<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report pursuant to Section 13 or 15(d)
--- of the Securities Exchange Act of 1934 for the Quarterly
Period ended June 30, 1996 or
Transition Report pursuant to Section 13 or 15(d) of the Securities
--- Exchange Act of 1934 for the transition period from _____________ to
_______________.
Commission File Number 0-16614
NeoRx Corporation
(Exact Name of Registrant as Specified in its Charter)
WASHINGTON 91-1261311
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
410 West Harrison Street, Seattle, Washington 98119
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (206) 281-7001
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
As of August 9, 1996 there were outstanding 15.5 million shares of the Company's
common stock, $.02 par value.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets 3
Statements of Operations 4
Statements of Cash Flows 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis
of Results of Operations and
Financial Condition, Liquidity and
Capital Resources 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of
Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 10
</TABLE>
2
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NEORX CORPORATION
(a development stage company)
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------- ------------
(unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,580 $ 7,182
Short-term investments 14,824 8,937
Inventories 585 538
Prepaids and other 971 931
------- -------
Total current assets 20,960 17,588
------- -------
FACILITIES AND EQUIPMENT, at cost:
Equipment and furniture 3,658 3,498
Leasehold improvements 3,216 3,233
------- -------
6,874 6,731
Less: accumulated depreciation and amortization (6,114) (5,914)
------- -------
Facilities and equipment, net 760 817
------- -------
OTHER ASSETS 118 113
------- -------
$ 21,838 $ 18,518
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 681 $ 1,511
Accrued liabilities 702 531
Deferred revenue 250 250
Current portion of capital leases 49 51
------- -------
Total current liabilities 1,682 2,343
------- -------
NON-CURRENT LIABILITIES:
Convertible subordinated debentures, 9 3/4% 1,195 1,195
Capital leases, less current portion 66 88
------- -------
Total non-current liabilities 1,261 1,283
------- -------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Series preferred stock, $.02 par value,
3,000,000 shares authorized:
Convertible exchangeable preferred stock, Series 1
208,000 shares issued and outstanding 4 4
Convertible preferred stock, Series 2,
40,000 shares issued and outstanding 1 -
Common stock, $.02 par value, 60,000,000
shares authorized, 15,482,000 and
14,359,000 shares issued and
outstanding, respectively 310 287
Additional paid-in capital 139,105 128,098
Deferred compensation - (139)
Accumulated deficit since inception (120,525) (113,358)
------- -------
Total shareholders' equity 18,895 14,892
------- -------
$ 21,838 $ 18,518
======= =======
</TABLE>
See notes to financial statements.
3
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NEORX CORPORATION
(a development stage company)
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
February 13,
Three months Six months 1984
ended June 30, ended June 30, (inception)
---------------------- -------------------- to June 30,
1996 1995 1996 1995 1996
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
REVENUES:
Contract revenues and fees $ - $ - $ 21 $ 57 $ 37,661
--------- --------- --------- --------- ---------
OPERATING EXPENSES:
Research and development 2,275 1,786 4,691 3,985 96,722
General and administrative 1,251 1,191 2,617 2,313 57,268
--------- --------- --------- --------- ---------
Total operating expenses 3,526 2,977 7,308 6,298 153,990
--------- --------- --------- --------- ---------
Loss from operations (3,526) (2,977) (7,287) (6,241) (116,329)
Other income (expense):
investment and interest
income, net 296 248 593 460 11,449
Interest expense (34) (33) (71) (67) (5,566)
Litigation expense, net - - - - (985)
Debt conversion expense - - - - (1,228)
--------- --------- --------- --------- ---------
Net loss $ (3,264) $ (2,762) $ (6,765) $ (5,848) $(112,659)
========= ========= ========= ========= =========
Preferred stock dividends (211) (162) (402) (344) (6,305)
--------- --------- --------- --------- ---------
Net loss applicable to
common shares $ (3,475) $ (2,924) $ (7,167) $ (6,192) $(118,964)
========= ========= ========= ========= =========
Net loss per common share $ (.23) $ (.23) $ (.47) $ (.50) $ (20.77)
========= ========= ========= ========= =========
Weighted average common shares
outstanding 15,416 12,952 15,185 12,487 5,727
========= ========= ========= ========= =========
</TABLE>
See notes to financial statements.
4
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NEORX CORPORATION
(a development stage company)
STATEMENTS OF CASH FLOWS
(in thousands)(unaudited)
<TABLE>
<CAPTION>
February 13,
Three months Six months 1984
ended June 30, ended June 30, (inception)
---------------------- ---------------------- to June 30,
1996 1995 1996 1995 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (3,264) $ (2,762) $ (6,765) $ (5,848) $(112,659)
--------- --------- --------- --------- ---------
Adjustments to reconcile net
loss to net cash (used in)
operating activities:
Depreciation and amortization 102 106 200 211 9,653
(Increase) decrease in
inventories (25) (25) (47) 2 (585)
(Increase) decrease in
prepaids and other assets 57 243 (99) 23 (698)
Increase (decrease) in
accounts payable and
accrued liabilities (102) (268) (417) (152) 1,208
Increase in deferred
revenue - - - - 250
Return of common stock for
license - - - - (3,850)
Debt conversion expense - - - - 1,228
Compensation expense on
stock awards and options - 23 139 46 1,263
Common stock issued for services - - 241 80 2,658
--------- --------- --------- --------- ---------
Total adjustments 32 79 17 210 11,127
--------- --------- --------- --------- ---------
Net cash (used in) operating
activities (3,232) (2,683) (6,748) (5,638) (101,532)
--------- --------- --------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from (purchases of)
short-term investments 4,909 (2,383) (5,887) (1,282) (14,824)
Facilities and equipment purchases (105) (29) (143) (70) (9,063)
Other - - 54 - (102)
--------- --------- --------- --------- ---------
Net cash provided by (used in)
investing activities 4,804 (2,412) (5,976) (1,352) (23,989)
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from sale of common stock
and warrants - 6,451 5,771 6,451 105,957
Proceeds from sale of convertible
debentures - - - - 26,606
Proceeds from sales of preferred
stock - - 4,425 - 4,425
Proceeds from capital lease
obligations - - - - 2,322
Repayments of capital lease
obligations (13) (3) (24) (8) (3,588)
Proceeds from stock options
exercised 35 13 204 48 1,577
Preferred stock issuance costs - - - - (792)
Preferred stock dividends (254) (204) (254) (204) (5,769)
Repurchase of preferred stock - - - - (305)
Repurchase of common stock - - - - (332)
--------- --------- --------- --------- ---------
Net cash provided by (used in)
financing activities (232) 6,257 10,122 6,287 130,101
--------- --------- --------- --------- ---------
Net increase (decrease) in cash
and cash equivalents 1,340 1,162 (2,602) (703) 4,580
Cash and cash equivalents:
Beginning of period 3,240 563 7,182 2,428 -
--------- --------- --------- --------- ---------
End of period $ 4,580 $ 1,725 $ 4,580 $ 1,725 $ 4,580
========= ========= ========= ========= =========
</TABLE>
See notes to financial statements.
5
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NEORX CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
1. Basis of Presentation
The interim financial statements contained herein have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules and regulations, although
the Company believes that the disclosures made are adequate to make the
information presented not misleading. These financial statements should be read
in conjunction with the Company's Form 10-K for the year ended December 31,
1995.
In the opinion of management, the interim financial statements reflect all
adjustments, consisting only of normal recurring accruals necessary to present
fairly the Company's financial position as of June 30, 1996 and the results of
operations and cash flows for the three and six month periods ended June 30,
1996 and 1995 and for the period from inception to June 30, 1996.
The results of operations for the three and six month periods ended June 30,
1996 are not necessarily indicative of the expected operating results for the
full year.
