to be
issued shall be duly authorized for listing by Nasdaq, subject to official
notice of issuance, to the extent required by the rules of Nasdaq.

 

(g)           Absence of Litigation.  No proceeding challenging this
Agreement or the Related Agreements or the transactions contemplated hereby or
thereby, or seeking to prohibit, alter, prevent or materially delay the
Closing, shall have been instituted or be pending before any court, arbitrator,
governmental body, agency or official.

 

(h)           No Governmental Prohibition or Third
Party Approval.  The sale of the
Securities by the Company shall not be prohibited by any law or governmental
order or regulation and any government regulatory or third party consents or
approvals, if any, necessary for the sale of the Securities and the Warrant
Shares shall have been received.

 

(i)            Pre-Closing Securities Ownership
Questionnaire.  The Purchaser shall have
delivered to the Company a properly completed and executed Pre-Closing
Securities Ownership Questionnaire, in the form attached hereto as Exhibit D.

 

5.2          Conditions to Purchasers’
Obligations at the Closing.  Each Purchaser’s
obligation to complete the purchase and sale of the Securities is subject to
the fulfillment or waiver as of the Closing Date of the following conditions:

 

(a)           Representations and Warranties.  The representations and warranties made by
the Company in Article 2 shall be true and correct in all material
respects when made and as of the Closing Date.

 

(b)           Covenants.  All covenants, agreements and conditions
contained in this Agreement and the Related Agreements to be performed by the
Company on or prior to the Closing Date shall have been performed or complied
with in all material respects.

 

(c)           Compliance with Laws.  The purchase of the Securities by each
Purchaser hereunder shall be legally permitted by all laws and regulations to
which each Purchaser or the Company is subject (including all applicable federal,
state and foreign securities laws).

 

(d)           Legal Opinion.  The Company shall have delivered to such
Purchaser an opinion, dated as of the Closing Date, from (i) Perkins Coie
LLP, counsel to the Company, in substantially the form attached hereto as Exhibit C.

 

(e)           Transfer Agent Instructions.  The Company shall have delivered to its
transfer agent irrevocable instructions to issue to each Purchaser or its
designee, on an expedited basis, one or more certificates representing the number
of Shares set forth opposite such Purchaser’s name on Exhibit A hereto,
and Warrants to purchase the Warrant Shares.

 

24

 

(f)            Nasdaq Qualification.  The Shares and the Warrant Shares shall be
duly authorized for listing by Nasdaq, subject to official notice of issuance,
to the extent required by the rules of Nasdaq.

 

(g)           Absence of Litigation.  No proceeding challenging this Agreement or
the Related Agreements or the transactions contemplated hereby or thereby, or
seeking to prohibit, alter, prevent or materially delay the Closing, shall have
been instituted or be pending before any court, arbitrator, governmental body,
agency or official.

 

(h)           No Governmental Prohibition or Third
Party Consents.  The sale of the
Securities and the Warrant Shares by the Company shall not be prohibited by any
law or governmental order or regulation and any governmental, regulatory or
third party consents or approvals, if any, necessary for the sale of the
Securities and the Warrants Shares shall have been received.

 

(i)            Board Designees.  The Company’s Board of Directors (which shall
have ten (10) members as of the Closing) shall have appointed, effective
as of the Closing, one Person designated by MPM Capital (the “MPM Representative”) and one Person
designated by mutual agreement of MPM Capital and Bay City Capital (the “Investor Representative”) as
members of the Company’s Board of Directors, initially Nick Simon and a person
to be named by MPM Capital and Bay City Capital, each in accordance with and
subject to the requirements of applicable legal rules and regulations and rules of
Nasdaq and the SEC.  Subject to being to
being deemed eligible to serve on the compensation committee of the Board of
Directors pursuant to the terms of the committee charter and applicable listing
standards and securities law requirements, the Company’s Board of Directors
shall have appointed, effective as of the Closing, the MPM Representative as a
member of the compensation committee of the Company’s Board of Directors, and
such appointments shall be in full force and effect.

 

(j)            Indemnification Agreements; Charter
Documents.  Promptly following the date
hereof and prior to the time that the MPM Representative and the Investor
Representative are appointed to the Company’s Board of Directors, the Company
shall have executed indemnification agreements with each director appointed or
elected to the Company’s Board of Directors in form reasonably acceptable to MPM
Capital and Bay City Capital.

 

(k)           Advisory Committee Appointment.  Dennis Henner, representing MPM Capital, shall
have been appointed to the Company’s product development advisory committee (or
substantially similar committee if the Company does not have a product
development advisory committee).

 

(l)            Executive Search.  The Company shall have initiated a search for
and diligently pursue the hire of a Chief Medical Officer, which individual
shall have extensive experience and expertise relevant to the position and the
Company’s business and is acceptable to the Board of Directors; provided,
however, the foregoing condition to Closing may be waived with the sole consent
of MPM Capital.

 

(m)          Shareholder Approval.  The Company shall have obtained the
Transaction Approval.

 

25

 

(n)           No Event of Default.  No event of default by the Company shall have
occurred under the Bridge Loan Agreement, the Security Agreement, the Bridge
Notes or the Bridge Warrants.

 

(o)           Officers’ Certificates.  The Company shall have delivered to the
Purchasers a certificate, dated as of the Closing Date and executed by the
Chief Executive Officer of the Company, and a certificate, dated as of the
Closing Date and executed by the Secretary of the Company, in the forms
attached hereto as Exhibits E and F, respectively.

 

(p)           No Material Adverse Effect. There shall
not have occurred a Material Adverse Effect.

 

(q)           Conversion of Series B Convertible Preferred
Stock.  Concurrently with the Closing, all
outstanding shares of the Company’s Series B Convertible Preferred Stock shall
be converted into shares of the Company’s Common Stock at the Conversion Rate
pursuant to the terms of the Series B Conversion Agreement.

 

(r)           Other. 
The Company shall have delivered to such Purchaser such other documents
relating to the transactions contemplated by this Agreement and the Related
Agreements as such Purchaser or its counsel may reasonably request.

 

ARTICLE 6

REGISTRATION RIGHTS

 

6.1          Mandatory
Registration. 
The Company shall prepare, and, as soon as practicable, but in no event later than
thirty (30) days after the Closing Date (the “Filing
Deadline”), file with the SEC a Registration Statement or
Registration Statements (as necessary) on Form S-3 covering the resale of
all of the Registrable Securities.  In
the event that Form S-3 is unavailable for such a registration, the
Company shall use such other form as is available for such a registration,
subject to the provisions of Section 6.6. 
The Company shall use its best efforts to cause such Registration
Statement to be declared effective by the SEC as soon as possible, but in no
event later than the earlier of (i) the fifth Business Day after the SEC
advises the Company that either (A) it will not review such Registration
Statement or (B) it has no further comments with respect to such
Registration Statement, and (ii) one hundred twenty (120) days after
the Closing Date (the earlier of such dates, the “Effectiveness
Deadline”).

 

6.2          Demand Registrations. 
If for any reason prior to the expiration of the Registration Period (as hereinafter defined), a Registration Statement required
to be filed pursuant to Section 6.1 ceases to be effective or fails to
cover all of the Registrable Securities required to be covered by such
Registration Statement, any Holder may demand registration pursuant to the
terms of and within the time frames set forth in Section 6.1 by providing
written demand registration notice to the Company (a “Demand
Registration”).  The
Company shall amend the applicable Registration Statement, or file a new
Registration Statement (on the short form available therefore, if applicable),
or both, so as to cover all of the Registrable Securities required to be
covered by a Registration Statement hereunder, as soon as practicable, but in
any event not later than ten (10) Business Days after the date that the
Demand Registration notice is

 

26

 

delivered
to the Company.  The Company shall use its best
efforts to cause such amendment and/or new Registration Statement to become
effective as soon as practicable following the filing thereof.  The compliance by the Company with the
provisions of this Section 6.2 shall not relieve the Company of any
liability for a breach of this Agreement, including, without limitation, any
breach by the Company of Section 6.1 hereof, and the Holders shall retain
any remedies available at law or in equity with respect thereto.

 

6.3          Piggy-Back Registrations. 
If at any time prior to the expiration of the Registration Period (as
hereinafter defined), the number of shares of Common Stock available for sale
under a Registration Statement is insufficient to cover all of the Registrable
Securities and the Company proposes to file with the SEC a Registration
Statement relating to an offering for its own account or the account of others
under the Securities Act of any of its securities (other than on Form S-4
or Form S-8 (or their equivalents at such time) relating to securities to
be issued solely in connection with any acquisition of any entity or business
or to equity securities issuable in connection with stock option or other
employee benefit plans approved by the Board of Directors of the Company), the
Company shall promptly send to each Holder written notice of the Company’s intention to file a Registration
Statement and of such Holder’s rights under this Section 6.3 and, if
within twenty (20) days after receipt of such notice, such Holder shall so
request in writing, the Company shall include in such Registration Statement
all or any part of the Registrable Securities such Holder requests to be
registered, subject to the priorities set forth in this Section 6.3
below.  No right to registration of
Registrable Securities under this Section 6.3 shall be construed to limit
any registration required under Section 6.1 or 6.2.  The obligations of the Company under this Section 6.3
may be waived by Holders holding at least 60% of the Registrable Securities,
provided such Holders are not named as selling securityholders in any
Registration Statement.  If an offering
in connection with which a Holder is entitled to registration under this Section 6.3
is an underwritten offering, then each Holder whose Registrable Securities are
included in such Registration Statement shall, unless otherwise agreed by the
Company, offer and sell such Registrable Securities in an underwritten offering
using the same underwriter or underwriters and, subject to the provisions of
this Article 6, on the same terms and conditions as other shares of Common
Stock included in such underwritten offering. 
If a registration pursuant to this Section 6.3 is to be an
underwritten public offering and the managing underwriter(s) advise the Company
in writing that, in their reasonable good faith opinion, marketing or other
factors dictate that a limitation on the number of shares of Common Stock which
may be included in the Registration Statement is necessary to facilitate and
not adversely affect the proposed offering, then the Company shall include in
such registration: (1) first, all securities the Company proposes to sell
for its own account and (2) second, up to the full number of securities
proposed to be registered for the account of the Holder entitled to
registration under this Section 6.3, pro rata among such Holder on the
basis of the number of Registrable Securities that each of them requested to be
included in such registration.

 

6.4          Allocation of Registrable
Securities.  The initial number of Registrable Securities
included in any Registration Statement and each increase in the number of
Registrable Securities included therein shall be allocated pro rata among the
Holders based on the number of Registrable Securities held by each Holder at
the time the Registration Statement covering such initial number of Registrable
Securities or increase thereof is declared effective by the SEC.  In the event that a Holder sells or otherwise
transfers any of such Holder’s

 

27

 

Registrable
Securities, each transferee shall be allocated a pro rata portion of the then
remaining number of Registrable Securities included in such Registration
Statement for such transferor.  Any
shares of Common Stock included in a Registration Statement and which remain
allocated to any Person which ceases to hold any Registrable Securities covered
by such Registration Statement shall be allocated to the remaining Holders, pro
rata based on the number of Registrable Securities then held by such Holders
which are covered by such Registration Statement.

 

6.5          Legal Counsel. 
Subject to Section 6.10 of this Agreement, the Holders holding at
least at least 60% of the Registrable Securities shall have the right to select
one legal counsel to review and comment upon any registration pursuant to this Article 6
(“Legal Counsel”),
which shall be Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP or such other counsel as is thereafter designated by the holders
of at least 60% of Registrable Securities and of which the Company and its
counsel have been given prior notice. 
The Legal Counsel shall not represent any Holder that sends such counsel
written notice that such Holder does not wish such counsel to represent it in
connection with the matters discussed in this Section 6.5.  The Holders, other than any Holder that
delivers the notice discussed in the preceding sentence, hereby waive any
conflict of interest or potential conflict of interest that may arise as a
result of the representation of such Holders by the Legal Counsel in connection
with the subject matter of this Article 6. 
These provisions will not prohibit any other counsel to a Holder from
reviewing and commenting on any registration filed pursuant to this Article 6
at no cost to the Company.  The Company
shall reasonably cooperate with Legal Counsel in performing the Company’s obligations under this Article 6.

 

6.6          Ineligibility for Form S-3. 
In the event that Form S-3 is not available for any registration of
Registrable Securities hereunder, the Company shall (i) register the sale
of the Registrable Securities on another appropriate form reasonably acceptable
to the holders of at least 60% of the Registrable Securities and (ii) undertake
to register the Registrable Securities on Form S-3 as soon as such form is
available, provided that the Company shall maintain the effectiveness of the
Registration Statement then in effect until such time as a Registration
Statement on Form S-3 covering the Registrable Securities has been
declared effective by the SEC.

 

6.7          Failure to File, Obtain and
Maintain Effectiveness of Registration Statement.  If
a Registration Delay occurs the Company shall pay to each holder of Registrable
Securities (the “Registration Delay Payments”),
as partial relief for the damages to any Holder by reason of any such
Registration Delay, and calculated for each share of Common Stock for which a
Registration Statement is required to be filed pursuant to the terms of Section 6.1
then outstanding that is a Registrable Security and not covered for resale at
such time pursuant to the terms of a Registration Statement, an accruing amount
per each such share equal to the Delay Payment Rate for each week (or portion
thereof) during the Damages Accrual Period; provided that such Registration
Delay Payments shall be paid only to the Holders that have complied with their
obligations under Section 6.9 of this Article 6 with respect
thereto.  The Registration Delay Payments
shall accrue from the first day of the applicable Registration Delay through
the date it is cured (the “Damages Accrual Period”),
and shall be payable in cash to the record holders of the Registrable
Securities entitled thereto on the earlier of the (i) last Business Day of
each calendar month during which such Registration Delay Payments are incurred
and (ii) the

 

28

 

third
Business Day after the event of failure giving rise to the Registration Delay
Payments is cured.  Nothing shall
preclude any Holder from pursuing or obtaining any available remedies at law, specific
performance or other equitable relief with respect to this Article 6 in
accordance with applicable law.

