8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORTPursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

October 19, 2004

Date of Report (Date of
earliest event reported)

NeoRx Corporation
(Exact Name of Registrant as Specified in Charter)
Washington	0-16614	91-1261311
(State or Other Jurisdiction of Incorporation)	(Commission File No.)	(IRS Employer Identification No.)
300 Elliot Avenue West, Suite 500, Seattle, WA		98119
(Address of principal executive offices)		(Zip Code)
(206) 281-7001
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01.Entry into a Material Definitive Agreement.

On October 19, 2004, NeoRx Corporation issued a press release announcing that Susan D. Berland has been appointed as Chief Financial Officer, effective October 25, 2004, the date Ms. Berland will join the Company.  Ms. Berland will assume the Company’s senior financial responsibilities from Michael K. Jackson, Corporate Controller and Chief Accounting Officer, who has been acting as the Company’s principal financial officer since April 2004.

Ms. Berland has entered into a Change of Control Agreement and a Key Executive Severance Agreement with the Company, each dated as of October 25, 2004.  Pursuant to the Change of Control Agreement, if we terminate Ms. Berland’s employment without cause, or if Ms. Berland terminates her employment for good reason, Ms. Berland is entitled to receive an amount equal to fifty percent of her annual base salary, fifty percent of the annual bonus that would have been paid but for the termination of her employment, up to one year’s medical and dental insurance benefits and the immediate vesting of all of her outstanding stock options.

Under the Change of Control Agreement, “cause” includes the following events: refusal or persistent failure to carry out any of the executive’s material duties after reasonable notice and an opportunity to correct the failure, violation by the executive of a state or federal criminal law involving a crime against the Company or any other crime involving moral turpitude, the executive’s abuse of alcohol or controlled substances, deception, fraud or dishonesty by the executive or any incident materially compromising the executive’s reputation or ability to represent us with the public. “Good reason” includes a material diminution in the executive’s position, duties or responsibility, our failure to pay the executive’s annual salary and bonus as provided in the agreement, requiring the executive to be based further than 50 miles from San Francisco, California or our failure to properly assign the Agreement to a successor.  The Agreement runs for an initial one-year term and renews automatically for successive one-year periods unless either party gives 90 days’ notice.  If a change of control occurs, the Agreement automatically renews and runs for a period of two additional years.  A “change of control” is triggered upon the occurrence of certain mergers, consolidations, reorganizations or purchases of significant minority interests in our voting securities, a sale of substantially all of our assets or the failure of incumbent board members (or persons nominated or appointment by incumbent board members) to hold a majority of the seats on our Board of Directors.

Pursuant to the Key Executive Severance Agreement, if we terminate Ms. Berland’s employment without cause or if she terminates for good reason, Ms. Berland is entitled to receive a severance payment of seventy-five percent of her current annual base salary and up to nine months’ medical and dental insurance benefits.  The Agreement runs for an initial one-year term and renews automatically for successive one-year periods unless either party gives 90 days’ notice.  The definitions of “cause” and “good reason” are the same as in the Change of Control Agreement described above.  The Key Executive Severance Agreement

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does not supersede or nullify the Change of Control Agreement.  However, if Ms. Berland’s termination of employment falls into the scope of both agreements, we do not need to make payments under the Severance Agreement to the extent we are making the same payments under the Change of Control Agreement.

Other than as specifically provided in the Severance Agreement and the Change of Control Agreement, these agreements provide for “at-will” employment, which means that Ms. Berland may terminate her service with the Company at any time.  Copies of the Key Executive Severance Agreement and Change of Control Agreement are filed as exhibits hereto and are hereby incorporated by reference.  Upon commencement of her employment, Ms. Berland will be awarded an option, under the NeoRx Corporation 2004 Incentive Compensation Plan, to purchase 150,000 shares of the Company’s common stock.  The per share exercise price of the option will be equal to the closing price of NeoRx Common Stock on the date of the option grant.

Item 5.02.Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.

On October 19, 2004, NeoRx Corporation issued a press release announcing that Susan D. Berland has been appointed as Chief Financial Officer, effective October 25, 2004, the date Ms. Berland will join the Company.  Ms. Berland will assume the Company’s senior financial responsibilities from Michael K. Jackson, Corporate Controller and Chief Accounting Officer, who has been acting as the Company’s senior financial officer since April 2004.  A copy of the press release is attached hereto and is hereby incorporated by reference.

