Exhibit 10.6

EMPLOYMENT AGREEMENT

This Employment Agreement (this “Agreement”), dated as of January 17, 2017, is
entered into by and between Merrimack Pharmaceuticals, Inc., a Delaware
corporation with a place of business at One Kendall Square, Suite B7201,
Cambridge, Massachusetts 02139 (the “Company”), and Richard Peters (the
“Employee”).

RECITALS

WHEREAS, the Company desires to employ the Employee on the terms and conditions,
and for the consideration, hereinafter set forth, and the Employee desires to be
employed by the Company on such terms and conditions and for such consideration.

NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

1.Term of Employment.  Subject to the terms and conditions hereinafter set
forth, the Company hereby employs the Employee, and the Employee hereby enters
into the employment of the Company, for an employment term commencing on
February 6, 2017 (the “Effective Date”) and, unless earlier terminated in
accordance with the provisions set forth in Section 7, continuing until December
31, 2017.  This Agreement shall renew automatically for successive one (1) year
terms, unless either party shall give the other notice of non-renewal in
accordance with Section 7.  The initial term of this Agreement, together with
any annual renewal terms of this Agreement, shall be referred to as the “Term of
Employment.”  The Employee’s Base Salary (as defined below) for any renewal term
shall be as agreed by the parties, provided that (i) the Base Salary shall in no
event be less than the Base Salary the Employee received in the immediately
preceding term, and (ii) in the absence of an agreement otherwise, the
Employee’s Base Salary shall be the same as the Base Salary he received in the
immediately preceding term.

2.Position.  During the Term of Employment, the Employee shall serve as the
President and Chief Executive Officer of the Company and in such additional
position(s) as he and the Board of Directors of the Company (the “Board”) shall
agree.  As soon as practicable after the Effective Date, the Board shall elect
the Employee to be a member of the Board.

3.Scope of Employment.  During the Term of Employment, the Employee shall be
responsible for the performance of all financial, managerial and administrative
duties customarily performed by a President and Chief Executive Officer,
together with such other duties as the Board and the Employee shall agree, and
shall perform similar duties as requested or appropriate for affiliates
(including any subsidiaries) of the Company (“Affiliates”).  The Employee shall
be accountable to the Board and shall perform and discharge, faithfully,
diligently and to the best of his ability, his duties and responsibilities
hereunder.  The Employee shall devote his full working time and efforts to the
business and affairs of the Company and its Affiliates; provided, however, that
the Employee may continue to serve on the Boards of Directors and Advisory
Boards of the companies on which he serves as of the date of this Agreement, so
long as such service does not interfere with the performance of his duties for
the Company.

 

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4.Compensation.  As full compensation for all services to be rendered by the
Employee during the Term of Employment, the Company will provide to the
Employee, and the Employee will accept, the following:

(a)Base Salary.  During the Term of Employment, the Employee shall receive a
base salary at the rate of $26,923.08 per bi-weekly pay period (which is an
annualized rate of $700,000), less all applicable taxes and withholdings (the
“Base Salary”), paid in installments in accordance with the Company’s regularly
established payroll procedure.  The Employee’s Base Salary shall be reviewed
annually by the Board and may be adjusted from time to time in accordance with
normal business practices and taking into account then-current market factors,
but in no event shall the Employee’s Base Salary be less than the Base Salary
the Employee received from the Company in the immediately preceding year.

(b)Signing Bonus.  Contingent upon the commencement of the Employee’s employment
and subject to the terms and conditions set forth herein, the Company agrees to
pay the Employee a one-time signing bonus of $900,000 (the “Signing Bonus”),
less all applicable taxes and withholdings, which will be paid no later than the
second pay period following the commencement of the Employee’s employment.  If
prior to the one-year anniversary of the Effective Date the Employee voluntarily
terminates his employment with the Company without Good Reason or the Company
terminates the Employee’s employment for Cause (as defined below), the Employee
will be obligated to repay to the Company within sixty (60) days following his
last day of employment with the Company the entire net amount of the Signing
Bonus received by him.

(c)Annual Discretionary Bonus.  During the Term of Employment, the Employee
shall be eligible to receive a discretionary annual performance and retention
bonus of up to 65% of his then-current Base Salary, at a time and under
circumstances determined by the Board, in its sole discretion.  In order to
receive this bonus, the Employee must be an active employee of the Company on
the date any bonus is determined and no discretionary annual bonus shall be
considered earned before such date.  Such discretionary bonus, if any, shall be
paid no later than sixty (60) days following the date on which the Board
approves such bonus.  The Employee’s bonus for 2017 shall be prorated based on
the Effective Date.

(d)Stock Options; Equity Grants.  Subject to approval by the Board, the Company
will grant the Employee an option to purchase a number of shares of the
Company’s common stock equal to the lesser of (i) such number of shares that has
a target grant date fair value of $3,500,000 and (ii) 2,000,000 shares, with an
exercise price equal to the fair market value per share on the date of the grant
of the stock option.  The stock option will vest over four years at the rate of
25% on the one-year anniversary of the Effective Date, subject to the Employee’s
continued employment with the Company as of that date.  The remaining shares
shall vest quarterly over the following three (3) years, subject to the
Employee’s continued employment with the Company on the applicable vesting
date.  This stock option shall be subject to the terms and conditions of the
Company’s 2011 Stock Incentive Plan and the applicable Stock Option
Agreement.  The Employee shall be eligible to receive additional option grants
or other equity grants at times and under circumstances determined by the Board,
in its sole discretion.

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(e)Paid Time Off.  The Employee shall be eligible for paid time off in
accordance with the Company’s Paid Time Off Policy contained within the
Company’s Employee Handbook, as amended and/or superseded from time to time.