 

6.8          Related Obligations. 
At such time as the Company is obligated to file a Registration
Statement with the SEC pursuant to Section 6.1, the Company will use its
best efforts to effect the registration of the Registrable Securities in
accordance with the intended method of distribution thereof and, pursuant
thereto, the Company shall have the following obligations:

 

(a)           The Company shall promptly prepare and
file with the SEC a Registration Statement with respect to the Registrable
Securities (but in no event later than the Filing Deadline) and use its best
efforts to cause such Registration Statement relating to the Registrable
Securities to become effective as soon as practicable after such filing (but in
no event later than the applicable Effectiveness Deadline).  The Company shall keep each Registration
Statement effective pursuant to Rule 415 at all times until the earliest
of (i) the three-year anniversary of the Closing Date; (ii) the date
as of which all of the Holders may sell all of the Registrable Securities
covered by such Registration Statement without restriction pursuant to Rule 144(k)
promulgated under the Securities Act (or successor thereto) or (iii) the
date on which the Holders shall have sold all the Registrable Securities
covered by such Registration Statement either pursuant to the Registration
Statement or in one or more transactions in which the Holder obtained
unlegended certificates representing the Registrable Securities so purchased in
accordance with applicable securities laws (the “Registration
Period”), which Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein (in
the case of any prospectus only, in light of the circumstances under which they
were made) not misleading.

 

(b)           The Company shall prepare and file with
the SEC such amendments (including post-effective amendments) and supplements
to a Registration Statement and the prospectus used in connection with such
Registration Statement, which prospectus is to be filed pursuant to Rule 424
promulgated under the Securities Act, as may be necessary to keep such
Registration Statement effective at all times during the Registration Period,
and, during such period, comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities of the Company covered
by such Registration Statement until such time as all of such Registrable
Securities shall have been disposed of in accordance with the intended methods
of distribution by the seller or sellers thereof as set forth in such Registration
Statement.  In the case of amendments and
supplements to a Registration Statement which are required to be filed pursuant
to this Article 6 (including pursuant to this Section 6.8(b)) by
reason of the Company filing a report on Form 10-K, Form 10-Q or Form 8-K
or any analogous report under the Exchange Act), the Company shall have
incorporated such report by reference into the Registration Statement, if
applicable, or shall file such amendments or supplements with the SEC on the
same day on which the Exchange Act report is filed which created the
requirement for the Company to amend or supplement the Registration Statement.

 

29

 

(c)           The Company shall (i) permit Legal
Counsel and any legal counsel for a particular Holder to review and comment
upon those sections of (a) the Registration Statement which are applicable
to the Holders at least five (5) Business Days prior to its filing with
the SEC and (b) all other Registration Statements and all amendments and
supplements to all Registration Statements which are applicable to the Holders
(except for Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K and any similar or successor reports)
within a reasonable number of days prior to their filing with the SEC and (b) not
file any Registration Statement (including any amendment or supplement thereto)
or document in a form to which Legal Counsel or such legal counsel reasonably
objects.  The Company shall furnish to
Legal Counsel, without charge, (i) any correspondence from the SEC or the
staff of the SEC to the Company or its representatives relating to any
Registration Statement, provided the Legal Counsel shall keep such
correspondence confidential and shall not provide copies thereof to any Holder
without the Holder’s prior consent, (ii) promptly after the same is
prepared and filed with the SEC, one copy of any Registration Statement and any
amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference, if requested by a Holder, and all
exhibits and (iii) upon the effectiveness of any Registration Statement,
one copy of the prospectus included in such Registration Statement and all
amendments and supplements thereto.  The
Company shall reasonably cooperate with Legal Counsel and such other legal
counsel in performing the Company’s
obligations pursuant to this Section 6.8.

 

(d)           The Company shall furnish to each Holder
whose Registrable Securities are included in any Registration Statement,
without charge, (i) promptly after the same is prepared and filed with the
SEC, at least one copy of such Registration Statement and any amendment(s)
thereto, including financial statements and schedules, all documents
incorporated therein by reference, if requested by a Holder, and all exhibits
and each preliminary prospectus, (ii) upon the effectiveness of any
Registration Statement, ten (10) copies of the prospectus included in such
Registration Statement and all amendments and supplements thereto (or such
other number of copies as such Holder may reasonably request) and (iii) such
other documents, including copies of any preliminary or final prospectus, as
such Holder may reasonably request from time to time in order to facilitate the
disposition of the Registrable Securities owned by such Holder.

 

(e)           The Company shall use its best efforts to
(i) register and qualify the Registrable Securities covered by a
Registration Statement under all other securities or “blue sky” laws of such
jurisdictions in the United States, (ii) prepare and file in those
jurisdictions, such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv) take
all other actions reasonably necessary or advisable to qualify the Registrable
Securities for sale in such jurisdictions; provided, however, that the Company
shall not be required in connection therewith or as a condition thereto to
(w) make any change in the Company’s Articles
of Incorporation or Bylaws that the Company’s Board of
Directors determines in good faith to be contrary to the best interests of the
Company and its shareholders, (x) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this Section 6.8(e),
(y) subject itself to general taxation in any such jurisdiction, or
(z) file a general consent to

 

30

 

service
of process in any such jurisdiction.  The
Company shall promptly notify Legal Counsel and each Holder who holds
Registrable Securities of the receipt by the Company of any notification with
respect to the suspension of the registration or qualification of any of the
Registrable Securities for sale under the securities or “blue
sky” laws of any jurisdiction in the
United States or its receipt of actual notice of the initiation or threat of
any proceeding for such purpose.

 

(f)            As promptly as practicable after becoming
aware of such event or development, the Company shall notify Legal Counsel and
each Holder in writing of the happening of any event as a result of which the
prospectus included in a Registration Statement, as then in effect, includes an
untrue statement of a material fact or omission to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and
promptly prepare a supplement or amendment to such Registration Statement to
correct such untrue statement or omission, and deliver ten (10) copies of
such supplement or amendment to Legal Counsel and each Holder (or such other
number of copies as Legal Counsel or such Holder may reasonably request).  The Company shall also promptly notify Legal
Counsel and each Holder in writing (i) when a prospectus or any prospectus
supplement or post-effective amendment has been filed, and when a Registration
Statement or any post-effective amendment has become effective (notification of
such effectiveness shall be delivered to Legal Counsel and each Holder by
facsimile on the same day of such effectiveness and by overnight mail), (ii) of
any request by the SEC for amendments or supplements to a Registration
Statement or related prospectus or related information, and (iii) of the
Company’s reasonable determination
that a post-effective amendment to a Registration Statement would be
appropriate.

 

(g)           The Company shall use its best efforts to
prevent the issuance of any stop order or other suspension of effectiveness of
a Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction and, if such an order or
suspension is issued, to obtain the withdrawal of such order or suspension at
the earliest possible moment and to notify Legal Counsel and each Holder who
holds Registrable Securities being sold of the issuance of such order and the
resolution thereof or its receipt of actual notice of the initiation or threat
of any proceeding for such purpose.

 

(h)           At the reasonable request of any Holder
and at such Holder’s expense, the Company shall use its best efforts to furnish
to such Holder, on the date of the effectiveness of the Registration Statement
and thereafter from time to time on such dates as an Holder may reasonably
request (i) a letter, dated such date, from the Company’s independent certified public
accountants in form and substance as is customarily given by independent
certified public accountants to underwriters in an underwritten public
offering, and (ii) an opinion, dated as of such date, of counsel
representing the Company for purposes of such Registration Statement, in form,
scope and substance as is customarily given in an underwritten public offering,
addressed to the Holders.

 

(i)            The Company shall, upon reasonable notice
and during normal business hours, make available for inspection by (i) any
Holder, (ii) Legal Counsel and any other legal counsel representing an
Holder and (iii) one firm of accountants or other agents retained by the
Holders (collectively, the “Inspectors”)
all pertinent financial and other records, and pertinent

 

31

 

corporate
documents and properties of the Company (collectively, the “Records”),
which are requested for any purpose reasonably related to the Holders’ rights and/or the Company’s obligations under this Article 6,
and cause the Company’s
officers, directors and employees to supply all information which any Inspector
may reasonably request; provided, however, that each Inspector which is not a
party hereto shall agree in writing prior to obtaining access to any Records,
and each Holder hereby agrees, to hold in strict confidence and shall not make
any disclosure (except to an Holder similarly bound by the terms hereof) or use
of any Record or other information which the Company determines in good faith
to be confidential, and of which determination the Inspectors are so notified,
unless (a) the disclosure of such Records is necessary to avoid or correct
a misstatement or omission in any Registration Statement or is otherwise
required under the Securities Act, (b) the release of such Records is
ordered pursuant to a final, non-appealable subpoena or order from a court or
government body of competent jurisdiction, or (c) the information in such
Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement of which the Inspector
has knowledge.  Neither the Company nor
any Inspector of a particular Holder shall provide any confidential information
to any other Holder unless such Holder is first informed of the confidential
nature of such information.  Each Holder
receiving the Records agrees that it shall, if permitted by applicable law,
upon learning that disclosure of such Records is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to the Company prior to making any such disclosure and allow the
Company, at its expense, to undertake appropriate action to prevent disclosure
of, or to obtain a protective order for, the Records deemed confidential.  Each Holder undertaking an inspection
pursuant to this Section 6.8(i) shall, and shall instruct its other
Inspectors to, use commercially reasonable efforts to perform any such
inspection in a manner designed to not materially disrupt the business
activities of the Company.  Nothing
herein (or in any other confidentiality agreement between the Company and any
Holder) shall be deemed to limit the Holders’ ability to sell Registrable
Securities in a manner which is otherwise consistent with applicable laws and
regulations.

 

(j)            The Company shall hold in confidence and
not make any disclosure of information concerning a Holder provided to the
Company unless (i) disclosure of such information is necessary to comply
with federal or state securities laws or the rules of Nasdaq, (ii) the
disclosure of such information is necessary to avoid or correct a misstatement
or omission in any Registration Statement, (iii) the release of such
information is ordered pursuant to a subpoena or other final, non-appealable
order from a court or governmental body of competent jurisdiction, (iv) such
information has been made generally available to the public other than by
disclosure in violation of this Article 6 or any other agreement, or (v) such
Holder expressly consents in writing to the form and content of any such
disclosure.  The Company agrees that it
shall, if permitted by applicable law, upon learning that disclosure of such
information concerning a Holder is sought in or by a court or governmental body
of competent jurisdiction or through other means, give prompt written notice to
such Holder prior to making any such disclosure and allow such Holder, at the
Holder’s expense, to undertake appropriate action to prevent disclosure of, or
to obtain a protective order for, such information.

 

(k)           The Company shall use its best efforts
either to (i) cause all the Registrable Securities covered by a
Registration Statement to be listed on each securities exchange on which securities
of the same class or series issued by the Company are then listed,

 

32

 

if
any, if the listing of such Registrable Securities is then permitted under the rules of
such exchange, or (ii) secure designation and quotation of the Shares, Warrant
Shares and the Bridge Warrant Shares on Nasdaq. 
The Company shall pay all fees and expenses in connection with
satisfying its obligation under this Section 6.8(k).

 

(l)            The Company shall cooperate with the
Holders who hold Registrable Securities being offered and, to the extent
applicable, to facilitate the timely preparation and delivery of certificates
(not bearing any restrictive legend) representing the Registrable Securities to
be offered pursuant to a Registration Statement and enable such certificates to
be in such denominations or amounts, as the case may be, as the Holders may
reasonably request and registered in such names as the Holders may request.

 

(m)          If requested by a Holder, the Company
shall (i) as soon as practicable incorporate in a prospectus supplement or
post-effective amendment, as necessary, such information as an Holder requests
to be included therein relating to the Holder and the sale and distribution of
Registrable Securities, including, without limitation, information with respect
to the number of Registrable Securities being offered or sold, the purchase
price being paid therefor and any other terms of the offering of the
Registrable Securities to be sold in such offering; (ii) as soon as
practicable, make all required filings of such prospectus supplement or post-effective
amendment after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment; and (iii) as soon as
practicable, supplement or make amendments to any Registration Statement if
reasonably requested by a Holder holding Registrable Securities.

 

(n)           The Company shall use its best efforts to
cause the Registrable Securities covered by the applicable Registration
Statement to be registered with or approved by such other governmental agencies
or authorities as may be necessary to consummate the disposition of such
Registrable Securities within the United States.

 

(o)           The Company shall otherwise use its best
efforts to comply with all applicable rules and regulations of the SEC in
connection with any registration hereunder.

 

(p)           Notwithstanding anything to the contrary
in this Section 6.8, at any time after the applicable Registration
Statement has been declared effective by the SEC, the Company may delay the
disclosure of material non-public information concerning the Company the
disclosure of which at the time is not, in the good faith opinion of the Board
of Directors of the Company and its counsel, in the best interest of the Company
and, in the opinion of counsel to the Company, otherwise required (a “Grace Period”); provided, that the
Company shall promptly (i) notify the Holders in writing of the existence
of material non-public information giving rise to a Grace Period (provided that
in each notice the Company will not disclose the content of such material non-public
information to the Holders) and the date on which the Grace Period will begin,
and (ii) notify the Holders in writing of the date on which the Grace
Period ends; and, provided further, that no Grace Periods shall exceed thirty
(30) consecutive days and during any consecutive three hundred sixty-five
(365) day period, such Grace Periods shall not exceed an aggregate of
sixty (60) days and the first day of any Grace Period must be at least two
(2) trading days after the last day of any prior Grace Period (an “Allowable Grace Period”).  For purposes of determining the length of a
Grace Period above, the Grace Period shall begin on

 

33

 

and
include the date the Holders receive the notice referred to in clause (i) and
shall end on and include the later of the date the Holders receive the notice
referred to in clause (ii) and the date referred to in such notice.  The provisions of Section 6.8(g) hereof
shall not be applicable during the period of any Allowable Grace Period.  Upon expiration of the Grace Period, the
Company shall again be bound by the first sentence of Section 6.8(f) with
respect to the information giving rise thereto unless such material non-public
information is no longer applicable.  In
the event that the Company shall exercise its right to effect a Grace Period
hereunder, the Registration Period during which the Registration Statement is
to remain effective shall be extended by a period of time equal to the duration
of any Grace Periods.

 

(q)           At the end of the Registration Period the
Holders shall discontinue sales of shares pursuant to the Registration
Statement upon receipt of notice from the Company of its intention to remove
from registration the shares covered by such Registration Statement which
remain unsold, and such Holders shall notify the Company of the number of
shares registered which remain unsold immediately upon receipt of such notice
by the Company.