6
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NEORX CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS (continued)
2. Shareholders' Equity
Changes in shareholders' equity from December 31, 1995 to June 30, 1996 were as
follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Balance December 31, 1995 $ 14,892
Preferred stock issued 4,425
Common stock issued 6,606
Preferred stock dividends (402)
Net loss (6,765)
Amortization of deferred compensation 139
--------
Balance June 30, 1996 $ 18,895
========
</TABLE>
3. In May 1996, the Company exchanged 7,000 shares of Series 2 Convertible
Preferred Stock for 123,120 shares of Common Stock and paid accrued dividends on
the shares by issuing 2,195 shares of Common Stock valued at $6.85 per share.
7
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NEORX CORPORATION
(a development stage company)
Item 2. Management's Discussion and Analysis of Results or Operations and
Financial Condition, Liquidity and Capital Resources
QUARTER AND SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO QUARTER AND SIX MONTHS
ENDED JUNE 30, 1995.
There were no contract revenues or fees earned in the quarters ended June 30,
1996 or 1995. For the six months ended June 30, 1996, contract revenues and fees
were $21,000 compared to $57,000 recorded for the six months ended June 30,
1995.
Total operating expenses increased 18% to $3,526,000 from $2,977,000 for the
quarters ended June 30, 1996 and 1995, respectively, and for the six month
periods increased 16% to $7,308,000 from $6,298,000. Research and development
expenses increased 27% to $2,275,000 from $1,786,000 for the quarters ended June
30, 1996 and 1995, respectively, and for the six month periods increased 18% to
$4,691,000 from $3,985,000. The increases in both the three and six month
periods were primarily due to antibody humanization and increased clinical trial
activities. General and administrative expenses increased 5% to $1,251,000 from
$1,191,000 for the quarters ended June 30, 1996 and 1995, respectively, and for
the six month periods increased 13% to $2,617,000 from $2,313,000. The increase
for the six month period was principally due to patent filing costs and a
noncash charge resulting from accelerated vesting of a stock option.
Interest income increased 19% to $296,000 from $248,000 for the three months
ended June 30, 1996 and 1995, respectively, and increased 29% to $593,000 from
$460,000 for the six months ended June 30, 1996 and 1995, respectively. The
increases were primarily due to higher cash balances resulting from financings.
Interest expense remained essentially unchanged for the periods.
Net loss increased 18% to $3,264,000 from $2,762,000 for the quarters ended June
30, 1996 and 1995, respectively, and for the six months periods increased 16% to
$6,765,000 from $5,848,000.
LIQUIDITY AND CAPITAL RESOURCES.
The Company expects that its capital resources and interest income will be
sufficient to finance its currently anticipated working capital and capital
requirements through late 1997. The Company's working capital and capital
requirements will depend upon numerous
8
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NEORX CORPORATION
(a development stage company)
Item 2. (Continued)
factors, including results of research and development activities, clinical
trials, the levels of resources that the Company devotes to establishing and
expanding marketing and manufacturing capabilities, competitive and
technological developments and the timing and cost of relationships with parties
to collaborative agreements. The Company will need to raise substantial
additional funds to conduct research and development activities, preclinical
studies and clinical trials necessary to bring its products to market, and to
establish marketing and limited manufacturing capabilities. The Company intends
to seek additional funding through public or private equity financings,
arrangements with corporate collaborators or other sources. Adequate funds may
not be available when needed or on terms acceptable to the Company.
When used in this report, the words "expects", "anticipates" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties such as those factors stated
above that could cause actual results to differ materially from those projected.
See "Important Factors Regarding Forward-Looking Statements" in the Company's
Form 10-K for the year ended December 31, 1995. Readers are cautioned not to
place undue reliance on these forward- looking statements, which speak only as
of the date of this report. Readers are also urged to carefully review and
consider the various disclosures made by the Company which attempt to advise
interested parties of the factors which affect the Company's business detailed
in the Company's Securities and Exchange Commission filings and those described
from time-to-time in the Company's press releases and other communications. The
Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements that may be made to reflect events
or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
9
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NEORX CORPORATION
(a development stage company)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
IN RE BLECH SECURITIES LITIGATION.
The Company had been named as an additional codefendant in an amended complaint
filed in the United States District Court Southern District of New York on March
27, 1995 in a pending purported class action suit against David Blech, D. Blech
& Co. and a number of other defendants, including eleven publicly traded
biotechnology companies.
On June 6, 1996 the Court granted the Company's motion to dismiss with leave for
plaintiffs to replead on or before July 26, 1996. The plaintiffs filed a second
amended complaint on July 26, 1996. The second amended complaint did not name
NeoRx as a defendant. NeoRx is not a defendant in the subject suit. Plaintiffs
have not appealed the Court's June 6, 1996 order of dismissal.
Item 4. Submission of Matters to a Vote of Security Holders
The following matter was voted upon at the 1996 Annual Meeting of Shareholders
held on May 14, 1996.
AMENDMENT TO 1991 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS.
The shareholders amended the 1991 Stock Option Plan for Non-Employee Directors
by accelerating the vesting of all outstanding options upon a liquidation of the
Company or upon certain mergers, consolidations, reorganizations or transfers of
assets of the Company. The shareholders voted 12,121,884 votes in favor of the
amendment, 574,811 votes against and 83,355 votes abstained.
10
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NEORX CORPORATION
(a development stage company)
Item 6. Exhibits and Reports on Form 8-K
(a) EXHIBITS:
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Exhibit Page
------- ------- ----
<S> <C> <C>
10.1 Change of Control Agreement 12
10.2 Form of Key Executive
Severance Agreement 28
</TABLE>
(b) REPORTS ON FORM 8-K:
Form 8-K dated April 15, 1996 - notification of the adoption
of a Shareholders' Rights Plan.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NeoRx Corporation
(Registrant)
Date: August 14, 1996 By: \s\ Robert M. Littauer
----------------------
Robert M. Littauer
Authorized Officer and
Senior Vice President,
Chief Financial Officer and
Treasurer
11
<PAGE>
EXHIBIT 10.1
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (this "Agreement"), dated as of
April 10, 1996, is entered into by and between NEORX CORPORATION, a
Washington corporation (the "Company"), and _________________ (the "Executive").
The Board of Directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to ensure that
the Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined in
Section 1 hereof) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive arising from the personal
uncertainties and risks created by a pending or threatened Change of Control, to
encourage the Executive's full attention and dedication to the Company currently
and in the event of any threatened or pending Change of Control, and to provide
the Executive with reasonable compensation and benefit arrangements upon a
Change of Control.
In order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
1. DEFINITIONS
1.1 "Change of Control" shall have the definition set forth in Appendix A
hereto, which is hereby incorporated by reference.
1.2 "Change of Control Date" shall mean the first date on which a Change oF
Control occurs.
1.3 "Employment Period" shall mean the two (2) year period commencing on
the Change of Control Date and ending on the second anniversary of such
date.
1.4 "Severance Agreement" shall mean the Key Executive Severance Agreement
dated as of the date hereof between the parties, as it may be amended
from time to time, that provides for certain benefits related to
termination of the Executive's employment that are unrelated to a
Change of Control.
2. TERM
The term of this Agreement ("Term") shall be for a period of two (2)
years from the date of this Agreement as first appearing above, at which time
this Agreement shall terminate without further action by either the Company or
the Executive; provided, however, that the Term shall automatically renew for
additional two (2) year periods unless notice of nonrenewal is given by either
party to the other at least ninety (90) days prior to the end of the initial
Term or any renewal Term, and provided further that if a Change in Control
occurs during the Term, the Term shall automatically extend for the duration of
the Employment Period.
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3. EMPLOYMENT
3.1 Employment Period
During the Employment Period, the Company hereby agrees to continue the
Executive in its employ or in the employ of its affiliated companies, and the
Executive hereby agrees to remain in the employ of the Company or its affiliated
companies, in accordance with the terms and provisions of this Agreement;
provided, however, that either the Company or the Executive may terminate the
employment relationship subject to the terms of this Agreement.