(f)Insurance.  The Employee shall be entitled to participate in, and receive
benefits under, all Company sponsored insurance and benefit programs (i.e.,
health, dental, life, and disability) available to senior management employees
of the Company, subject to and on a basis consistent with the eligibility
requirements, terms, conditions and overall administration of such programs.

(g)Other Benefits.  The Employee shall be entitled to participate in, and
receive benefits under, all Company employee benefit plans and arrangements
(including but not limited to 401(k) and similar programs), available to senior
management employees of the Company, subject to and on a basis consistent with
the eligibility requirements, terms, conditions and overall administration of
such plans, policies and arrangements.

5.Expenses.  The Employee shall be entitled to reimbursement by the Company for
all reasonable expenses actually incurred by him on the Company’s behalf in the
performance of his duties during the course of his employment by the Company,
upon the prompt presentation by the Employee, from time to time and in
accordance with the Company’s then-current reimbursement policies, of an
itemized account of such expenditures together with all supporting vouchers and
receipts.  All expense reimbursements shall be subject to the terms set forth in
Section 5 of Exhibit C.

6.Restrictive Covenants/Other Conditions to Employment.  Notwithstanding
anything to the contrary contained herein, the Employee’s employment hereunder
is subject to and conditioned on the Employee’s (i) completion of a background
check and drug screen analysis satisfactory to the Company, (ii) execution and
delivery to the Company of the Non-Disclosure, Developments, Non-Competition and
Non-Solicitation Agreement (the “Restrictive Covenants Agreement”) attached
hereto as Exhibit A, and (iii) timely providing proof of his right to work in
the United States.  The Employee further agrees that he shall sign all consents
necessary to the accomplishment of any of the foregoing, and that, should he not
satisfy the conditions set forth in this Section 6, he shall not commence
employment and this Agreement shall be null and void, with no obligations owed
to the Employee.

7.Early Termination.

(a)Death and Disability.  In the event of the Employee’s death during the Term
of Employment, this Agreement shall terminate immediately.  If, during the Term
of Employment, the Employee shall be unable for a period of more than any three
(3) consecutive months or for periods aggregating more than twenty-six (26)
weeks in a twelve (12) month period to perform the services provided for herein
as a result of any illness or disability, the Company may terminate the
Employee’s employment hereunder.  The Employee shall be considered unable to
perform the services provided for herein if and whenever the Company reasonably
determines, based upon the results of a medical examination performed by a
mutually agreed-upon professional, that he is mentally or physically incapable
of performing his duties hereunder with or without reasonable accommodation.

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(b)Termination for Cause.  The Employee may be terminated by the Company without
notice for “Cause.”  The following, as determined by the Board in its reasonable
judgment, shall constitute “Cause” for termination:

(i)Failure to Perform Duties.  The Employee’s material failure to perform (other
than by reason of illness or disability) his duties to the Company, or his
material negligence in the performance of his duties and/or responsibilities to
the Company, provided that the Employee shall have had prior written notice and
a reasonable opportunity of not less than thirty (30) days to correct any
deficiency in such performance;

(ii)Breach of Employment Agreement or Restrictive Covenants Agreement.  The
Employee’s material breach of this Agreement or the Restrictive Covenants
Agreement;

(iii)Misconduct.  The Employee’s conviction for or plea of nolo contendere or
guilty to any crime involving fraud, embezzlement or moral turpitude or any
felony; or

(iv)Harmful Conduct.  Any conduct of the Employee that is materially harmful to
the business, interests or reputation of the Company, provided that the Employee
shall have had prior written notice and a reasonable opportunity of not less
than ten (10) days to correct any such conduct.

(c)Termination By Company Without Cause.  The Employee may be terminated by the
Company without “Cause” upon delivery of written notice to the Employee.  In the
event the Employee is terminated without “Cause,” the Employee shall be entitled
to receive the severance benefits set forth in Section 7(f) or 7(g), as
applicable.  The Company’s decision not to renew the Term of Employment shall
constitute a termination without “Cause.”

(d)Termination by the Employee for Good Reason.  This Agreement may be
terminated by the Employee for “Good Reason” (as defined below), upon thirty
(30) days’ prior written notice to the Company specifying any and all
circumstances the Employee believes to constitute the basis for Good Reason,
provided that the Company shall have the opportunity to cure the asserted Good
Reason within the thirty (30) day period.  The Employee shall have “Good Reason”
to terminate this Agreement in the event that the Company, without the express
written consent of the Employee: (i) causes a material diminution of the
Employee’s authority, duties or responsibilities; (ii) materially breaches this
Agreement, including, without limitation, by materially reducing the Employee’s
Base Salary; or (iii) relocates the Employee’s place of business by more than
thirty (30) miles from the Company’s current Cambridge, Massachusetts
office.  Notwithstanding the foregoing, the Employee must give notice of his
intention to resign within ninety (90) days after the occurrence of the grounds
for termination for Good Reason, and resign within thirty (30) days after the
expiration of the Company’s 30-day cure period referenced above, or grounds for
termination for Good Reason due to the circumstances specified in the notice are
irrevocably waived.  In the event the Employee terminates his employment for
Good Reason, the Employee shall be entitled to the severance benefits set forth
in Section 7(f) or 7(g), as applicable.

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(e)Effect of Early Termination.  Except for a termination by the Company without
“Cause” or by the Employee for “Good Reason,” in the event of any early
termination of the Term of Employment, the Company’s obligations under this
Agreement shall immediately cease and the Employee shall be entitled to only the
Employee’s Base Salary and employment benefits which have accrued and to which
the Employee is entitled through the date of such termination, including any
bonus that may have been awarded but not yet paid.  These accrued salary and
benefits shall be paid on or about the date of termination.  The Employee shall
not be entitled to any other compensation or consideration, including any bonus
not yet awarded that the Employee may have been eligible for had his Term of
Employment not ceased, except as otherwise set forth in this Section 7(e).  In
the event of an early termination of the Term of Employment due to the
Employee’s death or disability, as set forth in Section 7(a), the Employee (or
his estate, in the event of his death) will be eligible to receive a pro rata
bonus determined in the manner set forth in the penultimate sentence of Section
7(f), which bonus shall be paid within thirty (30) days following the date of
the Employee’s termination.