 

6.9          Obligations of the Holders.

 

(a)           At least seven (7) days prior to the
first anticipated filing date of a Registration Statement, the Company shall
notify each Holder in writing of the information the Company requires from each
such Holders if such Holder elects to have any of such Holder’s Registrable
Securities included in such Registration Statement.  It shall be a condition precedent to the
obligations of the Company to complete the registration pursuant to this Article 6
with respect to the Registrable Securities of a particular Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it and the intended method of disposition of the
Registrable Securities held by it as shall be reasonably required to effect the
registration of such Registrable Securities and shall execute such documents in
connection with such registration as the Company may reasonably request, in
each case within seven (7) Business Days of being notified by the Company
of its necessity.

 

(b)           Each Holder by such Holder’s acceptance
of the Registrable Securities agrees to cooperate with the Company as
reasonably requested by the Company in connection with the preparation and
filing of any Registration Statement hereunder, unless such Holder has notified
the Company in writing of such Holder’s election to exclude all of such Holder’s
Registrable Securities from such Registration Statement.

 

(c)           Each Holder agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind described
in Section 6.8(g) or the first sentence of Section 6.8(f), such
Holder will immediately discontinue disposition of Registrable Securities
pursuant to any Registration Statement(s) covering such Registrable Securities
until such Holder’s receipt of the copies of the supplemented or amended
prospectus contemplated by Section 6.8(g) or the first sentence of Section 6.8(f) or
receipt of notice that no supplement or amendment is required.  Notwithstanding anything to the contrary, the
Company shall cause its transfer agent to deliver unlegended shares of Common
Stock to a transferee of an Holder in accordance with the terms of this
Agreement in connection with any sale of Registrable Securities with respect to
which an Holder has entered into a contract for sale prior to the Holder’s receipt of a notice from the
Company of the happening of any event of the kind

 

34

 

described
in Section 6.8(g) or the first sentence of Section 6.8(f) and
for which the Holder has not yet settled.

 

(d)           As promptly as practicable after becoming
aware of such event, each Holder shall notify the Company in writing of the
happening of any event as a result of which the information provided in writing
by such Holder to the Company expressly for use in the prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that no separate written notification shall be required for any event disclosed
by such Holder in a timely filing with the SEC relating to the Company’s securities.

 

6.10        Expenses of Registration. 
All expenses incurred in connection with registrations, filings or
qualifications pursuant to Sections 6.1 through 6.8 of this Article 6,
including, without limitation, all registration, listing and qualifications
fees, printers and accounting fees, transfer agent fees and fees and
disbursements of counsel for the Company, but excluding underwriting discounts
and commissions, shall be paid by the Company. 
The Company shall also reimburse the Holders for the reasonable and
documented fees and disbursements of Legal Counsel in connection with
registration, filing or qualification pursuant to Sections 6.1 through 6.8 of
this Article 6.  The Company shall
pay all of the Holders’ reasonable costs (including fees and disbursements of
Legal Counsel) incurred in connection with the successful enforcement of the
Holders’ rights under this Article 6.  Notwithstanding the foregoing, each seller of
Registrable Securities shall pay all fees and disbursements of all counsel
(other than the Legal Counsel) retained by such seller and all selling
expenses, including, without limitation, all underwriting discounts, selling
commissions, transfer taxes and other similar expenses, to the extent required
by applicable law.

 

6.11        Indemnification. In the event any Registrable Securities
are included in a Registration Statement under this Article 6:

 

(a)           To the extent permitted by law, the
Company shall indemnify each Holder, the directors, officers, members,
partners, employees, agents, Legal Counsel or other representatives of and each
Person controlling such Holder within the meaning of Section 15 of the
Securities Act, with respect to which any registration that has been effected
pursuant to this Agreement, against all claims, losses, damages, liabilities,
fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in
settlement or expenses, joint or several, (collectively, “Claims”) (or action in respect thereof),
including any Claims incurred in settlement of any litigation, commenced or
threatened (subject to Section 6.11(c) below), arising out of or
based on (i) any untrue statement (or alleged untrue statement) of a
material fact contained in the Registration Statement, prospectus (final or
preliminary), any amendment or supplement thereof, or other document incident
to any such registration, qualification or compliance or based on any omission
(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in light of
the circumstances in which they were made, (ii) any violation by the
Company of any rule or regulation promulgated by the Securities Act, the
Exchange Act, or any other law, including, without limitation, any state
securities law, or any rule or regulation thereunder relating to the

 

35

 

offer
or sale of the Registrable Securities pursuant to a Registration Statement
applicable to the Company and relating to any action or inaction required of
the Company in connection with any such registration, qualification or
compliance, or (iii) any violation by the Company of the terms of this Article 6,
and will reimburse each Holder, the directors, officers, members, partners,
employees, agents, Legal Counsel or other representatives of and each Person
controlling such Holder, for reasonable legal and other out-of-pocket expenses
reasonably incurred in connection with investigating or defending any such
Claim as incurred; provided that the Company will not be liable in any such
case to the extent that any untrue statement or omission or allegation thereof
is made in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Holder for use in preparation of such
Registration Statement, prospectus, amendment or supplement; provided further that the Company will not be liable in any
such case where the Claim results from the material failure of such Holder to
comply with the covenants and agreements contained in this Article 6
respecting sales of Registrable Securities, and except that the foregoing
indemnity agreement is subject to the condition that, insofar as it relates to
any such untrue statement or alleged untrue statement or omission or alleged
omission made in the preliminary prospectus but eliminated or remedied in the
amended prospectus on file with the SEC at the time the Registration Statement
becomes effective or in the amended prospectus filed with the SEC pursuant to Rule 424(b) or
in the prospectus subject to completion under Rule 434 of the Securities
Act, which together meet the requirements of Section 10(a) of the
Securities Act (the “Final Prospectus”), such
indemnity shall not inure to the benefit of any such Holder, the directors,
officers, members, partners, employees, agents, Legal Counsel or other
representatives of or any such controlling Person, if a copy of the Final
Prospectus that was timely furnished by the Company to the Holder pursuant to Section 6.8(d) for
delivery was not furnished to the Person asserting the Claim at or prior to the
time such furnishing is required by the Securities Act, such Person was
promptly advised in writing by the Company not to use the incorrect prospectus
and the Final Prospectus would have cured the defect giving rise to such Claim.

 

(b)           Each Purchaser will severally, and not
jointly, indemnify the Company, the directors, officers, employees, agents, legal
counsel and other representatives and each Person who controls the Company
within the meaning of Section 15 of the Securities Act, against all Claims
(or actions in respect thereof), including any Claims incurred in settlement of
any litigation, commenced or threatened (subject to Section 6.11(c) below),
arising out of or based on any untrue statement (or alleged untrue statement)
of a material fact contained in the Registration Statement, prospectus (final
or preliminary), any amendment or supplement thereof or other documents,
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
light of the circumstances in which they were made, and will reimburse the
Company, the directors, officers, employees, agents, legal counsel and other
representatives and each Person controlling the Company for reasonable legal
and any other expenses reasonably incurred in connection with investigating or
defending any such Claim as incurred, in each case to the extent, that such
untrue statement or omission or allegation thereof is made in reliance upon and
in conformity with written information furnished to the Company by or on behalf
of the Holder for use in preparation of the Registration Statement, prospectus,
amendment or supplement; provided that the indemnity shall not apply to the
extent that such Claim results from the fact that a current copy of the
prospectus was not made available to the Person or entity asserting the Claim
at or prior to the

 

36

 

time
such furnishing is required by the Securities Act and the Final Prospectus
would have cured the defect giving rise to such Claim.  Notwithstanding the foregoing, a Holder’s
aggregate liability pursuant to this subsection (b) and subsection (d) shall
not exceed the net proceeds received by the Holder from the sale of the
Registrable Securities pursuant to the Registration Statement giving rise to
such liability.

 

(c)           Each party entitled to indemnification
under this Section 6.11 (the “Indemnified Party”)
shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after
such Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party (at its expense) to
assume the defense of any such claim or any litigation resulting therefrom,
provided that counsel for the Indemnifying Party, who shall conduct the defense
of such claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not unreasonably be withheld), and the Indemnified Party may
participate in such defense at such Indemnified Party’s expense, and provided
further that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Agreement, unless such failure is materially prejudicial to the Indemnifying
Party in defending such claim or litigation. 
Notwithstanding the foregoing, an Indemnified Party shall have the right
to retain its own counsel, with the fees and expenses to be paid by the
Indemnifying Party, if representation of such Indemnified Party by the counsel
retained by the Indemnifying Party would be inappropriate due to actual or
potential differing interests between such Indemnified Party and any other
party represented by such counsel in such proceeding.  An Indemnifying Party shall not be liable for
any settlement of an action or claim effected without its written consent
(which consent will not be unreasonably withheld).  No Indemnifying Party, in its defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.

 

(d)           If the indemnification provided for in
this Section 6.11 is held by a court of competent jurisdiction to be
unavailable to an Indemnified Party with respect to any Claim referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party thereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Claim in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on the one
hand and of the Indemnified Party on the other in connection with the
statements or omissions which resulted in such Claim as well as any other
relevant equitable considerations.  The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties’ relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission provided,
that in no event shall any contribution by a Holder hereunder when combined
with amounts paid pursuant to subsection (b) exceed the net proceeds
received by such Holder upon the sale of the Registrable Securities giving rise
to such contribution obligation.

 

37

 

6.12        Assignment and Transfer.  The
rights to cause the Company to register Registrable Securities granted to the
Holders by the Company in this Article 6 may be assigned by a Holder in
connection with a transfer by such Holder of all or a portion of its
Registrable Securities, provided, however,
that such transfer must be made at least ten days prior to the Filing Deadline
and that (a) such transfer may otherwise be effected in accordance with
applicable securities laws, including establishing the tranferee’s
qualification as an “accredited investor” within the meaning of the Securities
Act; (b) such Holder gives prior written notice to the Company at least
ten days prior to the Filing Deadline; and (c) such transferee agrees in
writing with the Company to comply with and be bound by all of the provisions
of this Agreement; and (d) such transfer is otherwise in accordance with
the applicable requirements of this Agreement and the Warrants and Bridge
Warrants.  Except as specifically
permitted by this Section 6.12, the rights of a Holder with respect to
Registrable Securities as set out herein shall not be transferable to any other
Person, and any attempted transfer shall cause all rights of such Holder
therein to be forfeited.  Notwithstanding
the foregoing provisions of this Section 6.12, no such restriction shall
apply to a transfer by a Holder that is: (i) a partnership transferring to
its partners or former partners in accordance with partnership interests; (ii) a
corporation transferring to a wholly-owned subsidiary or a parent corporation
that owns all of the capital stock of the Holder;  (iii) a limited liability company
transferring to its members or former members in accordance with their interest
in the limited liability company; (iv) an affiliated investment fund
transferring to another affiliated investment fund; or (v) an individual
transferring to the Holder’s family member or trust for the benefit of an
individual Holder; provided that in each case the transfer is effected in
accordance with applicable securities laws, including establishing the
transferee’s qualification as an “accredited investor” within the meaning of
the Securities Act, and the transferee agrees in writing to be subject to the
terms of this Agreement to the same extent as if the transferee were an
original Holder hereunder.

 

6.13        Amendment and Waiver of
Registration Rights.
The rights of any Holder under the provisions of this Article 6 may be
waived (either generally or in a particular instance, either retroactively or
prospectively and either for a specified period of time or indefinitely) or
amended by an instrument in writing signed by the Holders of at least 60% of
the Registrable Securities; provided however, that any waiver or amendment that
adversely affects any Holder in a different manner than other Holders shall
require the consent of such Holder.  For
purposes of this provision, differences in investments or ownership among
Holders shall not be considered as a basis for determining whether a waiver or
amendment results in adversely affecting a Holder in a different manner.  Any amendment or waiver effected in
accordance with this Section 6.13 shall be binding upon each such Holder
and the Company.  By acceptance of the
benefits under this Article 6, the Holders of the Registrable Securities
hereby agree to be bound by the provisions hereof.

 

ARTICLE 7

 

OTHER
COVENANTS

 

7.1          Observation Rights. 
For so long as MPM Capital continues to own at least 10% of the Shares originally
purchased by MPM Capital at the Closing ( the “Threshold
Securities”), and provided that an MPM Designee does not at such
time serve on the Company’s Board of Directors, the Company shall allow one
representative designated by MPM Capital

 

38

 

(the “MPM Observer Representative”) to
attend all regularly scheduled meetings of the Company’s Board of Directors in
a nonvoting capacity, and in connection therewith, the Company shall give such MPM
Observer Representative copies of all notices, minutes, consents and other
materials, financial or otherwise, which the Company provides to its Board of
Directors; provided, however, that: (a) the MPM Observer Representative
shall agree, by written instrument in writing in form and substance
satisfactory to the Company, to hold in confidence and trust and to act in a
fiduciary manner with respect to all information so provided; and (b) the
Company reserves the right to exclude such MPM Observer Representative from
access to any material or meeting or portion thereof if the Company believes
that such exclusion is reasonably necessary: (i) to preserve the
attorney-client privilege; (ii) to protect highly confidential
information; or (iii) to prevent the disclosure of trade secrets to a
competitor.  Prior to such designation,
the MPM Observer Representative must be approved by the Board of Directors,
such approval not be unreasonably withheld or delayed.

 

7.2          Board of Directors Matters. 
For so long as MPM Capital continues to own the Threshold Securities:

 

(a)           the
Company shall: (i) use its reasonable best efforts to cause one person
designated by MPM Capital to be nominated and elected to the Company’s Board of
Directors at each meeting or pursuant to each consent of the Company’s
shareholders for the election directors (the “MPM
Designee”), which designee shall initially be initially Nick
Simon; and (ii) use its reasonable best efforts to cause one person
designated by mutual agreement of MPM Capital and Bay City Capital to be
nominated and elected to the Company’s Board of Directors at each meeting or
pursuant to each consent of the Company’s shareholders for the election of
directors (the “Investor Designee”); and (iii) if
any MPM Designee or Investor Designee elected to the Company’s Board of
Directors ceases to be a member of the Company’s Board of Directors during such
person’s term as a director due to such person’s resignation, death or removal,
the Company shall use its reasonable best efforts, subject to applicable laws
and regulations, to cause such vacancy to be filled by a replacement designated
by MPM Capital or by mutual agreement of MPM Capital and Bay City Capital, as
the case may be, and such designee shall be an MPM Designee and the Investor
Designee, as applicable, for purposes of this Agreement; and

 

(b)           as
long as an MPM Designee remains on the Company’s Board of Directors pursuant to
this Section 7.2, the Company shall use its commercially reasonable
efforts to appoint one of the MPM Designees to the compensation committee of
the Company’s Board of Directors; provided, however, that the Company shall not
be required to make any appointment to a committee of the Company’s Board of
Directors if such appointment could reasonably be expected to conflict with
federal securities laws or any other rules or regulations then in effect
of Nasdaq or any exchange on which the Company’s securities are listed for
trading.