3.2 Position and Duties
During the Employment Period, the Executive's position, authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the ninety (90) day period immediately preceding the Change of
Control Date.
3.3 Location
During the Employment Period, the Executive's services shall be
performed at the Company's headquarters on the Change of Control Date or any
office that is subsequently designated as the headquarters of the Company and is
less than twenty (20) miles from such location.
3.4 Employment at Will
The Executive and the Company acknowledge that, except as may otherwise
be provided under any other written agreement between the Executive and the
Company, the employment of the Executive by the Company or its affiliated
companies is "at will" and may be terminated by either the Executive or the
Company or its affiliated companies at any time with or without cause. Moreover,
if prior to the Change of Control Date, the Executive's employment with the
Company or its affiliated companies terminates for any reason, then the
Executive shall have no further rights under this Agreement; provided, however,
that the Company may not avoid liability for any termination payments that would
have been required during the Employment Period pursuant to Section 8 hereof by
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terminating the Executive prior to the Employment Period where such termination
is carried out in anticipation of a Change of Control and the principal
motivating purpose is to avoid liability for such termination payments.
[Add the following clause to P. Abrams' agreement:
3.5 Board of Directors
The Executive is currently a member of the Board but his continuation
as a member shall be subject to the will of the Company's shareholders and the
Board, as provided in the Company's Bylaws and Articles of Incorporation.
Removal of the Executive from, or nonelection of the Executive to, the Board by
the Company's shareholders or the Board, as provided in the Company's Bylaws and
Articles of Incorporation, shall in no event be deemed a breach of this
Agreement by the Company.]
4. ATTENTION AND EFFORT
During the Employment Period, and excluding any periods of vacation and
sick leave to which the Executive is entitled, the Executive will devote all of
his productive time, ability, attention and effort to the business and affairs
of the Company and the discharge of the responsibilities assigned to him
hereunder, and will use his reasonable best efforts to perform faithfully and
efficiently such responsibilities. It shall not be a violation of this Agreement
for the Executive to (a) serve on corporate, civic or charitable boards or
committees, (b) deliver lectures, fulfill speaking engagements or teach at
educational institutions, (c) manage personal investments, or (d) engage in
activities permitted by the policies of the Company or as specifically permitted
by the Company, so long as such activities do not significantly interfere with
the performance of the Executive's responsibilities in accordance with this
Agreement. It is expressly understood and agreed that to the extent any such
activities have been conducted by the Executive prior to the Employment Period,
the continued conduct of such activities (or the conduct of activities similar
in nature and scope thereto) during the Employment Period shall not thereafter
be deemed to interfere with the performance of the Executive's responsibilities
to the Company.
5. COMPENSATION
As long as the Executive remains employed by the Company during the
Employment Period, the Company agrees to pay or cause to be paid to the
Executive, and the Executive agrees to accept in exchange for the services
rendered hereunder by him, the following compensation:
5.1 Salary
The Executive shall receive an annual base salary (the "Annual Base
Salary"), at least equal to the annual salary established by the Board or the
Compensation Committee of the Board (the "Compensation Committee") or the Chief
Executive Officer for the fiscal year in which the Change of Control Date
occurs. The Annual Base Salary shall be paid in substantially equal installments
and at the same intervals as the salaries of other executives of the Company are
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paid. The Board or the Compensation Committee or the Chief Executive Officer
shall review the Annual Base Salary at least annually and shall determine in
good faith and consistent with any generally applicable Company policy any
increases for future years.
5.2 Bonus
In addition to the Annual Base Salary, the Executive shall be awarded,
for each fiscal year ending during the Employment Period, an annual bonus (the
"Annual Bonus") in cash at least equal to the average annualized (for any fiscal
year consisting of less than twelve (12) full months) bonus paid or payable
(including by reason of any deferral and including the value of any stock awards
and the compensation expense disclosed in the Company's financial statements for
the grant of any stock options) to the Executive by the Company and its
affiliated companies in respect of the three fiscal years immediately preceding
the fiscal year in which the Change of Control Date occurs. Each Annual Bonus
shall be paid no later than ninety (90) days after the end of the fiscal year
for which the Annual Bonus is awarded, unless the Executive shall elect to defer
the receipt of the Annual Bonus.
6. BENEFITS
6.1 Incentive, Retirement and Welfare Benefit Plans; Vacation
During the Employment Period, the Executive shall be entitled to
participate, subject to and in accordance with applicable eligibility
requirements, in such fringe benefit programs as shall be generally made
available to other executives of the Company and its affiliated companies from
time to time during the Employment Period by action of the Board (or any person
or committee appointed by the Board to determine fringe benefit programs and
other emoluments), including, without limitation, paid vacations; any stock
purchase, savings or retirement plan, practice, policy or program; and all
welfare benefit plans, practices, policies or programs (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident insurance plans
or programs).
6.2 Expenses
During the Employment Period, the Executive shall be entitled to
receive prompt reimbursement for all reasonable employment expenses incurred by
him in accordance with the policies, practices and procedures of the Company and
its affiliated companies in effect for the executives of the Company and its
affiliated companies during the Employment Period.
7. TERMINATION
During the Employment Period, employment of the Executive may be
terminated as follows, but, in any case, the nondisclosure provisions set forth
in Section 10 hereof shall survive the termination of this Agreement and the
termination of the Executive's employment with the Company:
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<PAGE>
7.1 By the Company or the Executive
At any time during the Employment Period, the Company may terminate the
employment of the Executive with or without Cause (as defined below), and the
Executive may terminate his employment for Good Reason (as defined below) or for
any reason, upon giving the Notice of Termination (as defined below).
7.2 Automatic Termination
This Agreement and the Executive's employment during the Employment
Period shall terminate automatically upon the death or Total Disability of the
Executive. The term "Total Disability" as used herein shall mean the Executive's
inability (with such accommodation as may be required by law and which places no
undue burden on the Company), as determined by a physician selected by the
Company and acceptable to the Executive, to perform the duties set forth in
Section 3.2 hereof for a period or periods aggregating twelve (12) weeks in any
three hundred sixty-five (365) day period as a result of physical or mental
illness, loss of legal capacity or any other cause beyond the Executive's
control, unless the Executive is granted a leave of absence by the Board. The
Executive and the Company hereby acknowledge that the duties specified in
Section 3.2 hereof are essential to the Executive's position and that
Executive's ability to perform those duties is the essence of this Agreement.
7.3 Notice of Termination
Any termination by the Company or by the Executive during the
Employment Period shall be communicated by the Notice of Termination to the
other party given in accordance with Section 12 hereof. The term "Notice of
Termination" shall mean a written notice that (a) indicates the specific
termination provision in this Agreement relied upon and (b) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated. The failure by the Executive or the Company to set forth
in the Notice of Termination any fact or circumstance that contributes to a
showing of Good Reason or Cause shall not waive any right of the Executive or
the Company hereunder or preclude the Executive or the Company from asserting
such fact or circumstance in enforcing the Executive's or the Company's rights
hereunder.
7.4 Date of Termination
During the Employment Period, "Date of Termination" means (a) if the
Executive's employment is terminated by reason of death, at the end of the
calendar month in which the Executive's death occurs, (b) if the Executive's
employment is terminated by reason of Total Disability, immediately upon a
determination by the Company of the Executive's Total Disability, and (c) in all
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other cases, ten (10) days after the date of personal delivery or mailing of the
Notice of Termination. The Executive's employment and performance of services
will continue during such ten (10) day period; provided, however, that the
Company may, upon notice to the Executive and without reducing the Executive's
compensation during such period, excuse the Executive from any or all of his
duties during such period.
8. TERMINATION PAYMENTS
In the event of termination of the Executive's employment during the
Employment Period, all compensation and benefits set forth in this Agreement
shall terminate except as specifically provided in this Section 8.