Prior to joining the Company, Ms. Berland, 50, was an independent consultant in the biotechnology sector.  From 2000 to June 2003, Ms. Berland was the Chief Financial Officer of DNA Sciences, Inc., a biotechnology company based in Fremont, California.  Ms. Berland was Head of Financial Planning at Monsanto (NYSE:  MON), a provider of agricultural products and pharmaceuticals from 1999 to 2000, and was Director, Mergers and Acquisitions for Monsanto from 1996 to 1999.

See disclosure under Item 1.01 above for the material terms of Ms. Berland’s Key Executive Severance Agreement and Change of Control Agreement.

Item 9.01.Financial Statements and Exhibits.

(c)Exhibits.

Exhibit 10.1	Key Executive Severance Agreement dated as of October 25, 2004, between the Company and Susan D. Berland.
Exhibit 10.2	Change of Control Agreement dated as of October 25, 2004, between the Company and Susan D. Berland.

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Exhibit 99.1 Press release dated October 19, 2004.

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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 hereunto duly authorized.

	NeoRx Corporation
Dated: October 19, 2004	By:	/s/ Michael K. Jackson
		Michael K. Jackson
		Corporate Controller and Chief Accounting Officer

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EXHIBIT INDEX

Exhibit No.	Description
10.1	Key Executive Severance Agreement dated as of October 25, 2004, between the Company and Susan D. Berland.
10.2	Change of Control Agreement dated as of October 25, 2004, between the Company and Susan D. Berland.
99.1	Press Release dated October 19, 2004.

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EX-10.1

Exhibit 10.1

NEORX CORPORATION
KEY EXECUTIVE SEVERANCE AGREEMENT

This Key Executive Severance Agreement (VP) (this “Agreement”), dated as of October 25, 2004, is entered into by and between NEORX CORPORATION, a Washington corporation (as supplemented by Section 10, the “Company”), and Susan D. Berland (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 initial term of this Agreement (the “Initial Term”) shall be for a period of one (1) year from the date of this Agreement as first appearing; provided, however, that this Agreement shall automatically renew for successive additional one (1) year periods (“Renewal Terms”), 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, and provided further that if a Change of Control (as defined in the Change of Control Agreement referenced in Section 16 hereof) occurs during the Term, the Term shall automatically extend for the duration of the Employment Period (as defined in the Change of Control Agreement).  The “Term” of this Agreement shall be the Initial Term plus all Renewal Terms and, if applicable, the duration of the Employment Period.  At the end of the Term, this Agreement shall terminate without further action by either the Company or the Executive.

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 her productive time, ability, attention and effort to the business and affairs of the Company and the discharge of the responsibilities assigned to her 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:

4.1By 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 her employment for Good Reason (as defined below) or for any reason, upon giving Notice of Termination (as defined below).

4.2Automatic 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.

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4.3Notice 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 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.

4.4Date 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 her 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.

5.1Termination 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 her 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

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(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 nine (9) months 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 her 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 seventy five percent (75%) of 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 Sections 5.5 and 5.9 hereof.

5.2Termination 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.

5.3Expiration 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.

5.4Termination 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 her 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.

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5.5Payment 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 nine (9) month period following the Date of Termination (“Payment Period”).  Any severance payments payable to the Executive pursuant to Section 5.1(c) on or after the date six (6) months after the Date of Termination (“Offset Period”) shall be 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 any part of the Payment 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 Offset Period, and the source(s) of such earnings.

(c)The Company, in each payroll period during the Offset 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.

5.6Cause

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 conviction of a crime against the Company, or a guilty plea related to such conviction, 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

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(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.

5.7Good 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 fifty (50) miles from the city of San Francisco, California;

(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.

5.8General Release of Claims

As a condition to the payment contemplated by Section 5.1(c), the Executive shall execute a general release of claims against the Company in a form satisfactory to the Company in its sole discretion.  By way of example and not limitation, the general release of claims will include any claims for wages, bonuses, employment benefits, or damages of any kind whatsoever, arising out of any contracts, express or implied, any covenant of good faith and fair dealing, express or implied, any theory of wrongful discharge, any legal restriction on the Company’s right to terminate employment, or any federal, state or other governmental statute or ordinance, including, without limitation, Title VII of the Civil Rights Act of 1964, the federal Age Discrimination in Employment Act, the Americans with Disabilities Act, the Family and Medical Leave Act, the Washington Law Against Discrimination, or any other legal limitation on the employment relationship.

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5.9Dispute regarding existence of Good Reason for Termination

In the event the Company disputes whether Good Reason existed for the Executive to terminate her employment for Good Reason, the Company shall pay salary continuation as provided in 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 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.