 

7.3          The
Company shall use its commercially reasonable efforts to maintain the Company’s
Articles of Incorporation and Bylaws to permit the Company to indemnify its
directors and officers to the fullest extent permitted by law (including to
seek to amend such Articles of Incorporation and Bylaws to the extent the law
permits greater indemnification than then permitted by such Articles of
Incorporation and Bylaws).

 

39

 

7.4          For
so long as MPM Capital continues to own the Threshold Securities, the Company
shall use its commercially reasonable efforts to appoint Dennis Henner to the
product development advisory committee of the Company (or substantially similar
advisory committee if the Company does not have a product development
committee).

 

ARTICLE 8

DEFINITIONS

 

8.1          “Affiliate” or “affiliate” means, with respect to any Person (as
defined below), any other Person controlling, controlled by or under direct or
indirect common control with such Person (for the purposes of this definition “control,” when used with respect to
any specified Person, shall mean the power to direct the management and
policies of such person, directly or indirectly, whether through ownership of
voting securities, by contract or otherwise; and the terms “controlling”
and “controlled” shall have meanings
correlative to the foregoing).

 

8.2          “Allowable Grace Period” has the meaning set out in Section 6.8(p).

 

8.3          “Alternative Proposal” has the meaning set forth in Section 4.10(a).

 

8.4          “Articles of Incorporation” has the meaning set forth in Section 2.3.

 

8.5          “Bridge Loan Agreement” means the Note and Warrant Purchase
Agreement between the Company and the Purchasers dated as of February 1,
2006.

 

8.6          “Bridge Loan” means the loan made by the Purchasers to
the Company pursuant to the Bridge Loan Agreement and the Bridge Notes.

 

8.7          “Bridge Note” means the convertible promissory notes
of the Company issued to the Purchasers pursuant to the Bridge Loan Agreement.

 

8.8          “Bridge Warrants” means the warrants to purchase Common
Stock issued to the Purchasers pursuant to the Bridge Loan Agreement.

 

8.9          “Bridge Warrant Shares” has the meaning set forth in Section 2.4.

 

8.10        “Business Day” means a day Monday through Friday on
which banks are generally open for business in New York City.

 

8.11        “Bylaws” has the meaning set forth in Section 2.3.

 

8.12        “Change in the Company
Recommendation”
has the meaning set forth in Section 4.5.

 

8.13        “Claims” has the meaning set forth in Section 6.11(a).

 

8.14        “Closing” has the meaning set forth in Section 1.4.

 

8.15        “Closing Date” has the meaning set forth in Section 1.4.

 

40

 

8.16        “Common Stock” means the common stock, par value $0.02
per share, of the Company.

 

8.17        “Company” means NeoRx Corporation.

 

8.18        “Company Recommendation” has the meaning set forth in Section 4.5.

 

8.19        “Conversion” shall have the meaning set forth in Section 2.3.

 

8.20        “Conversion Rate”
has the meaning set forth in Section 2.3.

 

8.21        “Damages Accrual Period” has the meaning set forth in Section 6.7.

 

8.22        “Delay Payment Rate” means during the Damages Accrual Period,
an amount per week (or portion thereof) per share of Common Stock equal to 1%
of the per share Purchase Price of such Share.

 

8.23        “Demand Registration” has the meaning set forth in Section 6.2.

 

8.24        “Disclosure Schedule” means the Disclosure Schedules of the
Company delivered concurrently herewith and incorporated herein by reference.

 

8.25        “Effectiveness Deadline” has the meaning set forth in Section 6.1.

 

8.26        “Exchange Act” means the Securities Exchange Act of
1934, as amended.

 

8.27        “FDA” means the US Food and Drug
Administration.

 

8.28        “FDCA” has the meaning set forth in Section 2.34.

 

8.29        “Filing
Deadline” has
the meaning set forth in Section 6.1.

 

8.30        “Final
Prospectus”
has the meaning set forth in Section 6.11(a).

 

8.31        “Financial
Statements” means the financial statements of the Company included in the SEC
Documents.

 

8.32        “Grace Period” has the meaning set forth in Section 6.8
(p).

 

8.33        “Holders” means any Purchaser and any Person to
whom a Purchaser, in accordance with Section 6.12 hereof, transfers its
rights under Article 6 of this Agreement.

 

8.34        “Indemnified
Party” has
the meaning set forth in Section 6.11(c).

 

8.35        “Indemnifying
Party” has
the meaning set forth in Section 6.11(c).

 

8.36        “Inspectors” has the meaning set forth in Section 6.8(i).

 

8.37        “Intellectual Property
Rights” has
the meaning set forth in Section 2.10.

 

41

 

8.38        “Investment Company Act” has the meaning set forth in Section 2.12.

 

8.39        “Investor Designee” has the meaning set forth in Section 7.2(a).

 

8.40        “Investor Representative” has the meaning set forth in Section 5.2(i).

 

8.41        “Legal Counsel” has the meaning set forth in Section 6.5.

 

8.42        “Life Science Product” has the meaning set forth in Section 2.34.

 

8.43        “Material Adverse Effect” means an event, change or occurrence
that individually, or together with any other event, change or occurrence, has
had or reasonably could be expected to have a material adverse effect on (a) the
business, operations, assets, or financial condition of the Company and its
Subsidiary, taken together as a whole, or (b) the ability of the Company
to perform its obligations pursuant to the transactions contemplated by this
Agreement and the Related Agreements.

 

8.44        “Material Contracts” has the meaning set forth in Section 2.28(a).

 

8.45        “Material Permits” has the meaning set forth in Section 2.5(c).

 

8.46        “MPM Capital” means, collectively, MPM BioVentures
III, L.P., MPM BioVentures III-QP, L.P., MPM BioVentures III GmbH &
Co. Beteiligungs KG, MPM BioVentures III Parallel Fund, L.P., MPM Asset
Management Investors 2005 BVIII LLC, MPM BioEquities Master Fund LP and their
respective Affiliates.

 

8.47        “MPM Designee” has the meaning set forth in Section 7.2(a).

 

8.48        “MPM Observer
Representative” has
the meaning set forth in Section 7.1.

 

8.49        “MPM Representative” has the meaning set forth in Section 5.2(i).

 

8.50        “Nasdaq” means The Nasdaq Capital Market.

 

8.51        “Offering” means the offer, sale, issuance and
purchase of the Company’s Securities and the Warrant Shares contemplated by
this Agreement and the Warrants and the offer, sale, issuance and purchase of
the Bridge Notes and the Bridge Warrant Shares contemplated by the Bridge Loan
Agreement and the Bridge Warrants, together as a single integrated transaction.

 

8.52        “Non-Core Technologies” has the meaning set forth in Section 4.10(e).

 

8.53        “Non-Core Technology Funds”
has the
meaning set forth in Section 4.10(e).

 

8.54        “Non-US Person” has the meaning set forth in Section 3.2.

 

8.55        “Other Material Contracts”
has the
meaning set forth in Section 2.28(a).

 

42

 

8.56        “Person” means any person, individual,
corporation, limited liability company, partnership, trust or other
nongovernmental entity or any governmental agency, court, authority or other
body (whether foreign, federal, state, local or otherwise).

 

8.57        “Placement Agent” means Banc of America Securities LLC.

 

8.58        “Proxy Statement” has the meaning set forth in Section 4.6.

 

8.59        “Purchasers” mean the Purchasers whose names are set
forth on the signature pages of this Agreement, and their permitted
transferees.

 

8.60        “Purchase Price” has the meaning set forth in Section 1.1.

 

8.61        “Records” has the meaning set forth in Section 6.8(i).

 

8.62        The terms “register,”
“registered” and “registration” refer to the
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.

 

8.63        “Registrable Securities” means (i) the Shares, including the
Shares issued upon conversion of the Bridge Notes at Closing, (ii) the
Warrant Shares and (iii) the Bridge Warrant Shares; provided,
however, that securities shall only be treated as Registrable
Securities if and only for so long as they (A) have not been disposed of
pursuant to a Registration Statement declared effective by the SEC, (B) have
not been sold in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act so that all transfer restrictions
and restrictive legends with respect thereto are removed upon the consummation
of such sale or (C) are held by a Holder or a permitted transferee
pursuant to Section 6.12.

 

8.64        “Registration Delay” means the occurrence of any of (i) a
Registration Statement covering all of the Registrable Securities is not filed
with the SEC on or before the Filing Deadline or is not declared effective on
or before the Effectiveness Deadline, (ii) a Registration Statement in
connection with a Demand Registration covering all of the Registrable
Securities required to be covered thereby is not filed with the SEC on or
before the deadline described in the last sentence of Section 6.2, (iii) on
any day during the Registration Period (other than during an Allowable Grace
Period), all of the Registrable Securities required to be included in such
Registration Statement cannot be sold pursuant to such Registration Statement
as a matter of law or because the Company has failed to perform the applicable
time period required for such performance (including, without limitation,
because of a failure to keep such Registration Statement effective, to disclose
such information as is necessary for sales to be made pursuant to such
Registration Statement, or to register a sufficient number of Shares, Warrant
Shares and Bridge Warrant Shares), or (iv) a Grace Period exceeds the
length of an Allowable Grace Period.

 

8.65        “Registration Delay
Payments” has
the meaning set forth in Section 6.7.

 

8.66        “Registration Period” has the meaning set forth in Section 6.8(a).

 

8.67        “Registration Period” has the meaning set forth in Section 6.4(a).

 

43

 

8.68        “Registration Statement” means a registration statement or
registration statements of the Company filed under the Securities Act covering
the Registrable Securities.

 

8.69        “Related Agreements” has the meaning set forth in Section 2.2.

 

8.70        “Required Approvals” has the meaning set forth in Section 2.5(b).

 

8.71        “Required Shareholder
Approval” has
the meaning set forth in Section 2.27

 

8.72        “Required Effectiveness
Date” has the
meaning set forth in Section 6.1.

 

8.73        “Rule 144” means Rule 144 promulgated under
the Securities Act, or any successor rule.

 

8.74        “SEC” means the United States Securities and
Exchange Commission.

 

8.75        “SEC Documents” has the meaning set forth in Section 2.6.

 

8.76        “Securities” has the meaning set forth in Section 1.1.

 

8.77        “Securities Act” means the Securities Act of 1933, as
amended, and the rules and regulations thereunder, or any similar
successor statute.

 

8.78        “Security Agreement” means the Security Agreement dated as of
February 1, 2006, entered into by and among the Company and the Purchasers
in connection with the Bridge Loan.

 

8.79        “Series B Conversion
Agreement”
means the Irrevocable Agreement to Convert Series B Convertible Preferred
Stock dated as of February 1, 2006 by and among the Company and each
holder of Series B Convertible Preferred Stock.

 

8.80        “Series B Convertible
Preferred Stock”
means the outstanding shares of the Company’s Series B Convertible
Preferred Stock.

 

8.81        “Shares” has the meaning set forth in Section 1.1
and includes the number of Shares of Common Stock issuable upon automatic
conversion of the Bridge Notes at Closing.

 

8.82        “Shareholders’ Meeting” has the meaning set forth in Section 4.5.

 

8.83        “Subsidiary” of any person shall mean any corporation,
partnership, limited liability company, joint venture or other legal entity of
which such Person (either above or through or together with any other
subsidiary) owns, directly or indirectly, more than 50% of the stock or other
equity interests the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.

 

8.84        “Superior Proposal” has the meaning set forth in Section 4.10(d).

 

8.85        “Threshold Securities” has the meaning set forth in Section 7.4.

 

44

 

8.86        “Transaction Approval” has the meaning set forth in Section 4.5.

 

8.87        “Transaction Securities” has the meaning set forth in Section 2.2.

 

8.88        “Warrant
Shares” has
the meaning set forth in Section 2.4.

 

8.89        “Warrants” has the meaning set forth in Section 1.1.

 

8.90        “WBCA” has the meaning set forth in Section 2.29.

 

ARTICLE 9

MISCELLANEOUS

 

9.1          Termination. 
This Agreement may be terminated at any time with respect to the
applicable parties prior to the Closing:

 

(a)           By mutual written agreement of the
Company and the holders of at least 60% in aggregate principal amount of the
Bridge Notes held by the Purchasers;

 

(b)           By either the Company or by the holders
of at least 60%-in-interest of the aggregate principal amount of Bridge Notes
held by the Purchasers, by written notice to the other parties (provided the
terminating party (or parties) is not then in material breach of any
representation, warranty, covenant or other agreement contained in this
Agreement or the Related Agreements) if the Closing shall not have been
consummated on or before May 31, 2006;

 

(c)           By either the Company or the holders of at
least 60% in interest of the aggregate principal amount of Bridge Notes held by
the Purchasers by giving written notice to the other party or parties if any
governmental entity shall have issued an injunction or other ruling prohibiting
the consummation of any of the transactions contemplated by this Agreement and
the Related Agreements and such injunction or other ruling shall not be subject
to appeal or shall have become final and unappealable;

 

(d)           By the holders of at least 60%-in-interest
of the aggregate principal amount of the Bridge Notes held by the Purchasers in
the event that the Transaction Approval is not obtained at the Shareholders’
Meeting;

 

(e)           By the holders of at least 60%-in-interest
of the aggregate principal amount of the Bridge Notes held by the Purchasers,
if there shall have occurred an event or events constituting a Material Adverse
Effect;

 

(f)            By the holders of at least 60%-in-interest
of the aggregate principal amount of the Bridge Notes held by the Purchasers,
if the Company shall have materially breached the terms of this Agreement, the
Bridge Loan Agreement or the Bridge Notes and such breach is not cured within
five (5) Business Days after receiving notice thereof; or

 

45

 

(g)           By the Company if the holders of at least
60%-in-interest of the aggregate principal amount of the Bridge Notes held by
the Purchasers shall have materially breached the terms of this Agreement, the
Bridge Loan Agreement or the Bridge Notes and such breach is not cured within
five (5) Business Days after receiving notice thereof.