8.1 Termination by the Company Other Than for Cause or by the Executive
for Good Reason
If during the Employment Period the Company terminates the Executive's
employment other than for Cause or the Executive terminates his employment for
Good Reason, the Executive shall be entitled to:
(a) receive payment of the following accrued obligations
(the "Accrued Obligations"):
(i) the Annual Base Salary through the Date of
Termination to the extent not theretofore paid;
(ii) the product of (x) the Annual Bonus payable with
respect to the fiscal year in which the Date of Termination occurs and
(y) a fraction the numerator of that is the number of days in the
current fiscal year through the Date of Termination, and the
denominator of which is three hundred sixty-five (365); and
(iii) any compensation previously deferred by the
Executive (together with accrued interest or earnings thereon, if any)
and any accrued vacation pay that would be payable under the Company's
standard policy, in each case to the extent not theretofore paid;
(b) for one year after the Date of Termination or until the
Executive qualifies for comparable medical and dental insurance benefits from
another employer, whichever occurs first, the Company shall pay the Executive's
premiums for health insurance benefit continuation for the Executive and his
family members, if applicable, which the Company provides to the Executive under
the provisions of the federal Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA"), to the extent that the Company would have paid such
premiums had the Executive remained employed by the Company (such continued
payment is hereinafter referred to as "COBRA Continuation"); and
(c) an amount as severance pay equal to one (1) times the
Annual Base Salary for the fiscal year in which the Date of Termination occurs.
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8.2 Termination for Cause or Other Than for Good Reason
If during the Employment Period the Executive's employment shall be
terminated by the Company for Cause or by the Executive for other than Good
Reason, this Agreement shall terminate without further obligation on the part of
the Company to the Executive, other than the Company's obligation to pay the
Executive (a) the Annual Base Salary through the Date of Termination, (b) the
amount of any compensation previously deferred by the Executive, and (c) any
accrued vacation pay that would be payable under the Company's standard policy,
in each case to the extent theretofore unpaid.
8.3 Expiration of Term
In the event the Executive's employment is not terminated prior to
expiration of the Term, this Agreement shall terminate without further
obligation on the part of the Company to the Executive, other than the Company's
obligation to pay the Executive the product of (a) the Annual Bonus payable with
respect to the fiscal year in which the Term expired and (b) a fraction the
numerator of which is the number of days in the current fiscal year through the
end of the Term and the denominator of which is three hundred sixty-five (365).
8.4 Termination Because of Death or Total Disability
If during the Employment Period the Executive's employment is
terminated by reason of the Executive's death or Total Disability, this
Agreement shall terminate automatically without further obligation on the part
of the Company to the Executive or his legal representatives under this
Agreement, other than the Company's obligation to pay the Executive the Accrued
Obligations (which shall be paid to the Executive's estate or beneficiary, as
applicable in the case of the Executive's death), and to provide COBRA
Continuation.
8.5 Payment Schedule
All payments of Accrued Obligations, or any portion thereof payable
pursuant to this Section 8, shall be made to the Executive within ten (10)
working days of the Date of Termination. Any payments payable to the Executive
pursuant to Section 8.1(c) hereof shall be made to the Executive in a lump sum
within ten (10) working days of the Date of Termination.
8.6 Cause
For purposes of this Agreement, "Cause" means cause given by the
Executive to the Company and shall include, without limitation, the occurrence
of one (1) or more of the following events:
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(a) A clear refusal to carry out any material lawful duties of
the Executive or any directions of the Board or senior management of the
Company, all reasonably consistent with the duties described in Section 3.2
hereof;
(b) Persistent failure to carry out any lawful duties of the
Executive described in Section 3.2 hereof or any directions of the Board or
senior management reasonably consistent with the duties herein set forth to be
performed by the Executive, provided, however, that the Executive has been given
reasonable notice and opportunity to correct any such failure;
(c) Violation by the Executive of a state or federal criminal
law involving the commission of a crime against the Company or any other
criminal act involving moral turpitude;
(d) Current abuse by the Executive of alcohol or controlled
substances; deception, fraud, misrepresentation or dishonesty by the Executive;
or any incident materially compromising the Executive's reputation or ability to
represent the Company with investors, customers or the public; or
(e) Any other material violation of any provision of this
Agreement by the Executive, subject to the notice and opportunity-to-cure
requirements of Section 11 hereof.
8.7 Good Reason
For purposes of this Agreement, "Good Reason" means
(a) The assignment to the Executive of any duties materially
inconsistent with the Executive's position, authority, duties or
responsibilities as contemplated by Section 3.2 hereof or any other action by
the Company that results in a material diminution in such position, authority,
duties or responsibilities, excluding for this purpose an isolated and
inadvertent action not taken in bad faith and that is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(b) Any failure by the Company to comply with any of the
provisions of Section 5 or Section 6 hereof, other than an isolated and
inadvertent failure not taken in bad faith and that is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
(c) The Company's requiring the Executive to be based at
any office or location other than that described in Section 3.3 hereof;
(d) Any failure by the Company to comply with and satisfy
Section 13 hereof; provided, however, that the Company's successor has received
at least ten (10) days' prior written notice from the Company or the Executive
of the requirements of Section 13 hereof; or
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(e) Any other material violation of any provision of this
Agreement by the Company, subject to the notice and opportunity-to-cure
requirements of Section 11 hereof.
8.8 Excess Parachute Limitation
If any portion of the payments or benefits for the Executive under this
Agreement, the Severance Agreement, or any other agreement or benefit plan of
the Company (including stock option plan) would be characterized as an "excess
parachute payment" to the Executive under Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code"), the Executive shall be paid an excise tax
that the Executive owes under Section 4999 of the Code as a result of such
characterization, such excise tax to be paid to the Executive at least ten (10)
days prior to the date that he is obligated to make the excise tax payment. The
determination of whether and to what extent any payments or benefits would be
"excess parachute payments" and the date by which any excise tax shall be due,
shall be determined in writing by recognized tax counsel selected by the Company
and reasonably acceptable to the Executive.
9. REPRESENTATIONS, WARRANTIES AND OTHER CONDITIONS
In order to induce the Company to enter into this Agreement, the
Executive represents and warrants to the Company as follows:
9.1 Health
The Executive is in good health and knows of no physical or mental
disability that, with any accommodation that may be required by law and that
places no undue burden on the Company, would prevent him from fulfilling his
obligations hereunder. The Executive agrees, if the Company requests, to submit
to reasonable periodic medical examinations by a physician or physicians
designated by, paid for and arranged by the Company. The Executive agrees that
the examination's medical report shall be provided to the Company.
9.2 No Violation of Other Agreements
The Executive represents that neither the execution nor the performance
of this Agreement by the Executive will violate or conflict in any way with any
other agreement by which the Executive may be bound.
10. NONDISCLOSURE; RETURN OF MATERIALS
10.1 Nondisclosure
Except as required by his employment with the Company, the Executive
will not, at any time during the term of employment by the Company, or at any
time thereafter, directly, indirectly or otherwise, use, communicate, disclose,
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disseminate, lecture upon or publish articles relating to any confidential,
proprietary or trade secret information without the prior written consent of the
Company. The Executive understands that the Company will be relying on this
Agreement in continuing the Executive's employment, paying him compensation,
granting him any promotions or raises, or entrusting him with any information
that helps the Company compete with others.
10.2 Return of Materials
All documents, records, notebooks, notes, memoranda, drawings or other
documents made or compiled by the Executive at any time, or in his possession,
including any and all copies thereof, shall be the property of the Company and
shall be held by the Executive in trust and solely for the benefit of the
Company, and shall be delivered to the Company by the Executive upon termination
of employment or at any other time upon request by the Company.