(f)Severance Benefits Prior to a Change in Control.  If the Term of Employment
is terminated by the Company without “Cause” (as that term is defined in Section
7(b)) or by the Employee for “Good Reason” (as that term is defined in Section
7(d)), in each case prior to a Change in Control (as that term is defined in
Exhibit B), the Employee shall be entitled to receive his Base Salary and all
other employment benefits accrued through the effective date of such
termination, which shall be paid on or about the date of termination.  In
addition, provided the Employee executes and allows to become binding a
severance agreement and release of claims drafted by and satisfactory to the
Company (the “Release”) on or before the sixtieth (60th) day after the date of
termination, then beginning on the first regularly scheduled payroll date that
is sixty (60) days following the date of termination (such date, the “Payment
Commencement Date”), for a period of twelve (12) months (the “Severance
Period”), the Company shall: (i) pay to the Employee as severance pay his Base
Salary in accordance with the Company’s regularly established payroll procedure
and (ii) pay for coverage under any medical benefit plans provided pursuant to
Section 4(f), provided the Employee is eligible for and elects to continue
receiving such benefits pursuant to the federal “COBRA” law, 29 U.S.C. § 1161
et. seq., and provided further that the Employee continues to pay the applicable
share of the premium for such coverage that is paid by active and similarly
situated employees who receive the same type of coverage.  In addition, the
Company shall pay to the Employee, on the Payment Commencement Date, a pro-rata
bonus equal to (A) the average of the Employee’s annual bonus payments over each
of the three (3) years prior to the year of termination (or, if the Employee is
an executive officer, such lesser period during which the Employee served as an
executive officer of the Company), or, if such termination occurs prior to the
award of the Employee’s first annual bonus for 2017, the Employee’s target
annual bonus for 2017, multiplied by (B) a fraction, the numerator of which is
the number of days during the year during which the Employee remained employed
by the Company and the denominator of which is 365.  The distribution of all
severance benefits under this Section 7(f) shall be subject to the provisions of
Exhibit C.

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(g)Severance Benefits After a Change in Control.  If the Term of Employment is
terminated by the Company without “Cause” (as that term is defined in Section
7(b)) or by the Employee for “Good Reason” (as that term is defined in Section
7(d)), in each case within the eighteen (18) month period following a Change in
Control (as that term is defined in Exhibit B), the Employee shall be entitled
to receive his Base Salary and all other employment benefits accrued through the
effective date of such termination, which shall be paid on or about the date of
termination.  In addition, provided the Employee executes and allows to become
binding the Release on or before the Payment Commencement Date, the Company
shall: (i) pay to the Employee as severance pay on the Payment Commencement Date
a lump sum amount equal to thirty-six (36) months of his Base Salary; (ii) pay
to the Employee on the Payment Commencement Date a bonus equal to (A) three (3)
multiplied by (B) the average of the Employee’s annual bonus payments over each
of the three (3) years prior to the year of termination (or, if the Employee is
an executive officer, such lesser period during which the Employee served as an
executive officer of the Company), or, if such termination occurs prior to the
award of the Employee’s first annual bonus for 2017, the Employee’s target
annual bonus for 2017; (iii) accelerate the vesting of all outstanding Company
stock options, restricted stock or other equity awards granted to the Employee;
and (iv) pay for coverage under any medical benefit plans provided pursuant to
Section 4(f) for a period of eighteen (18) months following the Employee’s date
of termination, provided the Employee is eligible for and elects to continue
receiving such benefits pursuant to the federal “COBRA” law, 29 U.S.C. § 1161
et. seq., and provided further that the Employee continues to pay the applicable
share of the premium for such coverage that is paid by active and similarly
situated employees who receive the same type of coverage.  The distribution of
all severance benefits under this Section 7(g) shall be subject to the
provisions of Exhibit C.

8.Cutback.

(a)Anything in this Agreement to the contrary notwithstanding and except as set
forth below, in the event it shall be determined that any payment, benefit,
vesting or distribution to or for the benefit of the Employee (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise) (a “Payment”) would but for this Section 8 be subject to the
excise tax imposed by §4999 of the Internal Revenue Code, or any comparable
successor provisions (the “Excise Tax”), then the Payments shall either be (i)
provided to the Employee in full, or (ii) provided to the Employee as to such
lesser extent which would result in no portion of such Payments being subject to
the Excise Tax, whichever of the foregoing amounts, when taking into account
applicable income and employment taxes, the Excise Tax, and any other applicable
taxes, results in the receipt by the Employee on an after-tax basis of the
greatest amount of Payments, notwithstanding that all or some portion of such
Payments may be subject to the Excise Tax.  Any determination required under
this Section 8 shall be made in writing in good faith by the Company’s
independent certified public accountants, appointed prior to any change in
ownership (as defined under §280G[g2017030112540609417679.jpg] (b)(2) of the
Internal Revenue Code), and/or tax counsel selected by such accountants (the
“Accounting Firm”) in accordance with the principles of
§280G[g2017030112540609517680.jpg] of the Internal Revenue Code.  In the event
of a reduction of Payments hereunder, the Payments shall be reduced as follows:
(i) first from cash payments which are included in full as parachute payments,
(ii) second from equity awards which are included in full as parachute payments,
(iii) third from cash payments which are partially included as parachute
payments, and (iv) from equity awards that are partially included

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as parachute payments, in each instance provided that §409A is complied with and
the Payments to be made later in time are to be reduced before Payments to be
made sooner in time.  For purposes of making the calculations required by this
Section 8, the Accounting Firm may make reasonable assumptions and
approximations concerning applicable taxes and may rely on reasonable, good
faith interpretations concerning the application of the Internal Revenue Code,
and other applicable legal authority.  The Company and the Employee shall
furnish to the Accounting Firm such information and documents as the Accounting
Firm may reasonably request in order to make a determination under this Section
8.  All fees and expenses of the Accounting Firm shall be borne solely by the
Company.