 

9.2          Effect of Termination. In the event of any termination of this
Agreement pursuant to Section 9.1, all rights and obligations of the
parties hereunder shall terminate without any liability on the part of any
party or its Affiliates in respect thereof; provided, however, that such
termination shall not relieve the Company or any Purchaser of any liability
under the Bridge Notes or for any willful breach of this Agreement.  If the Agreement is terminated pursuant to Section 9.1(d) or
(f), the Company shall promptly reimburse the Purchasers for their reasonable
legal, financial, due diligence and advisory fees and expenses, up to an
aggregate maximum of $125,000.

 

9.3          Governing Law; Jurisdiction. 
This Agreement will be governed by and interpreted in accordance with the
laws of the State of California.

 

9.4          Counterparts; Signatures by
Facsimile.  This Agreement may be executed in two or more
counterparts, all of which are considered one and the same agreement and will
become effective when counterparts have been signed by each party and delivered
to the other parties.  This Agreement,
once executed by a party, may be delivered to the other parties hereto by
facsimile transmission of a copy of this Agreement bearing the signature of the
party so delivering this Agreement.

 

9.5          Headings. 
The headings of this Agreement are for convenience of reference only,
are not part of this Agreement and do not affect its interpretation.

 

9.6          Severability.  If any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such
provision will be deemed modified in order to conform with such statute or rule of
law.  Any provision hereof that may prove
invalid or unenforceable under any law will not affect the validity or
enforceability of any other provision hereof.

 

9.7          Entire Agreement; Amendments;
Waiver.  This Agreement and the Related Agreements
(including all schedules and exhibits hereto and thereto) constitute the entire
agreement among the parties hereto with respect to the subject matter hereof
and thereof.  There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein or therein.  This Agreement and
the Related Agreements supersede all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof and thereof.  Except as otherwise provided herein, no
provision of this Agreement may be amended or waived other than by an
instrument in writing signed by the Company and the holders of at least 60%-in-interest
of the aggregate amount of Transaction Securities then held by the Purchasers
under this Agreement and the Related Agreements (or, if prior to the Closing,
by the Purchasers holding at least 60% in interest of the aggregate principal
amount of the Bridge Notes), or in the case of a waiver, by the party against
whom enforcement of such waiver is sought. 
Notwithstanding the foregoing, any amendment or waiver that adversely
affects any Purchaser in a different manner than other Purchasers shall require
the consent of such

 

46

 

Purchaser.  For purposes of this provision, differences
in investments or ownership among Purchasers shall not be considered as a basis
for determining whether an amendment or waiver results in adversely affecting a
Purchaser in a different manner.  Any
amendment effected in accordance with this Section 9.7 shall be binding
upon each holder of any Securities purchased under this Agreement at the time
outstanding (including securities into which such Securities are convertible
and for which such Securities are exercisable), each future holder of all such
securities, and the Company.

 

9.8          Notices. 
All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given: (a) upon personal delivery to the party
to be notified, (b) when sent by confirmed email, telex or facsimile if
sent during normal business hours of the recipient, if not, then on the next
business day, (c) five days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (d) one
business day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt.  The addresses for such communications are:

 

If to the Company:                                                                     NeoRx
Corporation

300 Elliott Avenue West, Suite 500.

Seattle, WA 98119-4114

Facsimile: (206) 286-2537

Attn:  Chief Financial Officer

cc: Vice President-Legal

 

With a copy to:                                                                                     Perkins
Coie LLP

1201 Third Avenue, Suite 4800

Seattle, WA 98101

Facsimile: (206) 359-9000

Attn:  Faith M. Wilson

 

If to a Purchaser: 
To the address set forth immediately below such Purchaser’s name on the
signature pages hereto.  Each party
will provide ten days’ advance written notice to the other parties of any
change in its address.

 

9.9          Successors and Assigns. 
This Agreement is binding upon and inures to the benefit of the parties
and their successors and permitted assigns. 
The Company will not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Purchasers, and no Purchaser
may assign this Agreement or any rights or obligations hereunder without the
prior written consent of the Company, except as permitted in accordance with Section 6.12
hereof.

 

9.10        Third Party Beneficiaries. 
This Agreement is intended for the benefit of the parties hereto, their
respective permitted successors and assigns and the Placement Agent, and is not
for the benefit of, nor may any provision hereof be enforced by, any other
person.

 

9.11        Further Assurances. 
Each party will do and perform, or cause to be done and performed, all
such further acts and things, and will execute and deliver all other
agreements, certificates, instruments and documents, as another party may
reasonably request in order to

 

47

 

carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.

 

9.12        No Strict Construction.  The language used in this
Agreement is deemed to be the language chosen by the parties to express their
mutual intent, and no rules of strict construction will be applied against
any party.

 

9.13        Equitable Relief. 
The Company recognizes that, if it fails to perform or discharge any of
its obligations under this Agreement, any remedy at law may prove to be
inadequate relief to the Purchasers.  The
Company therefore agrees that the Purchasers are entitled to seek temporary and
permanent injunctive relief in any such case. Each Purchaser also recognizes
that, if it fails to perform or discharge any of its obligations under this
Agreement, any remedy at law may prove to be inadequate relief to the
Company.  Each Purchaser therefore agrees
that the Company is entitled to seek temporary and permanent injunctive relief
in any such case

 

9.14        Survival
of Representations and Warranties.  Notwithstanding
any investigation made by any party to this Agreement, all representations and
warranties made by the Company and the Purchasers herein shall survive the execution of this Agreement and the
delivery to the Purchasers of the Shares and the Warrants.  All covenants contained herein shall survive
the execution of this Agreement and the Closing of the transactions contemplated
hereby (except to the extent expressly provided in this Agreement).

 

9.15        Independent Nature of Purchasers’
Obligations and Rights. The obligations of each Purchaser under this Agreement are several and
not joint with the obligations of any other Purchaser, and no Purchaser shall
be responsible in any way for the performance of the obligations of any other
Purchaser under this Agreement and the Related Agreements. Nothing contained
herein or therein and no action taken by any Purchaser pursuant hereto or thereto,
shall be deemed to constitute the Purchasers as a partnership, an association,
a joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group, or are deemed
affiliates (as such term is defined under the Exchange Act) with respect to
such obligations or the transactions contemplated by this Agreement and the
Related Agreements.  Each Purchaser shall
be entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement and the Related Agreements,
and it shall not be necessary for any other Purchaser to be joined as an
additional party in any proceeding for such purpose.

 

9.16        Aggregation of Stock. 
All shares of Registrable Securities held or acquired by affiliated Person
or Persons under common management or control shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.

 

[Signature Page Follows]

 

48

 

IN WITNESS WHEREOF, the
undersigned Purchasers and the Company have caused this Agreement to be duly
executed as of the date first above written.

 

	
   

  	
  NEORX CORPORATION.

  
	
   

  	
   

  
	
   

  	
  /s/ Gerald McMahon

  	
   

  
	
   

  	
  Gerald McMahon

  	
   

  
	
   

  	
  Chairman and Chief
  Executive Officer

  	
   

  

 

 

SIGNATURE PAGE TO
SECURITIES PURCHASE AGREEMENT

 

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
  DEERFIELD SPECIAL
  SITUATIONS FUND,

  LTD.

  	
   

  
	
   

  	
   

  	
  (investor name)

  
	
   

  	
  By:

  	
  /s/ Darren Levine

  	
   

  
	
   

  	
   

  	
  (signature)

  
	
   

  	
  Darren Levine, CFO

  	
   

  
	
   

  	
   

  	
  (print name and title)

  
	
   

  	
  Address:

  	
  780 3rd Ave

  	
   

  
	
   

  	
   

  	
  37th Floor

  	
   

  
	
   

  	
   

  	
  NY, NY 10017

  	
   

  
	
   

  	
   

  	
  Facsimile:
  DLevine@deerfieldpartners.com

  	
   

  
							

 

SECURITIES PURCHASE
AGREEMENT

SIGNATURE PAGE

 

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
  DEERFIELD SPECIAL
  SITUATIONS FUND

  INTERNATIONAL, LTD.

  	
   

  
	
   

  	
   

  	
  (investor name)

  
	
   

  	
  By:

  	
  /s/ Darren Levine

  	
   

  
	
   

  	
   

  	
  (signature)

  
	
   

  	
  Darren Levine, CFO

  	
   

  
	
   

  	
   

  	
  (print name and title)

  
	
   

  	
  Address:

  	
  780 3rd Ave

  	
   

  
	
   

  	
   

  	
  37th Floor

  	
   

  
	
   

  	
   

  	
  NY, NY 10017

  	
   

  
	
   

  	
  DLevine@deerfieldpartners.com

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Facsimile: 

  	
  (212) 751-0755

  	
   

  	
   

  
								

 

SECURITIES PURCHASE AGREEMENT

SIGNATURE PAGE

 

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  MPM
  BIOVENTURES III, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:           MPM
  BioVentures III GP, L.P., its 

  General Partner

  
	
   

  	
   

  	
  By:      MPM
  BioVentures III LLC, its General 

  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Nicholas J. Simon

  	
   

  
	
   

  	
   

  	
  Name:
  Nicholas J. Simon

  
	
   

  	
   

  	
  Title:
  Series A Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
  The
  John Hancock Tower

  
	
   

  	
   

  	
   

  	
   200
  Clarendon Street, 54th Floor

  
	
   

  	
   

  	
   

  	
   Boston, MA 02116

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MPM
  BIOVENTURES III-QP, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:           MPM
  BioVentures III GP, L.P., its 

  General Partner

  
	
   

  	
   

  	
  By:        MPM
  BioVentures III LLC, its General 

  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Nicholas J. Simon

  	
   

  
	
   

  	
   

  	
  Name:
  Nicholas J. Simon

  
	
   

  	
   

  	
  Title:
  Series A Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
  The
  John Hancock Tower

  
	
   

  	
   

  	
   

  	
   200
  Clarendon Street, 54th Floor

  
	
   

  	
   

  	
   

  	
   Boston, MA 02116

  
						

 

 

SIGNATURE PAGE TO
SECURITIES PURCHASE AGREEMENT

 

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MPM BIOVENTURES III GMBH & CO. 

  BETEILIGUNGS KG

  
	
   

  	
   

  
	
   

  	
  By: MPM BioVentures III GP, L.P., in its 

  capacity as the Managing Limited Partner

  
	
   

  	
  By: MPM BioVentures III LLC, its General 

  Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Nicholas J. Simon

  	
   

  
	
   

  	
  Name:
  Nicholas J. Simon

  
	
   

  	
  Title: Series A
  Member

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  The John Hancock Tower

  	
   

  
	
   

  	
   

  	
   200 Clarendon Street, 54th Floor

  	
   

  
	
   

  	
   

  	
   Boston, MA 02116

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MPM BIOVENTURES III PARALLEL 

  FUND, L.P.

  
	
   

  	
   

  
	
   

  	
  By: MPM BioVentures III GP, L.P., its 

  General Partner

  
	
   

  	
  By: MPM BioVentures III LLC, its General 

  Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Nicholas J. Simon

  	
   

  
	
   

  	
  Name:
  Nicholas J. Simon

  
	
   

  	
  Title: Series A
  Member

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  The John Hancock Tower

  	
   

  
	
   

  	
   

  	
  200 Clarendon Street, 54th
  Floor

  	
   

  
	
   

  	
   

  	
  Boston, MA 02116

  	
   

  
						

 

 

SIGNATURE PAGE TO
SECURITIES PURCHASE AGREEMENT

 

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MPM ASSET MANAGEMENT INVESTORS 

  2005 BVIII LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Nicholas J. Simon

  	
   

  
	
   

  	
  Name:
  Nicholas J. Simon

  
	
   

  	
  Title: Manager

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  The John Hancock Tower

  	
   

  
	
   

  	
   

  	
  200 Clarendon Street, 54th Floor

  	
   

  
	
   

  	
   

  	
  Boston, MA 02116

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MPM BIOEQUITIES MASTER FUND, LP

  
	
   

  	
   

  
	
   

  	
  By: MPM BioEquities GP, L.P., its General 

  Partner

  
	
   

  	
  By: MPM BioEquities GP LLC, its General 

  Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kurt Von Emster

  	
   

  
	
   

  	
   

  	
  Manager

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  The John Hancock Tower

  	
   

  
	
   

  	
   

  	
   200 Clarendon
  Street, 54th Floor

  	
   

  
	
   

  	
   

  	
   Boston, MA 02116

  	
   

  
							

 

 

SIGNATURE PAGE TO
SECURITIES PURCHASE AGREEMENT

 

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Bay City Capital Management IV, LLC

  
	
   

  	
  General Partner of:

  
	
   

  	
  Bay City Capital Fund IV Co-Investment Fund, 

  L.P.

  
	
   

  	
   

  
	
   

  	
  /s/ Carl S. Goldfisher

  	
   

  
	
   

  	
  By:
  Bay City Capital LLC, its Manager

  
	
   

  	
  By: Carl S. Goldfisher,
  M.D., a Managing 

  Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  Bay City Capital

  	
   

  
	
   

  	
   

  	
  750 Battery
  Street, Suite 400

  	
   

  
	
   

  	
   

  	
  San Francisco,
  CA 94111

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Bay City Capital Management IV, LLC

  General Partner of:

  
	
   

  	
  Bay City Capital Fund IV, L.P.

  
	
   

  	
   

  
	
   

  	
  /s/ Carl S. Goldfisher

  	
   

  
	
   

  	
  By:
  Bay City Capital LLC, its Manager

  
	
   

  	
  By: Carl S. Goldfisher,
  M.D., a Managing 

  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  Bay City Capital

  	
   

  
	
   

  	
   

  	
  750 Battery
  Street, Suite 400

  	
   

  
	
   

  	
   

  	
  San Francisco,
  CA 94111

  	
   

  
						

 

 

SIGNATURE PAGE TO
SECURITIES PURCHASE AGREEMENT

 

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
  ABINGWORTH BIOVENTURES IV
  EXECUTIVES

  
	
   

  	
  L.P.

  	
   

  
	
   

  	
  (investor name)

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James Abell

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Abingworth Management Ltd.