11. NOTICE AND CURE OF BREACH
Whenever a breach of this Agreement by either party is relied upon as
justification for any action taken by the other party pursuant to any provision
of this Agreement, other than clause (a), (b), (c) or (d) of Section 8.6 hereof,
before such action is taken, the party asserting the breach of this Agreement
shall give the other party at least twenty (20) days' prior written notice of
the existence and the nature of such breach before taking further action
hereunder and shall give the party purportedly in breach of this Agreement the
opportunity to correct such breach during the twenty (20) day period.
12. FORM OF NOTICE
Every notice required by the terms of this Agreement shall be given in
writing by serving the same upon the party to whom it was addressed personally
or by registered or certified mail, return receipt requested, at the address set
forth below or at such other address as may hereafter be designated by notice
given in compliance with the terms hereof:
If to the Executive: _________________
_________________
_________________
If to the Company: NeoRx Corporation
410 West Harrison
Seattle, Washington 98119
Attn: President
With a copy to: Perkins Coie
1201 Third Avenue, 40th Floor
Seattle, Washington 98101-3099
Attn: James R. Lisbakken
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Except as set forth in Section 7.4 hereof, if notice is mailed, such notice
shall be effective upon mailing.
13. ASSIGNMENT
This Agreement is personal to the Executive and shall not be assignable
by the Executive.
The Company shall assign to and require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all the business and/or assets of the Company to assume expressly
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean NeoRx Corporation and any
successor to its business and/or assets as aforesaid that assumes and agrees to
perform this Agreement by operation of law, or otherwise. All the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto and their respective successors and
permitted assigns.
14. WAIVERS
No delay or failure by any party hereto in exercising, protecting or
enforcing any of its rights, titles, interests or remedies hereunder, and no
course of dealing or performance with respect thereto, shall constitute a waiver
thereof. The express waiver by a party hereto of any right, title, interest or
remedy in a particular instance or circumstance shall not constitute a waiver
thereof in any other instance or circumstance. All rights and remedies shall be
cumulative and not exclusive of any other rights or remedies.
15. AMENDMENTS IN WRITING
No amendment, modification, waiver, termination or discharge of any
provision of this Agreement, or consent to any departure therefrom by either
party hereto, shall in any event be effective unless the same shall be in
writing, specifically identifying this Agreement and the provision intended to
be amended, modified, waived, terminated or discharged and signed by the Company
and the Executive, and each such amendment, modification, waiver, termination or
discharge shall be effective only in the specific instance and for the specific
purpose for which given. No provision of this Agreement shall be varied,
contradicted or explained by any oral agreement, course of dealing or
performance or any other matter not set forth in an agreement in writing and
signed by the Company and the Executive.
16. APPLICABLE LAW
This Agreement shall in all respects, including all matters of
construction, validity and performance, be governed by, and construed and
enforced in accordance with, the laws of the State of Washington, without regard
to any rules governing conflicts of laws.
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17. ARBITRATION; ATTORNEYS' FEES
Except in connection with enforcing Section 10 hereof, for which legal
and equitable remedies may be sought in a court of law, any dispute arising
under this Agreement shall be subject to arbitration. The arbitration proceeding
shall be conducted in accordance with the Commercial Arbitration Rules of the
American Arbitration Association (the "AAA Rules") then in effect, conducted by
one arbitrator either mutually agreed upon or selected in accordance with the
AAA Rules. The arbitration shall be conducted in King County, Washington, under
the jurisdiction of the Seattle office of the American Arbitration Association.
The arbitrator shall have authority only to interpret and apply the provisions
of this Agreement, and shall have no authority to add to, subtract from or
otherwise modify the terms of this Agreement. Any demand for arbitration must be
made within sixty (60) days of the event(s) giving rise to the claim that this
Agreement has been breached. The arbitrator's decision shall be final and
binding, and each party agrees to be bound to by the arbitrator's award, subject
only to an appeal therefrom in accordance with the laws of the State of
Washington. Either party may obtain judgment upon the arbitrator's award in the
Superior Court of King, County, Washington.
If it becomes necessary to pursue or defend any legal proceeding,
whether in arbitration or court, in order to resolve a dispute arising under
this Agreement, the prevailing party in any such proceeding shall be entitled to
recover its reasonable costs and attorneys' fees.
18. SEVERABILITY
If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any jurisdiction, for any reason, including, without
limitation, the duration of such provision, its geographical scope or the extent
of the activities prohibited or required by it, then, to the full extent
permitted by law, (a) all other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in order to carry
out the intent of the parties hereto as nearly as may be possible, (b) such
invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision hereof, and (c) any court or
arbitrator having jurisdiction thereover shall have the power to reform such
provision to the extent necessary for such provision to be enforceable under
applicable law.
19. ENTIRE AGREEMENT
Except as described in Section 22 hereof, this Agreement constitutes
the entire agreement between the Company and the Executive with respect to the
subject matter hereof, and all prior or contemporaneous oral or written
communications, understandings or agreements between the Company and the
Executive with respect to such subject matter are hereby superseded and
nullified in their entireties, except that the Proprietary Information and
Invention Agreement between the Company and the Executive shall continue in full
force and effect to the extent not superseded by Section 10 hereof.
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20. WITHHOLDING
The Company may withhold from any amounts payable under this Agreement
such federal, state or local taxes as shall be required to be withheld pursuant
to any applicable law or regulation.
21. COUNTERPARTS
This Agreement may be executed in counterparts, each of which
counterparts shall be deemed an original, but all of which together shall
constitute one and the same instrument.
22. COORDINATION WITH SEVERANCE AGREEMENT
The Severance Agreement that the parties are entering into
contemporaneously with this Agreement provides for certain forms of severance
and benefit payments in the event of termination of the Executive's employment.
This Agreement is in addition to the Severance Agreement and in no way
supersedes or nullifies the Severance Agreement. Nevertheless, it is possible
that termination of employment by the Company or by the Executive may fall
within the scope of both agreements. In such event, payments made to the
Executive under Section 8.1 hereof shall be coordinated with payments made to
the Executive under Section 5.1 of the Severance Agreement as follows:
(a) Accrued Obligations under this Agreement need not be paid
if paid under the Severance Agreement;
(b) COBRA Continuation under this Agreement shall need not be
provided to the extent COBRA Continuation is provided under Section 5.1(c) of
the Severance Agreement; and
(c) The severance payment required under Section 8.1(c) hereof
shall be paid in addition to any severance payment required under Section 5.1(c)
of the Severance Agreement.
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IN WITNESS WHEREOF, the parties have executed and entered into this
Agreement effective on the date first set forth above.