(b)If, notwithstanding any reduction described in this Section 8, the Internal
Revenue Service (the “IRS”) determines that the Employee is liable for the
Excise Tax as a result of the receipt of the Payments as described above, then
the Employee shall be obligated to pay back to the Company, within thirty (30)
days after a final IRS determination or in the event that the Employee
challenges the final IRS determination, a final judicial determination, a
portion of the Payments equal to the “Repayment Amount.”  The Repayment Amount
with respect to the Payments shall be the smallest such amount, if any, as shall
be required to be paid to the Company so that the Employee’s net after-tax
proceeds with respect to the Payments (after taking into account the payment of
the Excise Tax and all other applicable taxes imposed on such payment) shall be
maximized.  The Repayment Amount with respect to the Payments shall be zero if a
Repayment Amount of more than zero would not result in the Employee’s net
after-tax proceeds with respect to the Payments being maximized.  If the Excise
Tax is not eliminated pursuant to this paragraph, the Employee shall pay the
Excise Tax.

(c)Notwithstanding any other provision of this Section 8, if (i) there is a
reduction in the Payments as described in this Section 8, (ii) the IRS later
determines that the Employee is liable for the Excise Tax, the payment of which
would result in the maximization of the Employee’s net after-tax proceeds
(calculated as if the Employee’s Payments had not previously been reduced), and
(iii) the Employee pays the Excise Tax, then the Company shall pay to the
Employee those Payments which were reduced pursuant to this subsection as soon
as administratively possible after the Employee pays the Excise Tax so that the
Employee’s net after-tax proceeds with respect to the Payments are maximized.

9.Absence of Restrictions.  The Employee represents and warrants that he is not
a party to any commitment or undertaking by which he is subject to any
restriction or limitation upon his entering into this Agreement or performing
the services required of him hereunder.

10.Amendments.  Any amendment to this Agreement shall be made in writing and
signed by the parties hereto.

11.Applicable Law/Jury Trial Waiver.  This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts
(without reference to the conflict of laws provisions thereof).  Any action,
suit or other legal proceeding arising under or relating to any provision of
this Agreement shall be commenced only in a court of the Commonwealth of
Massachusetts (or, if appropriate, a federal court located within the
Commonwealth of Massachusetts), and the Company and the Employee each consents
to the jurisdiction of such a court.  The Company and the Employee each hereby
irrevocably waives any right to a trial by jury in any action, suit or other
legal proceeding arising under or relating to any provision of this Agreement.

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12.Entire Agreement.  This Agreement, together with the Restrictive Covenants
Agreement attached hereto as Exhibit A and executed as a condition of the
Employee’s employment, constitutes the entire agreement between the parties and
supersedes all prior agreements and understandings, whether written or oral,
relating to the subject matter of these agreements.

13.Successors and Assigns.  This Agreement shall be binding upon and inure to
the benefit of both parties and their respective successors and assigns,
including any corporation with which or into which the Company may be merged or
which may succeed to all or substantially all of its assets or business;
provided, however, that the obligations of the Employee are personal and shall
not be assigned by him.

14.Acknowledgment.  The Employee states and represents that he has had an
opportunity to fully discuss and review the terms of this Agreement with an
attorney.  The Employee further states and represents that he has carefully read
this Agreement, understands the contents herein, freely and voluntarily assents
to all of the terms and conditions hereof, and signs his name of his own free
act.

15.Miscellaneous.

(a)No delay or omission by either party in exercising any right under this
Agreement shall operate as a waiver of that or any other right.  A waiver or
consent given by either party on any one occasion shall be effective only in
that instance and shall not be construed as a bar to or waiver of any right on
any other occasion.

(b)The captions of the sections of this Agreement are for convenience of
reference only and in no way define, limit or affect the scope or substance of
any section of this Agreement.

(c)In case any provision of this Agreement shall be invalid, illegal or
otherwise unenforceable, the validity, legality and enforceability of the
remaining provisions shall in no way be affected or impaired thereby.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.

 

COMPANY:

MERRIMACK PHARMACEUTICALS, INC.

 

 

 

 

By:

/s/ Gary L. Crocker

 

 

Gary L. Crocker

 

 

Chairman, Board of Directors

 

 

 

EMPLOYEE:

 

/s/ Richard Peters

 

 

Richard Peters

 

 

 

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Exhibit A

Non-Disclosure, Developments, Non-Competition and Non-Solicitation Agreement

 

 

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NON-DISCLOSURE, DEVELOPMENTS, NON-COMPETITION

AND NON-SOLICITATION AGREEMENT

This Non-Disclosure, Developments, Non-Competition and Non-Solicitation
Agreement (the “Agreement”), dated as of February 6, 2017, is entered into by
and between Merrimack Pharmaceuticals, Inc., a Delaware corporation (the
“Company”), and Richard Peters (the “Employee”).

In consideration of the Employee’s employment with the Company and for other
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the Employee, the Employee hereby agrees as follows:

1.Condition of Employment.