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:

6.1Health

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 her from fulfilling her 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.

6.2No 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

7.1Nondisclosure

Except as required by her 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 her compensation,

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granting her any promotions or raises, or entrusting her with any information that helps the Company compete with others.

7.2Return 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 her 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:

If to the Executive:	Susan D. Berland
	321 North San Mateo Drive
	San Mateo, California 94401
If to the Company:	NeoRx Corporation
	300 Elliott Avenue West, Suite 500
	Seattle, Washington 98119
	Attn: Chief Executive Officer
With a copy to:	Perkins Coie LLP
	1201 Third Avenue, 40th Floor
	Seattle, Washington 98101-3099
	Attn: James R. Lisbakken

Except as set forth in Section 4.4 hereof, if notice is mailed, such notice shall be effective upon mailing.

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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.

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.

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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 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

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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 need not be paid if paid under the Change of Control Agreement;

(b)COBRA Continuation under this Agreement need not be provided if provided under the Change of Control Agreement; and

(c)the severance payment required under Section 5.1(c) hereof need not be paid during the first six (6) months of the Payment Period if a severance payment is made under Section 8.1(d) of the Change of Control Agreement; provided that the remaining one-third balance of the severance payment required under Section 5.1(c) hereof shall be paid during the Offset Period as provided herein.

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 she 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.

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.

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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
By:	/s/ Linda T. Findlay
	Name:			Linda T. Findlay
	Its:			Vice President, Human Resources
EXECUTIVE
By:		/s/ Susan D. Berland
Name:			Susan D. Berland

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EX-10.2

Exhibit 10.2

NEORX CORPORATION
CHANGE OF CONTROL AGREEMENT

This Change of Control Agreement (this “Agreement”), dated as of October 25, 2004, is entered into by and between NEORX CORPORATION, a Washington corporation (as supplemented by Section 13, the “Company”), and Susan D. Berland (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 initial term of this Agreement (“Initial Term”) shall be for a period of one (1) year from the date of this Agreement as first appearing above; provided, however, that this Agreement shall automatically renew for successive additional one (1) year periods (“Renewal Terms”) unless notice of nonrenewal is given by either party to the other at least ninety (90) days prior to the end of the Initial Term or any Renewal Term, and provided further that if a Change in Control occurs during the Term, the Term shall automatically

extend for the duration of the Employment Period.  The “Term” of this Agreement shall be the Initial Term plus all Renewal Terms and, if applicable, the duration of the Employment Period.  At the end of the Term, this Agreement shall terminate without further action by either the Company or the Executive.

3.Employment

3.1Employment 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.

3.2Position 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.

3.3Location

During the Employment Period, the Executive’s services shall be performed at the Company’s headquarters on the Change of Control Date, or the cities of San Francisco or San Mateo, California.

3.4Employment 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 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.

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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 her productive time, ability, attention and effort to the business and affairs of the Company and the discharge of the responsibilities assigned to her hereunder, and will use her 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:

5.1Salary

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 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.

5.2Bonus

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

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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

6.1Incentive, 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).

6.2Expenses

During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable employment expenses incurred by her 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:

7.1By 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 her employment for Good Reason (as defined below) or for any reason, upon giving the Notice of Termination (as defined below).

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7.2Automatic 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.

7.3Notice 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.

7.4Date of Termination

During the Employment Period, “Date of Termination” means (a) if the Executive’s employment is terminated by reason of death, at the end of the calendar month in which the Executive’s death occurs, (b) if the Executive’s employment is terminated by reason of Total Disability, immediately upon a determination by the Company of the Executive’s Total Disability, and (c) in all other cases, ten (10) days after the date of personal delivery or mailing of the Notice of Termination.  The Executive’s employment and performance of services will continue during such ten (10) day period; provided, however, that the Company may, upon notice to the Executive and without reducing the Executive’s compensation during such period, excuse the Executive from any or all of her duties during such period.

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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.