  	
   

  
	
   

  	
  Name:

  	
  James Abell

  	
   

  
	
   

  	
   

  	
  (signature)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  James Abell,
  Director

  	
   

  
	
   

  	
  (print name and title)

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  38 Jermyn Street

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  London SW 1Y 6DN

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  U.K.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Facsimile:

  	
  +44 207 536 1539

  	
   

  
							

 

 

SIGNATURE PAGE TO
SECURITIES PURCHASE AGREEMENT

 

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
  ABINGWORTH BIOEQUITIES MASTER
  FUND

  
	
   

  	
  LTD.

  	
   

  
	
   

  	
  (investor name)

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James Abell

  	
   

  
	
   

  	
   

  	
  (signature)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Abingworth Management Ltd.

  	
   

  
	
   

  	
  Name:

  	
  James Abell

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  James Abell,
  Director

  	
   

  
	
   

  	
  (print name and title)

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  38 Jermyn Street

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  London SW 1Y 6DN

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  U.K.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Facsimile:

  	
  +44 207 536 1539

  	
   

  
							

 

 

SIGNATURE PAGE TO
SECURITIES PURCHASE AGREEMENT

 

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
  ABINGWORTH BIOVENTURES IV L.P.

  	
   

  
	
   

  	
  (investor name)

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James Abell

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Abingworth Management Ltd.

  	
   

  
	
   

  	
  Name:

  	
  James Abell

  	
   

  
	
   

  	
   

  	
  (signature)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  James Abell,
  Director

  	
   

  
	
   

  	
  (print name and title)

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  38 Jermyn Street

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  London SW 1Y 6DN

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  U.K.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Facsimile:

  	
  +44 207 536 1539

  	
   

  
							

 

 

SIGNATURE PAGE TO
SECURITIES PURCHASE AGREEMENT

 

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Steven Bloom

  	
   

  
	
   

  	
  (investor name)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven Bloom

  	
   

  
	
   

  	
   

  	
  (signature)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:  Steven Bloom

  	
   

  
	
   

  	
  Title: Managing
  Director, Sagamore Hill Capital

  Management, on behalf of Sagamore Hill Hub

  Fund, Ltd.

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  c/o Sagamore Hill
  Capital Management

  	
   

  
	
   

  	
   

  	
  One Manhattanville Road

  	
   

  
	
   

  	
   

  	
  Purchase, NY 10577

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Facsimile:

  	
  914644-7220

  	
   

  
									

 

 

SIGNATURE PAGE TO
SECURITIES PURCHASE AGREEMENT

 

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
  Shepherd Investments
  International, Ltd.

  
	
   

  	
  By: Stark Offshore
  Management, LLC its

  
	
   

  	
  Investment Manager

  	
   

  
	
   

  	
  (investor name)

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael A. Roth

  	
   

  
	
   

  	
   

  	
  (signature)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Michael A. Roth, Managing Member

  	
   

  
	
   

  	
  (print name and title)

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  3600 South Lake
  Drive

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  St. Francis, WI 53235

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Facsimile:

  	
  414-294-7700

  	
   

  
							

 

SIGNATURE PAGE TO
SECURITIES PURCHASE AGREEMENT

 

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SMITHFIELD FIDUCIARY
  LLC

  	
   

  
	
   

  	
  (investor name)

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Adam :J. Chill

  	
   

  
	
   

  	
   

  	
  (signature)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Adam J. Chill, Authorized
  Signatoryr

  	
   

  
	
   

  	
  (print name and title)

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  c/o Highbridge Capital
  Management LLC

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  9 West 57th
  Street, 27th Floor

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  New York, New York
  10019

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attn: Ari J. Storch / Adam J. Chill

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Facsimile:

  	
  (212) 751-0755

  	
   

  
								

 

 

SIGNATURE PAGE TO
SECURITIES PURCHASE AGREEMENT

 

 

SECURITIES PURCHASE AGREEMENT

 

 

	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
  T. ROWE PRICE ASSOCIATES, INC.,
  AS

  REGISTERED INVESTMENT ADVISER TO

  
	
   

  	
  THE PARTICIPATING T. ROWE PRICE

  ACCOUNTS IN THE SCHEDULE OF

  PURCHASERS

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Kris H. Jenner

  	
   

  
	
   

  	
   

  	
  (signature)

  	
   

  
	
   

  	
   

  
	
   

  	
  Kris H. Jenner, Vice
  President

  	
   

  
	
   

  	
  (print name and title)

  
	
   

  	
   

  
	
   

  	
  100 E. Pratt Stret

  	
   

  
	
   

  	
   

  
	
   

  	
  Baltimore, MD 21202

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  Attn: Darrell N. Braman

  
	
   

  	
   

  	
  Vice President and
  Associate

  
	
   

  	
   

  	
  Legal Counsel

  
	
   

  	
   

  	
  100 E. Pratt Street

  
	
   

  	
   

  	
  Baltimore, MD 21202

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Phone: 410-345-2013

  
	
   

  	
   

  	
  Facsimile: 410-345-6575

  
						

 

 

SIGNATURE PAGE TO SECURITIES
PURCHASE AGREEMENT

 

 

EXHIBIT A

SCHEDULE OF PURCHASERS

 

	
  Name of Purchaser

  and State of Residency

  	
   

  	
  Shares

  	
   

  	
  Warrants

  	
   

  	
  Aggregate Purchase

  Price

  	
   

  
	
  Abingworth Bioequities Master Fund Ltd.

  United Kingdom

  	
   

  	
  3,719,450

  	
   

  	
  1,074,010

  	
   

  	
  $

  	
  2,603,615.00

  	
   

  
	
  Abingworth Bioventures IV Executives LP

  United Kingdom

  	
   

  	
  25,877

  	
   

  	
  7,472

  	
   

  	
  $

  	
  18,113.90

  	
   

  
	
  Abingworth Bioventures IV LP

  United Kingdom

  	
   

  	
  3,017,310

  	
   

  	
  871,264

  	
   

  	
  $

  	
  2,112,117.00

  	
   

  
	
  Bay City Capital Fund IV Co-Investment Fund, L.P.

  California

  	
   

  	
  428,075

  	
   

  	
  123,608

  	
   

  	
  $

  	
  299,652.50

  	
   

  
	
  Bay City Capital Fund IV, L.P.

  California

  	
   

  	
  19,859,838

  	
   

  	
  5,734,633

  	
   

  	
  $

  	
  13,901,886.60

  	
   

  
	
  Deerfield Special Situations Fund Intl. Ltd

  New York

  	
   

  	
  6,593,571

  	
   

  	
  1,903,928

  	
   

  	
  $

  	
  4,615,499.70

  	
   

  
	
  Deerfield Special Situations Fund, LP

  New York

  	
   

  	
  3,550,385

  	
   

  	
  1,025,192

  	
   

  	
  $

  	
  2,485,269.50

  	
   

  
	
  MPM Asset Management Investors 2005 BVIII LLC

  Massachusetts

  	
   

  	
  499,252

  	
   

  	
  144,161

  	
   

  	
  $

  	
  349,476.40

  	
   

  
	
  MPM BioEquities Master Fund, LP

  Massachusetts

  	
   

  	
  4,057,583

  	
   

  	
  1,171,648

  	
   

  	
  $

  	
  2,840,308.10

  	
   

  
	
  MPM BioVentures III GmbH & Co. Beteiligungs
  KG

  Massachusetts

  	
   

  	
  2,381,801

  	
   

  	
  687,757

  	
   

  	
  $

  	
  1,667,260.70

  	
   

  
	
  MPM BioVentures III Parallel Fund, LP

  Massachusetts

  	
   

  	
  851,416

  	
   

  	
  245,850

  	
   

  	
  $

  	
  595,991.20

  	
   

  
	
  MPM BioVentures III, LP

  Massachusetts

  	
   

  	
  1,895,229

  	
   

  	
  547,257

  	
   

  	
  $

  	
  1,326,660.30

  	
   

  
	
  MPM BioVentures III-QP, LP

  Massachusetts

  	
   

  	
  28,185,488

  	
   

  	
  8,138,708

  	
   

  	
  $

  	
  19,729,841.60

  	
   

  
	
  Sagamore Hill Hub Fund, Ltd.

  New York

  	
   

  	
  1,343,201

  	
   

  	
  387,856

  	
   

  	
  $

  	
  940,240.70

  	
   

  
	
  Shepherd Investments International, Ltd.

  Wisconsin

  	
   

  	
  6,086,374

  	
   

  	
  1,757,472

  	
   

  	
  $

  	
  4,260,461.80

  	
   

  
	
  Smithfield Fiduciary LLC

  New York

  	
   

  	
  2,028,791

  	
   

  	
  585,824

  	
   

  	
  $

  	
  1,420,153.70

  	
   

  
	
  T. Rowe Price Health Sciences Fund, Inc.

  New York

  	
   

  	
  2,518,406

  	
   

  	
  727,203

  	
   

  	
  $

  	
  1,762,884.20

  	
   

  
	
  T. Rowe Price Health Sciences Portfolio, Inc.

  New York

  	
   

  	
  18,935

  	
   

  	
  5,467

  	
   

  	
  $

  	
  13,254.50

  	
   

  

 

 

	
  TD Mutual Funds - TD Health Sciences Fund

  New York

  	
   

  	
  186,135

  	
   

  	
  53,747

  	
   

  	
  $

  	
  130,294.50

  	
   

  
	
  VALIC Company I – Health Sciences Fund

  New York

  	
   

  	
  213,213

  	
   

  	
  61,566

  	
   

  	
  $

  	
  149,249.10

  	
   

  
	
  John Hancock Trust – Health Sciences Trust

  New York

  	
   

  	
  416,937

  	
   

  	
  120,392

  	
   

  	
  $

  	
  291,855.90

  	
   

  
	
  Raytheon Company Combined DB/DC Master Trust –
  Health Sciences

  New York

  	
   

  	
  37,019

  	
   

  	
  10,689

  	
   

  	
  $

  	
  25,913.30

  	
   

  
	
  TOTAL

  	
   

  	
  87,914,286

  	
   

  	
  25,385,704

  	
   

  	
  $

  	
  61,540,000.20

  	
   

  

 

 

EXHIBIT B

 

WARRANT

 

 

OFFERING WARRANT

 

NEITHER THIS WARRANT NOR THE UNDERLYING
SECURITIES HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE OF THE UNITED STATES IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), OR REGULATION S THEREUNDER, AND, ACCORDINGLY, MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED, TRANSFERRED OR ASSIGNED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY
ACCEPTABLE TO THE COMPANY.

 

NEORX CORPORATION

 

WARRANT TO PURCHASE COMMON STOCK

 

	
  No. W-      

  	
   

  	
                       ,
  2006

  

 

Void After                ,
2011

 

THIS CERTIFIES THAT, for value received,                                                      ,
with its principal office at                                                      ,
or assigns (the “Holder”),
is entitled to subscribe for and purchase at the Exercise Price (defined below)
from NeoRx Corporation, a Washington corporation, with its principal office at
300 Elliott Avenue West, Suite 500, Seattle, WA 98119-4114 (the “Company”) up to                         shares of the Common Stock of the Company (the “Common Stock”),
subject to adjustment as provided herein. 
This Warrant is one of a series of Warrants being issued pursuant to the
terms of the Securities Purchase Agreement dated as of February 1, 2006, by and among the Company and the
original Holder of this Warrant and the other parties named therein (the “Purchase Agreement”). 
Capitalized terms not otherwise defined herein shall have the respective
meanings ascribed to such terms in the Purchase Agreement.

 

1.             DEFINITIONS.  As used herein, the following terms shall have the following respective
meanings:

 

(a)           “Exercise
Period” shall mean the
period commencing on the date hereof and ending          ,
2011, unless sooner terminated as provided below.

 

(b)           “Exercise
Price” shall mean $0.77 per share, subject to adjustment
pursuant to Sections 5 and 6 below.

 

 

(c)           “Exercise
Shares” shall mean the
shares of the Company’s Common Stock issued or issuable upon exercise of this
Warrant, subject to adjustment and limitation pursuant to the terms herein.

 

(d)           “Fundamental
Transaction”
means any of the following: (1) the Company effects any merger or
consolidation of the Company with or into another Person pursuant to which the
Common Stock is effectively converted into or exchanged for other securities,
cash or property (other than as a result of a change in the jurisdiction of
incorporation of the Company), (2) the Company effects any sale, exclusive
license or other conveyance of all or substantially all of its assets in one or
a series of related transactions pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property,
(3) any tender offer or exchange offer (whether by the Company or another
Person) is completed pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, cash or property, or (4) the
Company effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively converted into
or exchanged for other securities, cash or property (other than a change in par
value, or from par value to no par value, or no par value to par value, or as a
result of a stock dividend, subdivision, split-up or combination of shares).

 

2.             EXERCISE OF
WARRANT.

 

2.1          Method of Exercise.  The
rights represented by this Warrant may be exercised in whole or in part at any
time during the Exercise Period, by delivery of the following to the Company at
its address set forth above (or at such other address as it may designate by
notice in writing to the Holder):

 

(a)           An executed Notice of Exercise in the form
attached hereto;

 

(b)           Payment of the Exercise Price either (i) in
cash or by check or wire transfer of immediately available funds, or (ii) pursuant
to a Cashless Exercise, as described below; and

 

(c)           This Warrant.

 

Immediately prior to the
expiration of the Exercise Period, the portion of this Warrant not exercised
prior thereto shall automatically be deemed to be exercised in full in the
manner set forth in Section 2.2, without any further action on behalf of
the Holder; provided, however, that in the event that the cashless exercise
formula set forth in Section 2.2 yields a result that is less than or
equal to zero, then the unexercised portion of this Warrant shall automatically
terminate and become void.  The Company
may not call or redeem all or any portion of this Warrant without the prior
written consent of the affected Holder.

 

Upon the exercise of the
rights represented by this Warrant, shares of Common Stock shall be issued for
the Exercise Shares so purchased, and shall be registered in the name of the
Holder or Persons affiliated with the Holder, if the Holder so designates, as
promptly as practicable, and in any event within (3) Business Days
thereafter, and shall be issued in certificate form and delivered to the
Holder.