The Employee acknowledges that his employment and the continuance of that
employment with the Company is contingent upon his agreement to sign and adhere
to the provisions of this Agreement.  The Employee further acknowledges that the
nature of the Company’s business is such that protection of its proprietary and
confidential information and goodwill with its customers and partners is
critical to its survival and success.

2.Confidential Information.

(a)The Employee agrees that all information and know-how, whether or not in
writing, of a private, secret or confidential nature concerning the Company and
its operations and business or financial affairs (collectively, “Confidential
Information”) is and shall be the exclusive property of the Company.  By way of
illustration, but not limitation, Confidential Information may include models,
systems, software and codes, or systems, software and codes in the course of
development, or planned or proposed systems, software or codes, customer,
prospect and supplier lists, contacts at or knowledge of customers or
prospective customers, customer accounts and other customer financial
information, strategic partners and/or collaborators, price lists and all other
pricing, marketing and sales information, projections, results relating to the
Company or any customer or supplier of the Company, databases, modules,
products, programs, product improvements, product enhancements and/or
developments, designs, specifications, processes, methods, techniques,
operations, projects, plans, chemical compounds, chemical or biological
materials, engineering data, clinical or technological data, research data,
financial data, personnel information obtained pursuant to the performance of
the Employee’s duties for the Company, and other confidential agreements or
documents (including, without limitation, clinical trial protocols and
unpublished patent applications).  Except as otherwise permitted by Section 5,
the Employee will not disclose any Confidential Information to others outside
the Company or use the same for any purpose other than the performance of his
duties as an employee of the Company, either during or at any time after his
employment with the Company, unless and until such Confidential Information has
become public knowledge without fault by the Employee.  While employed by the
Company, the Employee will use the Employee’s best efforts to prevent
unauthorized publication or disclosure of any Confidential Information.

 

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(b)The Employee agrees that all Company Property (as defined below), whether
created by the Employee or others, that shall come into the Employee’s custody
or possession shall be and is the sole and exclusive property of the Company to
be used only in the performance of the Employee’s duties for the
Company.  “Company Property” means any and all written, photographic or any
other record containing Confidential Information and shall include, but not be
limited to, all agreements, notes, disks, files, letters, memoranda, reports,
records, lists, data, drawings, sketches, notebooks, program listings,
specifications, software programs, software code, computers and other electronic
equipment, documentation, or other equipment or materials of any nature and in
any form, containing Confidential Information.  Upon the earliest of the
Employee’s termination or a request from the Company, the Employee will return
to the Company any and all Company Property in the Employee’s custody or
possession without retaining any copies thereof (including, without limitation,
any electronic copy) and without using or allowing others to improperly use such
Company Property.

(c)The Employee acknowledges that the Employee’s obligations with regard to
Confidential Information that are set out in Sections 2(a) and (b) extend to all
information, know-how, records and tangible property of customers of the Company
or suppliers to the Company or of any third party who may have disclosed or
entrusted the same to the Company or to the Employee in the course of the
Company’s business.

3.Developments.

(a)The Employee will make full and prompt disclosure to the Company of all
inventions, ideas, concepts, improvements, discoveries, methods, techniques,
tools, formula, developments, enhancements, modifications, databases, processes,
software and works of authorship, whether patentable or not, that are created,
made, conceived or reduced to practice by the Employee or under the Employee’s
direction or jointly with others during the Employee’s employment with the
Company, whether or not during normal working hours or on the premises of the
Company (all of which are collectively referred to in this Agreement as
“Developments”).

(b)The Employee agrees to assign and does hereby assign to the Company (or any
person or entity designated by the Company) all of the Employee’s right, title
and interest in and to all Developments and all related intellectual property
rights.  Except as, and solely to the extent that, it may be necessary for the
Employee to perform the Employee’s duties and fulfill the Employee’s obligations
in the course of the Employee’s employment with the Company, the Company does
not grant the Employee, and the Employee agrees that he/she will not receive,
any license or right to use any Development or related intellectual property
right.  The Employee hereby also waives all claims to moral rights in any
Developments.  However, this Section 3(b) shall not apply to Developments that
do not relate to the present or planned business or research and development of
the Company and that are made and conceived by the Employee not during normal
working hours, not on the Company’s premises and not using the Company’s tools,
devices, equipment or Confidential Information.  This Section 3(b) also shall
not apply to any Developments that the Employee conceived of prior to the
Employee’s employment with the Company, which invention(s) the Employee shall
disclose on Exhibit A attached hereto.  IF THERE ARE ANY SUCH DEVELOPMENTS TO BE
EXCLUDED UNDER THIS AGREEMENT, THE EMPLOYEE SHALL INITIAL HERE; OTHERWISE IT
WILL BE DEEMED THAT THERE ARE NO SUCH EXCLUSIONS. ____  The Employee understands

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that, to the extent this Agreement shall be construed in accordance with the
laws of any state that precludes the requirement in an employee agreement to
assign certain classes of inventions made by an employee, this Section 3(b)
shall be interpreted not to apply to any invention that a court rules and/or the
Company agrees falls within such classes.  To the extent allowed by law, the
Employee hereby grants to the Company an exclusive (even unto the Employee),
irrevocable, fully paid up, worldwide license to make, use and sell any and all
inventions for which assignment cannot be effected.