8.1Termination 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 her employment for Good Reason, the Executive shall be entitled to:

(a)receive payment of the following accrued obligations (the “Accrued Obligations”):

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

(ii)the product of (x) the Annual Bonus payable with respect to the fiscal year in which the Date of Termination occurs and (y) a fraction the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is three hundred sixty-five (365); provided that, in the event that the Executive is entitled to an amount in respect of the Annual Bonus under Section 8.1(c), she shall receive the amount payable under Section 8.1(c) first and the amount payable under this Section 8.1(a)(ii) only to the extent it exceeds the amount payable under Section 8.1(c); and

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

(b)for one year after the Date of Termination or until the Executive qualifies for comparable medical and dental insurance benefits from another employer, whichever occurs first, the Company shall pay the Executive’s premiums for health insurance benefit continuation for the Executive and her family members, if applicable, which the Company provides to the Executive under the provisions of the federal Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), to the extent that the Company would have paid such premiums had the Executive remained employed by the Company (such continued payment is hereinafter referred to as “COBRA Continuation”);

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

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(d)an amount as severance pay equal to fifty percent (50%) of the Annual Base Salary for the fiscal year in which the Date of Termination occurs; and

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

8.2Termination 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.

8.3Expiration 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).

8.4Termination 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 her 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.

8.5Payment Schedule

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

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8.6Cause

For purposes of this Agreement, “Cause” means cause given by the Executive to the Company and shall include, without limitation, the occurrence of one (1) or more of the following events:

(a)a clear refusal to carry out any material lawful duties of the Executive or any directions of the Board 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.

8.7Good 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;

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(c)the Company’s requiring the Executive to be based at any office or location more than fifty (50) miles from the city of San Francisco, California;

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

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

8.8Excess Parachute Limitation

If any portion of the payments or benefits for the Executive under this Agreement, the Severance Agreement, or any other agreement or benefit plan of the Company (including stock option plan) would be characterized as an “excess parachute payment” to the Executive under Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), the Executive shall be paid any excise tax that the Executive owes under Section 4999 of the Code as a result of such characterization, such excise tax to be paid to the Executive at least ten (10) days prior to the date that she 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:

9.1Health

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 her from fulfilling her 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.

9.2No 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.

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10.Nondisclosure; Return of Materials

10.1Nondisclosure

Except as required by her employment with the Company, the Executive will not, at any time during the term of employment by the Company, or at any time thereafter, directly, indirectly or otherwise, use, communicate, disclose, disseminate, lecture upon or publish articles relating to any confidential, proprietary or trade secret information without the prior written consent of the Company.  The Executive understands that the Company will be relying on this Agreement in continuing the Executive’s employment, paying her compensation, granting her any promotions or raises, or entrusting her with any information that helps the Company compete with others.

10.2Return of Materials

All documents, records, notebooks, notes, memoranda, drawings or other documents made or compiled by the Executive at any time, or in her 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:	Susan D. Berland
	321 North San Mateo Drive
	San Mateo, California 94401

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If to the Company:	NeoRx Corporation
	300 Elliott Avenue West, Suite 500
	Seattle, Washington  98119
	Attn:  Chief Executive Officer
With a copy to:	Perkins Coie LLP
	1201 Third Avenue, 40th Floor
	Seattle, Washington 98101-3099
	Attn:  James R. Lisbakken

Except as set forth in Section 7.4 hereof, if notice is mailed, such notice shall be effective upon mailing.

13.Assignment

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

The Company shall assign to and require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  As used in this Agreement, “Company” shall mean NeoRx Corporation and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law, or otherwise.  All the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and permitted assigns.

14.Waivers

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

15.Amendments In Writing

No amendment, modification, waiver, termination or discharge of any provision of this Agreement, or consent to any departure therefrom by either party hereto, shall in any event be effective unless the same shall be in writing, specifically identifying this Agreement and the provision intended to be amended, modified, waived, terminated or discharged and signed by the Company and the Executive, and each such amendment, modification, waiver, termination or discharge shall be effective only in the specific instance and for the specific

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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.

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.

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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.

20.Withholding

The Company may withhold from any amounts payable under this Agreement such federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation.

21.Counterparts

This Agreement may be executed in counterparts, each of which counterparts shall be deemed an original, but all of which together shall constitute one and the same instrument.

22.Coordination With Severance Agreement

The Severance Agreement that the parties are entering into contemporaneously with this Agreement provides for certain forms of severance and benefit payments in the event of termination of the Executive’s employment.  This Agreement is in addition to the Severance Agreement and in no way supersedes or nullifies the Severance Agreement.  Nevertheless, it is possible that termination of employment by the Company or by the Executive may fall within the scope of both agreements.  In such event, payments made to the Executive under Section 8.1 hereof shall be coordinated with payments made to the Executive under Section 5.1 of the Severance Agreement as follows:

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

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

(c)the severance payment required under Section 8.1(d) hereof shall be paid first, in which case only that portion of any severance payment required under Section 5.1(c) of the Severance Agreement in excess of the severance payment required under Section 8.1(d) hereof shall be paid in accordance with the provisions of the Severance Agreement.