NEORX CORPORATION
By_______________________________
Its____________________________
EXECUTIVE
________________________________
______________________
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APPENDIX A
For purposes of this Agreement, a "Change of Control" shall mean:
(a) A "Board Change" that, for purposes of this Agreement, shall have
occurred if a majority (excluding vacant seats) of the seats on the Board are
occupied by individuals who were neither (i) nominated by a majority of the
Incumbent Directors nor (ii) appointed by directors so nominated. An "Incumbent
Director" is a member of the Board who has been either (i) nominated by a
majority of the directors of the Company then in office or (ii) appointed by
directors so nominated, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person (as hereinafter defined) other than the
Board; or
(b) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of (i) twenty percent (20%) or more of either (A) the then
outstanding shares of Common Stock of the Company (the "Outstanding Company
Common Stock") or (B) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"), in the case of either
(A) or (B) of this clause (i), which acquisition is not approved in advance by a
majority of the Incumbent Directors, or (ii) thirty-three percent (33%) or more
of either (A) the Outstanding Company Common Stock or (B) the Outstanding
Company Voting Securities, in the case of either (A) or (B) of this clause (ii),
which acquisition is approved in advance by a majority of the Incumbent
Directors; provided, however, that the following acquisitions shall not
constitute a Change of Control: (x) any acquisition by the Company, (y) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or (z)
any acquisition by any corporation pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or consolidation, the
conditions described in clauses (i), (ii) and (iii) of subsection (c) of this
Appendix A are satisfied; or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation, in each case, unless, immediately following such
reorganization, merger or consolidation, (i) more than sixty percent (60%) of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all the individuals and
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entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and the Outstanding Company Voting Securities immediately
prior to such reorganization, merger or consolidation in substantially the same
proportion as their ownership immediately prior to such reorganization, merger
or consolidation of the Outstanding Company Common Stock and the Outstanding
Company Voting Securities, as the case may be, (ii) no Person (excluding the
Company, any employee benefit plan (or related trust) of the Company or such
corporation resulting from such reorganization, merger or consolidation and any
Person beneficially owning, immediately prior to such reorganization, merger or
consolidation, directly or indirectly, thirty-three percent (33%) or more of the
Outstanding Company Common Stock or the Outstanding Company Voting Securities,
as the case may be) beneficially owns, directly or indirectly, thirty-three
percent (33%) or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors, and (iii) at least a majority of the members of the board of
directors of the corporation resulting from such reorganization, merger or
consolidation were the Incumbent Directors at the time of the execution of the
initial agreement providing for such reorganization, merger or consolidation; or
(d) Approval by the shareholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) the sale or other disposition
of all or substantially all the assets of the Company, other than to a
corporation with respect to which immediately following such sale or other
disposition, (A) more than sixty percent (60%) of, respectively, the then
outstanding shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all the individuals and entities who were
the beneficial owners, respectively, of the Outstanding Company Common Stock and
the Outstanding Company Voting Securities immediately prior to such sale or
other disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities, as the case may be,
(B) no Person (excluding the Company, any employee benefit plan (or related
trust) of the Company or such corporation and any Person beneficially owning,
immediately prior to such sale or other disposition, directly or indirectly,
thirty-three percent (33%) or more of the Outstanding Company Common Stock or
the Outstanding Company Voting Securities, as the case may be) beneficially
owns, directly or indirectly, thirty-three percent (33%) or more of,
respectively, the then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors, and (C) at
least a majority of the members of the board of directors of such corporation
were approved by a majority of the Incumbent Directors at the time of the
execution of the initial agreement or action of the Board providing for such
sale or other disposition of the Company's assets.
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EXHIBIT 10.2
NEORX CORPORATION
KEY EXECUTIVE SEVERANCE AGREEMENT
This Key Executive Severance Agreement (this "Agreement"), dated and
effective as of April 10, 1996, is between NEORX CORPORATION, a Washington
corporation (the "Company"), and __________________ (the "Executive").
The Board of Directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to ensure that
the Company will have the continued dedication of the Executive, notwithstanding
the fact that the Executive does not have any form of traditional employment
contract or other assurance of job security. The Board believes it is imperative
to diminish any distraction of the Executive arising from the personal
uncertainty and insecurity that arises in the absence of any assurance of job
security by providing the Executive with reasonable compensation and benefit
arrangements in the event of termination of the Executive's employment by the
Company under certain defined circumstances.
In order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
1. TERM
The term of this Agreement (the "Term") shall be for a period of two
(2) years from the date of this Agreement as first appearing; provided, however,
that the Term shall automatically renew for additional two (2) year periods,
unless notice of nonrenewal is given by either party to the other party at least
ninety (90) days prior to the end of the initial Term or any renewal Term, at
the end of which Term this Agreement shall terminate without further action by
either the Company or the Executive.
2. EMPLOYMENT
The Executive and the Company acknowledge that, except as may otherwise
be provided under any other written agreement between the Executive and the
Company, the employment of the Executive by the Company or by any affiliated or
successor company is "at will" and may be terminated by either the Executive or
the Company or its affiliated companies at any time with or without cause,
subject to the termination payments prescribed herein.
3. ATTENTION AND EFFORT
During any period of time that the Executive remains in the employ of
the Company, and excluding any periods of vacation and sick leave to which the
Executive is entitled, the Executive will devote all his productive time,
ability, attention and effort to the business and affairs of the Company and the
<PAGE>
discharge of the responsibilities assigned to him hereunder, and will seek to
perform faithfully and efficiently such responsibilities. It shall not be a
violation of this Agreement for the Executive to (a) serve on corporate, civic
or charitable boards or committees, (b) deliver lectures, fulfill speaking
engagements or teach at educational institutions, (c) manage personal
investments, or (d) engage in activities permitted by the policies of the
Company or as specifically permitted by the Company, so long as such activities
do not significantly interfere with the performance of the Executive's
responsibilities in accordance with this Agreement. It is expressly understood
and agreed that to the extent any such activities have been conducted by the
Executive prior to the Term, the continued conduct of such activities (or the
conduct of activities similar in nature and scope thereto) during the Term shall
not thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
4. TERMINATION
During the Term, employment of the Executive may be terminated as
follows, but, in any case, the nondisclosure provisions set forth in Section 7
hereof shall survive the termination of this Agreement and the termination of
the Executive's employment with the Company:
4.1 By the Company or the Executive
At any time during the Term, the Company may terminate the employment
of the Executive with or without Cause (as defined below), and the Executive may
terminate his employment for Good Reason (as defined below) or for any reason,
upon giving Notice of Termination (as defined below).
4.2 Automatic Termination
This Agreement and the Executive's employment shall terminate
automatically upon the death or Total Disability of the Executive. The term
"Total Disability" as used herein shall mean the Executive's inability (with
such accommodation as may be required by law and which places no undue burden on
the Company), as determined by a physician selected by the Company and
acceptable to the Executive, to perform the Executive's essential duties for a
period or periods aggregating twelve (12) weeks in any three hundred sixty-five
(365) day period as a result of physical or mental illness, loss of legal
capacity or any other cause beyond the Executive's control, unless the Executive
is granted a leave of absence by the Board.
4.3 Notice of Termination
Any termination by the Company or by the Executive during the Term
shall be communicated by Notice of Termination to the other party given in
accordance with Section 9 hereof. The term "Notice of Termination" shall mean a
written notice that (a) indicates the specific termination provision in this
Agreement relied upon and (b) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated. The failure by the
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Executive or the Company to set forth in the Notice of Termination any fact or
circumstance that contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company hereunder or preclude the
Executive or the Company from asserting such fact or circumstance in enforcing
the Executive's or the Company's rights hereunder.
4.4 Date of Termination
"Date of Termination" means (a) if the Executive's employment is
terminated by reason of death, the last day of the calendar month in which the
Executive's death occurs, (b) if the Executive's employment is terminated by
reason of Total Disability, immediately upon a determination by the Company of
the Executive's Total Disability, and (c) in all other cases, ten (10) days
after the date of personal delivery or mailing of the Notice of Termination. The
Executive's employment and performance of services will continue during such ten
(10) day period; provided, however, that the Company may, upon notice to the
Executive and without reducing the Executive's compensation during such period,
excuse the Executive from any or all of his duties during such period.
5. TERMINATION PAYMENTS
In the event of termination of the Executive's employment during the
Term, all compensation and benefits shall terminate, except as specifically
provided in this Section 5.
5.1 Termination by the Company Other Than for Cause or by the Executive for
Good Reason
If during the Term the Company terminates the Executive's employment
other than for Cause or the Executive terminates his employment for Good Reason,
the Executive shall be entitled to:
(a) receive payment of the following accrued obligations
(the "Accrued Obligations"):
(i) the Executive's then current annual base
salary through the Date of Termination to the extent not theretofore
paid and
(ii) any compensation previously deferred by the
Executive (together with accrued interest or earnings thereon, if any)
and any accrued vacation pay that would be payable under the Company's
standard policy, in each case to the extent not theretofore paid;
(b) for one year after the Date of Termination or until the
Executive qualifies for comparable medical and dental insurance benefits from
another employer, whichever occurs first, the Company shall pay the Executive's
premiums for health insurance benefit continuation for the Executive and his
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family members, if applicable, that the Company provides to the Executive under
the provisions of the federal Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA"), to the extent that the Company would have paid such
premiums had the Executive remained employed by the Company (such continued
payment is hereinafter referred to as "COBRA Continuation"); and
(c) an amount as severance pay equal to the Executive's then
current annual base salary for the fiscal year in which the Date of Termination
occurs, subject to payment and potential reduction as set forth in Section 5.5
hereof.