(c)The Employee agrees to cooperate fully with the Company, both during and
after the Employee’s employment with the Company, with respect to the
procurement, maintenance and enforcement of all copyrights, trademarks, patents
and other intellectual property rights (both in the United States and foreign
countries) relating to any Development.  The Employee shall sign all papers,
including, without limitation, copyright applications, patent applications,
declarations, oaths, formal assignments, assignment of priority rights and
powers of attorney, that the Company may deem necessary or desirable in order to
protect and enforce its rights and interests in any Development.  The Employee
further agrees that if the Company is unable, after reasonable effort, to secure
the signature of the Employee on any such papers, any executive officer of the
Company shall be entitled to execute any such papers as the agent and the
attorney-in-fact of the Employee, and the Employee hereby irrevocably designates
and appoints each executive officer of the Company as the Employee’s agent and
attorney-in-fact for all countries worldwide to execute any such papers on the
Employee’s behalf, and to take any and all actions as the Company may deem
necessary or desirable in order to protect its rights and interests in any
Development, under the conditions described in this sentence.  Should the
Company engage in litigation to enforce any such intellectual property rights,
the Employee agrees to appear and testify at no charge, but at the Company’s
expense.

4.Non-Competition and Non-Solicitation.

(a)While the Employee is employed by the Company and for a period of twelve (12)
months following the Employee’s termination or cessation of employment for any
reason (voluntarily or involuntarily), the Employee will not, directly or
indirectly:

(i)engage in any business or enterprise (whether as an owner, partner, officer,
employee, director, investor, lender, consultant, independent contractor or
otherwise, except as the holder of not more than 2% of the combined voting power
of the outstanding stock of a publicly held company) that is competitive with
the Company’s business, including, without limitation, any business or
enterprise that develops, designs, produces, markets or sells any product or
service competitive with any product or service developed, designed, produced,
marketed or sold or planned to be developed, designed, produced, marketed or
sold by the Company while the Employee was employed by the Company; provided,
however, that this Section 4(a)(i) shall not prohibit the Employee from serving
on the Boards of Directors and Advisory Boards of, or owning a beneficial
interest in, the companies on which he serves as of the date of this Agreement
(which the Employee represents are not currently competitive with the Company’s
business), so long as such service and/or beneficial ownership does not
interfere with the performance of his duties to the Company and such companies
continue to not be competitive with the Company’s business.

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(ii)either alone or in association with others, recruit, solicit, hire or engage
as an independent contractor, or attempt to recruit, solicit, hire or engage as
an independent contractor, any person who was employed by the Company or engaged
as an independent contractor for the Company at any time during the period of
the Employee’s employment with the Company, except for an individual whose
employment with or service for the Company has been terminated for a period of
six (6) months or longer; and/or

(iii)either alone or in association with others, service, solicit, divert or
take away, or attempt to service, solicit, divert or take away, the business or
patronage of any of the clients, customers or accounts, or prospective clients,
customers or accounts, of the Company that were contacted, solicited or served
by the Employee while the Employee was employed by the Company or about which
the Employee had access to Confidential Information in the course of his
employment with the Company.

(b)The geographic scope of this Section 4 shall extend to anywhere the Company
or any of its subsidiaries is doing business, has done business or has plans to
do business during the Employee’s employment with the Company.

(c)If any restriction set forth in this Section 4 is found by any court of
competent jurisdiction to be unenforceable because it extends for too long a
period of time or over too great a range of activities or in too broad a
geographic area, the parties expressly agree that such court shall reform the
restriction and enforce it to extend over the maximum period of time, range of
activities or geographic area deemed reasonable by such court.

(d)The Employee agrees that during the non-competition and non-solicitation
period, the Employee will give notice to the Company of each new job, contract
assignment or other work (either as an employee, contractor or otherwise) the
Employee plans to undertake at least ten (10) business days prior to beginning
any such activity.  The notice shall state the name and address of the
individual, corporation, association or other entity or organization (the
“Entity”) for whom such activity is undertaken and the Employee’s proposed
business relationship or position with the Entity.  The Employee further agrees
to provide the Company with other pertinent information concerning such business
activity as the Company may reasonably request in order to determine the
Employee’s continued compliance with his obligations under this
Agreement.  During the non-competition and non-solicitation period, the Employee
agrees to provide a copy of this Agreement to all person and Entities with whom
the Employee seeks to be hired or do business before accepting employment or
engagement with any of them.

(e)If the Employee violates any of the provisions of this Section 4, the
Employee shall continue to be held by the restrictions set forth in this Section
4 until a period equal to the period of restriction has expired without any
violation.

5.Scope of Disclosure Restrictions.

Nothing in this Agreement prohibits the Employee from communicating with
government agencies about possible violations of federal, state or local laws or
otherwise providing information to government agencies or participating in
government agency investigations or proceedings.  The Employee is not required
to notify the Company of any such communications;

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provided, however, that nothing herein authorizes the disclosure of information
the Employee obtained through a communication that was subject to the
attorney-client privilege.  Further, notwithstanding the Employee’s
confidentiality and nondisclosure obligations, the Employee is hereby advised as
follows pursuant to the Defend Trade Secrets Act: “An individual shall not be
held criminally or civilly liable under any Federal or State trade secret law
for the disclosure of a trade secret that (A) is made (i) in confidence to a
Federal, State, or local government official, either directly or indirectly, or
to an attorney; and (ii) solely for the purpose of reporting or investigating a
suspected violation of law; or (B) is made in a complaint or other document
filed in a lawsuit or other proceeding, if such filing is made under seal.  An
individual who files a lawsuit for retaliation by an employer for reporting a
suspected violation of law may disclose the trade secret to the attorney of the
individual and use the trade secret information in the court proceeding, if the
individual (A) files any document containing the trade secret under seal; and
(B) does not disclose the trade secret, except pursuant to court order.”

6.Other Agreements.

The Employee hereby represents that, except as the Employee has disclosed in
writing to the Company, the Employee is not bound by the terms of any
restrictive covenant agreement with any previous employer or other party
relating to the non-disclosure of trade secret or confidential or proprietary
information, non-competition and/or non-solicitation of customers, clients,
employees or others.  The Employee further represents that the Employee’s
performance of all the terms of this Agreement and as an employee of the Company
does not and will not breach any such restrictive covenant agreement, and the
Employee will not disclose to the Company or induce the Company to use any
confidential or proprietary information or material belonging to any previous
employer or others.