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

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NEORX CORPORATION
By:	/s/ Linda T. Findlay
	Name:		Linda T. Findlay
	Its:	Vice President, Human Resources
EXECUTIVE
By:	/s/ Susan D. Berland
	Name:		Susan D. Berland

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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 entities who were

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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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EX-99.1

Exhibit 99.1

NeoRx Announces Appointment of Susan D. Berland as Chief Financial Officer

Caroline M. Loewy joins as VP of Strategic Development

SEATTLE (October 19, 2004) – NeoRx Corporation (NASDAQ: NERX), a cancer therapeutics development company, today announced the appointment and approval, by the Board of Directors, of Susan D. Berland as chief financial officer.  The Company also announced that Caroline M. Loewy has joined the company in a consulting capacity as vice president of strategic development.

“We are extremely pleased to have two exceptionally talented and experienced biotech veterans join our management team,” said Jerry McMahon, Ph.D., chairman and chief executive officer of NeoRx.  “Susan is a results-oriented professional with 25 years of corporate financial experience that includes financing and management of financial operations for biotechnology and pharmaceutical companies.  In addition, Susan has had a distinguished career as a skilled negotiator in corporate development and partnerships that will be important as we seek to grow our business.”

Ms. Berland served as chief financial officer at DNA Sciences, Inc. from 2000 to 2003, where she was responsible for the completion of several strategic financings.  Ms. Berland joined DNA Sciences after four years at Monsanto leading up to the merger of Monsanto with Pharmacia and Upjohn.  While at Monsanto, she was a key member of the management team with oversight of financial planning and numerous M&A transactions.  Most recently, Ms. Berland has served as an independent consultant for biotechnology companies.  Ms. Berland has an MBA and a BA in business administration from the University of Wisconsin.  Ms. Berland will begin employment at NeoRx on October 25.

Ms. Loewy has more than 11 years of senior management experience in equity research at top-tier Wall Street firms, most recently serving as executive director of biotechnology equity research at Morgan Stanley Inc.  In addition, Ms. Loewy held various positions at Prudential Securities Inc., including managing director of biotechnology equity research.  Prior to that, she served as a senior financial analyst at BankAmerica Corporation.  Ms. Loewy holds an MBA from Carnegie Mellon, Graduate School of Business, and a BA in economics from the University of California, Berkeley.

“Caroline has a comprehensive understanding of the financial and commercial operations of biotechnology companies as well as understanding of the value drivers within the investment community,” said McMahon.  “Susan and Caroline are key management additions that underscore my commitment to growing shareholder value and building a new organization committed to bringing oncology products to the market.”

NeoRx is a cancer therapeutics development company.  The Company’s product pipeline includes STR^TM (Skeletal Targeted Radiotherapy), currently in a pivotal phase III clinical trial for patients with multiple myeloma, and NX 473, a next-generation platinum therapy that the Company plans to evaluate in the treatment of patients with advanced lung and colorectal cancers.  For more information, visit www.neorx.com.

This release contains forward-looking statements relating to the development of the Company’s products and strategic goals that are subject to certain risks and uncertainties, which could cause actual results to differ materially from those projected. The words “believe,” “expect,” “intend,” “anticipate,” “plan,” variations of such words, and similar expressions identify forward-looking statements, but their absence does not mean that the statement is not forward-looking. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Factors that could affect the Company’s actual results include the availability of working capital and financing sources for the development of NeoRx’s business, the progress and costs of clinical trials and the timing of regulatory approvals, the availability of clinical materials from third-party suppliers, NeoRx’s ability to manufacture STR in a timely and cost-effective manner, NeoRx’s ability to successfully  commercialize product candidates, and other risks and uncertainties described in NeoRx’s current and periodic reports filed with the Securities and Exchange Commission, including NeoRx’s Annual Report on Form 10-K for the year ended December 31, 2003, and Quarterly Report on Form 10- Q for the quarter ended June 30, 2004. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. The Company undertakes no obligation to update any forward-looking statement to reflect new information, events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.

NeoRx and STR are trademarks or registered trademarks of NeoRx Corporation in the United States and/or foreign countries.

© 2004 NeoRx Corporation. All Rights Reserved.

For Further Information:

NeoRx Corporation	Lippert/Heilshorn & Associates, Inc.
Julie Rathbun	Jody Cain (jcain@lhai.com)
Corporate Communications	Bruce Voss (bvoss@lhai.com)
206-286-2517	310-691-7100
jrathbun@neorx.com

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