5.2 Termination for Cause or Other Than for Good Reason
If during the Term the Executive's employment shall be terminated by
the Company for Cause or by the Executive for other than Good Reason, this
Agreement shall terminate without further obligation on the part of the Company
to the Executive, other than the Company's obligation to pay the Executive the
Accrued Obligations to the extent theretofore unpaid.
5.3 Expiration of Term
In the event the Executive's employment is not terminated prior to
expiration of the Term, this Agreement shall terminate without further
obligation on the part of the Company to the Executive.
5.4 Termination Because of Death or Total Disability
If the Executive's employment is terminated during the Term by reason
of the Executive's death or Total Disability, this Agreement shall terminate
automatically without further obligation on the part of the Company to the
Executive or his legal representatives under this Agreement, other than the
Company's obligation to pay the Executive the Accrued Obligations (which shall
be paid to the Executive's estate or beneficiary, as applicable in the case of
the Executive's death) and to provide COBRA Continuation.
5.5 Payment Schedule and Offset for Other Earnings
All payments of Accrued Obligations, or any portion thereof payable
pursuant to this Section 5, shall be made to the Executive within ten (10)
working days of the Date of Termination. Any severance payments payable to the
Executive pursuant to Section 5.1(c) shall be made to the Executive in the form
of salary continuation, payable at normal payroll intervals during the one (1)
year severance period, and subject to offset for other earnings received by the
Executive as follows:
(a) The Executive shall have no affirmative duty to seek other
employment or otherwise mitigate lost earnings during the one (1) year severance
period;
(b) The Executive shall disclose to the Company any earnings
received (or that the Executive had the right to receive) from employment,
consulting or performance of other personal services during the one (1) year
severance period, and the source(s) of such earnings;
-4-
<PAGE>
(c) The Company, in each payroll period that a severance
payment is due, shall have the right to offset on a dollar-for-dollar basis all
such earnings that the Executive received or had the right to receive during
that payroll period; and
(d) In the event the Company disputes whether Good Reason
existed for the Executive to terminate his employment for Good Reason, the
Company shall pay salary continuation as provided above in this Section 5.5
until the earliest of (i) settlement by the parties, (ii) determination by
arbitration in accordance with Section 14 hereof that Good Reason did not exist,
and (iii) completion of the payments required by this Section 5.5 and Section
5.1(c) hereof. If, pursuant to Section 14 hereof, an arbitrator determines that
Good Reason did not exist, the arbitrator shall also decide whether the
Executive had a reasonable, good-faith basis for claiming that there was Good
Reason to terminate. If the arbitrator determines that there was not such a
basis, the Executive shall be obligated to repay promptly to the Company the
salary continuation payments; if the arbitrator determines that there was such a
basis, the Executive shall not be obligated to repay the salary continuation.
5.6 Cause
For purposes of this Agreement, "Cause" means cause given by the
Executive to the Company and shall include, without limitation, the occurrence
of one or more of the following events:
(a) A clear refusal to carry out any material lawful duties of
the Executive or any directions of the Board or senior management of the Company
reasonably consistent with those duties;
(b) Persistent failure to carry out any lawful duties of the
Executive or any directions of the Board or senior management reasonably
consistent with those duties; provided, however, that the Executive has been
given reasonable notice and opportunity to correct any such failure;
(c) Violation by the Executive of a state or federal
criminal law involving the commission of a crime against the Company or any
other criminal act involving moral turpitude;
(d) Current abuse by the Executive of alcohol or controlled
substances; deception, fraud, misrepresentation or dishonesty by the Executive;
or any incident materially compromising the Executive's reputation or ability to
represent the Company with investors, customers or the public; or
(e) Any other material violation of any provision of this
Agreement by the Executive, subject to the notice and opportunity to cure
requirements of Section 8 hereof.
-5-
<PAGE>
5.7 Good Reason
For purposes of this Agreement, "Good Reason" means
(a) Reduction of the Executive's annual base salary to a level
below the level in effect on the date of this Agreement, regardless of any
change in the Executive's duties or responsibilities;
(b) The assignment to the Executive of any duties materially
inconsistent with the Executive's position, authority, duties or
responsibilities or any other action by the Company the results in a material
diminution in such position, authority, duties or responsibilities, excluding
for this purpose an isolated and inadvertent action not taken in bad faith and
that is remedied by the Company promptly after receipt of notice thereof given
by the Executive;
(c) The Company's requiring the Executive to be based at any
office or location more than twenty (20) miles from the Company's current
location in Seattle, Washington;
(d) Any failure by the Company to comply with and satisfy
Section 10 hereof, provided, however, that the Company's successor has received
at least ten (10) days' prior written notice from the Company or the Executive
of the requirements of Section 10 hereof; or
(e) Any other material violation of any provision of this
Agreement by the Company, subject to the notice and opportunity to cure
requirements of Section 8 hereof.
6. REPRESENTATIONS, WARRANTIES AND OTHER CONDITIONS
In order to induce the Company to enter into this Agreement, the
Executive represents and warrants to the Company as follows:
6.1 Health
The Executive is in good health and knows of no physical or mental
disability that, with any accommodation that may be required by law and that
places no undue burden on the Company, would prevent him from fulfilling his
obligations hereunder. The Executive agrees, if the Company requests, to submit
to reasonable periodic medical examinations by a physician or physicians
designated, paid for and arranged by the Company. The Executive agrees that the
examination's medical report shall be provided to the Company.
-6-
<PAGE>
6.2 No Violation of Other Agreements
The Executive represents that neither the execution nor the performance
of this Agreement by the Executive will violate or conflict in any way with any
other agreement by which the Executive may be bound.
7. NONDISCLOSURE; RETURN OF MATERIALS
7.1 Nondisclosure
Except as required by his employment with the Company, the Executive
will not, at any time during the term of employment by the Company, or at any
time thereafter, directly, indirectly or otherwise, use, communicate, disclose,
disseminate, lecture upon or publish articles relating to any confidential,
proprietary or trade secret information without the prior written consent of the
Company. The Executive understands that the Company will be relying on this
covenant in continuing the Executive's employment, paying him compensation,
granting him any promotions or raises, or entrusting him with any information
that helps the Company compete with others.
7.2 Return of Materials
All documents, records, notebooks, notes, memoranda, drawings or other
documents made or compiled by the Executive at any time while employed by the
Company, or in his possession, including any and all copies thereof, shall be
the property of the Company and shall be held by the Executive in trust and
solely for the benefit of the Company, and shall be delivered to the Company by
the Executive upon termination of employment or at any other time upon request
by the Company.
8. NOTICE AND CURE OF BREACH
Whenever a breach of this Agreement by either party is relied upon as
justification for any action taken by the other party pursuant to any provision
of this Agreement, other than clause (a), (b), (c) or (d) of Section 5.6 hereof,
before such action is taken, the party asserting the breach of this Agreement
shall give the other party at least twenty (20) days' prior written notice of
the existence and the nature of such breach before taking further action
hereunder and shall give the party purportedly in breach of this Agreement the
opportunity to correct such breach during the twenty (20) day period.