7.Employment At Will.

The Employee acknowledges that this Agreement does not constitute a contract of
employment for any period of time and does not modify the at-will nature of the
Employee’s employment with the Company, pursuant to which both the Company and
the Employee may terminate the employment relationship at any time, for any or
no reason, with or without notice.

8.General Provisions.

(a)Equitable Relief.  The Employee acknowledges that the restrictions contained
in this Agreement are necessary for the protection of the business and goodwill
of the Company and are considered by the Employee to be reasonable for such
purpose.  The Employee agrees that any breach or threatened breach of this
Agreement will cause the Company substantial and irrevocable damage that is
difficult to measure.  Therefore, in the event of any such breach or threatened
breach, the Employee agrees that the Company, in addition to such other remedies
that may be available, shall have the right to specific performance and
injunctive relief without posting a bond, as well as its reasonable attorneys’
fees incurred as a result of any such breach or threatened breach.  The Employee
hereby waives the adequacy of a remedy at law as a defense to such relief.

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(b)Change in Terms/Conditions of Employment.  The Employee agrees that
his  obligations under this Agreement shall continue in full force and effect in
the event that the Employee’s job title, responsibilities, reporting structure,
work location, compensation or other conditions of his employment with the
Company change subsequent to the execution of this Agreement, without the need
to execute a new agreement.

(c)No Conflict.  The Employee represents that the execution and performance by
the Employee of this Agreement does not and will not conflict with or breach the
terms of any other agreement by which the Employee is bound.

(d)Severability.  The invalidity or unenforceability of any provision of this
Agreement shall not affect or impair the validity or enforceability of any other
provision of this Agreement.

(e)Waiver.  No delay or omission by the Company in exercising any right under
this Agreement will operate as a waiver of that or any other right.  A waiver or
consent given by the Company on any one occasion is effective only in that
instance and will not be construed as a bar to or waiver of any right on any
other occasion.  Any waiver of any provision hereof shall be in writing and
signed by the Company.

(f)Successors and Assigns.  This Agreement shall be binding upon and inure to
the benefit of both parties and their respective successors and assigns,
including, without limitation, any corporation or entity with which or into
which the Company may be merged or which may succeed to all or substantially all
of its assets or business; provided, however, that the obligations of the
Employee are personal and shall not be assigned by the Employee.

(g)Governing Law, Forum and Jurisdiction/Jury Trial Waiver.  This Agreement
shall be governed by and construed as a sealed instrument under and in
accordance with the laws of the Commonwealth of Massachusetts without regard to
conflict of laws provisions.  Any action, suit or other legal proceeding that is
commenced to resolve any matter arising under or relating to any provision of
this Agreement shall be commenced only in a court of the Commonwealth of
Massachusetts (or, if appropriate, a federal court located within
Massachusetts), and the Company and the Employee each consents to exclusive
personal jurisdiction in such a court.  The Employee and the Company hereby
expressly waive the right to a jury trial for any claim relating to his/its
rights or obligations under this Agreement, or otherwise relating to the
Employee’s employment or separation from employment with the Company.

(h)Captions.  The captions of the sections of this Agreement are for convenience
of reference only and in no way define, limit or affect the scope or substance
of any section of this Agreement.

(i)Entire Agreement.  This Agreement supersedes all prior agreements, written or
oral, between the Employee and the Company relating to the subject matter of
this Agreement.  This Agreement may not be amended, modified, changed or
discharged in whole or in part (other than pursuant to Section 4(e)), except by
an agreement in writing signed by the Employee and the Company.

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THE EMPLOYEE ACKNOWLEDGES THAT HE/SHE HAS CAREFULLY READ THIS AGREEMENT AND
UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AGREEMENT.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.

 

COMPANY:

MERRIMACK PHARMACEUTICALS, INC.

 

 

 

 

By:

/s/ Jeffrey A. Munsie

 

 

Jeffrey A. Munsie

 

 

General Counsel

 

 

 

EMPLOYEE:

 

/s/ Richard Peters

 

 

Richard Peters

 

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Exhibit A

List of Prior Inventions and Original Works of Authorship

Title

Date

Identifying Number or Brief Description

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional Sheets Attached

 

 

Signature of Employee:

 

 

 

Printed Name of Employee:

 

 

 

Date:

 

 

 

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Exhibit B

Definition of Change in Control

A “Change in Control” shall occur upon any of the following events, provided, in
each case, that such event constitutes a “change in control event” within the
meaning of Treasury Regulation Section 1.409A-3(i)(5)(i):

(A)the acquisition by an individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)) (a “Person”) of beneficial ownership of any capital stock
of the Company if, after such acquisition, such Person beneficially owns (within
the meaning of Rule 13d-3 under the Exchange Act) 50% or more of either (x) the
then-outstanding shares of common stock of the Company (the “Outstanding Company
Common Stock”) or (y) the combined voting power of the then-outstanding
securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”); provided, however, that
for purposes of this subsection (A), the following acquisitions shall not
constitute a Change in Control: (1) any acquisition directly from the Company or
(2) any acquisition by any corporation pursuant to a Business Combination (as
defined below) which complies with clauses (x) and (y) of subsection (C) of this
definition;

(B)a change in the composition of the Board that results in the Continuing
Directors (as defined below) no longer constituting a majority of the Board (or,
if applicable, the Board of Directors of a successor corporation to the
Company), where the term “Continuing Director” means at any date a member of the
Board (x) who was a member of the Board on the date of this Agreement or (y) who
was nominated or elected subsequent to such date by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election or whose election to the Board was recommended or endorsed by at least
a majority of the directors who were Continuing Directors at the time of such
nomination or election; provided, however, that there shall be excluded from
this clause (y) any individual whose initial assumption of office occurred as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents, by or on behalf of a person other than the Board; or