 

2

 

The Person in whose name any
Exercise Shares are to be issued upon exercise of this Warrant shall be deemed
to have become the holder of record of such shares on the date on which this
Warrant was surrendered and payment of the Exercise Price was made,
irrespective of the date of issuance of the shares of Common Stock, except
that, if the date of such surrender and payment is a date when the stock
transfer books of the Company are closed, such Person shall be deemed to have
become the holder of such shares at the close of business on the next
succeeding date on which the stock transfer books are open.

 

2.2          Cashless Exercise.  Notwithstanding any provisions herein to the contrary, if, at any time
during the Exercise Period, the Current Market Price (as defined below) of one
share of Common Stock is greater than the Exercise Price (at the date of calculation
as set forth below), in lieu of exercising this Warrant by payment of cash, the
Holder may exercise this Warrant by a cashless exercise by surrender of this
Warrant at the principal office of the Company, together with the properly
endorsed Notice of Exercise, and the Company shall issue to the Holder a number
of shares of Common Stock computed using the following formula:

 

	
   

  	
  X =

  	
  Y (B-A)

  	
   

  
	
   

  	
   

  	
  B

  	
   

  
	
   

  	
   

  	
   

  
	
  Where:

  	
  X =

  	
  the number of shares of
  Common Stock to be issued to the Holder.

  
	
   

  	
   

  	
   

  
	
   

  	
  Y =

  	
  the
  number of shares of Common Stock purchasable upon exercise of all of the
  Warrant or, if only a portion of the Warrant is being exercised, the portion
  of the Warrant being exercised.

  
	
   

  	
   

  	
   

  
	
   

  	
  A =

  	
  the
  Exercise Price.

  
	
   

  	
   

  	
   

  
	
   

  	
  B =

  	
  the
  Current Market Price of one share of Common Stock.

  

 

“Current Market Price” means on any
particular date:

 

(a)           if the Common Stock is traded on the Nasdaq
Capital Market or the Nasdaq National Market, the average of the closing prices
of the Common Stock of the Company on such market over the five (5) trading
days ending immediately prior to the applicable date of valuation;

 

(b)           if the Common Stock is traded on any
registered national stock exchange but is not traded on the Nasdaq Capital
Market or the Nasdaq National Market, the average of the closing prices of the
Common Stock of the Company on such exchange over the five (5) trading
days ending immediately prior to the applicable date of valuation;

 

(c)           if the Common Stock is traded
over-the-counter, but not on the Nasdaq Capital Market, the Nasdaq National
Market or a registered national stock exchange, the average of the closing bid
prices over the 30-day period ending immediately prior to the applicable date
of valuation; and

 

3

 

(d)           if there is no active public market for the
Common Stock, the value thereof, as determined in good faith by the Board of
Directors of the Company upon due consideration of the proposed determination
thereof by the Holder.

 

2.3          Partial
Exercise.  If this Warrant is exercised in part only,
the Company shall, upon surrender of this Warrant, execute and deliver, within
10 days of the date of exercise, a new Warrant evidencing the rights of the
Holder, or such other Person as shall be designated in the Notice of Exercise,
to purchase the balance of the Exercise Shares purchasable hereunder.  In no event shall this Warrant be exercised
for a fractional Exercise Share, and the Company shall not distribute a Warrant
exercisable for a fractional Exercise Share. 
Fractional Exercise Shares shall be treated as provided in Section 7
hereof.

 

3.             COVENANTS OF THE
COMPANY.

 

3.1          Covenants as to
Exercise Shares.  The Company covenants and agrees that all
Exercise Shares that may be issued upon the exercise of the rights represented
by this Warrant will, upon issuance, be validly issued, fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issuance thereof.  The Company further
covenants and agrees that the Company will at all times during the Exercise
Period, have authorized and reserved, free from preemptive rights, a sufficient
number of shares of its Common Stock to provide for the exercise of the rights
represented by this Warrant (taking into account any adjustments and
restrictions set forth in Sections 5, 6, 7 and 8 hereof).  If at any time during the Exercise Period the
number of authorized but unissued shares of Common Stock shall not be
sufficient to permit exercise of this Warrant, the Company will take such
corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock (or other
securities as provided herein) to such number of shares as shall be sufficient
for such purposes.

 

3.2          No Impairment. 
Except and to the extent as waived or consented to by the Holder or
otherwise in accordance with Section 12 hereof, the Company will not, by
amendment of its Articles of Incorporation (as such may be amended from time to
time), or through any means, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of this Warrant and in the taking of all commercially reasonable
actions as may be necessary in order to protect the exercise rights of the
Holder against impairment.

 

3.3          Notices of Record
Date.  In the event of any taking by the Company of
a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend which is the same as cash dividends paid in previous quarters)
or other distribution, the Company shall mail to the Holder, at least twenty
(20) days prior to the date specified herein, a notice specifying the date on
which any such record is to be taken for the purpose of such dividend or
distribution, provided that the failure to mail such notice or any defect
therein or in the mailing thereof shall not adversely affect the validity of
the dividend or distribution required to be specified in such notice.

 

4

 

3.4          Charges, Taxes and
Expenses.  Issuance and delivery of Exercise Shares upon
exercise of this Warrant shall be made without charge to the Holder for any
issue or transfer tax, withholding tax, transfer agent fee or other incidental
tax or expense in respect of the issuance of such certificates, all of which
taxes and expenses shall be paid by the Company; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the registration of any certificates for Exercise
Shares or Warrants in a name other than that of the Holder.  The Holder shall be responsible for all other
tax liability that may arise as a result of holding or transferring this
Warrant or receiving Exercise Shares upon exercise hereof.

 

3.5          Reservation of
Exercise Shares.  The Company covenants that it will at all
times reserve and keep available out of the aggregate of its authorized but
unissued and otherwise unreserved Common Stock, solely for the purpose of
enabling it to issue Exercise Shares upon exercise of this Warrant as herein
provided, the number of Exercise Shares which are then issuable and deliverable
upon the exercise of this entire Warrant, free from preemptive rights or any
other contingent purchase rights of Persons other than the Holder The Company
covenants that all Warrant Shares so issuable and deliverable shall, upon
issuance and the payment of the applicable Exercise Price in accordance with
the terms hereof, be duly and validly authorized, issued and fully paid and
nonassessable.

 

4.             REPRESENTATIONS OF
HOLDER.

 

4.1          Acquisition of
Warrant for Personal Account.  The Holder represents and
warrants that it is acquiring the Warrant and the Exercise Shares solely for
its account for investment and not with a present view toward the public sale
or distribution of said Warrant or Exercise Shares or any part thereof and has
no intention of selling or distributing said Warrant or Exercise Shares or any
arrangement or understanding with any other Persons regarding the sale or
distribution of said Warrant, or except in accordance with the provisions of Article 6
of the Purchase Agreement with respect to the Exercise Shares, and except as
would not result in a violation of the Securities Act.  The Holder will not, directly or indirectly,
offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to
buy, purchase or otherwise acquire or take a pledge of) the Warrant except in
accordance with the Securities Act and will not, directly or indirectly, offer,
sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy,
purchase or otherwise acquire or take a pledge of) the Exercise Shares except
in accordance with the provisions of Article 6 of the Purchase Agreement
or pursuant to and in accordance with the Securities Act.

 

4.2          Securities Are Not Registered.

 

(a)           The Holder understands that the offer and
sale of the Warrant and the Exercise Shares have not been registered under the
Securities Act on the basis of specific exemptions from the registration
provisions of the Securities Act, which exemptions depend upon, among other
things, the bona fide nature of the Holder’s investment intent as expressed
herein.  The Holder realizes that the
basis for such exemptions may not be present if, notwithstanding its
representations, the Holder has a present intention of acquiring the securities
for a fixed or determinable period in the future, selling (in connection with a
distribution or 

 

5

 

otherwise), granting any participation in, or
otherwise distributing the securities. 
Except in accordance with Article 6 of the Purchase Agreement, the
Holder has no such present intention.

 

(b)           The Holder recognizes that the Warrant and
the Exercise Shares must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available.  The Holder recognizes that
the Company has no obligation to register the Warrant or, except as provided in
the Purchase Agreement, the Exercise Shares, or to comply with any exemption
from such registration.

 

4.3          Disposition of
Warrant and Exercise Shares.

 

(a)           The Holder further agrees not to make any
disposition of all or any part of the Warrant or Exercise Shares in any event
unless and until:

 

(i)            The Company shall have received a letter
secured by the Holder from the SEC stating that no action will be recommended
to the SEC with respect to the proposed disposition;

 

(ii)           There is then in effect a registration
statement under the Securities Act covering such proposed disposition and such
disposition is made in accordance with said registration statement; or

 

(iii)         The Holder shall have notified the Company of
the proposed disposition and shall have delivered to the Company an opinion of
counsel to the Holder reasonably satisfactory to the Company to the effect that
such disposition will not require registration of such Warrant or Exercise
Shares under the Securities Act or any applicable state securities laws.

 

Notwithstanding the
foregoing provisions of this Section 4.3 above, no such restrictions shall
apply to a transfer or assignment by a Holder that is: (i) a partnership
transferring to its partners or former partners in accordance with partnership
interests; (ii) a corporation transferring to a wholly-owned subsidiary or
a parent corporation that owns all of the capital stock of the Holder;  (iii) a limited liability company
transferring to its members or former members in accordance with their interest
in the limited liability company; (iv) an affiliated investment fund
transferring to another affiliated investment fund; or (v) an individual
transferring to the Holder’s family member or trust for the benefit of an
individual Holder; provided that in each case the transfer is effected in
accordance with applicable securities laws, including establishing that the
transferee qualifies as an “accredited investor” within the meaning of the
Securities Act and the transferee agrees in writing to be subject to the terms
of this Warrant and the Purchase Agreement to the same extent as if the
transferee were an original Holder hereunder and thereunder.

 

(b)           The Holder understands and agrees that all
certificates evidencing the Exercise Shares to be issued to the Holder may bear
a legend in substantially the following form:

 

THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE 

 

6

 

COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE OF THE UNITED STATES IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR REGULATION S THEREUNDER, AND ACCORDINGLY, MAY NOT
BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, TRANSFERRED OR ASSIGNED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

 

5.             ADJUSTMENT OF
EXERCISE PRICE.  In the event of changes in the outstanding
Common Stock of the Company by reason of a stock dividend or distribution,
subdivision, split-up, or combination of shares, the number of shares available
under the Warrant in the aggregate and the Exercise Price shall be
correspondingly adjusted to give the Holder of the Warrant, on exercise for the
same aggregate Exercise Price, the total number of shares as the Holder would
have owned had the Warrant been exercised prior to the event and had the Holder
continued to hold such shares until after the event requiring adjustment.  The form of this Warrant need not be changed
because of any adjustment in the Exercise Price and/or number of shares subject
to this Warrant.  The Company shall
promptly provide a certificate from the Company notifying the Holder in writing
of any adjustment in the Exercise Price and/or the total number of shares
issuable upon exercise of this Warrant, which certificate shall specify the
Exercise Price and number of shares under this Warrant after giving effect to
such adjustment.

 

6.             OTHER ACTION
AFFECTING COMMON STOCK.  In case at any time or from time to time the
Company shall take any action in respect of its Common Stock, other than any
action described in Section 5, then, if such action will materially
adversely effect the rights of the holder of this Warrant, the number of shares
of Common Stock or other stock into which this Warrant is exercisable and/or
the purchase price thereof shall be adjusted in such manner as may equitable in
the circumstances; provided, that, the mere authorization or issuance of
additional shares of capital stock of the Company (other than pursuant to a
stock dividend) shall not be considered an action creating any right to
adjustment under this Section 6.

 

7.             FRACTIONAL
SHARES.  No fractional shares shall be issued upon the
exercise of this Warrant as a consequence of any adjustment pursuant
hereto.  All Exercise Shares (including
fractions) issuable upon exercise of this Warrant may be aggregated for purposes
of determining whether the exercise would result in the issuance of any
fractional share.  If, after aggregation,
the exercise would result in the issuance of a fractional share, the Company
shall, in lieu of issuance of any fractional share, pay the Holder otherwise
entitled to such fraction a sum in cash equal to the product resulting from
multiplying the then current fair market value of an Exercise Share by such
fraction.

 

7

 

8.             CERTAIN EVENTS.   If, at any time while this Warrant is outstanding
there is a Fundamental Transaction, then the Holder shall have the right
thereafter to receive, upon exercise of this Warrant, the same amount and kind
of securities, cash or property as it would have been entitled to receive upon
the occurrence of such Fundamental Transaction if it had been, immediately
prior to such Fundamental Transaction, the holder of the number of Exercise
Shares then issuable upon exercise in full of this Warrant (the “Alternate Consideration”).  For purposes of any such exercise, the
determination of the Exercise Price shall be appropriately adjusted to apply to
such Alternate Consideration based on the amount of Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration.  If holders of Common Stock are given any
choice as to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Warrant following such
Fundamental Transaction.  At the Holder’s
sole option and request, any successor to the Company or surviving entity in
such Fundamental Transaction shall, either (1)issue to the Holder a new warrant
substantially in the form of this Warrant and consistent with the foregoing
provisions and evidencing the Holder’s right to purchase the Alternate
Consideration for the aggregate Exercise Price upon exercise thereof, or (2) purchase
the Warrant from the Holder for a purchase price, payable in cash within five
trading days after such request (or, if later, on the effective date of the
Fundamental Transaction), equal to the Black Scholes value of the remaining
unexercised portion of this Warrant on the date of such request.  The terms of any agreement pursuant to which
a Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this Section 8
and insuring that the Warrant (or any such replacement security) will be
similarly adjusted upon any subsequent transaction analogous to a Fundamental
Transaction. The Company shall provide to the Holder ten days’ advance written
notice of such Fundamental Transaction, and the Holder shall have the option,
in its sole discretion, to allow any unexercised portion of the Warrant to
be deemed automatically exercised pursuant to Sections 2.1 and 2.2. This
Warrant will be binding upon the successors and assigns of the Company upon a
Fundamental Transaction.

 

9.             NO SHAREHOLDER
RIGHTS.  This Warrant in and of itself shall not
entitle the Holder to any voting rights or other rights as a shareholder of the
Company.