9. FORM OF NOTICE
Every notice required by the terms of this Agreement shall be given in
writing by serving the same upon the party to whom it was addressed personally
or by registered or certified mail, return receipt requested, at the address set
forth below or at such other address as may hereafter be designated by notice
given in compliance with the terms hereof:
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<PAGE>
If to the Executive: _____________________
_____________________
_____________________
If to the Company: NeoRx Corporation
410 West Harrison
Seattle, Washington 98119
Attn: President
With a copy to: Perkins Coie
1201 Third Avenue, 40th Floor
Seattle, Washington 98101-3099
Attn: James R. Lisbakken
or such other address as shall be provided in accordance with the terms hereof.
Except as set forth in Section 4.4 hereof, if notice is mailed, such notice
shall be effective upon mailing.
10. ASSIGNMENT
This Agreement is personal to the Executive and shall not be assignable
by the Executive.
The Company shall assign to and require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all the business and/or assets of the Company to assume expressly
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession had taken
place. As used in this Agreement, the "Company" shall mean NeoRx Corporation and
any affiliated company or successor to its business and/or assets as aforesaid
that assumes and agrees to perform this Agreement by contract, operation of law
or otherwise; and as long as such successor assumes and agrees to perform this
Agreement, the termination of the Executive's employment by one such entity and
the immediate hiring and continuation of the Executive's employment by the
succeeding entity shall not be deemed to constitute a termination or trigger any
severance obligation under this Agreement. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the parties hereto and their respective successors and permitted assigns.
11. WAIVERS
No delay or failure by any party hereto in exercising, protecting or
enforcing any of its rights, titles, interests or remedies hereunder, and no
course of dealing or performance with respect thereto, shall constitute a waiver
thereof. The express waiver by a party hereto of any right, title, interest or
remedy in a particular instance or circumstance shall not constitute a waiver
thereof in any other instance or circumstance. All rights and remedies shall be
cumulative and not exclusive of any other rights or remedies.
-8-
<PAGE>
12. AMENDMENTS IN WRITING
No amendment, modification, waiver, termination or discharge of any
provision of this Agreement, or consent to any departure therefrom by either
party hereto, shall in any event be effective unless the same shall be in
writing, specifically identifying this Agreement and the provision intended to
be amended, modified, waived, terminated or discharged and signed by the Company
and the Executive, and each such amendment, modification, waiver, termination or
discharge shall be effective only in the specific instance and for the specific
purpose for which given. No provision of this Agreement shall be varied,
contradicted or explained by any oral agreement, course of dealing or
performance or any other matter not set forth in an agreement in writing and
signed by the Company and the Executive.
13. APPLICABLE LAW
This Agreement shall in all respects, including all matters of
construction, validity and performance, be governed by, and construed and
enforced in accordance with, the laws of the State of Washington, without regard
to any rules governing conflicts of laws.
14. ARBITRATION; ATTORNEYS' FEES
Except in connection with enforcing Section 7 hereof, for which legal
and equitable remedies may be sought in a court of law, any dispute arising
under this Agreement shall be subject to arbitration. The arbitration proceeding
shall be conducted in accordance with the Commercial Arbitration Rules of the
American Arbitration Association (the "AAA Rules") then in effect, conducted by
one (1) arbitrator either mutually agreed upon or selected in accordance with
the AAA Rules. The arbitration shall be conducted in King County, Washington,
under the jurisdiction of the Seattle office of the American Arbitration
Association. The arbitrator shall have authority only to interpret and apply the
provisions of this Agreement, and shall have no authority to add to, subtract
from or otherwise modify the terms of this Agreement. Any demand for arbitration
must be made within sixty (60) days of the event(s) giving rise to the claim
that this Agreement has been breached. The arbitrator's decision shall be final
and binding, and each party agrees to be bound by the arbitrator's award,
subject only to an appeal therefrom in accordance with the laws of the State of
Washington. Either party may obtain judgment upon the arbitrator's award in the
Superior Court of King County, Washington.
If it becomes necessary to pursue or defend any legal proceeding,
whether in arbitration or court, in order to resolve a dispute arising under
this Agreement, the prevailing party in any such proceeding shall be entitled to
recover its reasonable costs and attorneys' fees.
15. SEVERABILITY
If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any jurisdiction, for any reason, including, without
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<PAGE>
limitation, the duration of such provision, its geographical scope or the extent
of the activities prohibited or required by it, then, to the full extent
permitted by law, (a) all other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in order to carry
out the intent of the parties hereto as nearly as may be possible, (b) such
invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision hereof, and (c) any court or
arbitrator having jurisdiction thereover shall have the power to reform such
provision to the extent necessary for such provision to be enforceable under
applicable law.
16. COORDINATION WITH CHANGE OF CONTROL AGREEMENT
The Company and the Executive are contemporaneously with this Agreement
entering into a Change of Control Agreement (the "Change of Control Agreement"),
which agreement provides for certain forms of severance and benefit payments in
the event of termination of Executive's employment under certain defined
circumstances. This Agreement is in addition to the Change of Control Agreement,
providing certain assurances to the Executive in circumstances that the Change
of Control Agreement does not cover, and in no way supersedes or nullifies the
Change of Control Agreement. Nevertheless, it is possible that a termination of
employment by the Company or by the Executive may fall within the scope of both
agreements. In such event, payments made to the Executive under Section 5.1
hereof shall be coordinated with payments made to the Executive under Section
8.1 of the Change of Control Agreement as follows:
(a) Accrued Obligations under this Agreement shall be paid
first, in which case Accrued Obligations need not be paid under the Change of
Control Agreement;
(b) COBRA Continuation under this Agreement shall be provided
first, in which case COBRA Continuation need not be provided under the Change of
Control Agreement; and
(c) The severance payment required under Section 5.1(c) hereof
shall be paid in addition to any severance payment required under Section 8.1(c)
of the Change of Control Agreement.
17. EXCESS PARACHUTE PAYMENTS
Unless provided by Section 8.8 of the Change of Control Agreement, if
any portion of the payments or benefits under this Agreement or any other
agreement or benefit plan of the Company (including stock options) would be
characterized as an "excess parachute payment" to the Executive under Section
280G of the Internal Revenue Code of 1986, as amended (the "Code"), the
Executive shall be paid any excise tax that the Executive owes under Section
4999 of the Code as a result of such characterization, such excise tax to be
paid to the Executive at least ten (10) days prior to the date that he is
obligated to make the excise tax payment. The determination of whether and to
what extent any payments or benefits would be "excess parachute payments" and
the date by which any excise tax shall be due, shall be determined in writing by
recognized tax counsel selected by the Company and reasonably acceptable to the
Executive.
-10-
<PAGE>
18. ENTIRE AGREEMENT
Except as described in Section 16 hereof, this Agreement constitutes
the entire agreement between the Company and the Executive with respect to the
subject matter hereof, and all prior or contemporaneous oral or written
communications, understandings or agreements between the Company and the
Executive with respect to such subject matter are hereby superseded and
nullified in their entireties, except that the Proprietary Information and
Invention Agreement between the Executive and the Company shall continue in full
force and effect to the extent not superseded by Section 10 hereof.
19. WITHHOLDING
The Company may withhold from any amounts payable under this Agreement
such federal, state or local taxes as shall be required to be withheld pursuant
to any applicable law or regulation.
20. COUNTERPARTS
This Agreement may be executed in counterparts, each of which
counterpart shall be deemed an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed and entered into this
Agreement effective on the date first set forth above.
NEORX CORPORATION EXECUTIVE
By:______________________________ _____________________________
Its:_______________________ _____________________________
-11-
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS OF NEORX CORPORATION AS OF 6/30/96 AND 12/31/95, AND THE RELATED STATE-
MENTS OF OPERATIONS FOR EACH OF THE SIX MONTHS ENDED 6/30/96 AND 6/30/95 AND
FOR THE PERIOD FROM 2/13/84 (INCEPTION) TO 6/30/96 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH 10-Q REPORT FOR THE PERIOD ENDED 6/30/96.
</LEGEND>
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