(C)the consummation of a merger, consolidation, reorganization, recapitalization
or share exchange involving the Company or a sale or other disposition of all or
substantially all of the assets of the Company (a “Business Combination”),
unless, immediately following such Business Combination, each of the following
two conditions is satisfied: (x) all or substantially all of the individuals and
entities who were the beneficial owners of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 50% of the
then-outstanding shares of common stock and the combined voting power of the
then-outstanding securities entitled to vote generally in the election of
directors, respectively, of the resulting or acquiring corporation in such
Business Combination (which shall include, without limitation, a corporation
which as a result of such transaction owns the Company or substantially all of
the Company’s assets either directly or through one or more subsidiaries) (such
resulting or acquiring corporation is referred to herein as the “Acquiring
Corporation”) in substantially the same

 

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proportions as their ownership of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, respectively, immediately prior to such
Business Combination and (y) no Person (excluding any employee benefit plan (or
related trust) maintained or sponsored by the Company or by the Acquiring
Corporation) beneficially owns, directly or indirectly, 50% or more of the
then-outstanding shares of common stock of the Acquiring Corporation, or of the
combined voting power of the then-outstanding securities of such corporation
entitled to vote generally in the election of directors (except to the extent
that such ownership existed prior to the Business Combination).

 

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Exhibit C

Payments Subject to Section 409A

Subject to this Exhibit C, severance payments or benefits under this Agreement
shall begin only on or after the date of the Employee’s “separation from
service” (determined as set forth below), which occurs on or after the
termination of the Employee’s employment.  The following rules shall apply with
respect to distribution of the payments and benefits, if any, to be provided to
the Employee under this Agreement:

1.It is intended that each installment of the payments provided under this
Agreement shall be treated as a separate “payment” for purposes of Section 409A
of the Internal Revenue Code and the guidance issued thereunder (“Section
409A”).  Neither the Company nor the Employee shall have the right to accelerate
or defer the delivery of any such payments or benefits except to the extent
specifically permitted or required by Section 409A.

2.If, as of the date of the Employee’s “separation from service” from the
Company, the Employee is not a “specified employee” (within the meaning of
Section 409A), then each installment of the severance payments and benefits
shall be made on the dates and terms set forth in this Agreement.

3.If, as of the date of the Employee’s “separation from service” from the
Company, the Employee is a “specified employee” (within the meaning of Section
409A), then:

(a)Each installment of the severance payments and benefits due under this
Agreement that, in accordance with the dates and terms set forth herein, will in
all circumstances, regardless of when the Employee’s separation from service
occurs, be paid within the Short-Term Deferral Period (as defined under Section
409A) shall be treated as a short-term deferral within the meaning of Treasury
Regulation Section 1.409A- l(b)(4) to the maximum extent permissible under
Section 409A and shall be paid at the time set forth in this Agreement; and

(b)Each installment of the severance payments and benefits due under this
Agreement that is not described in this Exhibit C, Section 3(a) and that would,
absent this subsection, be paid within the six (6) month period following the
Employee’s “separation from service” from the Company shall not be paid until
the date that is six (6) months and one (1) day after such separation from
service (or, if earlier, the Employee’s death), with any such installments that
are required to be delayed being accumulated during the six (6) month period and
paid in a lump sum on the date that is six (6) months and one (1) day following
the Employee’s separation from service, and any subsequent installments being
paid in accordance with the dates and terms set forth in this Agreement;
provided, however, that the preceding provisions of this sentence shall not
apply to any installment of severance payments and benefits if and to the
maximum extent that such installment is deemed to be paid under a separation pay
plan that does not provide for a deferral of compensation by reason of the
application of Treasury Regulation 1.409A-l(b)(9)(iii) (relating to separation
pay upon an involuntary separation from service).  Any installments that qualify
for the exception under Treasury Regulation Section 1.409A-l(b)(9)(iii) must be
paid no later than the last day of the Employee’s second taxable year following
the taxable year in which the separation from service occurs.

 

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4.The determination of whether and when the Employee’s separation from service
from the Company has occurred shall be made in a manner consistent with, and
based on the presumptions set forth in, Treasury Regulation Section
1.409A-l(h).  Solely for purposes of this Exhibit C, Section 4, “Company” shall
include all persons with whom the Company would be considered a single employer
under Section 414(b) and 414(c) of the Internal Revenue Code.

5.All reimbursements and in-kind benefits provided under this Agreement shall be
made or provided in accordance with the requirements of Section 409A to the
extent that such reimbursements or in-kind benefits are subject to Section 409A,
including, where applicable, the requirement that (i) any reimbursement is for
expenses incurred during the Employee’s lifetime (or during a shorter period of
time specified in this Agreement), (ii) the amount of expenses eligible for
reimbursement during a calendar year may not affect the expenses eligible for
reimbursement in any other calendar year, (iii) the reimbursement of an eligible
expense will be made on or before the last day of the calendar year following
the year in which the expense is incurred and (iv) the right to reimbursement is
not subject to set off or liquidation or exchange for any other benefit.

6.The Company makes no representation or warranty and shall have no liability to
the Employee or to any other person if any of the provisions of this Agreement
(including this Exhibit C) are determined to provide for non-qualified deferred
compensation subject to Section 409A but that do not satisfy an exemption from,
or the conditions of, that section.

7.The Company may withhold (or cause to be withheld) from any payments made
under this Agreement, all federal, state, city or other taxes as shall be
required to be withheld pursuant to any law or governmental regulation or
ruling.