 

10.          TRANSFER OF
WARRANT.  Subject to applicable laws and compliance
with Section 4.3 hereof and the terms of the Purchase Agreement, this
Warrant and all rights hereunder are transferable, by the Holder in person or
by duly authorized attorney, upon delivery of this Warrant and the form of
assignment attached hereto to any authorized transferee designated by the
Holder.  The authorized transferee shall
sign an investment letter in form and substance satisfactory to the Company.

 

11.          LOST, STOLEN,
MUTILATED OR DESTROYED WARRANT.  If this Warrant is lost, stolen, mutilated or
destroyed, the Company may, on such terms as to indemnity or otherwise as it
may reasonably impose (which shall, in the case of a mutilated Warrant, include
the surrender thereof but shall not include a surety bond), issue a new Warrant
of like denomination and tenor as the Warrant so lost, stolen, mutilated or
destroyed.  Any such new Warrant shall
constitute an 

 

8

 

original contractual obligation of the Company,
whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall
be at any time enforceable by anyone.

 

12.          MODIFICATIONS AND WAIVER. 
Unless otherwise provided herein, this Warrant and any provision hereof
may be changed, waived, discharged or terminated only by an instrument in
writing signed by the Company and (i) Purchasers holding Warrants
representing at least 60% of the aggregate number of Exercise Shares then
issuable upon exercise of the Warrants issued under the Purchase Agreement provided, however, that such modification,
amendment or waiver is made with respect to all Warrants issued under the
Purchase Agreement and does not adversely affect the Holder without adversely
affecting all holders of such Warrants in a similar manner; or (ii) the
Holder.

 

13.          NOTICES, ETC.  All notices required or permitted hereunder shall be in writing and
shall be deemed effectively given: (a) upon personal delivery to the party
to be notified, (b) when sent by confirmed email, telex or facsimile if
sent during normal business hours of the recipient, if not, then on the next
business day, (c) five days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (d) one
business day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt.  All communications shall be sent to the
Company at the address listed on the signature page and to the Holders at
the addresses on the Company records (as provided by the Holder to the
Company), or at such other address as the Company or Holder may designate by
ten days’ advance written notice to the other party hereto.

 

14.          ACCEPTANCE.  Receipt of this Warrant by the Holder shall constitute acceptance of
and agreement to all of the terms and conditions contained herein and in the
Purchase Agreement.

 

15.          GOVERNING LAW.  This Warrant and all rights, obligations and liabilities hereunder
shall be governed by the laws of the State of California without regard to the
principles of conflict of laws.

 

16.          DESCRIPTIVE HEADINGS.  The
descriptive headings of the several paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant.  The language in this Warrant shall be
construed as to its fair meaning without regard to which party drafted this
Warrant.

 

17.          SEVERABILITY.  The
invalidity or unenforceability of any provision of this Warrant in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction, or affect any other provision of this Warrant, which
shall remain in full force and effect.

 

18.          ENTIRE AGREEMENT.  This
Warrant constitutes the entire agreement between the parties pertaining to the
subject matter contained in it and supersedes all prior and contemporaneous
agreements, representations, and undertakings of the parties, whether oral or
written, with respect to such subject matter.

 

[Signature Page Follows]

 

9

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its duly authorized officer as of                              ,
2006.

 

	
   

  	
  NEORX CORPORATION.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Gerald
  McMahon

  
	
   

  	
  Chairman
  and Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  300
  Elliott Avenue West, Suite 500

  
	
   

  	
   

  	
  Seattle,
  WA 98119-4114

  
	
   

  	
   

  	
  Attention:
  Chief Financial Officer

  
	
   

  	
   

  	
  Facsimile: (206) 286-2537

  
				

 

10

 

NOTICE OF EXERCISE

 

TO:  NEORX CORPORATION

 

(1)           The
undersigned hereby elects to (check one box only):

 

o            purchase
            shares of
the Common Stock of NeoRx Corporation. (the
“Company”)
pursuant to the terms of the attached Warrant, and tenders herewith payment of
the exercise price in full for such shares.

 

o            purchase
the number of shares of Common Stock of the Company by cashless exercise
pursuant to the terms of the Warrant as shall be issuable upon cashless
exercise of the portion of the Warrant relating to            
shares.

 

(2)           Please
issue a certificate or certificates representing said shares of Common Stock in
the name of the undersigned or in such other name as is specified below:

 

	
   

  
	
  (Name)

  
	
   

  
	
   

  
	
  (Address)

  

 

(3)           The undersigned represents that (i) the
aforesaid shares of Common Stock are being acquired for the account of the
undersigned for investment and not with a view to, or for resale in connection
with, the distribution thereof and that the undersigned has no present
intention of distributing or reselling such shares except pursuant to Article 6
of the Purchase Agreement; (ii) the undersigned is aware of the Company’s
business affairs and financial condition and has acquired sufficient
information about the Company to reach an informed and knowledgeable decision
regarding its investment in the Company; (iii) the undersigned is
experienced in making investments of this type and has such knowledge and
background in financial and business matters that the undersigned is capable of
evaluating the merits and risks of this investment and protecting the
undersigned’s own interests; and (iv) the undersigned agrees not to make
any disposition of all or any part of the aforesaid shares of Common Stock
unless and until there is then in effect a registration statement under the
Securities Act of 1933, as amended, covering such proposed disposition and such
disposition is made in accordance with said registration statement, or the
undersigned has provided the Company with an opinion of counsel to the
undersigned satisfactory to the Company, stating that such registration is not
required.

 

	
   

  	
   

  	
  Holder’s Name:  

  	
   

  
	
  (Date)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Note:   SIGNATURE MUST CONFORM IN 

  	
   

  	
  (Authorized Signature)  

  
	
  ALL RESPECTS TO THE NAME OF

  	
   

  	
   

  
	
  HOLDER AS SPECIFIED ON THE FACE OF 

  	
   

  	
   

  
	
  THE WARRANT.

  	
   

  	
  (Title)

  

 

11

 

ASSIGNMENT FORM

 

(To
assign the foregoing Warrant, subject to compliance with applicable law and the
terms of the Warrant, execute this form and supply required information.  Do not use this form to exercise the
Warrant.)

 

FOR VALUE RECEIVED, the foregoing Warrant and all rights
evidenced thereby are hereby assigned to

 

	
  Name:

  	
   

  
	
  (Please Print)

  
	
   

  
	
  Address:

  	
   

  	
  ,

  
	
  (Please Print)

  
	
   

  
	
  and                                                                                             is
  hereby appointed attorney to transfer said rights on the books of NeoRx
  Corporation, with full power of substitution in the premises.

  
	
   

  
	
  Dated:
               ,
  20     

  
	
   

  
	
  Holder’s Name: 

  	
   

  	
   

  
	
   

  
	
  Signature:

  	
   

  	
   

  
	
   

  
	
  Title: 

  	
   

  	
   

  
	
   

  
	
  Holder’s Address:

  	
   

  	
   

  
	
   

  
	
  Telephone: 

  	
   

  	
   

  
	
   

  
	
  Facsimile:

  	
   

  	
   

  
	
   

  
	
  Signature Guaranteed:

  	
   

  	
   

  
												

 

NOTE:  The signature to this Assignment Form must
correspond with the name as it appears on the face of the Warrant, without
alteration or enlargement or any change whatever and must be guaranteed by a
bank or trust company.  Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.

 

12

 

EXHIBIT C

 

FORM OF LEGAL OPINION

 

 

EXHIBIT D

 

PRE-CLOSING
SECURITIES OWNERSHIP QUESTIONNAIRE

 

The undersigned (“Potential Purchaser”)
hereby provides the following information to the Company and its legal counsel
and represents and warrants that such information is accurate of the date
hereof and shall be accurate as of the Closing Date:

 

1.                                      Name.

 

Full Legal Name of Potential
Purchaser

 

	
   

  

 

 

2.                                      Address of Potential Purchaser.

 

	
  Mailing Address:

  	
   

  
	
   

  
	
   

  
	
  Telephone:

  	
   

  
	
  Fax:

  	
   

  
	
  Contact Person:

  	
   

  
	
  E-mail address of Contact Person:

  	
   

  
						

 

3.                                      Residency.

 

(a)                                  State/Country of Residency of Potential Purchaser:

 

(b)                                 Is the
Potential Purchaser a “US Person”
as defined in Rule 901(k) of Regulation S under the Securities Act?    oYes    oNo

 

NOTE:  Regulation S defines a “US Person”
as any of the following: (i) a natural person resident in the United
States; (ii) a partnership or corporation organized or incorporated under
the laws of the United States; (iii) an estate of which any executor or
administrator is a US Person; (iv) a trust of which any trustee is a US
Person; (v) an agency or branch of a foreign entity located in the United
States; (vi) a non-discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary for the benefit or account
of a US Person; (vii) a discretionary account or similar account (other
than an estate or trust) held by a dealer or other fiduciary organized,
incorporated, or (if an individual) resident in the United States; or (viii) a
partnership or corporation organized under the laws of any foreign jurisdiction
and formed by a US Person for the purpose of investing in securities not
registered under the Act.

 

 

4.                                      Beneficial
Ownership of Company Securities Prior to the Offering.

 

Except as set forth below in this Item 4, the
Potential Purchaser is not the beneficial or registered owner of any Securities
of the Company.

 

(a)                                  As of [date
prior to execution of Securities Purchase Agreement], 2005, the Purchaser owned
outright (including shares registered in the Purchaser’s name individually or
jointly with others, shares held in the name of a bank, broker, nominee,
depository or in “street name” for its account),                  shares
of Company’s capital stock If “zero,” please so state.

 

(b)                                 In addition to
the number of shares Purchaser owned outright as indicated in Item 4(a) above,
as of [date prior to execution of Securities Purchase Agreement], 2005, the
Purchaser had or shared voting power or investment power, directly or
indirectly, through a contract, arrangement, understanding, relationship or
otherwise,                       shares
of the Company’s capital stock.  If “zero,”
please so state.

 

If the answer to Item 4(b) is
not “zero,” please complete the following tables:

 

Shared Voting Power:

 

	
  Number of Shares

  	
   

  	
  With Whom Shared

  	
   

  	
  Nature of Relationship

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

Shared Investment Power:

 

	
  Number of Shares

  	
   

  	
  With Whom Shared

  	
   

  	
  Nature of Relationship

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

(c)                                  As of [date
prior to execution of Securities Purchase Agreement], 2005, the Potential
Purchaser had the right to acquire the following shares of the Company’s common
stock pursuant to the exercise of outstanding stock options, warrants or other
rights.  If “none”, please so state.

 

 

SIGNATURE

 

The undersigned agrees to promptly notify the Company of any
inaccuracies or changes in the information provided in this Questionnaire that
may occur subsequent to the date hereof at any time prior the Closing Date.

 

The undersigned understands and agrees that the information provided
herein will be relied upon by the Company and its legal counsel in evaluating
the availability of certain exemptions from registration under US federal and
state securities laws and the applicability of shareholder approval and other
requirements of the Nasdaq Marketplace Rules.

 

IN WITNESS WHEREOF the undersigned, by authority duly given, has caused
this Questionnaire to be executed and delivered either in person or by its duly
authorized agent.

 

	
  Dated:

  	
   

  	
   

  	
   

  	
  Potential Purchaser:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
								

 

PLEASE FAX A COPY OF THE COMPLETED AND EXECUTED
QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT MAIL, TO:

 

 

EXHIBIT E

CERTIFICATE OF EXECUTIVE OFFICER

 

The
undersigned,                                        ,
does hereby certify that he has been duly elected and qualified as, and
at this date is, the Chief Executive Officer of NeoRx Corporation (the “Company”)
and that:

 

The
representations and warranties of the Company contained in Article 2 of
the Securities Purchase Agreement dated                        ,
2006 by and among the Company and the Purchasers listed on Exhibit A
thereto (the “Agreement”)  were true in
all material respects when made and are true in all material respects on and as
of the date hereof.

 

The
Company has performed and complied in all material respects with all
agreements, obligations and conditions contained in the Agreement that are
required to be performed or complied with by it on or before the date hereof.

 

There
has been no material adverse change in the business, affairs, operations,
properties, assets or condition of the Company from that described in the
Agreement (and the Company Disclosure Schedule attached thereto).

 

IN
WITNESS WHEREOF, the undersigned has executed this certificate this           day
of                         ,
2006.

 

 

	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Chief Executive
  Officer

  

 

 

EXHIBIT F

CERTIFICATE OF SECRETARY

 

The
undersigned,                          ,
hereby certifies as follows:

 

She is the duly elected,
qualified and acting Secretary of NeoRx Corporation, a Washington corporation
(the “Company”).

 

Attached hereto as Exhibit A
is a true and correct copy of the Company’s Amended and Restated Articles of
Incorporation and all amendments, as in effect on the date hereof.

 

Attached hereto as Exhibit B
is a true and correct copy of the Company’s Bylaws as in effect on the date
hereof.

 

Attached hereto as Exhibit C
is a true and correct copy of the resolutions of the Company’s Board of
Directors adopted by the Board of Directors of the Company on January 25,
2006, approving, among other things, the performance of the Securities Purchase
Agreement dated as of February 1, 2006 (the “Purchase Agreement”),
including the amendment of the Company’s Articles of Incorporation to increase
the Company’s authorized Common Stock to 200 million shares and the sale, issuance
and delivery of the shares of Common Stock (the “Shares”) and warrants (the “Warrants”)
issuable pursuant to the Purchase Agreement and the shares of Common Stock issuable
upon exercise of the Warrants (the “Warrant Shares”), in all cases subject to
required shareholder approvals, to the Purchasers listed on Exhibit A to
the Purchase Agreement, and such resolutions have not been modified or
rescinded since their adoption and remain in full force and effect.

 

Attached hereto as Exhibit D
is a true and correct copy of the proxy statement filed by the Company with the
Commission and delivered to shareholders of the Company in accordance with the
requirements of the Commission with respect to the Special Shareholders’
Meeting held on                                                 ,
2006, to approve the issuance of the securities and other transactions
contemplated by the Purchase Agreement dated as of February 1, 2006 and
the related agreements and the amendment of the Company’s Articles of
Incorporation to increase the Company’s authorized Common Stock to 200 million
shares, each of which proposals was approved by the requisite vote of the
shareholders; and such approval has not been modified or rescinded and remains
in full force and effect.

 

IN
WITNESS WHEREOF, the undersigned has executed this Certificate this           day
of                      ,
2006.

 

 

	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Secretary

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00097-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00097-of-00352.parquet"}]]